Edgar Filing: VISHAY INTERTECHNOLOGY INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 27, 2014

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 1-7416

VISHAY INTERTECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

Delaware		38-1686453
(State or Other Jurisdiction of Incorporation)		(I.R.S. Employer Identification Number)

63 Lancaster Avenue Malvern, PA 19355-2143		610-644-1300
(Address of Principal Executive Offices)		(Registrant's Area Code and Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.

ýYes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes ý No

As of October 24, 2014, the registrant had 135,324,313 shares of its common stock and 12,129,227 shares of its Class B common stock outstanding.

This page intentionally left blank.

VISHAY INTERTECHNOLOGY, INC.

FORM 10-Q

September 27, 2014

CONTENTS

			Page Number
PART I.		FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Condensed Balance Sheets – September 27, 2014 (Unaudited) and December 31, 2013	4

		Consolidated Condensed Statements of Operations (Unaudited) – Fiscal Quarters Ended September 27, 2014 and September 28, 2013	6

		Consolidated Condensed Statements of Comprehensive Income (Unaudited) – Fiscal Quarters Ended September 27, 2014 and September 28, 2013	7

		Consolidated Condensed Statements of Operations (Unaudited) – Nine Fiscal Months Ended September 27, 2014 and September 28, 2013	8

		Consolidated Condensed Statements of Comprehensive Income (Unaudited) – Nine Fiscal Months Ended September 27, 2014 and September 28, 2013	9

		Consolidated Condensed Statements of Cash Flows (Unaudited) – Nine Fiscal Months Ended September 27, 2014 and September 28, 2013	10

		Consolidated Condensed Statement of Equity (Unaudited)	11

		Notes to Consolidated Condensed Financial Statements (Unaudited)	12

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55

	Item 4.	Controls and Procedures	55

PART II.		OTHER INFORMATION

	Item 1.	Legal Proceedings	56

	Item 1A.	Risk Factors	56

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56

	Item 3.	Defaults Upon Senior Securities	56

	Item 4.	Mine Safety Disclosures	56

	Item 5.	Other Information	56

	Item 6.	Exhibits	56

		SIGNATURES	57

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Balance Sheets

(In thousands)

	September 27, 2014			December 31, 2013
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	575,302		$	640,348
Short-term investments		538,109			511,231
Accounts receivable, net		303,923			274,083
Inventories:
Finished goods		124,271			109,617
Work in process		195,439			197,600
Raw materials		130,675			125,491
Total inventories		450,385			432,708

Deferred income taxes		21,122			21,716
Prepaid expenses and other current assets		107,267			100,594
Total current assets		1,996,108			1,980,680

Property and equipment, at cost:
Land		92,980			93,685
Buildings and improvements		564,514			560,418
Machinery and equipment		2,368,291			2,340,778
Construction in progress		67,428			95,278
Allowance for depreciation		(2,207,101	)		(2,163,540	)
		886,112			926,619

Goodwill		147,436			43,132

Other intangible assets, net		193,913			129,951

Other assets		152,953			156,757
Total assets	$	3,376,522		$	3,237,139

Continues on following page.

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Balance Sheets (continued)

(In thousands)

	September 27, 2014			December 31, 2013
	(Unaudited)
Liabilities and equity
Current liabilities:
Notes payable to banks	$	17		$	2
Trade accounts payable		158,021			163,894
Payroll and related expenses		138,708			120,997
Other accrued expenses		156,699			146,670
Income taxes		16,536			17,502
Total current liabilities		469,981			449,065

Long-term debt less current portion		440,880			364,911
Deferred income taxes		181,710			157,640
Other liabilities		101,147			99,426
Accrued pension and other postretirement costs		269,325			287,901
Total liabilities		1,463,043			1,358,943

Redeemable convertible debentures		91,092			-

Stockholders' equity:
Vishay stockholders' equity
Common stock		13,532			13,520
Class B convertible common stock		1,213			1,213
Capital in excess of par value		1,964,277			2,054,087
(Accumulated deficit) retained earnings		(195,837	)		(257,698	)
Accumulated other comprehensive income (loss)		12,064			61,634
Total Vishay stockholders' equity		1,795,249			1,872,756
Noncontrolling interests		27,138			5,440
Total equity		1,822,387			1,878,196
Total liabilities, temporary equity, and equity	$	3,376,522		$	3,237,139

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Statements of Operations

(Unaudited - In thousands, except per share amounts)

	Fiscal quarters ended
	September 27, 2014			September 28, 2013

Net revenues	$	638,211		$	602,890
Costs of products sold		479,819			459,670
Gross profit		158,392			143,220

Selling, general, and administrative expenses		93,837			90,067
Restructuring and severance costs		3,508			-
U.S. pension settlement charges		15,588			-
Operating income		45,459			53,153

Other income (expense):
Interest expense		(6,167	)		(5,797	)
Other		(474	)		556
		(6,641	)		(5,241	)

Income before taxes		38,818			47,912

Income tax expense		11,841			15,043

Net earnings		26,977			32,869

Less: net earnings attributable to noncontrolling interests		6			150

Net earnings attributable to Vishay stockholders	$	26,971		$	32,719

Basic earnings per share attributable to Vishay stockholders	$	0.18		$	0.23

Diluted earnings per share attributable to Vishay stockholders	$	0.17		$	0.22

Weighted average shares outstanding - basic		147,569			145,044

Weighted average shares outstanding - diluted		155,546			151,890

Cash dividends per share	$	0.06		$	-

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Statements of Comprehensive Income

(Unaudited - In thousands)

	Fiscal quarters ended
	September 27, 2014			September 28, 2013

Net earnings	$	26,977		$	32,869

Other comprehensive income (loss), net of tax

Foreign currency translation adjustment		(55,934	)		24,975

Pension and other post-retirement actuarial items		10,805			3,078

Unrealized gain (loss) on available-for-sale securities		(50	)		60

Other comprehensive income (loss)		(45,179	)		28,113

Comprehensive income (loss)		(18,202	)		60,982

Less: comprehensive income attributable to noncontrolling interests		6			150

Comprehensive income (loss) attributable to Vishay stockholders	$	(18,208	)	$	60,832

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Statements of Operations

(Unaudited - In thousands, except per share amounts)

	Nine fiscal months ended
	September 27, 2014			September 28, 2013

Net revenues	$	1,882,518		$	1,754,809
Costs of products sold		1,414,750			1,331,998
Gross profit		467,768			422,811

Selling, general, and administrative expenses		287,300			273,941
Restructuring and severance costs		18,926			-
U.S. pension settlement charges		15,588			-
Executive compensation credit		-			(1,778	)
Operating income		145,954			150,648

Other income (expense):
Interest expense		(17,968	)		(17,107	)
Other		1,046			1,455
		(16,922	)		(15,652	)

Income before taxes		129,032			134,996

Income taxes		40,259			41,501

Net earnings		88,773			93,495

Less: net earnings attributable to noncontrolling interests		350			536

Net earnings attributable to Vishay stockholders	$	88,423		$	92,959

Basic earnings per share attributable to Vishay stockholders	$	0.60		$	0.65

Diluted earnings per share attributable to Vishay stockholders	$	0.57		$	0.61

Weighted average shares outstanding - basic		147,565			144,119

Weighted average shares outstanding - diluted		154,142			151,471

Cash dividends per share	$	0.18		$	-

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Statements of Comprehensive Income

(Unaudited - In thousands)

	Nine fiscal months ended
	September 27, 2014			September 28, 2013

Net earnings	$	88,773		$	93,495

Other comprehensive income (loss), net of tax

Foreign currency translation adjustment		(64,373	)		10,304

Pension and other post-retirement actuarial items		13,665			9,250

Unrealized gain (loss) on available-for-sale securities		1,138			(154	)

Other comprehensive income (loss)		(49,570	)		19,400

Comprehensive income		39,203			112,895

Less: comprehensive income attributable to noncontrolling interests		350			536

Comprehensive income attributable to Vishay stockholders	$	38,853		$	112,359

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Statements of Cash Flows

(Unaudited - In thousands)

	Nine fiscal months ended
	September 27, 2014			September 28, 2013
Operating activities
Net earnings	$	88,773		$	93,495
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		132,344			125,611
(Gain) loss on disposal of property and equipment		(65	)		118
Accretion of interest on convertible debentures		2,930			2,709
Inventory write-offs for obsolescence		15,101			14,476
U.S. pension settlement charges		15,588			-
Other		4,215			(11,986	)
Net change in operating assets and liabilities, net of effects of businesses acquired		(61,875	)		(44,862	)
Net cash provided by operating activities		197,011			179,561

Investing activities
Capital expenditures		(90,507	)		(91,591	)
Proceeds from sale of property and equipment		2,345			3,866
Purchase of businesses, net of cash acquired		(198,186	)		(23,034	)
Purchase of short-term investments		(335,341	)		(424,940	)
Maturity of short-term investments		330,734			284,814
Other investing activities		1,734			1,246
Net cash used in investing activities		(289,221	)		(249,639	)

Financing activities
Debt issuance costs		-			(4,558	)
Principal payments on long-term debt and capital leases		(11	)		(21	)
Net proceeds on revolving credit lines		73,000			21,000
Net changes in short-term borrowings		14			(142	)
Dividends paid to common stockholders		(24,358	)		-
Dividends paid to Class B common stockholders		(2,183	)		-
Excess tax benefit from RSUs vested		-			456
Proceeds from stock options exercised		50			-
Distributions to noncontrolling interests		(547	)		(240	)
Other financing activities		(1,323	)		-
Net cash provided by financing activities		44,642			16,495
Effect of exchange rate changes on cash and cash equivalents		(17,478	)		939

Net decrease in cash and cash equivalents		(65,046	)		(52,644	)

Cash and cash equivalents at beginning of period		640,348			697,595
Cash and cash equivalents at end of period	$	575,302		$	644,951

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.

Consolidated Condensed Statement of Equity

(Unaudited - In thousands, except share amounts)

	Common Stock		Class B Convertible Common Stock		Capital in Excess of Par Value			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Total Vishay Stockholders' Equity			Noncontrolling Interests			Total Equity
Balance at January 1, 2014	$	13,520	$	1,213	$	2,054,087		$	(257,698	)	$	61,634		$	1,872,756		$	5,440		$	1,878,196
Net earnings		-		-		-			88,423			-			88,423			350			88,773
Other comprehensive loss		-		-		-			-			(49,570	)		(49,570	)		-			(49,570	)
Noncontrolling interest in business acquired		-		-		-			-			-			-			21,895			21,895
Distributions to noncontrolling interests		-		-		-			-			-			-			(547	)		(547	)
Temporary equity reclassification		-		-		(91,092	)		-			-			(91,092	)		-			(91,092	)
Restricted stock issuances (117,895 shares)		12		-		(384	)		-			-			(372	)		-			(372	)
Dividends declared ($ 0.18 per share)		-		-		21			(26,562	)		-			(26,541	)		-			(26,541	)
Stock compensation expense		-		-		1,703			-			-			1,703			-			1,703
Stock options exercised (4,337 shares)		-		-		50			-			-			50			-			50
Tax effects of stock plan		-		-		(108	)		-			-			(108	)		-			(108	)
Balance at September 27, 2014	$	13,532	$	1,213	$	1,964,277		$	(195,837	)	$	12,064		$	1,795,249		$	27,138		$	1,822,387

See accompanying notes.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 1 – Basis of Presentation

The accompanying unaudited consolidated condensed financial statements of Vishay Intertechnology, Inc. ("Vishay" or the "Company") have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for presentation of financial position, results of operations, and cash flows required by accounting principles generally accepted in the United States ("GAAP") for complete financial statements. The information furnished reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair summary of the financial position, results of operations, and cash flows for the interim periods presented. The financial statements should be read in conjunction with the consolidated financial statements filed with the Company's Annual Report on Form 10-K for the year ended December 31, 2013. The results of operations for the fiscal quarter and nine fiscal months ended September 27, 2014 are not necessarily indicative of the results to be expected for the full year.

The Company reports interim financial information for 13-week periods beginning on a Sunday and ending on a Saturday, except for the first fiscal quarter, which always begins on January 1, and the fourth fiscal quarter, which always ends on December 31. The four fiscal quarters in 2014 end on March 29, 2014, June 28, 2014, September 27, 2014, and December 31, 2014, respectively. The four fiscal quarters in 2013 ended on March 30, 2013, June 29, 2013, September 28, 2013, and December 31, 2013, respectively.

Recently Adopted Accounting Guidance

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU is the result of a convergence project between the FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards. The ASU removes inconsistencies and weaknesses in revenue requirements; provides a more robust framework for addressing revenue issues; improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; provides more useful information to users of financial statements through expanded disclosure requirements; and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The ASU is effective for the Company for interim and annual periods beginning after January 1, 2017. Vishay is currently evaluating the effect of the ASU on its revenue contracts.

Reclassifications

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

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 2 – Acquisition Activities

As part of its growth strategy, the Company seeks to expand through targeted acquisitions of other manufacturers of electronic components that have established positions in major markets, reputations for product quality and reliability, and product lines with which the Company has substantial marketing and technical expertise.

Holy Stone Polytech Co., Ltd.

On June 11, 2014, Vishay acquired Holy Stone Polytech Co., Ltd. ("Holy Stone Polytech"), a Japanese manufacturer of tantalum capacitors and formerly a subsidiary of Holy Stone Enterprise Co. Ltd., for $20,776, net of cash acquired. The acquisition is expected to strengthen the Company's position in tantalum capacitors, especially in Asia. For financial reporting purposes, the results of operations of Holy Stone Polytech have been included in the Capacitors segment since June 11, 2014. The inclusion of this business did not have a material impact on the Company's consolidated results for the fiscal quarter or nine fiscal months ended September 27, 2014. Based on an estimate of their fair values, the Company allocated $3,736 of the purchase price to definite-lived intangible assets. After allocating the purchase price to the assets acquired and liabilities assumed based on an estimation of their fair values at the date of acquisition, the Company recorded goodwill of $7,736 related to this acquisition. The goodwill associated with this transaction is not deductible for income tax purposes. The Company will test the goodwill for impairment at least annually in accordance with GAAP. The preliminary allocation is pending finalization of appraisals for property and equipment and intangible assets, finalization of a working capital adjustment, environmental assessments, and completion of other customary post-closing review activities. There can be no assurance that the estimated amounts recorded represent the final purchase allocation.

Capella Microsystems Inc.

On July 11, 2014, Vishay entered into an agreement to acquire Capella Microsystems (Taiwan) Inc. ("Capella") for approximately $205,000. Capella is a fabless IC design company specializing in optoelectronic products. As a first step in the acquisition, Vishay launched a tender offer for Capella's outstanding shares. A total of 38,703,705 shares of Capella, or 88.95% of outstanding shares, were tendered and accepted by Vishay. The offer period expired on September 1, 2014. Pursuant to the terms of the tender offer, Vishay paid NT$139 for each share tendered. The aggregate purchase price was $180,167. Capella had cash and short-term investments on hand of $50,195 at the date of acquisition. Vishay funded the acquisition with cash on hand and $53,000 of borrowings under its credit facility. The acquisition is expected to strengthen the Company's position in optoelectronic sensors.

Upon the close of the tender offer, Vishay controlled Capella and began consolidating it in its financial statements. For financial reporting purposes, the results and operations and net assets of Capella have been included in the Optoelectronic Components segment. The interest represented by the shares not tendered are presented as noncontrolling interests in the consolidated condensed financial statements. The fair value of the noncontrolling interest was determined based on the observable quoted share price as of the acquisition date. Due to the timing of the close of the tender offer, Capella's results were not material to the Company's consolidated results for the fiscal quarter or nine fiscal months ended September 27, 2014.

Vishay expects to acquire the remaining outstanding shares of Capella pursuant to the merger agreement. In connection with the closing of the merger, all remaining holders of Capella common stock other than Vishay and its subsidiaries will receive the same consideration for their shares as the holders who tendered their shares in the tender offer, or approximately $22,000 in the aggregate. The merger is expected to be completed by the end of January 2015. The closing of the merger is subject to customary closing conditions, including obtaining all necessary governmental approvals and clearances.

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

Short-term investments	$	47,438
Working capital (excluding cash and short-term investments)		(6,374	)
Property and equipment		4,134
Intangible assets:
Patents and acquired technology		14,870
Capitalized software		101
Customer relationships		54,400
Tradenames		5,110
Total intangible assets		74,481
Other, net		(454	)
Deferred taxes, net		(17,626	)
Total identifiable assets and liabilities		101,599

Cash paid to Capella stockholders, net of cash aquired		177,410
Fair value of noncontrolling interest		21,895

Goodwill	$	97,706

The weighted average useful lives for patents and acquired technology, customer relationships, and tradenames are 10, 7, and 7 years, respectively. The Company will test the goodwill for impairment at least annually in accordance with GAAP. The goodwill associated with this transaction is not deductible for income tax purposes. The preliminary allocation is pending finalization of appraisals for property and equipment and intangible assets. There can be no assurance that the estimated amounts recorded represent the final purchase price allocation.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

In evaluating the acquisition of Capella, the Company focused primarily on the ability to synergize its optoelectronics design capabilities with Vishay's existing optoelectronics product lines and customers. As a result, the fair value of the acquired assets, including identified intangible assets, corresponds to a relatively smaller portion of the acquisition price, with the Company recording a substantial amount of goodwill associated with the acquisition.

The Company recognized $613 of acquisition costs classified as a component of selling, general, and administrative expenses in its consolidated condensed statements of operations.

Pro Forma Results

The unaudited pro forma results would have been as follows, assuming the acquisitions had occurred as of January 1, 2013:

	Fiscal quarters ended				Nine fiscal months ended
	September 27, 2014		September 28, 2013		September 27, 2014		September 28, 2013

Pro forma net revenues	$	643,917	$	619,580	$	1,911,246	$	1,817,633
Pro forma net earnings attributable to Vishay stockholders		26,688		33,182		85,713		98,200
Pro forma basic earnings per share attributable to Vishay stockholders	$	0.18	$	0.23	$	0.58	$	0.68
Pro forma diluted earnings per share attributable to Vishay stockholders	$	0.17	$	0.22	$	0.56	$	0.65

The pro forma information presented for the fiscal quarter and nine fiscal months ended September 27, 2014 was adjusted to exclude acquisition-related costs incurred in 2014. The pro forma information also includes adjustments for interest expense that would have been incurred to finance the acquisition, amortization of acquired intangible assets, depreciation of acquired property and equipment, allocation of a portion of Capella results to noncontrolling interests, and tax related effects.

The unaudited pro forma results are not necessarily indicative of the results that would have been attained had the acquisition occurred on January 1, 2013.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 3 – Goodwill

Goodwill represents the excess of the cost of a business acquired over the fair value of the related net assets at the date of acquisition. Goodwill is not amortized but rather tested for impairment at least annually. The required annual impairment test of goodwill is completed as of the first day of the fourth fiscal quarter of each year. These impairment tests must be performed more frequently whenever events or changes in circumstances indicate that the asset might be impaired. The Company's business segments (see Note 10) represent its reporting units for goodwill impairment testing purposes.

The changes in the carrying amount of goodwill by segment for the nine fiscal months ended September 27, 2014 was as follows:

	Optoelectronic Components		Resistors & Inductors			Capacitors			Total

Balance at January 1, 2014	$	-	$	43,132		$	-		$	43,132
Holy Stone acquisition		-		-			7,736			7,736
Capella acquisition		97,706		-			-			97,706
Exchange rate effects		-		(643	)		(495	)		(1,138	)
Balance at September 27, 2014	$	97,706	$	42,489		$	7,241		$	147,436

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 4 – Restructuring and Related Activities

The Company places a strong emphasis on controlling its costs.

Historically, the Company's primary cost reduction technique was through the transfer of production to the extent possible from high-labor-cost countries, such as the United States and Western Europe, to lower-labor-cost countries, such as the Czech Republic, Hungary, Israel, India, Malaysia, Mexico, the People's Republic of China, and the Philippines. Between 2001 and 2009, the Company recorded, in the consolidated statements of operations, restructuring and severance costs and related asset write-downs in order to reduce its cost structure going forward.

The Company also incurred significant costs to restructure and integrate acquired businesses, which was included in the cost of the acquisitions under then-applicable GAAP.

The Company did not initiate any new restructuring projects in the years ended December 31, 2012, 2011, or 2010.

On October 28, 2013, the Company announced various cost reduction programs as part of its continuous efforts to improve efficiency and operating performance. The cash costs of these programs, primarily severance, are expected to be approximately $31,700. Complete implementation of all of the programs is expected to occur before the end of the first fiscal quarter of 2016. Many of the severance costs will be recognized ratably over the required stay periods.

The following table summarizes restructuring and related expenses which were recognized and reported on a separate line in the accompanying consolidated statements of operations:

	Fiscal quarter ended			Nine fiscal months ended
	September 27, 2014			September 27, 2014
MOSFETs Enhanced Competitiveness Program	$	1,522		$	4,741
Voluntary Separation / Retirement Program		(94	)		12,105
Modules Production Transfer Program		2,080			2,080
Total	$	3,508		$	18,926

MOSFETs Enhanced Competitiveness Program

Over a period of approximately 2 years and in a series of discrete steps, the manufacture of wafers for a substantial share of products will be transferred into a more cost-efficient fab. As a consequence, certain other manufacturing currently occurring in-house will be transferred to third-party foundries.

The total severance costs associated with these initiatives are expected to be approximately $16,000. Employees generally must remain with the Company during the production transfer period. Accordingly, the Company will accrue these severance costs ratably over the respective employees' remaining service periods.

The following table summarizes the activity to date related to this program:

Expense recorded in the fourth fiscal quarter of 2013	$	2,328
Cash paid		(267	)
Balance at December 31, 2013	$	2,061
Expense		4,741
Cash paid		(682	)
Balance at September 27, 2014	$	6,120

Severance benefits are generally paid in a lump sum at cessation of employment. The current portion of the liability is $840 and is included in other accrued expenses in the accompanying consolidated condensed balance sheets. The non-current portion of the liability is included in other liabilities in the accompanying consolidated condensed balance sheets.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Voluntary Separation / Retirement Program

The voluntary separation / early retirement program was offered to employees worldwide who were eligible because they met job classification, age, and years-of-service criteria as of October 31, 2013. The program benefits vary by country and job classification, but generally include a cash loyalty bonus based on years of service. All employees eligible for the program have been identified, and have left or will leave the Company after the expiration of their respective transition periods.

These employees generally were not aligned with any particular segment. The effective separation / retirement date for most employees who accepted the offer was June 30, 2014 or earlier, with a few exceptions to allow for a transition period.

The following table summarizes the activity to date related to this program:

Expense recorded in the fourth fiscal quarter of 2013	$	486
Cash paid		(98	)
Foreign currency translation		3
Balance at December 31, 2013	$	391
Expense		12,105
Cash paid		(6,654	)
Foreign currency translation		(291	)
Balance at September 27, 2014	$	5,551

The payment terms vary by country, but generally are paid in a lump sum at cessation of employment. The entire amount of the liability is considered current and is included in other accrued expenses in the accompanying consolidated balance sheets.

Modules Production Transfer

In an effort to reduce costs and streamline production of its module products within its Diodes segment, the Company committed to two smaller cost reduction programs related to the transferring of production of certain of its products. The production transfers will take approximately twelve months to execute.

The following table summarizes the activity to date related to this program:

Expense	$	2,080
Cash paid		(94	)
Foreign currency translation		(44	)
Balance at September 27, 2014	$	1,942

Severance benefits are generally paid in a lump sum at cessation of employment. The entire amount of the liability is considered current and is included in other accrued expenses in the accompanying consolidated condensed balance sheets.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 5 – Income Taxes

The provision for income taxes consists of provisions for federal, state, and foreign income taxes. The effective tax rates for the periods ended September 27, 2014 and September 28, 2013 reflect the Company's expected tax rate on reported income from continuing operations before income tax and tax adjustments. The Company operates in a global environment with significant operations in various jurisdictions outside the United States. Accordingly, the consolidated income tax rate is a composite rate reflecting the Company's earnings and the applicable tax rates in the various jurisdictions where the Company operates.

In July 2013, a new tax law was enacted in Israel which effectively increases the corporate income tax rate on certain types of income earned after January 1, 2014. Accordingly, the Company's deferred tax assets in Israel were increased to reflect the higher rate and a one-time tax benefit of $2,867 was recorded in the consolidated condensed statement of operations during the fiscal quarter and nine fiscal months ended September 28, 2013. As a result of the retroactive enactment of the American Taxpayer Act of 2012, which was signed into law on January 2, 2013, the Company recorded one-time tax benefits of $1,330 in the consolidated condensed statement of operations during the nine fiscal months ended September 28, 2013.

During the nine fiscal months ended September 27, 2014, the liabilities for unrecognized tax benefits decreased by $1,432 on a net basis, principally due to payments and currency effects offset by increases for interest and positions taken in prior periods.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 6 – Long-Term Debt

Long-term debt consists of the following:

	September 27, 2014		December 31, 2013

Credit facility	$	187,000	$	114,000
Exchangeable unsecured notes, due 2102		38,642		38,642
Convertible senior debentures, due 2040		103,364		101,846
Convertible senior debentures, due 2041		52,966		52,264
Convertible senior debentures, due 2042		58,908		58,159
		440,880		364,911
Less current portion		-		-
	$	440,880	$	364,911

Convertible Senior Debentures

Vishay currently has three issuances of convertible senior debentures outstanding with generally congruent terms. The quarterly cash dividend program of the Company results in adjustments to the conversion rate and effective conversion price for each issuance of the Company's convertible senior debentures effective as of the ex-dividend date of each cash dividend.

The following table summarizes some key facts and terms regarding the three series of outstanding convertible senior debentures following the adjustment made to the conversion rate of the debentures on the ex-dividend date of the September 18, 2014 dividend payment:

	Due 2040			Due 2041			Due 2042
Issuance date	November 9, 2010			May 13, 2011			May 31, 2012
Maturity date	November 15, 2040			May 15, 2041			June 1, 2042
Principal amount	$	275,000		$	150,000		$	150,000
Cash coupon rate (per annum)		2.25	%		2.25	%		2.25	%
Nonconvertible debt borrowing rate at issuance (per annum)		8.00	%		8.375	%		7.50	%
Conversion rate effective August 26, 2014 (per $1 principal amount)		72.8961			53.1957			85.7084
Effective conversion price effective August 26, 2014 (per share)	$	13.72		$	18.80		$	11.67
130% of the conversion price (per share)	$	17.84		$	24.44		$	15.17
Call date	November 20, 2020			May 20, 2021			June 7, 2022

Prior to three months before the maturity date, the holders may only convert their debentures under the following circumstances: (1) during any fiscal quarter after the first full quarter subsequent to issuance, if the sale price of Vishay common stock reaches 130% of the conversion price for a specified period; (2) the trading price of the debentures falls below 98% of the product of the sale price of Vishay's common stock and the conversion rate for a specified period; (3) Vishay calls any or all of the debentures for redemption, at any time prior to the close of business on the third scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events.

The convertible debentures due 2042 became convertible subsequent to the September 27, 2014 evaluation of the conversion criteria, due to the sale price of Vishay's common stock exceeding 130% of the conversion price for the applicable period in the third fiscal quarter of 2014. The debentures due 2042 will remain convertible until December 31, 2014, at which time the conversion criteria will be reevaluated. At the direction of its Board of Directors, the Company intends, upon conversion, to repay the principal amounts of the convertible senior debentures due 2042 in cash and settle any additional amounts in shares of Vishay common stock. The excess of the amount that the Company would pay to the holders of the debentures upon conversion over the carrying value of the liability component of the debentures currently convertible has been reclassifed as temporary equity in the condensed consolidated financial statements. The Company intends to finance the principal amount of any converted debentures using borrowings under its credit facility. Accordingly, the debt component of the convertible debentures due 2042 continues to be classified as a non-current liability in the consolidated condensed balance sheets.

GAAP requires an issuer to separately account for the liability and equity components of the instrument in a manner that reflects the issuer's nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods. The resulting discount on the debt is amortized as non-cash interest expense in future periods.

The carrying values of the liability and equity components of the convertible debentures are reflected in the Company's consolidated condensed balance sheets as follows:

	Principal amount of the debentures		Unamortized discount			Embedded derivative		Carrying value of liability component		Equity component (including temporary equity) - net carrying value
September 27, 2014
Due 2040	$	275,000		(172,189	)		553	$	103,364	$	110,094
Due 2041	$	150,000		(97,348	)		314	$	52,966	$	62,246
Due 2042	$	150,000		(91,301	)		209	$	58,908	$	57,874
Total	$	575,000	$	(360,838	)	$	1,076	$	215,238	$	230,214

December 31, 2013
Due 2040	$	275,000		(173,645	)		491	$	101,846	$	110,094
Due 2041	$	150,000		(98,085	)		349	$	52,264	$	62,246
Due 2042	$	150,000		(92,038	)		197	$	58,159	$	57,874
Total	$	575,000	$	(363,768	)	$	1,037	$	212,269	$	230,214

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Interest is payable on the debentures semi-annually at the cash coupon rate; however, the remaining debt discount is being amortized as additional non-cash interest expense using an effective annual interest rate equal to the Company's estimated nonconvertible debt borrowing rate at the time of issuance. In addition to ordinary interest, contingent interest will accrue in certain circumstances relating to the trading price of the debentures and under certain other circumstances beginning ten years subsequent to issuance.

Interest expense related to the debentures is reflected on the consolidated condensed statements of operations for the fiscal quarters ended:

	Contractual coupon interest		Non-cash amortization of debt discount		Non-cash amortization of deferred financing costs		Non-cash change in value of derivative liability			Total interest expense related to the debentures
September 27, 2014
Due 2040	$	1,547		495		22		93		$	2,157
Due 2041	$	844		251		11		(29	)	$	1,077
Due 2042	$	844		251		13		13		$	1,121
Total	$	3,235	$	997	$	46	$	77		$	4,355

September 28, 2013
Due 2040	$	1,547		458		22		(30	)	$	1,997
Due 2041	$	844		231		11		(13	)	$	1,073
Due 2042	$	844		233		13		3		$	1,093
Total	$	3,235	$	922	$	46	$	(40	)	$	4,163

Interest expense related to the debentures is reflected on the consolidated condensed statements of operations for the nine fiscal months ended:

	Contractual coupon interest		Non-cash amortization of debt discount		Non-cash amortization of deferred financing costs		Non-cash change in value of derivative liability			Total interest expense related to the debentures
September 27, 2014
Due 2040	$	4,641		1,456		66		62		$	6,225
Due 2041	$	2,532		737		35		(35	)	$	3,269
Due 2042	$	2,532		737		40		12		$	3,321
Total	$	9,705	$	2,930	$	141	$	39		$	12,815

September 28, 2013
Due 2040	$	4,641		1,346		66		(193	)	$	5,860
Due 2041	$	2,532		679		35		(100	)	$	3,146
Due 2042	$	2,532		684		40		(73	)	$	3,183
Total	$	9,705	$	2,709	$	141	$	(366	)	$	12,189

Exchangeable Unsecured Notes, due 2102

Quarterly cash dividends do not result in an adjustment to the put/call rate of the Company's exchangeable unsecured notes due 2102; therefore, the cash dividend payments in the first, second, and third fiscal quarters of 2014 had no effect on the exchangeable notes due 2102.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 7 – Accumulated Other Comprehensive Income (Loss)

The cumulative balance of each component of other comprehensive income (loss) and the income tax effects allocated to each component are as follows:

	Pension and other post-retirement actuarial items			Currency translation adjustment			Unrealized gain (loss) on available-for-sale securities			Total
Balance at January 1, 2014	$	(129,918	)	$	190,998			554		$	61,634
Other comprehensive income (loss) before reclassifications		(1,177	)		(64,373	)		1,775		$	(63,775	)
Tax effect		412			-			(621	)	$	(209	)
Other comprehensive income (loss) before reclassifications, net of tax		(765	)		(64,373	)		1,154		$	(63,984	)
Amounts reclassified out of AOCI		22,010			-			(24	)	$	21,986
Tax effect		(7,580	)		-			8		$	(7,572	)
Amounts reclassified out of AOCI, net of tax		14,430			-			(16	)	$	14,414
Net other comprehensive income (loss)	$	13,665		$	(64,373	)	$	1,138		$	(49,570	)
Balance at September 27, 2014	$	(116,253	)	$	126,625		$	1,692		$	12,064

Reclassifications of pension and other post-retirement actuarial items out of AOCI are included in the computation of net periodic benefit cost, and include the U.S. pension settlement charges. (See Note 8 for further information). The amount of unrealized gains (losses) on available-for-sale securities reclassified out of AOCI as a result of sales of securities held by the Company's rabbi trust used to fund a deferred compensation plan was $24 for the fiscal quarter and nine fiscal months ended September 27, 2014. These reclassifications are recorded as a component of compensation expense within Selling, General, and Administrative expenses on our consolidated condensed statements of operations.

Other comprehensive income (loss) includes Vishay's proportionate share of other comprehensive income (loss) of nonconsolidated subsidiaries accounted for under the equity method.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 8 – Pensions and Other Postretirement Benefits

The Company maintains various retirement benefit plans.

The following table shows the components of the net periodic pension cost for the third fiscal quarters of 2014 and 2013 for the Company's defined benefit pension plans:

	Fiscal quarter ended September 27, 2014						Fiscal quarter ended September 28, 2013
	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans

Net service cost	$	-		$	826		$	-		$	864
Interest cost		3,313			2,149			3,471			2,022
Expected return on plan assets		(3,578	)		(534	)		(4,781	)		(510	)
Amortization of prior service cost (credit)		(23	)		1			244			(9	)
Amortization of losses		1,507			677			3,733			832
Curtailment and settlement losses		15,588			-			-			-
Net periodic benefit cost	$	16,807		$	3,119		$	2,667		$	3,199

The following table shows the components of the net periodic pension cost for the nine fiscal months ended September 27, 2014 and September 28, 2013 for the Company's defined benefit pension plans:

	Nine fiscal months ended September 27, 2014						Nine fiscal months ended September 28, 2013
	U.S. Plans			Non-U.S. Plans			U.S. Plans			Non-U.S. Plans

Net service cost	$	-		$	2,481		$	-		$	2,621
Interest cost		10,981			6,525			10,412			6,076
Expected return on plan assets		(11,694	)		(1,591	)		(14,343	)		(1,559	)
Amortization of prior service cost (credit)		(69	)		3			733			(26	)
Amortization of losses		5,127			2,055			11,198			2,499
Curtailment and settlement losses		15,588			-			-			-
Net periodic benefit cost	$	19,933		$	9,473		$	8,000		$	9,611

During the third fiscal quarter of 2014, the Company executed two partial-settlement transactions to reduce the risk associated with its U.S. qualified pension obligations. These transactions included the purchase of annuity contracts for approximately 700 participants pursuant to an arrangement inherited in a past acquisition and a special limited-time voluntary lump-sum payment offer to certain former employees who were deferred vested participants of the plan not currently receiving periodic payments of their pension benefit. A total of 800 participants accepted the voluntary lump-sum offer. The plan is no longer obligated to pay any benefits to the 1,500 participants covered by these two settlement transactions. These former participants represented approximately 23% of the total participants prior to executing these transactions.

As a result of these transactions, the projected benefit obligation, plan assets, and funded status were remeasured on the dates of the respective settlements. The plan assets consisted of equity securities, fixed income securities, and real estate investments.

Equity securities held by the U.S. defined benefit retirement plan consist of various mutual funds and exchange traded funds that are valued based on quoted market prices on the last business day of the year. The fair value measurement of the mutual funds and exchange traded funds securities is considered a Level 1 measurement within the fair value hierarchy.

Fixed income securities held by the U.S. defined benefit retirement plans consist of exchange traded funds and a short-term investment fund. The exchange traded funds are valued based on quoted market prices on the last business day of the year. The fair value measurement of the exchange traded funds securities is considered a Level 1 measurement within the fair value hierarchy. The short-term investment fund strictly invests in short-term investments, including commercial paper, certificates of deposit, U.S. government agency and instrumentality obligations, U.S. government obligations, corporate notes, and funding agreements. The maturity date of all investments held by the short-term investment fund is within one year from the financial statement date. There are no redemption restrictions on the plan's investment. The fair value of the short-term investment fund has been estimated using the net asset value per share of the investment. The fair value measurement of the short-term investment fund is considered a Level 2 measurement within the fair value hierarchy.

Real estate investments held by the U.S. defined benefit retirement plans consist of real estate investment trust securities that are valued at quoted market prices on the last business day of the year. The fair value measurement of the real estate investments is considered a Level 1 measurement within the fair value hierarchy.

These transactions reduced the U.S. projected benefit obligation by approximately $59,400, and were funded entirely with plan assets. These transactions also resulted in the recognition of non-cash settlement charges aggregating $15,588, representing previously unrecognized actuarial items. These non-cash charges are presented on a separate line in the consolidated condensed statements of operations.

The Company continues to evaluate options to further reduce the risk associated with its pension obligations.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

The following table shows the components of the net periodic benefit cost for the third fiscal quarters of 2014 and 2013 for the Company's other postretirement benefit plans:

	Fiscal quarter ended September 27, 2014					Fiscal quarter ended September 28, 2013
	U.S. Plans			Non-U.S. Plans		U.S. Plans			Non-U.S. Plans

Service cost	$	29		$	77	$	28		$	74
Interest cost		88			61		78			64
Amortization of prior service (credit)		(206	)		-		(200	)		-
Amortization of losses (gains)		(35	)		9		1			-
Net periodic benefit cost	$	(124	)	$	147	$	(93	)	$	138

The following table shows the components of the net periodic pension cost for the nine fiscal months ended September 27, 2014 and September 28, 2013 for the Company's other postretirement benefit plans:

	Nine fiscal months ended September 27, 2014					Nine fiscal months ended September 28, 2013
	U.S. Plans			Non-U.S. Plans		U.S. Plans			Non-U.S. Plans

Service cost	$	87		$	235	$	83		$	222
Interest cost		264			187		235			191
Amortization of prior service (credit)		(618	)		-		(599	)		-
Amortization of losses (gains)		(105	)		29		3			-
Net periodic benefit cost	$	(372	)	$	451	$	(278	)	$	413

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 9 – Stock-Based Compensation

The Company has various stockholder-approved programs which allow for the grant of stock-based compensation to officers, employees, and non-employee directors of the Company.

The amount of compensation cost related to stock-based payment transactions is measured based on the grant-date fair value of the equity instruments issued. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Company determines compensation cost for restricted stock units ("RSUs"), phantom stock units, and restricted stock based on the grant-date fair value of the underlying common stock adjusted for expected dividends paid over the required vesting period for non-participating awards. Compensation cost is recognized over the period that an officer, employee, or non-employee director provides service in exchange for the award.

The following table summarizes stock-based compensation expense recognized:

	Fiscal quarters ended					Nine fiscal months ended
	September 27, 2014			September 28, 2013		September 27, 2014		September 28, 2013

Stock options	$	-		$	-	$	-		18
Restricted stock units		(42	)		382		1,572		(1,336	)
Phantom stock units		-			-		131		108
Total	$	(42	)	$	382	$	1,703		(1,210	)

The Company recognizes compensation cost for RSUs that are expected to vest and records cumulative adjustments in the period that the expectation changes. Stock-based compensation for the nine fiscal months ended September 28, 2013, as presented in the table above, includes the material reversal of stock-based compensation expense recognized for the performance-based RSUs scheduled to vest on January 1, 2014 recorded in the second fiscal quarter of 2013. $1,778 of these reversed costs had been originally reported as a separate line item upon cessation of employment of certain former executives in 2011, and accordingly, this adjustment is also reported as a separate line item in the accompanying consolidated condensed statements of operations. A portion of the stock-based compensation expense related to certain current executives that was reversed in the second fiscal quarter of 2013 was recognized in the fourth fiscal quarter of 2013 due to certain amendments to the performance-based RSUs granted to certain current executives in 2011 approved by the Compensation Committee of the Board of Director's in the fourth fiscal quarter of 2013. Pursuant to their original terms, the performance-based RSUs would have vested on January 1, 2014 only if all of the associated performance criteria were met for the three-year period ending December 31, 2013. Pursuant to the amended terms, 75% of the performance-based RSUs of each of such executives vested effective December 5, 2013 in light of the Compensation Committee of the Board of Director's assessment that the performance criteria would be achieved in substantial part by December 31, 2013.

The following table summarizes unrecognized compensation cost and the weighted average remaining amortization periods at September 27, 2014 (amortization periods in years):

	Unrecognized Compensation Cost		Weighted Average Remaining Amortization Periods

Stock options	$	-		0.0
Restricted stock units		10,808		1.2
Phantom stock units		-		0.0
Total	$	10,808

Unrecognized compensation cost presented in the table above includes $6,485 of unrecognized compensation cost for performance-based RSUs that are not currently expected to vest and for which no compensation cost is currently being recognized.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

2007 Stock Incentive Plan

The Company's 2007 Stock Incentive Program (the "2007 Program") was amended and restated and approved by Vishay's stockholders at Vishay's Annual Meeting of Stockholders on May 20, 2014. The 2007 Program permits the grant of up to 6,500,000 shares of restricted stock, unrestricted stock, RSUs, stock options, and phantom stock units, to officers, employees, and non-employee directors of the Company. Such instruments are available for grant until May 20, 2024.

Stock Options

In addition to stock options outstanding pursuant to the 2007 Program, during the periods presented, the Company had stock options outstanding under previous stockholder-approved stock option programs. These programs are more fully described in Note 12 to the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2013. No additional options may be granted pursuant to these programs.

Stock option activity under the 2007 Program as of September 27, 2014 and changes during the nine fiscal months then ended are presented below (number of options in thousands):

	Number of Options			Weighted Average Exercise Price
Outstanding:
January 1, 2014		109		$	15.24
Granted		-			-
Exercised		(4	)		11.62
Cancelled or forfeited		-			-
Outstanding at September 27, 2014		105		$	15.38

Vested		105

Exercisable		105

At September 27, 2014, there were no unvested options outstanding.

The pretax aggregate intrinsic value (the difference between the closing stock price on the last trading day of the third fiscal quarter of 2014 of $14.42 per share and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on September 27, 2014 is $42. This amount changes based on changes in the market value of the Company's common stock. During the nine fiscal months ended September 27, 2014, 4,337 options were exercised. The total instrinsic value of options exercised during the nine fiscal months ended September 27, 2014 was $18.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Restricted Stock Units

RSU activity under the 2007 Program as of September 27, 2014 and changes during the nine fiscal months then ended are presented below (number of RSUs in thousands):

	Number of RSUs			Weighted Average Grant-date Fair Value per Unit
Outstanding:
January 1, 2014		1,059		$	13.40
Granted		336			13.48
Vested*		(146	)		15.87
Cancelled or forfeited		(102	)		17.45
Outstanding at September 27, 2014		1,147		$	12.75

Expected to vest at September 27, 2014		649

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

The number of performance-based RSUs that are scheduled to vest on January 1, 2015 is evaluated based on the full achievement of the defined target performance criteria. The number of performance-based RSUs that are scheduled to vest on January 1, 2016 and January 1, 2017 increases ratably based on the achievement of defined performance criteria between the established target and maximum levels. RSUs with performance-based vesting criteria are expected to vest as follows (number of RSUs in thousands):

Vesting Date	Expected to Vest		Not Expected to Vest		Total
January 1, 2015		-		276		276
January 1, 2016		-		222		222
January 1, 2017		192		-		192

Phantom Stock Plan

The 2007 Program authorizes the grant of phantom stock units to the extent provided for in the Company's employment agreements with such senior executives. Each phantom stock unit entitles the recipient to receive a share of common stock at the individual's termination of employment or any other future date specified in the applicable employment agreement. Phantom stock units participate in dividend distribution on the same basis as the Company's common stock and Class B common stock. Dividend equivalents are issued in the form of additional units of phantom stock. The phantom stock units are fully vested at all times.

Phantom stock unit activity under the phantom stock plan as of September 27, 2014 and changes during the nine fiscal months then ended are presented below (number of phantom stock units in thousands):

	Number of units		Grant-date Fair Value per Unit
Outstanding:
January 1, 2014		107
Granted		10	$	13.12
Dividend equivalents issued		2
Redeemed for common stock		-
Outstanding at September 27, 2014		119

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 10 – Segment Information

Vishay operates, and its chief operating decision maker makes strategic and operating decisions with regards to assessing performance and allocating resources based on, five reporting segments: MOSFETs, Diodes, Optoelectronic Components, Resistors & Inductors, and Capacitors.

The Company evaluates business segment performance on operating income, exclusive of certain items ("segment operating income"). Only dedicated, direct selling, general, and administrative expenses of the segments are included in the calculation of segment operating income. The Company's calculation of segment operating income excludes such selling, general, and administrative costs as global operations, sales and marketing, information systems, finance and administration groups, as well as restructuring and severance costs, executive compensation charges (credits), material gains and losses on sales of property, and other items. Management believes that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic operating results of the Company. These items represent reconciling items between segment operating income and consolidated operating income. Business segment assets are the owned or allocated assets used by each business.

The following tables set forth business segment information:

	MOSFETs		Diodes		Optoelectronic Components		Resistors & Inductors		Capacitors		Total
Fiscal quarter ended September 27, 2014:
Product Sales	$	121,631	$	151,444	$	67,549	$	189,419	$	107,105	$	637,148
Royalty Revenues		28		-		-		1,035		-	$	1,063
Total Revenue	$	121,659	$	151,444	$	67,549	$	190,454	$	107,105	$	638,211

Gross Margin	$	17,384	$	36,135	$	24,585	$	59,581	$	20,707	$	158,392

Fiscal quarter ended September 28, 2013:
Product Sales	$	115,143	$	140,790	$	56,796	$	176,885	$	111,910	$	601,524
Royalty Revenues		25		-		51		1,290		-	$	1,366
Total Revenue	$	115,168	$	140,790	$	56,847	$	178,175	$	111,910	$	602,890

Gross Margin	$	15,735	$	32,405	$	20,163	$	54,093	$	20,824	$	143,220

Nine fiscal months ended September 27, 2014:
Product Sales	$	358,715	$	437,944	$	188,305	$	569,944	$	324,360	$	1,879,268
Royalty Revenues		127		-		-		3,123		-	$	3,250
Total Revenue	$	358,842	$	437,944	$	188,305	$	573,067	$	324,360	$	1,882,518

Gross Margin	$	48,872	$	100,606	$	68,610	$	181,096	$	68,584	$	467,768

Nine fiscal months ended September 28, 2013:
Product Sales	$	331,473	$	406,525	$	171,419	$	510,630	$	329,821	$	1,749,868
Royalty Revenues		146		-		51		4,744		-	$	4,941
Total Revenue	$	331,619	$	406,525	$	171,470	$	515,374	$	329,821	$	1,754,809

Gross Margin	$	45,101	$	91,093	$	59,088	$	161,039	$	66,490	$	422,811

The Optoelectronic Components segment assets increased due to the Capella acquisition (see Note 2).

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

	Fiscal quarters ended						Nine fiscal months ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Operating margin reconciliation:
MOSFETs	$	7,824		$	5,313		$	19,804		$	13,828
Diodes		29,720			26,240			80,908			72,968
Optoelectronic Components		20,571			16,492			56,920			48,259
Resistors & Inductors		50,194			45,096			152,499			134,836
Capacitors		14,482			14,879			49,945			48,920
Restructuring and Severance Costs		(3,508	)		-			(18,926	)		-
U.S. Pension Settlement Charges		(15,588	)		-			(15,588	)		-
Executive Compensation Credit		-			-			-			1,778
Unallocated Selling, General, and Administrative Expenses		(58,236	)		(54,867	)		(179,608	)		(169,941	)
Consolidated Operating Income	$	45,459		$	53,153		$	145,954		$	150,648

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 11 – Earnings Per Share

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

	Fiscal quarters ended				Nine fiscal months ended
	September 27, 2014		September 28, 2013		September 27, 2014		September 28, 2013

Numerator:
Numerator for basic earnings per share:
Net earnings	$	26,971	$	32,719	$	88,423	$	92,959

Adjustment to the numerator for continuing operations and net earnings:
Interest savings assuming conversion of dilutive convertible and exchangeable notes, net of tax		14		33		44		124

Numerator for diluted earnings per share:
Net earnings	$	26,985	$	32,752	$	88,467	$	93,083

Denominator:
Denominator for basic earnings per share:
Weighted average shares		147,451		144,937		147,447		144,012
Outstanding phantom stock units		118		107		118		107
Adjusted weighted average shares		147,569		145,044		147,565		144,119

Effect of dilutive securities:
Convertible and exchangeable debt instruments		7,702		6,560		6,332		7,045
Restricted stock units		267		279		237		301
Other		8		7		8		6
Dilutive potential common shares		7,977		6,846		6,577		7,352

Denominator for diluted earnings per share:
Adjusted weighted average shares		155,546		151,890		154,142		151,471

Basic earnings per share attributable to Vishay stockholders	$	0.18	$	0.23	$	0.60	$	0.65

Diluted earnings per share attributable to Vishay stockholders	$	0.17	$	0.22	$	0.57	$	0.61

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

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

	Fiscal quarters ended				Nine fiscal months ended
	September 27, 2014		September 28, 2013		September 27, 2014		September 28, 2013
Convertible and exchangeable notes:
Convertible Senior Debentures, due 2040		-		19,809		-		19,809
Convertible Senior Debentures, due 2041		7,925		7,885		7,927		7,885
Weighted average employee stock options		77		77		77		87
Weighted average other		154		285		143		370

In periods in which they are dilutive, if the potential common shares related to the exchangeable notes are included in the computation, the related interest savings, net of tax, assuming conversion/exchange is added to the net earnings used to compute earnings per share.

The Company's convertible debt instruments are only convertible upon the occurrence of certain events. The convertible debentures due 2042 are convertible subsequent to the September 27, 2014 evaluation of the conversion criteria. In periods that the debentures are not convertible, the certain conditions which could trigger conversion of the remaining debentures have been deemed to be non-substantive, and accordingly, the Company has always assumed the conversion of these instruments in its diluted earnings per share computation during periods in which they are dilutive.

At the direction of its Board of Directors, the Company intends, upon conversion, to repay the principal amounts of the convertible senior debentures, due 2040, due 2041, and due 2042, in cash and settle any additional amounts in shares of Vishay common stock. Accordingly, the debentures are included in the diluted earnings per share computation using the "treasury stock method" (similar to options and warrants) rather than the "if converted method" otherwise required for convertible debt. Under the "treasury stock method," Vishay calculates the number of shares issuable under the terms of the debentures based on the average market price of Vishay common stock during the period, and that number is included in the total diluted shares figure for the period. If the average market price is less than $13.72, no shares are included in the diluted earnings per share computation for the convertible senior debentures due 2040, if the average market price is less than $18.80, no shares are included in the diluted earnings per share computation for the convertible senior debentures due 2041, and if the average market price is less than $11.67, no shares are included in the diluted earnings per share computation for the convertible senior debentures due 2042.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 12 – Fair Value Measurements

The fair value measurement accounting guidance establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that reflect the Company's own assumptions.

An asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. There have been no changes in the classification of any financial instruments within the fair value hierarchy in the periods presented.

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

	Total Fair Value			Level 1		Level 2		Level 3
September 27, 2014:
Assets:
Assets held in rabbi trusts	$	38,270		$	25,081	$	13,189	$	-
Available for sale securities	$	7,162			7,162		-		-
	$	45,432		$	32,243	$	13,189	$	-
Liabilities:
Embedded derivative - convertible debentures due 2040	$	(553	)	$	-	$	-	$	(553	)
Embedded derivative - convertible debentures due 2041	$	(314	)		-		-		(314	)
Embedded derivative - convertible debentures due 2042	$	(209	)		-		-		(209	)
	$	(1,076	)	$	-	$	-	$	(1,076	)

December 31, 2013:
Assets:
Assets held in rabbi trusts	$	36,992		$	24,064		12,928	$	-
Available for sale securities	$	7,356			7,356		-		-
	$	44,348		$	31,420	$	12,928	$	-
Liabilities:
Embedded derivative - convertible debentures due 2040	$	(491	)	$	-	$	-	$	(491	)
Embedded derivative - convertible debentures due 2041	$	(349	)		-		-		(349	)
Embedded derivative - convertible debentures due 2042	$	(197	)		-		-		(197	)
	$	(1,037	)	$	-	$	-	$	(1,037	)

The Company maintains non-qualified trusts, referred to as "rabbi" trusts, to fund payments under deferred compensation and non-qualified pension plans. Rabbi trust assets consist primarily of marketable securities, classified as available-for-sale and company-owned life insurance assets. The marketable securities held in the rabbi trusts are valued using quoted market prices on the last business day of the period. The company-owned life insurance assets are valued in consultation with the Company's insurance brokers using the value of underlying assets of the insurance contracts. The fair value measurement of the marketable securities held in the rabbi trust is considered a Level 1 measurement and the measurement of the company-owned life insurance assets is considered a Level 2 measurement within the fair value hierarchy.

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

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

The convertible senior debentures, due 2040, due 2041, and due 2042, issued by the Company on November 9, 2010, May 13, 2011, and May 31, 2012, respectively, contain embedded derivative features that GAAP requires to be bifurcated and remeasured each reporting period. Each quarter, the change in the fair value of the embedded derivative features, if any, is recorded in the consolidated condensed statements of operations. The Company uses a derivative valuation model to derive the value of the embedded derivative features. Key inputs into this valuation model are the Company's current stock price, risk-free interest rates, the stock dividend yield, the stock volatility, and the debentures' credit spread over LIBOR. The first three aforementioned inputs are based on observable market data and are considered Level 2 inputs while the last two aforementioned inputs are unobservable and thus require management's judgment and are considered Level 3 inputs. The fair value measurement is considered a Level 3 measurement within the fair value hierarchy.

In the third fiscal quarter of 2014, the Company entered into a forward contract with a highly-rated financial institution to mitigate the foreign currency risk associated with an intercompany loan denominated in a currency other than the legal entity's functional currency. The notional amount of the forward contract was $25,000 as of September 27, 2014. The intercompany loan was used to finance a portion of the purchase price for Capella. The forward contract settles monthly and is expected to be renewed at the Company's discretion on a monthly basis until the intercompany loan is repaid. The forward contract was renewed on the last day of the third fiscal quarter. We have not designated the forward contract as a hedge for accounting purposes, and as such the change in the fair value of the contract is recognized in the consolidated condensed statements of operations as a component of other income (expense). The Company estimates the fair value of the forward contract based on applicable and commonly used pricing models using current market information and is considered a Level 2 measurement within the fair value hierachy. Due to the timing of the renewal of the forward contract, the value of the forward contract was immaterial as of September 27, 2104. The Company does not utilize derivatives or other financial instruments for trading or other speculative purposes.

The fair value of the long-term debt, excluding the derivative liabilities, at September 27, 2014 and December 31, 2013 is approximately $859,500 and $750,700, respectively, compared to its carrying value, excluding the derivative liabilities, of $439,804, and $363,874, respectively. The Company estimates the fair value of its long-term debt using a combination of quoted market prices for similar financing arrangements and expected future payments discounted at risk-adjusted rates, which are considered Level 2 inputs.

At September 27, 2014 and December 31, 2013, the Company's short-term investments were comprised of time deposits with financial institutions that have maturities that exceed 90 days from the date of acquisition; however they all mature within one year from the respective balance sheet dates. The short-term investments are accounted for as held-to-maturity debt instruments, at amortized cost, which approximates their fair value. The investments are funded with excess cash not expected to be needed for operations prior to maturity; therefore, the Company believes it has the intent and ability to hold the short-term investments until maturity. At each reporting date, the Company performs an evaluation to determine if any unrealized losses are other-than-temporary. No other-than-temporary impairments have been recognized on these securities, and there are no unrecognized holding gains or losses for these securities during the periods presented. There have been no transfers to or from the held-to-maturity classification. All decreases in the account balance are due to returns of principal at the securities' maturity dates. Interest on the securities is recognized as interest income when earned.

At September 27, 2014 and December 31, 2013, the Company's cash and cash equivalents were comprised of demand deposits, time deposits with maturities of three months or less when purchased, and money market funds. The Company estimates the fair value of its cash, cash equivalents, and short-term investments using level 2 inputs. Based on the current interest rates for similar investments with comparable credit risk and time to maturity, the fair value of the Company's cash, cash equivalents, and short-term investments approximate the carrying amounts reported in the consolidated condensed balance sheets.

The Company's financial instruments also include accounts receivable, short-term notes payable, and accounts payable. The carrying amounts for these financial instruments reported in the consolidated condensed balance sheets approximate their fair values.

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

Vishay Intertechnology, Inc. ("Vishay," "we," "us," or "our") is a global manufacturer and supplier of discrete semiconductors and passive components, including power MOSFETs, power integrated circuits, transistors, diodes, optoelectronic components, resistors, capacitors, and inductors. Discrete semiconductors and passive components manufactured by Vishay are used in virtually all types of electronic products, including those in the industrial, computing, automotive, consumer electronic products, telecommunications, power supplies, military/aerospace, and medical industries.

We operate in five product segments: MOSFETs; Diodes; Optoelectronic Components; Resistors & Inductors; and Capacitors.

Since 1985, we have pursued a business strategy of growth through focused research and development and acquisitions. Through this strategy, we have grown to become one of the world's largest manufacturers of discrete semiconductors and passive components. We expect to continue our strategy of acquisitions while also maintaining a prudent capital structure.

We are focused on enhancing stockholder value and improving earnings per share. In addition to our growth plan, we also have opportunistically repurchased our stock. We have repurchased 44.3 million shares of our common stock since the fourth fiscal quarter of 2010, representing 24% of our shares outstanding before we began this initiative. The exchange of $56.4 million principal amount of our exchangeable unsecured notes by a holder of the notes in the third fiscal quarter of 2013 increased the number of our common shares outstanding by 3.7 million, but did not affect the number of weighted average shares outstanding used for computing diluted earnings per share because our earnings per share computation assumes that the exchangeable unsecured notes would be converted. On February 3, 2014, our Board of Directors instituted a quarterly dividend payment program and declared the first cash dividend in the history of Vishay. The permitted capacity to repurchase shares of stock or pay dividends under our credit facility increases each quarter by an amount equal to 20% of net income. At September 27, 2014, our total permitted capacity to repurchase shares of stock or pay dividends under our credit facility is $195.7 million. Although we have no current plans, we will continue to evaluate attractive stock repurchase opportunities.

Our business and operating results have been and will continue to be impacted by worldwide economic conditions. Our revenues are dependent on end markets that are impacted by consumer and industrial demand, and our operating results can be adversely affected by reduced demand in those global markets. For several years, we implemented aggressive cost reduction programs. We continue to monitor the current economic environment and its potential effects on our customers and the end markets that we serve. Additionally, we continue to closely monitor our costs, inventory, and capital resources to respond to changing conditions and to ensure we have the management, business processes, and resources to meet our future needs. In response to the current economic environment, we began implementing a targeted cost reduction program in the fourth fiscal quarter of 2013 to support our profitability without jeopardizing our growth plan. See additional information regarding our competitive strengths and key challenges as disclosed in Part 1 of our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission (the "SEC") on February 19, 2014.

On July 11, 2014, we entered into an agreement to acquire Capella Microsystems (Taiwan) Inc. for approximately NT$6,051 million or $205 million. Capella is a fabless IC design company specializing in optoelectronic sensors. As a first step in the acquisition, we launched a tender offer for Capella's oustanding shares. A total of 38,703,705 shares of Capella, or 88.95% of outstanding shares, were tendered and accepted by us. The offer period expired on September 1, 2014. Pursuant to the terms of the tender offer, we paid NT$139 for each share tendered. The aggregate purchase price was NT$5,400 million or approximately $180 million. We expect to acquire the remaining outstanding shares of Capella pursuant to the merger agreement by the end of January 2015. The acquisition is expected to strengthen our position in optoelectronic sensors, a promising growth market. (See further discussion in "Acquisition Activity.")

During the third fiscal quarter of 2014, we executed two partial-settlement transactions to reduce the risk associated with our U.S. qualified pension obligations. As a result of these transactions, the projected benefit obligation, plan assets, and funded status were remeasured on the dates of the respective settlements. These transactions reduced the U.S. projected benefit obligation by approximately $59.4 million, and were funded entirely with plan assets. These transactions also resulted in the recognition of non-cash settlement charges aggregating $15.6 million, representing previously unrecognized actuarial items. These non-cash charges are presented on a separate line in the accompanying consolidated condensed statements of operations. We continue to evaluate options to further reduce the risk associated with our pension obligations.

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.") Revenues decreased slightly in the third fiscal quarter of 2014, but remain higher than the range experienced in 2013. Operating results have been close to our expectations at this relatively low revenue level. A decrease in orders in the latter part of the third fiscal quarter of 2014 resulted in a decrease in key financial metrics compared to prior quarters.

Net revenues for the fiscal quarter ended September 27, 2014 were $638.2 million, compared to $602.9 million for the fiscal quarter ended September 28, 2013. The net earnings attributable to Vishay stockholders for the fiscal quarter ended September 27, 2014 were $27.0 million, or $0.17 per diluted share, compared to $32.7 million, or $0.22 per diluted share for the fiscal quarter ended September 28, 2013.

Net revenues for the nine fiscal months ended September 27, 2014 were $1,882.5 million, compared to $1,754.8 million for the nine fiscal months ended September 28, 2013. The net earnings attributable to Vishay stockholders for the nine fiscal months ended September 27, 2014 were $88.4 million, or $0.57 per diluted share, compared to $93.0 million, or $0.61 per diluted share for the nine fiscal months ended September 28, 2013.

Net earnings attributable to Vishay stockholders for the fiscal quarters and nine fiscal months ended September 27, 2014 and September 28, 2013 include items affecting comparability. The reconciliation below includes certain financial measures which are not recognized in accordance with GAAP, including adjusted net earnings and adjusted net earnings per share. These non-GAAP measures should not be viewed as an alternative to GAAP measures of performance. Non-GAAP measures such as adjusted net earnings and adjusted net earnings per share do not have uniform definitions. These measures, as calculated by Vishay, may not be comparable to similarly titled measures used by other companies. Management believes that these measures are meaningful because they provide insight with respect to our intrinsic operating results. Reconciling items to arrive at adjusted net earnings represent significant charges or credits that are important to understanding our intrinsic operations.

The items affecting comparability are (in thousands, except per share amounts):

	Fiscal quarters ended						Nine fiscal months ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013

GAAP net earnings attributable to Vishay stockholders	$	26,971		$	32,719		$	88,423		$	92,959

Reconciling items affecting operating margin:
Restructuring and severance costs	$	3,508		$	-		$	18,926		$	-
U.S. pension settlement charges		15,588			-			15,588			-
Executive compensation credit		-			-			-			(1,778	)

Reconciling items affecting tax expense:
Tax effects of items above and other one-time tax expense (benefit)	$	(6,011	)	$	(2,867	)	$	(10,855	)	$	(3,564	)

Adjusted net earnings	$	40,056		$	29,852		$	112,082		$	87,617

Adjusted weighted average diluted shares outstanding		155,546			151,890			154,142			151,471

Adjusted earnings per diluted share *	$	0.26		$	0.20		$	0.73		$	0.58

* Includes add-back of interest on exchangeable notes in periods where the notes are dilutive.

Our results for the fiscal quarter and nine fiscal months ended September 27, 2014 represent the effects of an improved business environment in nearly all of our customer end markets versus the prior year periods, as well as the effects of our cost reduction programs and our organic growth initiatives. The business environment began to be negatively effected by some political and macroeconomic uncertainties in the third fiscal quarter of 2014. Our results for the fiscal quarter and nine fiscal months ended September 28, 2013 represent the effects of a rapid reduction of orders from distribution in the third fiscal quarter of 2013 following a recovery of business conditions experienced in the first six fiscal months of 2013.

Financial Metrics

We utilize several financial metrics to evaluate the performance and assess the future direction of our business. These key financial measures and metrics include net revenues, gross profit margin, operating margin, segment operating income, end-of-period backlog, and the book-to-bill ratio. We also monitor changes in inventory turnover and average selling prices ("ASP").

Gross profit margin is computed as gross profit as a percentage of net revenues. Gross profit is generally net revenues less costs of products sold, but also deducts certain other period costs, particularly losses on purchase commitments and inventory write-downs. Losses on purchase commitments and inventory write-downs have the impact of reducing gross profit margin in the period of the charge, but result in improved gross profit margins in subsequent periods by reducing costs of products sold as inventory is used. Gross profit margin is clearly a function of net revenues, but also reflects our cost management programs and our ability to contain fixed costs.

Operating margin is computed as gross profit less operating expenses as a percentage of net revenues. We evaluate business segment performance on segment operating margin. Only dedicated, direct selling, general, and administrative expenses of the segments are included in the calculation of segment operating income. Segment operating margin is computed as operating income less items such as restructuring and severance costs, asset write-downs, goodwill and indefinite-lived intangible asset impairments, inventory write-downs, gains or losses on purchase commitments, global operations, sales and marketing, information systems, finance and administrative groups, and other items, expressed as a percentage of net revenues. We believe that evaluating segment performance excluding such items is meaningful because it provides insight with respect to intrinsic operating results of the segment. Operating margin is clearly a function of net revenues, but also reflects our cost management programs and our ability to contain fixed costs.

End-of-period backlog is one indicator of future revenues. We include in our backlog only open orders that we expect to ship in the next twelve months. If demand falls below customers' forecasts, or if customers do not control their inventory effectively, they may cancel or reschedule the shipments that are included in our backlog, in many instances without the payment of any penalty. Therefore, the backlog is not necessarily indicative of the results to be expected for future periods.

An important indicator of demand in our industry is the book-to-bill ratio, which is the ratio of the amount of product ordered during a period as compared with the product that we ship during that period. A book-to-bill ratio that is greater than one indicates that our backlog is building and that we are likely to see increasing revenues in future periods. Conversely, a book-to-bill ratio that is less than one is an indicator of declining demand and may foretell declining revenues.

We focus on our inventory turnover as a measure of how well we are managing our inventory. We define inventory turnover for a financial reporting period as our costs of products sold for the four fiscal quarters ending on the last day of the reporting period divided by our average inventory (computed using each fiscal quarter-end balance) for this same period. A higher level of inventory turnover reflects more efficient use of our capital.

Pricing in our industry can be volatile. We analyze trends and changes in average selling prices to evaluate likely future pricing. The erosion of average selling prices of established products is typical for semiconductor products. We attempt to offset this deterioration with ongoing cost reduction activities and new product introductions. Our specialty passive components are more resistant to average selling price erosion.

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 third fiscal quarter of 2013 through the third fiscal quarter of 2014 (dollars in thousands):

	3rd Quarter 2013			4th Quarter 2013			1st Quarter 2014			2nd Quarter 2014			3rd Quarter 2014

Net revenues	$	602,890		$	616,170		$	602,378		$	641,929		$	638,211

Gross profit margin		23.8	%		23.4	%		24.1	%		25.6	%		24.8	%

Operating margin ⁽¹⁾		8.8	%		7.6	%		7.1	%		9.0	%		7.1	%

End-of-period backlog ⁽²⁾	$	613,800		$	611,400		$	664,200		$	663,800		$	598,000

Book-to-bill ratio		0.93			0.99			1.09			1.00			0.91

Inventory turnover		4.08			4.23			4.12			4.19			4.18

Change in ASP vs. prior quarter		-0.6	%		-0.7	%		-1.0	%		-0.6	%		-0.9	%

(1) Operating margin for the fourth fiscal quarter of 2013 and the first, second, and third fiscal quarters of 2014 includes $2.8 million, $6.4 million, $9.0 million, and $3.5 million, respectively, of restructuring and severance expenses (see Note 4 to our consolidated condensed financial statements). Operating margin for the third fiscal quarter of 2014 includes $15.6 million of U.S. pension settlement charges (see Note 8 to our consolidated condensed financial statements).

(2) End of period backlog for the second fiscal quarter of 2014 reflects a total of $1.3 million related to the backlog of Holy Stone Polytech Co., Ltd. as of the date of acquisition. End of period backlog for the third fiscal quarter of 2014 reflects a total of $8.2 million related to the backlog of Capella as of the date of acquisition.

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

Revenues slightly decreased sequentially versus the second fiscal quarter of 2014. The order level through the first nine fiscal months of 2014 was higher than the level experienced in the latter half of 2013, but decreased at the end of the third fiscal quarter of 2014. The decrease in orders was primarily due to a decrease in deman from distributors, particularly in Asia. Currency effects also decreased third fiscal quarter of 2014 revenues by $6 million versus the second fiscal quarter of 2014. Average selling prices continue to decline primarily due to our commodity semiconductor products and the effects of growing our Resistors & Inductors business in Asia.

Gross margins decreased versus the second fiscal quarter of 2014, but remain higher than the prior year. The decrease versus the second fiscal quarter of 2014 is primarily due to the decrease in average selling prices. The increases versus the prior year periods are primarily due to volume increases. Gross margins have been negatively impacted by additional depreciation associated with our cost reduction programs beginning with the fourth fiscal quarter of 2013 and will continue to be negatively impacted until the complete implementation of our cost reduction programs.

The book-to-bill ratio in the third fiscal quarter of 2014 decreased to 0.91 from 1.00 in the second fiscal quarter of 2014. The book-to-bill ratios for distributors and original equipment manufacturers ("OEM") were 0.86 and 0.97, respectively, versus ratios of 1.03 and 0.97, respectively, during the second fiscal quarter of 2014.

For the fourth fiscal quarter of 2014, we anticipate revenues between $600 million and $640 million at margins corresponding to this volume.

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 third fiscal quarter of 2013 through the third fiscal quarter of 2014 (dollars in thousands):

	3rd Quarter 2013			4th Quarter 2013			1st Quarter 2014			2nd Quarter 2014			3rd Quarter 2014
MOSFETs
Net revenues	$	115,168		$	117,858		$	113,141		$	124,042		$	121,659

Book-to-bill ratio		0.94			0.96			1.13			1.05			0.83

Gross profit margin		13.7	%		12.1	%		11.2	%		15.2	%		14.3	%

Segment operating margin		4.6	%		4.5	%		2.2	%		7.7	%		6.4	%

Diodes
Net revenues	$	140,790		$	140,739		$	136,929		$	149,571		$	151,444

Book-to-bill ratio		0.88			0.98			1.09			1.07			0.89

Gross profit margin		23.0	%		21.4	%		21.7	%		23.2	%		23.9	%

Segment operating margin		18.6	%		16.8	%		16.8	%		18.8	%		19.6	%

Optoelectronic Components
Net revenues	$	56,847		$	56,775		$	57,498		$	63,258		$	67,549

Book-to-bill ratio		0.87			1.05			1.16			1.04			0.96

Gross profit margin		35.5	%		31.1	%		36.9	%		36.0	%		36.4	%

Segment operating margin		29.0	%		24.7	%		30.3	%		29.9	%		30.5	%

Resistors & Inductors
Net revenues	$	178,175		$	190,874		$	189,299		$	193,314		$	190,454

Book-to-bill ratio		1.04			0.95			1.04			0.98			0.98

Gross profit margin		30.4	%		31.9	%		31.8	%		31.8	%		31.3	%

Segment operating margin		25.3	%		27.1	%		26.6	%		26.9	%		26.4	%

Capacitors
Net revenues	$	111,910		$	109,924		$	105,511		$	111,744		$	107,105

Book-to-bill ratio		0.84			1.07			1.09			0.88			0.90

Gross profit margin		18.6	%		19.6	%		20.4	%		23.6	%		19.3	%

Segment operating margin		13.3	%		14.2	%		14.5	%		18.0	%		13.5	%

Acquisition Activity

As part of our growth strategy, we seek to expand through targeted acquisitions of other manufacturers of electronic components that have established positions in major markets, reputations for product quality and reliability, and product lines with which we have substantial marketing and technical expertise. This includes exploring opportunities to acquire targets to gain market share, penetrate different geographic markets, enhance new product development, round out our existing product lines, or grow our high margin niche market businesses. Acquisitions of passive components businesses would likely be made to strengthen and broaden our position as a specialty product supplier; acquisitions of discrete semiconductor businesses would be made to increase market share and to generate synergies. To limit our financial exposure, we have implemented a policy not to pursue acquisitions if our post-acquisition debt would exceed 2.5x our pro forma earnings before interest, taxes, depreciation, and amortization ("EBITDA"). For these purposes, we calculate pro forma EBITDA as the adjusted EBITDA of Vishay and the target for Vishay's four preceding fiscal quarters, with a pro forma adjustment for savings which management estimates would have been achieved had the target been acquired by Vishay at the beginning of the four fiscal quarter period.

Our growth plan targets adding, through acquisitions, an average of approximately $100 million of revenues per year. Depending on the opportunities available, we might make several smaller acquisitions or a few larger acquisitions. We intend to make such acquisitions using mainly cash, rather than debt or equity, although we do have capacity on our revolving credit facility if necessary. We are not currently targeting acquisitions with a purchase price larger than $500 million.

On June 11, 2014, we acquired Holy Stone Polytech Co., Ltd. ("Holy Stone Polytech"), a Japanese manufacturer of tantalum capacitors and formerly a subsidiary of Holy Stone Enterprise Co. Ltd., for $20.8 million, net of cash acquired. The acquisition is expected to strengthen our position in tantalum capacitors, especially in Asia. For financial reporting purposes, the results and operations of Holy Stone Polytech have been included in the Capacitors segment since June 11, 2014.

On July 11, 2014, we entered into an agreement to acquire Capella for approximately NT$6,051 million or $205 million. Capella is a fabless IC design company specializing in optoelectronic sensors that is publicly traded in Taiwan. As a first step in the acquisition, we launched a tender offer for Capella's outstanding shares. A total of 38,703,705 shares of Capella, or 88.95% of outstanding shares, were tendered and accepted by us. The offer period expired on September 1, 2014. Pursuant to the terms of the tender offer, Vishay paid NT$139 for each share tendered. The aggregate purchase price was NT$5,400 million or approximately $180 million. Capella had cash and short-term investments on hand of $50 million at the date of acquisition. The acquisition is expected to strengthen our position in optoelectronic sensors, a promising growth market.

Upon the close of the tender offer, we controlled Capella and began consolidating it in our financial statements. For financial reporting purposes, the results and operations of Capella have been included in the Optoelectronic Components segment. The interest of the shares not tendered are presented as noncontrolling interest in our consolidated condensed financial statements. Due to the timing of the close of the tender offer, Capella's results were not material to our third fiscal quarter results.

We expect to acquire the remaining outstanding shares of Capella pursuant to the merger agreement. In connection with closing of the merger, all remaining holders of Capella common stock other than Vishay and our subsidiaries will receive the same consideration for their shares as the holders who tendered their shares in the tender offer, or approximately $22 million in the aggregate. The merger is expected to be completed by the end of January 2015. The closing of the merger is subject to customary closing conditions, including obtaining all necessary governmental approvals and clearances.

We funded the acquisition mostly with cash on-hand, and borrowed $53 million on our revolving credit facility to achieve future flexibility given the legal entity and financial structure utilized for the acquisition. Due to the nature of Capella's business, $74.5 million of the purchase price is allocated to definite-lived intangible assets, which will result in yearly amortization expense of the intangible assets of approximately $10 million. The preliminary allocation is pending finalization of appraisals for property and equipment and intangible assets. There can be no assurance that the estimated amounts recorded represent the final purchase price allocation.

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

Cost Management

We place a strong emphasis on controlling our costs.

The erosion of average selling prices of our established products, particularly our semiconductor products, that is typical of our industry and inflation drive us to continually seek ways to reduce our variable costs. Our variable cost reduction efforts include expending capital to increase automation and maximize the efficiency in our production facilities, consolidating materials purchasing across regions and divisions to achieve economies of scale, materials substitution, maintaining an appropriate mix of in-house production and subcontractor production, increasing wafer size and shrinking dies to maximize efficiency in our semiconductor production processes, and other yield improvement activities.

Our cost management strategy also includes a focus on controlling fixed costs. We seek to maintain selling, general, and administrative expenses at current quarterly levels, excluding foreign currency exchange effects and substantially independent of sales volume changes. Our fixed cost control efforts include automating administrative processes through the expansion of IT systems, gradually migrating to common IT systems across our organization, streamlining our legal entity structure, and reducing our external resource needs by utilizing more cost-effective in-house personnel, while utilizing external resources when day-to-day expertise is not required in-house.

Historically, our primary cost reduction technique was through the transfer of production to the extent possible from high-labor-cost countries, such as the United States and Western Europe, to lower-labor-cost countries, such as the Czech Republic, Hungary, Israel, India, Malaysia, Mexico, the People's Republic of China, and the Philippines. Between 2001 and 2009, we recorded, in the consolidated condensed statements of operations, restructuring and severance costs totaling $320 million and related asset write-downs totaling $89 million in order to reduce our cost structure going forward. We also incurred significant costs to restructure and integrate acquired businesses, which was included in the cost of the acquisitions under then-applicable GAAP.

We did not initiate any new restructuring projects in 2010, 2011, or 2012 and thus did not record any restructuring and severance expenses during such periods. Occasionally, our ongoing cost containment activities are not adequate and we must take actions to maintain our cost competitiveness. On October 28, 2013, we announced various cost reduction programs as part of our continuous efforts to improve efficiency and operating performance. We recorded $3.5 million of restructuring and severance expenses in the third fiscal quarter of 2014 for expenses that were recognizable under GAAP during the period and $21.7 million of restructuring and severance expenses since the cost reduction programs were implemented. The remaining expenses associated with the programs will be recorded as they become recognizable under GAAP.

The programs primarily focus on a plan to enhance the competitiveness of our MOSFETs segment and a voluntary separation / early retirement offer to certain employees Company-wide. We also implemented two other smaller cost reduction programs concerning the manufacturing of products within our Diodes segment. The programs in total are expected to lower costs by approximately $36 million per year when fully implemented at expected cash costs of approximately $32 million.

The project for the MOSFETs segment will extend over a period of approximately two years. The manufacture of wafers for a substantial share of products will be transferred into a more cost-efficient fab. As a consequence, certain other wafer manufacturing currently occurring in-house will be transferred to third-party foundries.

The total cash costs associated with the MOSFETs initiatives, principally severance, are expected to be approximately $16 million. Once fully implemented, we anticipate that the MOSFETs programs will result in an annual reduction in variable and fixed manufacturing costs of approximately $23 million at current volumes.

The voluntary separation / early retirement offer was made to employees worldwide who were eligible because they met job classification, age, and/or years-of-service criteria as of October 31, 2013. The program benefits vary by country and job classification, but generally offer a cash loyalty bonus. All eligible employees have been identified. The voluntary separation / early retirement program will not impact manufacturing operations or our growth plan. Our named executive officers (as defined in our proxy statement) and certain other key employees, generally research, development, and engineering personnel, were not eligible for the voluntary separation / early retirement program. The effective separation / retirement date for most eligible employees who accepted the offer was June 30, 2014 or earlier, with a few exceptions to allow for a transition period.

The total costs associated with the voluntary separation / early retirement program are approximately $12.6 million. Once fully implemented, the Company anticipates that the program will result in an annual reduction in fixed costs of approximately $10 million, split approximately 35 percent in manufacturing and 65 percent in selling, general, and administrative expenses.

Two other smaller cost reduction programs relate to the transfer of production of certain products within our Diodes segment, which were initiated in the third fiscal quarter of 2014. Both programs are connected to production moves, in order to take advantage of lower labor costs in one program and from the consolidation of manufacturing locations in the other. The total cash costs associated with these production transfers are expected to be approximately $3 million, and will result in annual cost savings of approximately $3 million when fully implemented.

We believe that our manufacturing footprint is suitable to serve our customers and end markets, while maintaining lower manufacturing costs. Except for the distinct and targeted programs noted above, we do not anticipate any other material restructuring activities during the remainder of 2014. As we have demonstrated the past two years, we believe that we can substantially maintain our trained workforce, even at lower manufacturing activity levels, by reducing hours and limiting the use of subcontractors and foundries. However, a continued sluggish business environment for the electronics industry or the recurrence of a significant economic downturn may require us to implement additional restructuring initiatives.

Our long-term strategy includes growth through the integration of acquired businesses, and GAAP requires plant closure and employee termination costs that we incur in connection with our acquisition activities to be recorded as expenses in our consolidated statement of operations, as such expenses are incurred. We have not incurred any material plant closure or employee termination costs related to our acquisitions of Huntington Electric, HiRel Systems, LLC, MCB Industrie, Holy Stone Polytech, or Capella, but we expect to have some level of future restructuring expenses due to acquisitions.

Even as we seek to manage our costs, 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.

Foreign Currency Translation

GAAP requires that we identify the "functional currency" of each of our subsidiaries and measure all elements of the financial statements in that functional currency. A subsidiary's functional currency is the currency of the primary economic environment in which it operates. In cases where a subsidiary is relatively self-contained within a particular country, the local currency is generally deemed to be the functional currency. However, a foreign subsidiary that is a direct and integral component or extension of the parent company's operations generally would have the parent company's currency as its functional currency. We have both situations among our subsidiaries.

Foreign Subsidiaries which use the Local Currency as the Functional Currency

We finance our operations in Europe and certain locations in Asia in local currencies, and accordingly, these subsidiaries utilize the local currency as their functional currency. For those subsidiaries where the local currency is the functional currency, assets and liabilities in the consolidated condensed 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 incurred in the local currency are translated at the average exchange rate for the year. While the translation of revenues and expenses incurred in the local currency into U.S. dollars does not directly impact the statements of operations, the translation effectively increases or decreases the U.S. dollar equivalent of revenues generated and expenses incurred in those foreign currencies. The dollar generally was weaker during the third fiscal quarter and first nine fiscal months of 2014 compared to the prior year periods, with the translation of foreign currency revenues and expenses into U.S. dollars generally increasing reported revenues and expenses versus the prior year periods. The dollar generally was stronger during the third fiscal quarter of 2014 compared to the second fiscal quarter of 2014, with the translation of foreign currency revenues and expenses into U.S. dollars generally decreasing reported revenues and expenses versus the prior quarter.

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

Our operations in Israel and most significant locations in Asia are largely financed in U.S. dollars, and accordingly, these subsidiaries utilize the U.S. dollar as their functional currency. For those foreign subsidiaries where the U.S. dollar is the functional currency, all foreign currency financial statement amounts are remeasured into U.S. dollars. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in the results of operations. While these subsidiaries transact most business in U.S. dollars, they may have significant costs, particularly payroll-related, which are incurred in the local currency. The cost of products sold and selling, general, and administrative expense for the third fiscal quarter and first nine fiscal months of 2014 have been slightly unfavorably impacted (compared to the prior year periods) by local currency transactions of subsidiaries which use the U.S. dollar as their functional currency.

In the third fiscal quarter of 2014, we entered into a forward contract with a highly-rated financial institution to mitigate the foreign currency risk associated with an intercompany loan denominated in a currency other than the legal entity's functional currency. The notional amount of the forward contract was $25 million as of September 27, 2014. The intercompany loan was used to finance a portion of the purchase price for Capella. The forward contract settles monthly and is expected to be renewed at our discretion on a monthly basis until the intercompany loan is repaid. The forward contract was renewed on the last day of the third fiscal quarter. The forward contract is carried at fair value in our consolidated condensed balance sheet. We have not designated the forward contract as a hedge for accounting purposes, and as such the change in the fair value of contract is recognized in our consolidated condensed statements of operations as a component of other income (expense). We do not utilize derivatives or other financial instruments for trading or other speculative purposes.

Results of Operations

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

	Fiscal quarters ended						Nine fiscal months ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Cost of products sold		75.2	%		76.2	%		75.2	%		75.9	%
Gross profit		24.8	%		23.8	%		24.8	%		24.1	%
Selling, general & administrative expenses		14.7	%		14.9	%		15.3	%		15.6	%
Operating income		7.1	%		8.8	%		7.8	%		8.6	%
Income before taxes and noncontrolling interest		6.1	%		7.9	%		6.9	%		7.7	%
Net earnings attributable to Vishay stockholders		4.2	%		5.4	%		4.7	%		5.3	%
________
Effective tax rate		30.5	%		31.4	%		31.2	%		30.7	%

Net Revenues

Net revenues were as follows (dollars in thousands):

	Fiscal quarters ended							Nine fiscal months ended
	September 27, 2014				September 28, 2013			September 27, 2014				September 28, 2013
Net revenues		$	638,211			$	602,890		$	1,882,518			$	1,754,809
Change versus comparable prior year period		$	35,321						$	127,709
Percentage change versus comparable prior year period			5.9	%						7.3	%

Changes in net revenues were attributable to the following:

	vs. Prior Year Quarter			vs. Prior Year-to-Date
Change attributable to:
Increase in volume		7.8	%		8.0	%
Decrease in average selling prices		-2.6	%		-2.5	%
Foreign currency effects		0.2	%		0.9	%
Acquisitions		0.9	%		1.2	%
Other		-0.4	%		-0.3	%
Net change		5.9	%		7.3	%

Our revenue results for the fiscal quarter and nine fiscal months ended ended September 27, 2014 were positively affected by increased demand for our products and overall higher demand compared to the prior year periods. Orders from distributors, particularly in Asia, decreased at the end of the third fiscal quarter of 2014.

We deduct, from the sales that we record to distributors, allowances for future credits that we expect to provide for returns, scrapped product, and price adjustments under various programs made available to the distributors. We make deductions corresponding to particular sales in the period in which the sales are made, although the corresponding credits may not be issued until future periods. We estimate the deductions based on sales levels to distributors, inventory levels at the distributors, current and projected market trends and conditions, recent and historical activity under the relevant programs, changes in program policies, and open requests for credits. We recorded deductions from gross revenues under our distributor incentive programs of $67.1 million and $63.1 million for the nine fiscal months ended September 27, 2014 and September 28, 2013, respectively, or 3.4% and 3.5% of gross revenues, respectively. Actual credits issued under the programs during the nine fiscal months ended September 27, 2014 and September 28, 2013 were $67.6 million and $65.3 million, respectively. Increases and decreases in these incentives are largely attributable to the then-current business climate.

Royalty revenues, included in net revenues in the consolidated condensed statements of operations, were approximately $3.3 million and $4.9 million for the nine fiscal months ended September 27, 2014 and September 28, 2013, respectively.

Gross Profit and Margins

Gross profit margins for the fiscal quarter and nine fiscal months ended September 27, 2014 were 24.8% and 24.8%, respectively, versus 23.8% and 24.1%, respectively, for the comparable prior year periods. The increase in gross profit margins for the fiscal quarter and nine fiscal months ended September 27, 2014 versus the prior year periods is primarily due to the increase in sales volume. Gross profit margins for the fiscal quarter and nine fiscal months ended September 27, 2014 were negatively impacted by additional depreciation associated with our cost reductions programs.

Segments

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

MOSFETs

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

	Fiscal quarters ended							Nine fiscal months ended
	September 27, 2014				September 28, 2013			September 27, 2014				September 28, 2013
Net revenues		$	121,659			$	115,168		$	358,842			$	331,619
Change versus comparable prior year period		$	6,491						$	27,223
Percentage change versus comparable prior year period			5.6	%						8.2	%

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

	vs. Prior Year Quarter			vs. Prior Year-to-Date
Change attributable to:
Increase in volume		13.9	%		15.6	%
Decrease in average selling prices		-6.4	%		-5.9	%
Foreign currency effects		0.0	%		0.3	%
Other		-1.9	%		-1.8	%
Net change		5.6	%		8.2	%

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

	Fiscal quarters ended						Nine fiscal months ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Gross profit margin		14.3	%		13.7	%		13.6	%		13.6	%

In the first nine fiscal months of 2014, the MOSFETs segment continued to regain volume that was lost in 2012. The rate of increase in the third fiscal quarter of 2014 was lower than the increase experienced in the first two fiscal quarters of 2014. The increase in volume was primarily due to increased demand from distributors in Asia.

Gross profit margin remains below expectations. The gross profit margin for the third fiscal quarter of 2014 improved slightly versus the prior year period and the gross profit margin for the nine fiscal months ended September 27, 2014 is now equal to the prior year period. The increase in volume and lower materials prices as well as our cost reduction program and efficiency improvements offset the decrease in average selling prices, general cost inflation, and the negative effect of additional depreciation associated with our cost reduction program.

Typical pricing pressure for our established MOSFETs products continues. We have experienced significant declines in average selling prices versus the prior year periods. The decline is partially due to lower materials prices.

On October 28, 2013, we announced a cost reduction program to enhance the competitiveness of our MOSFETs segment. The program is long-term in nature and will not provide significant improvement until the program is close to full implementation. See "Cost Management" above.

We continue to be optimistic about the long-term prospects of the MOSFETs segment and continue to make capital and R&D investments in this business.

Diodes

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

	Fiscal quarters ended							Nine fiscal months ended
	September 27, 2014				September 28, 2013			September 27, 2014				September 28, 2013
Net revenues		$	151,444			$	140,790		$	437,944			$	406,525
Change versus comparable prior year period		$	10,654						$	31,419
Percentage change versus comparable prior year period			7.6	%						7.7	%

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

	vs. Prior Year Quarter			vs. Prior Year-to-Date
Change attributable to:
Increase in volume		11.2	%		10.4	%
Decrease in average selling prices		-3.2	%		-2.8	%
Foreign currency effects		0.3	%		0.7	%
Other		-0.7	%		-0.6	%
Net change		7.6	%		7.7	%

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

	Fiscal quarters ended						Nine fiscal months ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Gross profit margin		23.9	%		23.0	%		23.0	%		22.4	%

The Diodes segment was positively affected by higher demand from distributors in Asia in the first nine fiscal months of 2014 compared to the prior year periods and positive business development directly with end customers in Europe. While demand from distributors in Asia was comparatively higher than the prior year periods, we experienced a slow-down in orders from distributors in Asia during the third fiscal quarter of 2014. The gross profit margin increased slightly versus the prior year periods as the increase in sales volume, the effects of our cost reduction programs, and lower material prices were able to offset the decreased average selling prices and effects of general cost inflation.

Typical pricing pressure for our established Diodes products continues. We have experienced a moderate price decline versus the third fiscal quarter of 2013 and slight price decline versus the prior fiscal quarter and the nine fiscal months ended September 28, 2013.

The cost reduction programs announced on October 28, 2013 include two smaller projects to improve the results of the Diodes segment. These projects were initiated in the third fiscal quarter of 2014 and demonstrate our ongoing effort to improve the results of this segment. See "Cost Management" above.

Optoelectronic Components

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

	Fiscal quarters ended							Nine fiscal months ended
	September 27, 2014				September 28, 2013			September 27, 2014				September 28, 2013
Net revenues		$	67,549			$	56,847		$	188,305			$	171,470
Change versus comparable prior year period		$	10,702						$	16,835
Percentage change versus comparable prior year period			18.8	%						9.8	%

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

	vs. Prior Year Quarter			vs. Prior Year-to-Date
Change attributable to:
Increase in volume		16.4	%		9.0	%
Decrease in average selling prices		-2.2	%		-1.8	%
Foreign currency effects		0.2	%		1.2	%
Acquisition		5.0	%		1.7	%
Other		-0.6	%		-0.3	%
Net change		18.8	%		9.8	%

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

	Fiscal quarters ended						Nine fiscal months ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Gross profit margin		36.4	%		35.5	%		36.4	%		34.5	%

The Optoelectronic Components segment increased its growth rate versus the prior year periods in the third fiscal quarter of 2014. The growth is primarily due to growth in distributor sales in Europe and, particularly in Asia. The Capella acquisition also contributed to the increase in revenues (see below). The increase in gross profit margin versus the prior year periods is due to increases in volume, lower materials prices, and positive exchange rate effects, partialy offset by slightly lower average selling prices and cost inflation.

Typical pricing pressure for our established Optoelectronic Components products continues. We have experienced slight declines in average selling prices versus the prior year periods and the prior fiscal quarter.

In September 2014, we acquired 88.95% of Capella, a fabless IC design company specializing in optoelectronic products. We expect to acquire the remaining outstanding shares of Capella pursuant to a merger agreement signed on July 11, 2014. The merger is expected to be completed by the end of January 2015. The acquisition is expected to strengthen our position in optoelectronic sensors, a promising growth market.

Resistors & Inductors

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

	Fiscal quarters ended							Nine fiscal months ended
	September 27, 2014				September 28, 2013			September 27, 2014				September 28, 2013
Net revenues		$	190,454			$	178,175		$	573,067			$	515,374
Change versus comparable prior year period		$	12,279						$	57,693
Percentage change versus comparable prior year period			6.9	%						11.2	%

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

	vs. Prior Year Quarter			vs. Prior Year-to-Date
Change attributable to:
Increase in volume		9.2	%		9.6	%
Decrease in average selling prices		-2.2	%		-2.2	%
Foreign currency effects		0.2	%		1.3	%
Acquisition		0.0	%		2.8	%
Other		-0.3	%		-0.3	%
Net change		6.9	%		11.2	%

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

	Fiscal quarters ended						Nine fiscal months ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Gross profit margin		31.3	%		30.4	%		31.6	%		31.2	%

The Resistors & Inductors segment continues to produce strong results. Net revenues for the fiscal quarter and nine fiscal months ending September 27, 2014 were solid and significantly higher than the prior year periods, although slightly lower than the previous quarter. General factory shutdowns in Europe for summer holidays caused lower sales in Europe versus the prior quarter. All regions have contributed to the higher sales compared to prior year quarter with the Americas and Asia regions reporting the most significant sales growth. All end use markets have also contributed to the higher sales compared to the prior year quarter with distribution, automotive and medical reporting the strongest sales growth.

The segment gross profit margin remains robust, improving versus the prior year periods. Average selling prices have continued to decrease slighlty versus prior periods, but have stabilized versus the previous quarter. Average selling prices have been negatively affected by our growth initiatives in Asia.

Capacitors

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

	Fiscal quarters ended							Nine fiscal months ended
	September 27, 2014				September 28, 2013			September 27, 2014				September 28, 2013
Net revenues		$	107,105			$	111,910		$	324,360			$	329,821
Change versus comparable prior year period		$	(4,805	)					$	(5,461	)
Percentage change versus comparable prior year period			-4.3	%						-1.7	%

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

	vs. Prior Year Quarter			vs. Prior Year-to-Date
Change attributable to:
Decrease in volume		-8.3	%		-4.7	%
Increase in average selling prices		1.8	%		1.0	%
Foreign currency effects		0.4	%		1.1	%
Acquisition		2.2	%		1.0	%
Other		-0.4	%		-0.1	%
Net change		-4.3	%		-1.7	%

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

	Fiscal quarters ended						Nine fiscal months ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Gross profit margin		19.3	%		18.6	%		21.1	%		20.2	%

Net revenues for the fiscal quarter and nine fiscal months ended September 27, 2014 decreased moderately versus the prior year periods and the second fiscal quarter of 2014 primarily due to a decrease in distribution sales. All regions contributed to the revenue decline, while the industrial and automotive end markets remained steady. The increase in gross profit margin versus the prior year periods is primarily due to the increase in average selling prices, increased efficiencies, and lower metals prices.

Average selling prices increased slightly versus the prior year periods, but declined slightly versus the second fiscal quarter of 2014.

On June 11, 2014, we acquired Holy Stone Polytech, a Japanese manufacturer of tantalum capacitors and formerly a subsidiary of Holy Stone Enterprise Co. Ltd., for $20.8 million, net of cash acquired. The acquisition is expected to strengthen our position in tantalum capacitors, especially in Asia.

Selling, General, and Administrative Expenses

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

	Fiscal quarters ended								Nine fiscal months ended
	September 27, 2014				September 28, 2013				September 27, 2014				September 28, 2013
Total SG&A expenses		$	93,837			$	90,067			$	287,300			$	273,941
as a percentage of revenues			14.7	%			14.9	%			15.3	%			15.6	%

The overall increase in SG&A expenses is primarily attributable to the non-repetition of temporary cost containment measures implemented in the first fiscal quarter of 2013, SG&A expenses of acquired companies, and additional compensation costs in general, partially offset by the benefits of our voluntary separation / early retirement program (see "Cost Management" above). We also incurred additional SG&A expenses in 2014 to close the Holy Stone Polytech acquisition and to investigate and negotiate the Capella acquisition.

Several items included in SG&A expenses impact the comparability of these amounts, as summarized below (in thousands):

	Fiscal quarters ended							Nine fiscal months ended
	September 27, 2014				September 28, 2013			September 27, 2014				September 28, 2013
Amortization of intangible assets		$	4,667			$	3,795		$	12,293			$	11,242
Net loss (gain) on sales of assets			(88	)			32			(65	)			118

Amortization of intangible assets is expected to increase significantly in future periods due to the acquisition of Capella. See "Acquisition Activity" above.

Other Income (Expense)

Interest expense for the fiscal quarter ended September 27, 2014 increased $0.4 million versus the fiscal quarter ended September 28, 2013. Interest expense for the nine fiscal months ended September 27, 2014 increased by $0.8 million versus the nine fiscal months ended September 28, 2013. The increase is primarily due to higher outstanding balances on our revolving credit facility and increased amortization of the debt discounts associated with our convertible senior debentures.

The following tables analyze the components of the line "Other" on the consolidated condensed statements of operations (in thousands):

	Fiscal quarters ended
	September 27, 2014			September 28, 2013			Change
Foreign exchange gain (loss)	$	145		$	(877	)	$	1,022
Interest income		1,172			1,019			153
Other		(1,791	)		414			(2,205	)
	$	(474	)	$	556		$	(1,030	)

	Nine fiscal months ended
	September 27, 2014			September 28, 2013			Change
Foreign exchange gain (loss)	$	(968	)	$	(75	)	$	(893	)
Interest income		3,656			3,326			330
Other		(1,642	)		(1,796	)		154
	$	1,046		$	1,455		$	(409	)

Income Taxes

For the fiscal quarter and nine fiscal months ended September 27, 2014, our effective tax rate was 30.5% and 31.2%, respectively, as compared to 31.4% and 30.7%, respectively, for the fiscal quarter and nine fiscal months ended September 28, 2013. The effective tax rate is generally less than the U.S. statutory rate primarily because of earnings in foreign jurisdictions.

Our effective tax rate for the fiscal quarter and nine fiscal months ended September 28, 2013 includes a one-time tax benefit of $2.9 million due to a new tax law enacted in Israel in July 2013 which effectively increased the corporate income tax rate on certain types of income earned after January 1, 2014, and, therefore, increased our deferred tax assets. Our effective tax rate for the nine fiscal months ended September 28, 2013 also includes one-time tax benefits due to the retroactive enactment of the American Taxpayer Relief Act of 2012, signed into law on January 2, 2013, of approximately $1.3 million.

We operate in a global environment with significant operations in various jurisdictions outside the United States. Accordingly, our consolidated income tax rate is a composite rate reflecting our earnings and the applicable tax rates in the various jurisdictions where we operate. Part of our strategy is to achieve cost savings by operating in countries where we can take advantage of lower labor costs and available tax and other government-sponsored incentives. Accordingly, our effective tax rate is generally less than the U.S. statutory tax rate. Changes in our effective tax rate are largely attributable to changes in the mix of pretax income among our various taxing jurisdictions.

During the nine fiscal months ended September 27, 2014, the liabilities for unrecognized tax benefits decreased by $1.4 million on a net basis, principally due to payments and currency effects offset by increases for interest and positions taken in prior periods.

Financial Condition, Liquidity, and Capital Resources

We focus on our ability to generate cash flows from operations. The cash generated from operations is used to fund our capital expenditure plans, and cash in excess of our capital expenditure needs is available to fund our acquisition strategy, to reduce debt levels, and to pay dividends and repurchase stock. We have generated cash flows from operations in excess of $200 million in each of the past 12 years, and cash flows from operations in excess of $100 million in each of the past 19 years.

We refer to the amount of cash generated from operations in excess of our capital expenditure needs and net of proceeds from the sale of assets as "free cash," a measure which management uses to evaluate our ability to fund acquisitions, repay debt, and otherwise enhance stockholder value through stock repurchases or dividends. Vishay has generated positive "free cash" in each of the past 17 years, and "free cash" in excess of $80 million in each of the past 12 years. In this volatile economic environment, we continue to focus on the generation of free cash, including an emphasis on cost controls.

We continued to generate positive cash flows from operations and free cash during the fiscal quarter ended September 27, 2014. Despite a slow start in terms of free cash generation, we continue to expect cash generation in 2014 in line with our history. There is no assurance, however, that we will be able to continue to generate cash flows from operations and free cash at the same levels, or at all, going forward if the economic environment worsens.

Beginning in the fourth fiscal quarter of 2010, we have reacted to favorable market conditions to significantly reshape the company's capital structure. We have completed three issuances of low-coupon convertible debentures since the fourth fiscal quarter of 2010, each of which matures thirty years from the date of issuance. We utilized the proceeds of those debenture offerings to repurchase 44.3 million shares of our common stock, representing approximately 24% of our outstanding stock prior to implementing these initiatives. In the third fiscal quarter of 2013, a holder of our exchangeable unsecured notes exercised its option to exchange $56.4 million principal amount of the notes for 3.7 million shares of our common stock. The exchange increases the number of our common shares outstanding, but has no effect on the calculation of the weighted average shares outstanding used for computing diluted earnings per share because our earnings per share computation assumes that the exchangeable unsecured notes would be converted, while also reducing our outstanding debt and improving our ratio of total debt to Vishay stockholders' equity.

We also entered into a new, larger, revolving credit facility in 2010, which was amended and restated on August 8, 2013. The amended and restated credit facility extends the term of our available credit, secures lower interest rates than we were previously paying for the next five years, and provides us with additional financial flexibility to pursue our growth plan. The total revolving commitment of our credit facility increased to $640 million and we have the ability to request up to an additional $50 million of incremental commitments, subject to the satisfaction of certain conditions. At September 27, 2014 and December 31, 2013, $187 million and $114 million, respectively, were outstanding under our credit facility. The credit facility provides a revolving commitment through August 8, 2018.

Borrowings under the credit facility bear interest at LIBOR plus an interest margin. The applicable interest margin is based on our leverage ratio. Based on our current leverage ratio, borrowings bear interest at LIBOR plus 1.75%. The interest rate on our borrowings will increase to LIBOR plus 2.00% if our leverage ratio equals or exceeds 2.50 to 1 and will decrease to LIBOR plus 1.50% if our leverage ratio decreases below 1.50 to 1. We are also required to pay facility fees on the entire commitment amount based on our leverage ratio. Based on our current leverage ratio, the facility fee is 0.35% per annum. Such facility fee will increase to 0.50% per annum if our leverage ratio equals or exceeds 2.50 to 1 and will decrease to 0.30% per annum if our leverage ratio decreases below 1.50 to 1.

The amendment and restatement of the credit facility also removed certain restrictions related to the incurrence and repayment of certain intercompany indebtedness, mergers, liquidations, and transfers of ownership of wholly owned subsidiaries that were present in the original credit agreement. These changes will enable us to streamline our complex subsidiary structure and provide greater operating flexibility.

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 for use in, or arising under the laws of, any country other than the United States, assets located 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 significant domestic and foreign subsidiaries; and are guaranteed by certain significant subsidiaries. Certain of our subsidiaries are permitted to borrow under the credit facility, subject to the satisfaction of specified conditions. Any borrowings by these subsidiaries under the credit facility will be guaranteed by Vishay and certain subsidiaries.

The credit facility also limits or restricts us, from, among other things, incurring indebtedness, incurring liens on assets, making investments and acquisitions, making asset sales, and making other restricted payments, and requires us to comply with other covenants, including the maintenance of specific financial ratios.

The financial maintenance covenants include (a) an interest expense coverage ratio of not less than 2.00 to 1; and (b) a leverage ratio of not more than 3.25 to 1 (and a pro forma ratio of 2.75 to 1 on the date of incurrence of additional debt, repurchase of stock, or payment of dividends). The computation of these ratios is prescribed in Article VI of the Credit Agreement between Vishay Intertechnology, Inc. and JPMorgan Chase Bank, N.A., which has been filed with the SEC as Exhibit 10.1 to our current report on Form 8-K filed August 8, 2013.

We were in compliance with all financial covenants under the credit facility at September 27, 2014. Our interest expense coverage ratio and leverage ratio were 13.72 to 1 and 1.85 to 1, respectively. We expect to continue to be in compliance with these covenants based on current projections.

If we are not in compliance with all of the required financial covenants, the credit facility could be terminated by the lenders, and all amounts outstanding pursuant to the credit facility could become immediately payable. Additionally, our exchangeable unsecured notes due 2102 and our convertible senior debentures due 2040, due 2041, and due 2042 have cross-default provisions that could accelerate repayment in the event the indebtedness under the credit facility is accelerated.

Our permitted capacity to repurchase shares of our outstanding common stock or pay cash dividends under the credit facility increases each quarter by an amount equal to 20% of net income. At September 27, 2014, our credit facility allowed us to repurchase our common stock or pay cash dividends up to $195.7 million. On February 3, 2014, our Board of Directors instituted a quarterly dividend payment program and declared the first cash dividend in the history of Vishay. Cash dividends of $0.06 per share of common stock and Class B common stock were paid on March 27, 2014, June 26, 2014, and September 18, 2014 to stockholders of record at the close of business on March 3, 2014, June 12, 2014, and August 28, 2014, respectively. The amount and timing of any future stock repurchases or cash dividend payments remains subject to authorization of our Board of Directors.

The balance of our revolving credit facility was $114 million at December 31, 2013. We borrowed $124 million and repaid $51 million on our credit facility during the nine fiscal months ended June 28, 2014. Included in the borrowings is $53 million borrowed in the third fiscal quarter of 2014 to partially fund the Capella acquisition while achieving future flexibility given the legal entity and financial structure utilized for the acquisition. The average outstanding balance on our credit facility calculated at fiscal month-ends was $137 million and the highest amount outstanding on our credit facility at a month end was $187 million during the nine fiscal months ended September 27, 2014.

The convertible debentures due 2042 became convertible subsequent to the September 27, 2014 evaluation of the conversion criteria, due to the sale price of our common stock exceeding 130% of the conversion price for the applicable period in the third fiscal quarter of 2014. Such debentures will remain convertible until December 31, 2014, at which time the conversion criteria will be reevaluated. At the direction of our Board of Directors, we intend, upon conversion, to repay the principal amount of the convertible debentures in cash and settle any additional amounts in shares of our common stock. We intend to finance the principal amount of any converted debentures using borrowings under our credit facility. Accordingly, the debt component of the convertible debentures due 2042 continues to be classified as a non-current liability in the consolidated condensed balance sheets.

Management expects to periodically pay down the balance of our revolving credit facility with available cash or use the credit facility to meet short-term financing needs. We expect that cash on-hand and cash flows from operations will be sufficient to meet our other longer-term financing needs related to normal operating requirements, regular dividend payments, and our research and development and capital expenditure plans. Additional acquisition activity, share repurchases, or conversion of the convertible debentures due 2042 may require additional borrowing under our credit facility or may otherwise require us to incur additional debt. No principal payments on our outstanding debt are due before the maturity of our revolving credit facility in August 2018.

Substantially all of our September 27, 2014 cash and cash equivalents and short-term investments balances were held by our non-U.S. subsidiaries. At the present time, we expect the remaining cash and profits generated by foreign subsidiaries will continue to be reinvested outside of the U.S. indefinitely. If additional cash is needed to be repatriated to the U.S., we would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits), state income taxes, incremental foreign income taxes, and withholding taxes payable to various foreign countries. Our substantially undrawn credit facility provides us with significant liquidity in the U.S.

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 condensed balance sheets. As these investments were funded using a portion of excess cash and represent a significant aspect of our cash management strategy, we include the investments in the calculation of net cash and short-term investments (debt).

The interest rates on our short-term investments average 0.6% and are approximately 40 basis points higher than interest rates on our cash accounts. Transactions related to these investments are classified as investing activities on our consolidated condensed statements of cash flows.

The following table summarizes the components of net cash and short-term investments (debt) at September 27, 2014 and December 31, 2013 (in thousands):

	September 27, 2014		December 31, 2013

Credit facility	$	187,000	$	114,000
Exchangeable unsecured notes, due 2102		38,642		38,642
Convertible senior debentures, due 2040*		103,364		101,846
Convertible senior debentures, due 2041*		52,966		52,264
Convertible senior debentures, due 2042*		58,908		58,159
Total debt		440,880		364,911

Cash and cash equivalents		575,302		640,348
Short-term investments		538,109		511,231

Net cash and short-term investments (debt)	$	672,531	$	786,668

*Represents the carrying amount of the convertible debentures, which is comprised of the principal amount of the debentures, net of the unamortized discount and the associated embedded derivative liability.

Measurements such as "free cash" and "net cash and short-term investments (debt)" do not have uniform definitions and are not recognized in accordance with GAAP. Such measures should not be viewed as alternatives to GAAP measures of performance or liquidity. However, management believes that "free cash" is a meaningful measure of our ability to fund acquisitions, repay debt, and otherwise enhance stockholder value through stock repurchases or dividends, and that an analysis of "net cash and short-term investments (debt)" assists investors in understanding aspects of our cash and debt management. These measures, as calculated by us, may not be comparable to similarly titled measures used by other companies.

Our financial condition as of September 27, 2014 continued to be strong, with a current ratio (current assets to current liabilities) of 4.2 to 1, as compared to 4.4 to 1 as of December 31, 2013. The slight decrease is primarily due to an increase in accrued payroll and related expenses and other accrued expenses in the first nine fiscal months of 2014. Our ratio of total debt to Vishay stockholders' equity as of September 27, 2014 was 0.25 to 1, as compared to 0.19 to 1 as of December 31, 2013. The increase is primarily due to the increase in the outstanding credit facility balance in the first nine fiscal months of 2014 and the reclassification of a portion of the equity component of the convertible debentures due 2042 to temporary equity.

Cash flows provided by operating activities were $197.0 million for the nine fiscal months ended September 27, 2014, as compared to cash flows provided by operations of $179.6 million for the nine fiscal months ended September 28, 2013.

Cash paid for property and equipment for the nine fiscal months ended September 27, 2014 was $90.5 million, as compared to $91.6 million for the nine fiscal months ended September 28, 2013. We expect capital spending of approximately $170 million in 2014.

Cash paid for the purchase of businesses, net of cash acquired for the nine fiscal months ended September 27, 2014 was $198.2 million, as compared to $23.0 million for the nine fiscal months ended September 28, 2013. The Capella acquisition accounts for $177.4 million of the reported cash paid for acquisitions, net of cash acquired for the nine fiscal months ended September 27, 2014. The $47.4 million of short-term investments acquired in the Capella acquisition are not reflected in the consolidated condensed statements of cash flows.

Cash paid for dividends to our common and Class B common stockholders totalled $26.5 million for the nine fiscal months ended September 27, 2014. We expect dividend payments in 2014 to total approximately $35.6 million. However, any future dividend declaration and payment remains subject to authorization by our Board of Directors.

Contractual Commitments and Off-Balance Sheet Arrangements

Our Annual Report on Form 10-K for the year ended December 31, 2013 filed on February 19, 2014, includes a table of contractual commitments. There were no material changes to these commitments since the filing of our Annual Report on Form 10-K.

We do not participate in nor have we created any off-balance sheet variable interest entities or other off-balance sheet financing, other than the operating leases described in our Annual Report on Form 10-K for the year ended December 31, 2013.

Dividends

On February 3, 2014, our Board of Directors approved the initiation of a quarterly cash dividend program. Cash dividends of $0.06 per share of common stock and Class B common stock were paid on March 27, 2014, June 26, 2014, and September 18, 2014 to stockholders of record at the close of business on March 3, 2014, June 12, 2014, and August 28, 2014, respectively. We expect to continue to pay quarterly dividends, although each dividend is subject to approval by our Board of Directors.

The following table summarizes the quarterly cash dividends declared (in thousands):

Fiscal Period	Amount		Month of Payment
Three fiscal months ended March 29, 2014	$	8,847	March
Three fiscal months ended June 28, 2014		8,847	June
Three fiscal months ended September 27, 2014		8,847	September

Safe Harbor Statement

From time to time, information provided by us, including but not limited to statements in this report, or other statements made by or on our behalf, may contain "forward-looking" information within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "estimate," "will be," "will," "would," "expect," "anticipate," "plan," "project," "intend," "could," "should," or other similar words or expressions often identify forward-looking statements.

Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions, many of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results, performance, or achievements may vary materially from those anticipated, estimated, or projected. Among the factors that could cause actual results to materially differ include: general business and economic conditions; difficulties in identifying suitable acquisition candidates, consummating a transaction on terms which we consider acceptable, and integration and performance of acquired businesses, including with respect to the pending Capella acquisition; difficulties in new product development; changes in competition and technology in the markets that we serve and the mix of our products required to address these changes; an inability to attract and retain highly qualified personnel, particularly in respect of our acquired businesses; uncertainty related to the effects of changes in foreign currency exchange rates; difficulties in implementing our cost management strategies; and other factors affecting our operations, markets, products, services, and prices that are set forth in our filings with the SEC, including our annual reports on Form 10-K and our quarterly reports on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Our 2013 Annual Report on Form 10-K listed various important factors that could cause actual results to differ materially from projected and historic results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find them in Part I, Item 1A, of that filing under the heading "Risk Factors." You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," of our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 19, 2014, describes our exposure to market risks. Other than described below, there have been no material changes to our market risks since December 31, 2013.

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 these exposures. In the third fiscal quarter of 2014, we entered into a forward contract with a highly-rated financial institution to mitigate the foreign currency risk associated with an intercompany loan denominated in a currency other than the legal entity's functional currency. The notional amount of the forward contract was $25 million as of September 27, 2014. The intercompany loan was used to finance a portion of the purchase price for Capella. The forward contract settles monthly and is expected to be renewed at our discretion on a monthly basis until the intercompany loan is repaid. The forward contract was renewed on the last day of the third fiscal quarter. We have not designated the forward contract as a hedge for accounting purposes, and as such the change in the fair value of contract is recognized in our consolidated condensed statements of operations as a component of other income (expense). We do not utilize derivatives or other financial instruments for trading or other speculative purposes.

Capella holds a significant amount of its financial assets denominated in a currency other than its functional currency and will continue to do so at least until the merger is completed. Exchange gains and losses arising from remeasurement of these financial assets into the functional currency of Capella are included in the results of operations. We have performed sensitivity analyses of our consolidated foreign exchange risk, including Capella and all of our other foreign subsidiaries, as of September 27, 2104, using a model that measures the change in the values arising from a hypothetical 10% adverse movement in foreign currency exchange rates relative to the U.S. dollar, with all other variables held constant. The foreign currency exchange rates we used were based on market rates in effect at September 27, 2014. The sensitivity analyses indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would impact our net earnings by approximately $5.2 million at September 27, 2014, although individual line items in our consolidated condensed statement of operations would be materially affected. For example, a 10% weakening in all foreign currencies would decrease the U.S. dollar equivalent of operating income generated in foreign currencies, which would be offset by foreign exchange losses of our foreign subsidiaries that have significant transactions in U.S. dollars or have the U.S. dollar as their functional currency.

Item 4.

Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are: (1) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms; and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

Item 3 of Part I of our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 19, 2014, and Item 1 of our Quarterly Report on Form 10-Q for the quarterly period ended June 28, 2014, filed with the SEC on July 29, 2014, describe certain of our legal proceedings. Except as provided below, there have been no material developments to the legal proceedings previously disclosed.

Since July 18, 2014, the Company has been named as a defendant in purported antitrust class action complaints filed by 1) Yana Bashmadin, Louis-Alexandre Leclair and Archie Martin, each in the Superior Court for the Province of Quebec, District of Montreal; 2) Chip-Tech, Ltd., David A. Bennett, Dependable Component Supply Corp., Everett Ellis, et al., Quathimatine Holdings, Inc., et al., Schuten Electronics, Inc., Home Tech Solutions Corp., and Steve Wong, each in the United States District Court for the Northern District of California; 3) Cygnus Electronic Corporation in the Ontario Superior Court of Justice; 4) eIQ Energy, Inc. in the United States District Court for the District of New Jersey; and 5) Sara Ramsay in the Supreme Court of British Columbia. The case filed by eIQ Energy has since been transferred to the United States District Court for the Northern District of California. The complaints allege restraints of trade in aluminum and tantalum electrolytic capacitors, and in some cases, film capacitors, by the Company and other manufacturers, and seek injunctive relief and unspecified joint and several treble damages. The Company intends to defend vigorously against the complaints.

Item 1A.

Risk Factors

Except as set forth below, there have been no material changes to the risk factors we previously disclosed under Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 19, 2014.

Certain acquisitions will increase the risks inherent in our business.

Our acquisition of Capella Microsystems (Taiwan) Inc. is unique compared to our past acquisitions. Most of our previous acquisitions were established businesses with substantial tangible assets. As a fabless design business, most of the assets acquired in the Capella transaction are intangible. If the acquired business does not perform as expected, we may be required to record significant impairment charges related to those intangible assets, with limited ability to monetize any of those assets. There are significant risks specific to the acquired business that could result in it not performing as expected.

As a fabless design business, Capella is substantially dependent on independent third-party foundries and subcontractors to manufacture its products. If Capella cannot obtain sufficient capacity commitments, if Capella's foundries and subcontractors suffer financial instability, liquidity issues, or insolvency proceedings affecting their ability to manufacture our products, or if Capella's foundries and subcontractors experience production delays for other reasons, the supply of its products could be disrupted, which could adversely affect our business. If demand for its products increases significantly, we have no assurances that Capella's third-party foundries and subcontractors will be able to increase their manufacturing capacity to a level that meets our requirements, potentially preventing us from meeting our customer demand and harming our business and customer relationships. Also, even if Capella's foundries and subcontractors are able to meet our increased demand, those third-party manufacturers may decide to charge significantly higher wafer prices to us, which could reduce our gross margin or require us to offset the increased prices by increasing prices to our customers, either of which could harm our business and operating results.

Capella's future success is substantially dependent on our ability to attract and retain highly qualified technical personnel. We could be materially adversely affected if the turnover rates for engineers and other key personnel increases significantly or we are unsuccessful in attracting, motivating and retaining qualified personnel. Should we lose one or more engineers who are key to a project's completion during the course of a particular project, the completion of such project may be delayed which could negatively affect customer relationships and goodwill and have a material adverse effect on our results of operations.

Capella's historical customer base is concentrated among a few key customers, and is focused on end-users in the consumer products industry. The delay, significant reduction in, or loss of, orders from these large customers or this market segment, or demands of price concessions from these customers could have a material adverse effect on our net revenues and results of operations, or could result in significant volatility in our results of operations.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3.

Defaults Upon Senior Securities

Not applicable.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

Not applicable.

Item 6.

Exhibits

31.1	Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Dr. Gerald Paul, Chief Executive Officer.
31.2	Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Lori Lipcaman, Chief Financial Officer.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Dr. Gerald Paul, Chief Executive Officer.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Lori Lipcaman, Chief Financial Officer.
101	Interactive Data File (Quarterly Report on Form 10-Q, for the quarterly period ended September 27, 2014, furnished in XBRL (eXtensible Business Reporting Language)).

____________

SIGNATURES

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

	VISHAY INTERTECHNOLOGY, INC.

	/s/ Lori Lipcaman
	Lori Lipcaman
	Executive Vice President and Chief Financial Officer
	(as a duly authorized officer and principal financial and
	accounting officer)

Date: October 28, 2014