Edgar Filing: VISHAY INTERTECHNOLOGY INC

vishay_10q.htm

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 October 2, 2010

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. x Yes o 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. x Yes o No

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

As of November 9, 2010, the registrant had 150,572,990 shares of its common stock and 14,352,839 shares of its Class B common stock outstanding.

VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q
OCTOBER 2, 2010
CONTENTS

			Page Number
PART I.		FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Condensed Balance Sheets
		(Unaudited) – October 2, 2010 and December 31, 2009	3

		Consolidated Condensed Statements of Operations
		(Unaudited) – Fiscal Quarters Ended October 2, 2010 and
		September 26, 2009	5

		Consolidated Condensed Statements of Operations
		(Unaudited) – Nine Fiscal Months Ended October 2, 2010 and
		September 26, 2009	6

		Consolidated Condensed Statements of Cash Flows
		(Unaudited) – Nine Fiscal Months Ended October 2, 2010 and
		September 26, 2009	7

		Consolidated Condensed Statement of Equity
		(Unaudited)	8

		Notes to Consolidated Condensed Financial Statements
		(Unaudited)	9

	Item 2.	Management’s Discussion and Analysis of Financial
		Condition and Results of Operations	34

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56

	Item 4.	Controls and Procedures	56

PART II.		OTHER INFORMATION

	Item 1.	Legal Proceedings	57

	Item 1A.	Risk Factors	57

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57

	Item 3.	Defaults Upon Senior Securities	57

	Item 4.	Removed and Reserved	57

	Item 5.	Other Information	58

	Item 6.	Exhibits	58

		SIGNATURES	60

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Balance Sheets
(Unaudited - In thousands)

	October 2,			December 31,
	2010			2009
Assets
Current assets:
Cash and cash equivalents	$	745,371		$	579,189
Accounts receivable, net		350,355			284,295
Inventories:
Finished goods		105,284			119,723
Work in process		187,099			192,206
Raw materials		133,477			122,940
Total inventories		425,860			434,869

Deferred income taxes		15,720			16,781
Prepaid expenses and other current assets		110,044			92,409
Total current assets		1,647,350			1,407,543

Property and equipment, at cost:
Land		94,080			98,623
Buildings and improvements		485,327			528,438
Machinery and equipment		2,026,527			2,126,226
Construction in progress		56,725			36,193
Allowance for depreciation		(1,760,389	)		(1,779,224	)
		902,270			1,010,256

Intangible assets, net		119,282			153,623

Other assets		93,325			148,124
Total assets	$	2,762,227		$	2,719,546

Continues on following page.

VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Balance Sheets (continued)
(Unaudited - In thousands)

	October 2,			December 31,
	2010			2009
Liabilities and equity
Current liabilities:
Notes payable to banks	$	5		$	24
Trade accounts payable		135,519			118,216
Payroll and related expenses		115,777			87,566
Other accrued expenses		184,097			162,083
Income taxes		48,233			23,558
Current portion of long-term debt		76,750			16,054
Total current liabilities		560,381			407,501

Long-term debt less current portion		221,792			320,052
Deferred income taxes		11,870			13,062
Deferred grant income		2,916			2,526
Other liabilities		134,227			152,874
Accrued pension and other postretirement costs		278,814			301,930
Total liabilities		1,210,000			1,197,945

Stockholders' equity:
Vishay stockholders' equity
Common stock		17,229			17,228
Class B convertible common stock		1,435			1,435
Capital in excess of par value		2,319,633			2,317,613
(Accumulated deficit) retained earnings		(889,465	)		(922,805	)
Accumulated other comprehensive income (loss)		98,285			102,975
Total Vishay stockholders' equity		1,547,117			1,516,446
Noncontrolling interests		5,110			5,155
Total equity		1,552,227			1,521,601
Total liabilities and equity	$	2,762,227		$	2,719,546

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except for per share)

	Fiscal quarters ended
	October 2,			September 26,
	2010			2009
Net revenues	$	694,365		$	525,304
Costs of products sold		475,987			420,937
Gross profit		218,378			104,367

Selling, general, and administrative expenses		87,475			89,667
Restructuring and severance costs		-			3,478
Operating income (loss)		130,903			11,222

Other income (expense):
Interest expense		(2,545	)		(2,626	)
Other		(4,716	)		327
		(7,261	)		(2,299	)

Income (loss) before taxes		123,642			8,923

Income tax expense		33,490			6,414

Net earnings (loss)		90,152			2,509

Less: net earnings attributable to noncontrolling interests		353			186

Net earnings (loss) attributable to Vishay stockholders	$	89,799		$	2,323

Basic earnings (loss) per share attributable to Vishay stockholders	$	0.48		$	0.01

Diluted earnings (loss) per share attributable to Vishay stockholders	$	0.47		$	0.01

Weighted average shares outstanding - basic		186,648			186,636

Weighted average shares outstanding - diluted		193,062			186,824

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except for per share)

	Nine fiscal months ended
	October 2,			September 26,
	2010			2009
Net revenues	$	2,036,480		$	1,435,073
Costs of products sold		1,440,496			1,183,908
Gross profit		595,984			251,165

Selling, general, and administrative expenses		298,629			260,873
Restructuring and severance costs		-			34,501
Settlement agreement gain		-			(28,195	)
Executive employment agreement charge		-			57,824
Operating income (loss)		297,355			(73,838	)

Other income (expense):
Interest expense		(7,379	)		(8,277	)
Other		1,284			7,700
		(6,095	)		(577	)

Income (loss) before taxes		291,260			(74,415	)

Income taxes		78,504			10,839

Net earnings (loss)		212,756			(85,254	)

Less: net earnings attributable to noncontrolling interests		878			415

Net earnings (loss) attributable to Vishay stockholders	$	211,878		$	(85,669	)

Basic earnings (loss) per share attributable to Vishay stockholders	$	1.14		$	(0.46	)

Diluted earnings (loss) per share attributable to Vishay stockholders	$	1.10		$	(0.46	)

Weighted average shares outstanding - basic		186,652			186,594

Weighted average shares outstanding - diluted		193,080			186,594

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)

	Nine fiscal months ended
	October 2,			September 26,
	2010			2009
Continuing operating activities
Net earnings (loss)	$	212,756		$	(85,254	)
Adjustments to reconcile net earnings (loss) to
net cash provided by continuing operating activities:
Depreciation and amortization		143,789			169,578
Loss on disposal of property and equipment		176			51
Inventory write-offs for obsolescence		17,022			22,301
Deferred grant income		(426	)		(529	)
Other		44,081			(8,621	)
Net change in operating assets and liabilities,
net of effects of businesses acquired or spun-off		(78,265	)		81,114
Net cash provided by continuing operating activities		339,133			178,640

Continuing investing activities
Capital expenditures		(80,079	)		(26,295	)
Proceeds from sale of property and equipment		725			2,231
Purchase of businesses, net of cash acquired or refunded		-			28,195
Proceeds from loans receivable		15,000			-
Other investing activities		(1,355	)		300
Net cash (used in) provided by continuing investing activities		(65,709	)		4,431

Continuing financing activities
Proceeds from long-term borrowings		-			15,000
Debt issuance costs		(456	)		-
Principal payments on long-term debt and capital leases		(25,998	)		(15,058	)
Net changes in short-term borrowings		511			(10,702	)
Distribution in connection with spin-off of VPG		(70,600	)		-
Distributions to noncontrolling interests		(757	)		(302	)
Net cash used in continuing financing activities		(97,300	)		(11,062	)
Effect of exchange rate changes on cash and cash equivalents		(9,860	)		14,896
Net increase in cash and cash equivalents
from continuing activities		166,264			186,905

Net cash used in discontinued operating activities		(82	)		(3,187	)
Net cash used in discontinued investing activities		-			-
Net cash used in discontinued financing activities		-			-
Net cash used in discontinued operations		(82	)		(3,187	)

Net increase in cash and cash equivalents		166,182			183,718

Cash and cash equivalents at beginning of period		579,189			324,164
Cash and cash equivalents at end of period	$	745,371		$	507,882

See accompanying notes.

VISHAY INTERTECHNOLOGY, INC.
Consolidated Condensed Statement of Equity
(Unaudited - In thousands, except share amounts)

				Class B					Retained			Accumulated			Total
				Convertible		Capital in			Earnings			Other			Vishay
	Common			Common		Excess of			(Accumulated			Comprehensive			Stockholders'			Noncontrolling			Total
	Stock			Stock		Par Value			Deficit)			Income (Loss)			Equity			Interests			Equity
Balance at January 1, 2010	$	17,228		$	1,435	$	2,317,613		$	(922,805	)	$	102,975		$	1,516,446		$	5,155		$	1,521,601
Net earnings (loss)		-			-		-			211,878			-			211,878			878			212,756
Other comprehensive income (loss)		-			-		-			-			(18,693	)		(18,693	)		-			(18,693	)
Comprehensive income (loss)																193,185			878			194,063
Spin-off of Vishay Precision Group, Inc.		-			-		-			(178,538	)		14,003			(164,535	)		(166	)		(164,701	)
Distributions to noncontrolling interests		-			-		-			-			-			-			(757	)		(757	)
Phantom and restricted stock issuances (80,343 shares)		8			-		(8	)		-			-			-			-			-
Cancellation of shares (68,976 shares)		(7	)		-		7			-			-			-			-			-
Stock compensation expense		-			-		2,021			-			-			2,021			-			2,021
Conversions from Class B to common stock (49 shares)		-			-		-			-			-			-			-			-
Balance at October 2, 2010	$	17,229		$	1,435	$	2,319,633		$	(889,465	)	$	98,285		$	1,547,117		$	5,110		$	1,552,227

See accompanying notes.

Vishay Intertechnology, Inc.
Notes to Consolidated Condensed Financial Statements
(Unaudited)

Note 1 – Basis of Presentation

The accompanying unaudited consolidated condensed financial statements of Vishay Intertechnology, Inc. (“Vishay” or the “Company”) have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for presentation of financial position, results of operations, and cash flows required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. The information furnished reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair summary of the financial position, results of operations, and cash flows for the interim periods presented. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The results of operations for the nine fiscal months ended October 2, 2010 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 2010 end on April 3, 2010, July 3, 2010, October 2, 2010, and December 31, 2010. The four fiscal quarters in 2009 ended on March 28, 2009, June 27, 2009, September 26, 2009, and December 31, 2009, respectively.

On July 6, 2010, Vishay completed the spin-off of Vishay Precision Group, Inc. (“VPG”) through a tax-free stock dividend to Vishay’s stockholders. Until July 6, 2010, VPG was part of Vishay and its assets, liabilities, results of operations, and cash flows are included in the balances reported in these consolidated condensed financial statements for periods prior to the completion of the spin-off.

In preparation for the spin-off of VPG, the Company realigned its reportable business segments structure in the second fiscal quarter to be consistent with changes made to its management reporting. Results for 2009 have been adjusted to reflect the new segment reporting structure. Refer to Note 9 for a description of the new segment reporting structure.

Recently Adopted Accounting Guidance

In January 2010, the Financial Accounting Standards Board (“FASB”) updated the accounting guidance related to fair value measurements disclosures. The updated guidance (i) requires separate disclosure of significant transfers in and out of Levels 1 and 2 fair value measurements, (ii) requires disclosure of Level 3 fair value measurements activity on a gross basis, (iii) clarifies existing disaggregation requirements, (iv) and clarifies existing input and valuation technique disclosure requirements. The updated guidance is effective for interim and annual periods beginning after December 15, 2009, except for the Level 3 fair value measurement disclosure requirements, which are effective for fiscal years beginning after December 15, 2010. Vishay adopted the aspects of the guidance that are currently effective as of January 1, 2010 and will adopt the remaining guidance on January 1, 2011. The adoption of the effective guidance had no effect on the Company’s financial position, results of operations, or liquidity and the adoption of the remaining guidance is not expected to have any effect on the Company’s financial position, results of operations, or liquidity.

In February 2010, the FASB updated the accounting guidance related to subsequent events. The updated guidance continues to require evaluation of subsequent events through the date the financial statements are issued, but removes the requirement to disclose the date through which subsequent events have been issued. Vishay adopted this guidance effective January 1, 2010. The adoption of this guidance had no effect on the Company’s financial position, results of operations, or liquidity.

Reclassifications

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

Note 2 – Acquisition and Divestiture Activities

As part of its growth strategy, the Company seeks to expand through targeted and synergistic 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.

Spin-off of Vishay Precision Group, Inc.

On October 27, 2009, Vishay announced that it intended to spin off its measurements and foil resistors businesses into an independent, publicly-traded company to be named Vishay Precision Group, Inc.

On June 15, 2010, the Board of Directors of Vishay approved the spin-off of VPG and on July 6, 2010, Vishay completed the spin-off through a tax-free stock dividend to Vishay’s stockholders. Vishay’s common stockholders received 1 share of VPG common stock for every 14 shares of Vishay common stock they held on the record date, June 25, 2010, and Vishay’s Class B common stockholders received 1 share of VPG Class B common stock for every 14 shares of Vishay Class B common stock they held on the record date. Upon completion of the spin-off certain executive officers received bonuses aggregating approximately $2.1 million, which are reflected in the results of the nine fiscal months ended October 2, 2010.

Until July 6, 2010, VPG was part of Vishay and its assets, liabilities, results of operations, and cash flows are included in the amounts reported in these consolidated condensed financial statements for periods prior to the completion of the spin-off. The product lines that comprise VPG are included in the VPG reporting segment. See Note 9 for further information on the effect that VPG had on Vishay’s consolidated results.

Relationship with VPG after Spin-off

Following the spin-off, VPG is an independent company and Vishay retains no ownership interest. However, two members of the VPG board of directors also serve on Vishay’s board of directors.

In connection with the completion of the spin-off, on July 6, 2010, Vishay and its subsidiaries entered into several agreements with VPG and its subsidiaries that govern the relationship of the parties following the spin-off. Among the agreements entered into with VPG and its subsidiaries were a transition services agreement, several lease agreements, and supply agreements. None of the agreements are expected to have a material impact on Vishay’s financial position, results of operations, or liquidity.

Vishay also entered into a trademark license agreement with VPG pursuant to which Vishay granted VPG the license to use certain trademarks, service marks, logos, trade names, entity names, and domain names which include the term “Vishay.” The license granted VPG the limited, exclusive, royalty-free right and license to use certain marks and names incorporating the term “Vishay” in connection with the design, development, manufacture, marketing, provision and performance of certain VPG products that do not compete with any products within Vishay’s product range as constituted immediately following the separation and certain services provided in connection with the products. The license cannot be terminated except as a result of willful misconduct or liquidation bankruptcy of VPG.

As a result of this continuing involvement, Vishay will not restate prior periods to present VPG as a discontinued operation.

Summary Balance Sheet Data

The table below summarizes the balance sheet information of VPG as of the date of the spin-off (in thousands):

	July 6,
	2010
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	70,600
Accounts receivable, net		32,017
Net inventories		44,075
Deferred income taxes		4,968
Prepaid expenses and other current assets		5,503
Total current assets		157,163

Property and equipment, net		45,167
Intangible assets, net		15,371
Other assets		8,376
Total assets	$	226,077

Liabilities and equity
Current liabilities:
Notes payable to banks	$	534
Trade accounts payable		7,029
Payroll and related expenses		8,212
Other accrued expenses		7,235
Income taxes		4,278
Total current liabilities		27,288

Long-term debt, less current portion		11,566
Deferred income taxes		6,038
Other liabilities		6,052
Accrued pension and other postretirement costs		10,432
Total liabilities		61,376

Equity:
Vishay Intertechnology, Inc. investment		178,538
Accumulated other comprehensive income (loss)		(14,003	)
Total Vishay Intertechnology, Inc. equity		164,535
Noncontrolling interests		166
Total equity		164,701
Total liabilities and equity	$	226,077

Prepayment of KEMET Loan Receivable

In conjunction with the acquisition of the wet tantalum capacitor business of KEMET Corporation (“KEMET”) on September 15, 2008, Vishay issued a three-year term loan of $15 million to KEMET. On May 5, 2010, KEMET prepaid the entire principal amount of the term loan plus interest.

Sale of Automotive Modules and Subsystems Business

On April 7, 2008, Vishay sold the automotive modules and subsystems business unit (“ASBU”) to a private equity firm. ASBU was originally acquired by Vishay as part of the April 1, 2007 acquisition of International Rectifier Corporation’s (“International Rectifier”) Power Control Systems (“PCS”) business. Vishay determined that ASBU would not satisfactorily complement Vishay’s operations and separately reported the results of ASBU in the consolidated condensed statement of operations as “discontinued operations.”

The Company resolved a net working capital adjustment and certain other disputes with the buyer in the fourth fiscal quarter of 2008. A portion of this amount was paid during the first fiscal quarters of 2009 and 2010 and is reflected on the accompanying consolidated condensed statement of cash flows as cash flows from discontinued operations.

Settlement with International Rectifier Corporation

On April 1, 2007, Vishay completed its acquisition of the PCS business of International Rectifier for approximately $285.6 million, net of cash acquired. The final purchase price was pending the resolution of a net working capital adjustment as of the date of acquisition. Vishay also had notified International Rectifier of certain other claims that it had regarding the sale of the PCS business to Vishay.

On June 25, 2009, Vishay and International Rectifier entered into a settlement agreement.

Under the settlement, International Rectifier refunded $30.0 million of the purchase price associated with the acquisition, and Vishay released International Rectifier from claims relating to certain outstanding disputes regarding the acquisition.

As part of the goodwill impairment charges recorded during 2008, all goodwill associated with the PCS business was written off. Vishay recorded a gain of $28.2 million during the second quarter of 2009, equal to the amount received pursuant to the settlement agreement less certain related expenses.

Note 3 – Restructuring and Severance Costs and Related Asset Write-Downs

Restructuring and severance costs reflect the cost reduction programs implemented by the Company. These include the closing of facilities and the termination of employees. Restructuring and severance costs include one-time exit costs, severance benefits pursuant to an on-going benefit arrangement, and related pension curtailment and settlement charges. Severance costs also include executive severance and charges for the fair value of stock options of certain former employees which were modified such that they did not expire at termination. Restructuring costs are expensed during the period in which the Company determines it will incur those costs and all requirements of accrual are met. Because these costs are recorded based upon estimates, actual expenditures for the restructuring activities may differ from the initially recorded costs. If the initial estimates are too low or too high, the Company could be required either to record additional expenses in future periods or to reverse part of the previously recorded charges. Asset write-downs are principally related to buildings and equipment that will not be used subsequent to the completion of restructuring plans presently being implemented, and cannot be sold for amounts in excess of carrying value.

Third Fiscal Quarter and Nine Fiscal Months Ended October 2, 2010

The Company did not initiate any new restructuring projects in the third fiscal quarter or nine fiscal months ended October 2, 2010 and thus did not record any restructuring and severance costs expenses during these periods.

Third Fiscal Quarter 2009

The Company recorded restructuring and severance costs of $3,478,000 for the third fiscal quarter of 2009. Employee termination costs were $2,749,000, covering technical, production, administrative, and support employees in nearly every country in which the Company operates. The Company also incurred $729,000 of other exit costs during the quarter, principally lease termination costs related to facility closures. The restructuring and severance costs were incurred primarily in response to the declining business conditions experienced in the second half of 2008 and recessionary trends that continued into the third fiscal quarter of 2009.

Nine Fiscal Months Ended September 26, 2009

The Company recorded restructuring and severance costs of $34,501,000 for the nine fiscal months ended September 26, 2009. Employee termination costs were $30,622,000, covering technical, production, administrative, and support employees in nearly every country in which the Company operates. Severance costs include net pension settlement charges and credits for employees in the Republic of China (Taiwan) and the Philippines. The Company also incurred $3,879,000 of other exit costs during the nine fiscal months ended September 26, 2009, principally lease termination costs related to facility closures. The restructuring and severance costs were incurred primarily in response to the declining business conditions experienced in the second half of 2008 and recessionary trends which continued into the third fiscal quarter of 2009.

Year Ended December 31, 2009

The Company recorded restructuring and severance costs of $37,874,000 for the year ended December 31, 2009. Employee termination costs were $33,142,000, covering technical, production, administrative, and support employees in nearly every country in which the Company operates. Severance costs include net pension settlement charges and credits for employees in the Republic of China (Taiwan) and the Philippines. The Company also incurred $4,732,000 of other exit costs, principally lease termination costs related to facility closures and $681,000 of asset write-downs during the year ended December 31, 2009. The restructuring and severance costs were incurred primarily in response to the declining business conditions experienced in the second half of 2008 and recessionary trends which continued into 2009.

The following table summarizes activity to date related to restructuring programs initiated in 2009 (in thousands, except for number of employees):

										Employees
	Severance			Other						to be
	Costs			Exit Costs			Total			Terminated
Restructuring and severance costs	$	33,142		$	4,732		$	37,874		2,571
Utilized		(21,293	)		(2,989	)		(24,282	)	(2,321	)
Foreign currency translation		802			15			817		-
Balance at December 31, 2009	$	12,651		$	1,758		$	14,409		250
Utilized		(8,123	)		(907	)		(9,030	)	(238	)
Foreign currency translation		(405	)		(49	)		(454	)	-
Balance at October 2, 2010	$	4,123		$	802		$	4,925		12

Most of the accrued restructuring liability, currently shown in other accrued expenses, is expected to be paid by December 31, 2010. The payment terms related to these restructuring programs varies, usually based on local customs and laws. Most severance amounts are paid in a lump sum at termination, while some payments are structured to be paid in installments.

Year Ended December 31, 2008

The Company recorded restructuring and severance costs of $62,537,000 for the year ended December 31, 2008. Employee termination costs were $58,601,000, covering technical, production, administrative, and support employees located in nearly every country in which the Company operates. Through the first nine months of 2008, these restructuring activities were part of the Company’s on-going cost reduction initiatives. The significant increase in restructuring activities during the fourth fiscal quarter of 2008 was substantially attributable to the declining business conditions experienced in the second half of 2008. Severance costs for the year ended December 31, 2008 also include executive severance and a pension settlement charge of $2,894,000 related to employees in the Republic of China (Taiwan). The Company also incurred $3,936,000 of other exit costs, principally related to the closures of facilities in Brazil and Germany. The restructuring and severance costs were incurred as part of the continuing cost reduction programs currently being implemented by the Company and in response to the declining business conditions experienced in the second half of 2008.

As a result of the decision to close its facility in Brazil, the Company completed a long-lived asset impairment analysis during the first fiscal quarter of 2008 and determined that various fixed assets and intangible assets were impaired. The Company recorded fixed asset write-downs of $3,419,000 and intangible asset write-downs of $776,000. During the fourth fiscal quarter of 2008, the Company also recorded asset write-downs of $878,000 to reduce the carrying value of buildings. The buildings had been vacated as part of restructuring activities. These buildings were held-for-sale and classified as “other assets” at December 31, 2008.

Also during the year ended December 31, 2008, the Company sold land and buildings that had been vacated as part of its restructuring programs and recognized a gain of $4,510,000, which was recorded within selling, general, and administrative expenses.

There is a $1.2 million accrued restructuring liability related to restructuring programs initiated in 2008 reported as other accrued expenses in the accompanying consolidated condensed balance sheet as of October 2, 2010. Most of the accrued restructuring liability is expected to be paid by December 31, 2010.

Note 4 – Income Taxes

The provision for income taxes consists of provisions for federal, state, and foreign income taxes. The effective tax rates for the periods ended October 2, 2010 and September 26, 2009 reflect the Company’s expected tax rate on reported income from continuing operations before income tax and tax adjustments. The Company operates in an international environment with significant operations in various locations 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 locations where the Company operates.

During the nine fiscal months ended October 2, 2010, the liabilities for unrecognized tax benefits were unchanged on a net basis, principally due to settlements and foreign exchange effects.

The Company recognized no tax benefit associated with the executive employment agreement charge of $57.8 million discussed in Note 10. The Company recorded no tax expense associated with the gain of $28.2 million recognized upon reimbursement of purchase price described in Note 2.

Note 5 – Long-Term Debt

Amendments of Credit Facility

Effective June 11, 2010, Vishay entered into an amendment to its credit facility. Pursuant to the amendment the lenders consented to various items necessary to effectuate the VPG spin-off transaction, including, upon consummation of such spin-off transaction, the release of all collateral related to VPG entities. Additionally, the tangible net worth covenant was revised to reflect the decrease in tangible net worth expected to occur upon the spin-off of VPG, to $1 billion plus 75% of net proceeds of equity offerings since July 6, 2010 plus, commencing with the fiscal quarter ending March 31, 2011, 50% of net income (without offset for losses) for each fiscal quarter ending after December 31, 2010.

This amendment also made minor modifications to the collateral arrangements and minor increases to pricing under the Credit Agreement.

Other significant terms and conditions of the credit agreement have not been changed. The credit agreement, as amended, will expire April 20, 2012.

See further information regarding the lenders consent to Vishay’s issuance of debentures and repurchase of its common stock in Note 13.

Modification of Exchangeable Notes due 2102

On December 13, 2002, Vishay issued $105,000,000 in nominal (or principal) amount of its floating rate unsecured exchangeable notes due 2102 in connection with an acquisition. The notes are governed by a note instrument and a put and call agreement dated December 13, 2002. The notes may be put to Vishay in exchange for shares of its common stock and, under certain circumstances, may be called by Vishay for similar consideration.

Under the terms of the put and call agreement, by reason of the spin-off, Vishay was required to take action so that the existing notes are deemed exchanged as of the date of the spin-off, for a combination of new notes of Vishay reflecting a lower principal amount of the notes and new notes issued by VPG.

Based on the relative trading prices of Vishay and VPG common stock on the ten trading days following the spin-off, Vishay retained the liability for an aggregate $95,041,540 principal amount of exchangeable notes effective July 6, 2010. The assumption of a portion of the liability by VPG was recorded as a reduction in parent net investment just prior to the completion of the spin-off.

The notes are subject to a put and call agreement under which the holders may at any time put the notes to Vishay in exchange for 6,176,471 shares of Vishay’s common stock in the aggregate, and Vishay may call the notes in exchange for cash or for shares of its common stock at any time after January 2, 2018. The put/call rate of the Vishay notes is $15.39 per share of common stock.

The notes bear interest at LIBOR. Interest continues to be payable quarterly on March 31, June 30, September 30, and December 31 of each calendar year. The interest rate could be further reduced to 50% of LIBOR after December 31, 2010 if the price of Vishay’s common stock is above $40.73 per share for thirty or more consecutive trading days.

Call of Convertible Notes

In 2003, Vishay sold $500 million aggregate principal amount of 3-5/8% convertible subordinated notes due 2023. Holders of substantially all (99.6%) of the 3-5/8% notes exercised their option to require Vishay to repurchase their notes on August 1, 2008. The remaining notes, with an aggregate principal amount of $1,870,000, were redeemed at Vishay’s option on August 1, 2010. The notes are classified as a current liability as of December 31, 2009 in the accompanying consolidated condensed balance sheets.

Repayment of Israeli Bank Loan

On October 1, 2010, Vishay repaid $10 million of the $13.5 million balance on an Israeli Bank Loan. $13.5 million of the loan balance was classified as a long-term liability as of December 31, 2009 in the accompanying consolidated condensed balance sheets as it was not due to be repaid in the current fiscal year. Half of the remaining balance of the loan is classified as a current liability as of October 2, 2010 in the accompanying consolidated condensed balance sheets due to the timing of the remaining payments.

Subsequent Event – Issuance of Convertible Senior Debentures

On November 3, 2010, Vishay announced the offering of $275 million principal amount of 2.25% convertible senior debentures due 2040 to qualified institutional investors. See further information in Note 13.

Note 6 – Comprehensive Income (Loss)

Comprehensive income (loss) includes the following components (in thousands):

	Fiscal quarters ended				Nine fiscal months ended
	October 2, 2010		September 26, 2009		October 2, 2010			September 26, 2009

Net earnings (loss)	$	90,152	$	2,509	$	212,756		$	(85,254	)
Other comprehensive income (loss):
Foreign currency translation
adjustment		61,476		30,644		(18,020	)		29,564
Unrealized gain (loss) on available
for sale securities		481		743		348			910
Pension and other postretirement
adjustments		3,977		3,053		(1,021	)		6,401
Total other comprehensive income (loss)		65,934		34,440		(18,693	)		36,875
Comprehensive income (loss)	$	156,086	$	36,949	$	194,063		$	(48,379	)
Less: Comprehensive income (loss)
attributable to noncontrolling interests		353		186		878			415
Comprehensive income (loss) attributable
to Vishay stockholders	$	155,733	$	36,763	$	193,185		$	(48,794	)

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

Note 7 – 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 2010 and 2009 for the Company’s defined benefit pension plans (in thousands):

	Fiscal quarter ended						Fiscal quarter ended
	October 2, 2010						September 26, 2009
	U.S.			Non-U.S.			U.S.			Non-U.S.
	Plans			Plans			Plans			Plans
Net service cost	$	-		$	514		$	-		$	783
Interest cost		4,011			2,541			4,194			2,862
Expected return on plan assets		(4,525	)		(340	)		(3,739	)		(440	)
Amortization of prior service credit		631			-			44			-
Amortization of losses		2,329			42			2,822			4
Curtailments and settlements		-			-			-			8
Net periodic benefit cost	$	2,446		$	2,757		$	3,321		$	3,217

The following table shows the components of the net periodic pension cost for the nine fiscal months ended October 2, 2010 and September 26, 2009 for the Company’s defined benefit pension plans (in thousands):

	Nine fiscal months ended						Nine fiscal months ended
	October 2, 2010						September 26, 2009
	U.S.			Non-U.S.			U.S.			Non-U.S.
	Plans			Plans			Plans			Plans
Net service cost	$	-		$	2,048		$	-		$	2,189
Interest cost		12,068			8,104			12,551			8,174
Expected return on plan assets		(13,574	)		(1,263	)		(11,216	)		(1,176	)
Amortization of prior service credit		833			-			(10	)		-
Amortization of losses		6,986			129			8,478			14
Curtailments and settlements		-			-			-			564
Net periodic benefit cost	$	6,313		$	9,018		$	9,803		$	9,765

The following table shows the components of the net periodic benefit cost for the third fiscal quarters of 2010 and 2009 for the Company’s other postretirement benefit plans (in thousands):

	Fiscal quarter ended					Fiscal quarter ended
	October 2, 2010					September 26, 2009
	U.S.			Non-U.S.		U.S.			Non-U.S.
	Plans			Plans		Plans			Plans
Service cost	$	19		$	62	$	44		$	84
Interest cost		162			71		193			99
Amortization of prior service (credit) cost		(111	)		-		(110	)		-
Amortization of transition obligation		19			-		18			-
Amortization of gains		(59	)		-		(74	)		-
Net periodic benefit cost	$	30		$	133	$	71		$	183

The following table shows the components of the net periodic pension cost for the nine fiscal months ended October 2, 2010 and September 26, 2009 for the Company’s other postretirement benefit plans (in thousands):

	Nine fiscal months ended					Nine fiscal months ended
	October 2, 2010					September 26, 2009
	U.S.			Non-U.S.		U.S.			Non-U.S.
	Plans			Plans		Plans			Plans
Service cost	$	76		$	190	$	132		$	242
Interest cost		553			217		579			287
Amortization of prior service (credit) cost		(331	)		-		(331	)		-
Amortization of transition obligation		56			-		56			-
Amortization of gains		(161	)		-		(222	)		-
Net periodic benefit cost	$	193		$	407	$	214		$	529

Note 8 – Stock-Based Compensation

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

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

The following table summarizes stock-based compensation expense recognized (in thousands):

	Fiscal quarters ended				Nine fiscal months ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Stock options	$	168	$	197	$	522	$	656
Restricted stock units		512		141		1,324		727
Phantom stock units		-		-		175		74
Total	$	680	$	338	$	2,021	$	1,457

The following table summarizes unrecognized compensation cost and the weighted average remaining amortization periods at October 2, 2010 (dollars in thousands, amortization periods in years):

			Weighted Average
	Unrecognized		Remaining
	Compensation		Amortization
	Cost		Periods
Stock options	$	748	2.0
Restricted stock units		4,606	2.1
Phantom stock units		-	0.0
Total	$	5,354

2007 Stock Incentive Plan

The Company’s 2007 Stock Incentive Program (the “2007 Program”) permits the grant of up to 3,000,000 shares of restricted stock, unrestricted stock, RSUs, and stock options, to officers, employees, and non-employee directors. Such instruments are available for grant until May 22, 2017.

The 2007 Program was originally approved by stockholders of the Company on May 22, 2007, as the “2007 Stock Option Program.” On May 28, 2008, the Company’s stockholders approved amendments to the 2007 Stock Option Program, which was then renamed the “2007 Stock Incentive Program.”

Stock Options

In addition to stock options outstanding pursuant to the 2007 Program, the Company has 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, 2009. No additional options may be granted pursuant to these programs.

As a consequence of the spin-off of VPG on July 6, 2010, the exercise price of all stock options was reduced 9.48% and 259,000 make-up options were granted to reflect the loss of value to the option holders due to the decrease in the trading price of Vishay’s common stock as result of the spin-off. Additionally, approximately 102,000 stock options that were held by VPG employees expired. Option activity under the stock option plans as of October 2, 2010 and changes during the nine fiscal months then ended are presented below (number of options in thousands, contractual life in years):

					Weighted
			Weighted		Average
	Number		Average		Remaining
	of		Exercise		Contractual
	Options		Price		Life
Outstanding:
January 1, 2010	2,728		$	19.84
Granted	-			-
Exercised	-			-
Cancelled or forfeited	(347	)		25.35
Adjustment due to VPG spin-off*	259			-
Outstanding at October 2, 2010*	2,640		$	17.17	1.52

Vested and expected to vest
at October 2, 2010*	2,640		$	17.17	1.52
Exercisable at October 2, 2010*	2,386		$	17.39	1.00

____________________

* The weighted average exercise price of the stock options included in the line item “Adjustment due to VPG spin-off” is equal to the weighted average exercise price of such stock options prior to the spin-off, as reduced by the spin-off adjustment. The weighted average exercise price of stock options outstanding, vested and expected to vest, and exercisable as of October 2, 2010 also reflects the decrease in the exercise price as a result of the spin-off adjustment.

During the nine fiscal months ended October 2, 2010, 81,000 options vested. At October 2, 2010, there are 254,000 unvested options outstanding, with a weighted average grant-date fair value of $9.33 per option.

The pretax aggregate intrinsic value (the difference between the closing stock price on the last trading day of the third fiscal quarter of 2010 of $9.56 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 October 2, 2010 is $55,000. This amount changes based on changes in the market value of the Company’s common stock. No options were exercised during the nine fiscal months ended October 2, 2010.

Restricted Stock Units

As a consequence of the spin-off of VPG on July 6, 2010, approximately 60,000 make-up RSUs were granted to reflect the loss of value to the unit holders due to the decrease in the trading price of Vishay’s common stock as result of the spin-off. Additionally, approximately 5,000 RSUs that were held by VPG employees expired. RSU activity under the stock incentive plan as of October 2, 2010 and changes during the nine fiscal months then ended are presented below (number of RSUs in thousands):

			Weighted Average
	Number		grant date
	of		fair value
	RSUs		per unit
Outstanding:
January 1, 2010	155		$	9.14
Granted	504			10.83
Vested	(76	)		9.68
Cancelled or forfeited	(14	)		8.83
Adjustment due to VPG spin-off*	60			-
Outstanding at October 2, 2010*	629		$	9.57

Expected to vest at October 2, 2010*	629

____________________

* The weighted average grant date fair value per unit included in the line item “Adjustment due to VPG spin-off” is equal to the weighted average grant date fair value per unit of such RSUs prior to the spin-off, as reduced by the spin-off adjustment. The weighted average grant date fair value per unit of RSUs outstanding as of October 2, 2010 also reflects the decrease in the grant date fair value as a result of the spin-off adjustment.

The Company recognizes compensation cost for RSUs that are expected to vest. Of the 555,800 (as adjusted for the VPG spin-off) RSUs granted in the first nine fiscal months of 2010, 323,700 contain performance-based vesting criteria. The performance vesting criteria of the 323,700 RSUs that contain performance-based vesting criteria have been adjusted by 10% to reflect the absence of VPG within Vishay’s consolidated results. The Company expects all performance-based vesting criteria to be achieved.

Phantom Stock Plan

The Company maintains a phantom stock plan for certain senior executives. The Phantom Stock Plan authorizes the grant of up to 300,000 phantom stock units to the extent provided for in employment agreements with the Company. During 2010 and 2009, the Company had such employment arrangements with four of its executives. The arrangements provide for an annual grant of 5,000 shares of phantom stock to each of these executives on the first trading day of the year. If the Company later enters into other employment arrangements with other individuals that provide for the granting of phantom stock, those individuals also will be eligible for grants under the Phantom Stock Plan. No grants may be made under the Phantom Stock Plan other than under the terms of employment arrangements with the Company. 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 employment agreement. The phantom stock units are fully vested at all times.

As a consequence of the spin-off of VPG on July 6, 2010, approximately 15,000 make-up phantom stock units were granted to reflect the loss of value to the unit holders due to the decrease in the trading price of Vishay’s common stock as result of the spin-off. Additionally, 35,000 phantom stock units held by a VPG employee were adjusted and will be redeemed as common stock as soon as practicable. Phantom stock units activity under the stock incentive plan as of October 2, 2010 and changes during the nine fiscal months then ended are presented below (number of phantom stock units in thousands):

	Number	Grant date
	of	fair value
	Units	per unit
Outstanding:
January 1, 2010	120
Granted	20	$	8.76
Redeemed for common stock	-
Adjustment due to VPG spin-off	15
Outstanding at October 2, 2010	155

Note 9 – Segment Information

In preparation for the spin-off of VPG, which was completed on July 6, 2010, the Company realigned its reportable business segments structure in the second fiscal quarter of 2010 to be consistent with changes made to its management reporting. The changes made to management reporting included separating the former Semiconductors reporting segment into MOSFETs, Diodes, and Optoelectronic Components and separating the former Passive Components reporting segment into Resistors and Inductors, Capacitors, and Vishay Precision Group. The changes were necessary due to the former Passive Components segment no longer being comparable after the completion of the spin-off of VPG, the need for discrete information regarding VPG, and the increased interest of management and outside investors in more discrete financial information. Effective beginning in the second fiscal quarter of 2010, the chief operating decision maker began making strategic and operating decisions with regards to assessing performance and allocating resources based on this new segment structure. Following the completion of the spin-off in the third fiscal quarter, we have five reporting segments.

The Company evaluates business segment performance on operating income, exclusive of certain items (“segment operating income”). Beginning in the second fiscal quarter of 2010, the Company changed its definition of segment operating income to exclude such costs as global operations, sales and marketing, information systems, finance and administration groups. These costs are managed by executives that report to the chief operating decision maker and were formerly included in segment operating income. Only dedicated, direct selling, general, and administrative expenses of the segments are included in the calculation of segment operating income. Additionally, management has always evaluated segment performance excluding 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, 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.

Results for 2009 have been adjusted to reflect the new reporting segment structure. The following table sets forth business segment information (in thousands):

					Optoelectronic		Resistors &				Vishay Precision
	MOSFETs		Diodes		Components		Inductors		Capacitors		Group		Corporate / Other		Total
Fiscal quarter ended October 2, 2010:
Product Sales	$	181,820	$	157,193	$	56,836	$	157,172	$	139,916	$	-	$	-	$	692,937
Royalty Revenues		145		-		-		1,283		-		-		-	$	1,428
Total Revenue	$	181,965	$	157,193	$	56,836	$	158,455	$	139,916	$	-	$	-	$	694,365

Gross Margin	$	62,795	$	40,017	$	19,282	$	55,907	$	40,377	$	-	$	-	$	218,378

Fiscal quarter ended September 26, 2009:
Product Sales	$	123,003	$	110,408	$	43,320	$	106,768	$	100,973	$	40,105	$	-	$	524,577
Royalty Revenues		14		-		-		713		-		-		-	$	727
Total Revenue	$	123,017	$	110,408	$	43,320	$	107,481	$	100,973	$	40,105	$	-	$	525,304

Gross Margin	$	18,485	$	16,860	$	10,281	$	25,316	$	20,745	$	12,680	$	-	$	104,367

Nine fiscal months ended October 2, 2010:
Product Sales	$	462,651	$	448,465	$	172,889	$	456,570	$	390,593	$	101,089	$	-	$	2,032,257
Royalty Revenues		193		-		60		3,970		-		-		-	$	4,223
Total Revenue	$	462,844	$	448,465	$	172,949	$	460,540	$	390,593	$	101,089	$	-	$	2,036,480

Gross Margin	$	136,700	$	103,528	$	59,226	$	162,713	$	96,787	$	37,030	$	-	$	595,984

Nine fiscal months ended September 26, 2009:
Product Sales	$	302,762	$	282,041	$	118,200	$	305,030	$	298,483	$	125,143	$	-	$	1,431,659
Royalty Revenues		71		-		13		3,330		-		-		-	$	3,414
Total Revenue	$	302,833	$	282,041	$	118,213	$	308,360	$	298,483	$	125,143	$	-	$	1,435,073

Gross Margin	$	34,439	$	32,232	$	24,894	$	67,171	$	54,719	$	37,710	$	-	$	251,165

	Fiscal quarter ended						Nine fiscal months ended
	October 2, 2010			September 26, 2009			October 2, 2010			September 26, 2009
Operating margin reconciliation:
MOSFETs	$	53,839		$	10,331		$	109,993		$	10,793
Diodes		34,363			11,920			86,319			17,588
Optoelectronic Components		16,516			5,504			50,631			14,370
Resistors & Inductors		48,604			19,758			142,341			50,288
Capacitors		35,438			15,641			80,311			39,754
Vishay Precision Group		-			5,189			18,949			15,187
Unallocated Selling, General, and Administrative Expenses		(57,857	)		(53,643	)		(191,189	)		(157,688	)
Restructuring and Severance Costs		-			(3,478	)		-			(34,501	)
Settlement agreement gain		-			-			-			28,195
Executive employment agreement charge		-			-			-			(57,824	)
Consolidated Operating Income (Loss)	$	130,903		$	11,222		$	297,355		$	(73,838	)

Restructuring and Severance costs:
MOSFETs	$	-		$	680		$	-		$	8,305
Diodes		-			253			-			4,814
Optoelectronic Components		-			33			-			2,936
Resistors & Inductors		-			857			-			8,058
Capacitors		-			824			-			4,666
Vishay Precision Group		-			175			-			2,044
Unallocated Selling, General, and Administrative Expenses		-			656			-			3,678
	$	-		$	3,478		$	-		$	34,501

Note 10 – Commitments and Contingencies

Executive Employment Agreements

The Company has employment agreements with certain of its senior executives. These employment agreements provide incremental compensation in the event of termination. The Company does not provide any severance or other benefits specifically upon a change in control except as described below.

On June 16, 2010, the terms of certain senior executives’ RSUs and performance-based RSUs were modified such that in the event of (i) the termination of the executive’s employment under certain circumstances, the executive’s outstanding RSUs shall immediately vest and the outstanding performance-based RSUs shall vest on their normal vesting date to the extent applicable performance criteria are realized; and (ii) a change of control of Vishay, all of such executive’s outstanding RSUs and performance-based RSUs shall immediately vest. In addition, on June 16, 2010, the Compensation Committee determined to modify Dr. Gerald Paul’s and the Compensation Committee recommended to the Board of Directors, and the Board of Directors determined to modify Mr. Marc Zandman’s employment arrangements such that upon any termination (other than for cause) after attaining age 62, the executive would be entitled to the same payments and benefits he would have received if his respective employment was terminated by Vishay without cause or by the respective executive for good reason. These modifications were included in formal amendments signed on August 8, 2010.

The modification of the terms of the RSUs and performance-vested RSUs had no effect on the Company’s financial position, results of operations, or liquidity. The expense associated with the modifications to the employment arrangements of Dr. Gerald Paul and Mr. Marc Zandman effectively represents a defined retirement benefit that will be recognized over the remaining service period of the individuals.

On May 13, 2009, the Company entered into an amended and restated employment agreement with Dr. Felix Zandman (the “2009 Agreement”). This agreement amended and restated the existing employment agreement between the Company and Dr. Zandman that was previously amended and restated as of January 1, 2004 (the “2004 Agreement”).

The purpose of the 2009 Agreement was to eliminate the right of Dr. Zandman to receive a royalty during the ten years following his termination of employment equal to 5% of gross sales, less returns and allowances, of Vishay products incorporating inventions and any other form of technology created, discovered or developed by him or under his direction. The royalty was payable in the event Dr. Zandman was terminated without “cause” or resigned for “good reason,” as defined in the 2004 Agreement. This provision was carried over from Dr. Zandman’s original employment agreement of March 1985, and could not be modified or eliminated without Dr. Zandman’s consent. It was a reflection, among other things, of Dr. Zandman’s key role in the founding of the Company and in creating, developing and commercializing the Company’s technologies and the absence of any compensation to Dr. Zandman for the core intellectual property that he has contributed to the Company over the years from its inception.

Pursuant to the 2009 Agreement, Dr. Zandman’s right to the royalty payments has been terminated. Dr. Zandman received a payment of $10 million as of the effective date of the amended and restated agreement, and is entitled to receive five additional annual payments of $10 million each. The Company recognized compensation expense of $57.8 million during the second quarter of 2009, representing the present value of these payments. This amount is presented on a separate line in the accompanying consolidated condensed statements of operations.

Payments pursuant to the 2009 Agreement may be deferred with interest in the event that making such payment would jeopardize the ability of the Company to continue as a going concern. Payments will accelerate if, following a change of control of the Company, Dr. Zandman is terminated without cause or if he terminates employment for good reason. In the event of Dr. Zandman’s death or disability, the unpaid annual installments would accelerate upon a change of control, whether it occurs before or after the death or disability. If an excise tax were imposed under Section 4999 of the Internal Revenue Code due to the acceleration of the payments, the Company will reimburse Dr. Zandman for the excise tax on customary terms. Absent a change of control, if the Company were to terminate Dr. Zandman’s employment without cause or Dr. Zandman were to terminate employment for good reason or in the event of his death or disability, the unpaid annual installment payments would not accelerate and would continue until completed. Dr. Zandman will forfeit future payments if he terminates his employment without good reason or if his employment is terminated for cause. Furthermore, as a result of the 2009 Agreement, Dr. Zandman will not receive any other severance payments upon his termination of employment for any reason. Other terms of the 2004 Agreement remain substantially the same. Dr. Zandman continues to be subject to non-competition, non-solicitation, non-disparagement and confidentiality covenants.

Note 11 – Earnings Per Share

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

	Fiscal quarters ended				Nine fiscal months ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Numerator:
Numerator for basic earnings (loss) per share:
Net earnings (loss)	$	89,799	$	2,323	$	211,878	$	(85,669	)

Adjustment to the numerator for continuing
operations and net earnings (loss):
Interest savings assuming conversion of dilutive
convertible and exchangeable notes, net of tax		82		-		175		-

Numerator for diluted earnings (loss) per share:
Net earnings (loss)	$	89,881	$	2,323	$	212,053	$	(85,669	)

Denominator:
Denominator for basic earnings (loss) per share:
Weighted average shares		186,648		186,636		186,652		186,594

Effect of dilutive securities:
Convertible and exchangeable notes		6,176		-		6,176		-
Employee stock options		7		-		6		-
Other		231		188		246		-
Dilutive potential common shares		6,414		188		6,428		-

Denominator for diluted earnings (loss) per share:
Adjusted weighted average shares		193,062		186,824		193,080		186,594

Basic earnings (loss) per share attributable to Vishay stockholders	$	0.48	$	0.01	$	1.14	$	(0.46	)

Diluted earnings (loss) per share attributable to Vishay stockholders	$	0.47	$	0.01	$	1.10	$	(0.46	)

Diluted earnings (loss) 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
	October 2, 2010	September 26, 2009	October 2, 2010	September 26, 2009
Convertible and exchangeable notes:
Convertible Subordinated Notes, due 2023	29	88	68	88
Exchangeable Unsecured Notes, due 2102	-	6,176	-	6,176
Weighted average employee stock options	2,606	3,834	2,599	3,859
Weighted average warrants	8,824	8,824	8,824	8,824
Weighted average other	39	-	45	301

In periods in which they are dilutive, if the potential common shares related to the convertible and 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 remaining convertible subordinated notes, due 2023, with an aggregate principal amount of $1,870,000, were redeemed at Vishay’s option on August 1, 2010. The notes were only convertible upon the occurrence of certain events. While none of these events occurred, certain conditions which could have triggered conversion were deemed to be non-substantive, and accordingly, the Company always assumed the conversion of these notes in its diluted earnings per share computation during periods in which they were dilutive.

The Company waived its rights to settle the principal amount of the convertible subordinated notes, due 2023, in shares of Vishay common stock. Accordingly, the notes were 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. If the average market price was less than $21.28, no shares were included in the diluted earnings per share computation.

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 (in thousands):

	Total
	Fair Value		Level 1		Level 2		Level 3
October 2, 2010:
Assets held in rabbi trusts	$	24,617	$	6,946	$	17,671	$	-

December 31, 2009:
Assets held in rabbi trusts	$	27,462	$	7,389	$	20,073	$	-

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. Effective July 6, 2010, $3,701,000 of these assets were transferred to VPG equal to the deferred compensation and non-qualified pension liabilities of employees of VPG, which were retained by VPG.

The fair value of the long-term debt at October 2, 2010 and December 31, 2009 is approximately $259.4 million and $280.6 million, respectively, compared to its carrying value of $298.5 million and $336.1 million, respectively. The Company estimates the fair value of its long-term debt using a combination of quoted market prices for similar financing arrangements and expected future payments discounted at risk-adjusted rates, which are considered level 2 inputs.

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

Note 13 – Subsequent Events – Issuance of Convertible Senior Debentures and Stock Repurchase

On November 3, 2010, Vishay announced the offering of $275 million principal amount of 2.25% convertible senior debentures due 2040 to qualified institutional investors. Under the terms of Vishay’s credit facility, Vishay was required to apply cash proceeds from the offering to prepay its outstanding term loan (balance of $75 million). Vishay used the remaining net proceeds from this offering, together with new net borrowings under its revolving credit facility and cash on hand, to repurchase 21,721,959 shares of common stock for an aggregate purchase price of $275 million. The transactions closed on November 9, 2010.

The debentures will be accounted for pursuant to ASC Topic 470-20, which requires an issuer to separately account for the liability and equity components of the instrument 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.

At issuance, the debt component of the debentures will be valued at approximately $97 million, and the equity component, net of deferred tax effects, will be valued at approximately $116 million.

Interest will be payable on the debentures semi-annually at a rate of 2.25% per annum; however, the Company will recognize an effective annual interest rate of 8.00% on the carrying value of the debentures, based on its nonconvertible debt borrowing rate. In addition to ordinary interest, beginning on November 15, 2020, contingent interest will accrue in certain circumstances relating to the trading price of the debentures and under certain other circumstances.

The debentures will be initially convertible, subject to certain conditions, into cash, shares of Vishay’s common stock or a combination thereof, at Vishay’s option, at an initial conversion rate of 72.0331 shares of common stock per $1,000 principal amount of debentures. This represents an initial effective conversion price of approximately $13.88 per share. This initial conversion price represents a premium of 12.5% to the closing price of Vishay’s common stock on November 3, which was $12.34 per share. At the direction of its Board of Directors, Vishay intends, upon conversion, to repay the principal amount of the debentures in cash and settle any additional amounts in shares. At the current time, Vishay’s credit facility does not allow for cash settlement for any portion of the debentures, but Vishay intends to amend or otherwise revise its credit facility to allow for such net share settlements prior to any debentures being converted. There is no assurance, however, that Vishay will be able to amend its credit facility, and accordingly, no assurance that Vishay will be able to settle conversions on a net share settlement basis.

Vishay may not redeem the debentures prior to November 20, 2020, except in connection with certain tax-related events. On or after November 20, 2020 and prior to the maturity date, Vishay may redeem for cash all or part of the debentures at a redemption price equal to 100% of the principal amount of the debentures to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of Vishay’s common stock has been at least 150% of the conversion price then in effect for at least 20 trading days during any 30 consecutive trading day period prior to the date on which Vishay provides notice of redemption.

On November 3, 2010, the Company entered into a consent letter with the lenders under its credit facility, pursuant to which the Company obtained consent under the agreement governing the facility to allow the Company to issue the debentures and execute the share repurchases described above.

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

Overview

Vishay Intertechnology, Inc. is an international manufacturer and supplier of discrete semiconductors and passive electronic components, including power MOSFETs, power integrated circuits, transistors, diodes, optoelectronic components, resistors, capacitors, and inductors. Discrete semiconductors and passive electronic components manufactured by Vishay are used in virtually all types of electronic products, including those in the industrial, computer, automotive, consumer electronic products, telecommunications, military/aerospace, and medical industries.

On July 6, 2010, we completed the spin-off of Vishay Precision Group, Inc. (“VPG”) through a tax-free stock dividend to our stockholders. Our common stockholders received 1 share of VPG common stock for every 14 shares of Vishay common stock they held on the record date, June 25, 2010, and our Class B common stockholders received 1 share of VPG Class B common stock for every 14 shares of Vishay Class B common stock they held on the record date. Until July 6, 2010, VPG was part of Vishay and its assets, liabilities, results of operations, and cash flows are included in the balances reported in the accompanying consolidated condensed financial statements for periods prior to the spin-off.

Prior to the completion of the spin-off of VPG, we operated in six product segments, MOSFETs, Diodes, Optoelectronic Components, Resistors and Inductors, Capacitors, and Vishay Precision Group. Following the spinoff we operate in five product segments.

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

Our business and operating results have been and will continue to be impacted by worldwide economic conditions. Our revenues are dependent on certain industry end markets that are impacted by consumer and industrial demand, and our operating results can be adversely affected by reduced demand in those markets. From 2001 to 2009, we implemented aggressive cost reduction programs to enhance our competitiveness, particularly in light of the erosion of average selling prices of established products that is typical of the industry. We continue to monitor the current 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 sufficient resources to meet our future needs.

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 debt (cash), and free cash generation to evaluate the performance and assess the future direction of our business. (See further discussion in “Financial Metrics” and “Liquidity and Capital Resources.”) The improvement in economic conditions experienced in the current year periods over prior year periods has increased overall demand for our products and the effects of the cost reductions initiated in the prior year has resulted in significant overall improvements in all key financial metrics over prior year periods.

Revenues for the fiscal quarter ended October 2, 2010 were $694.4 million, compared to $525.3 million for the fiscal quarter ended September 26, 2009. The net earnings attributable to Vishay stockholders for the fiscal quarter ended October 2, 2010 were $89.8 million, or $0.47 per diluted share, compared to $2.3 million, or $0.01 per diluted share for the fiscal quarter ended September 26, 2009.

Revenues for the nine fiscal months ended October 2, 2010 were $2,036.5 million, compared to $1,435.1 million for the nine fiscal months ended September 26, 2009. The net earnings attributable to Vishay stockholders for the nine fiscal months ended October 2, 2010 were $211.9 million, or $1.10 per diluted share, compared to a net loss attributable to Vishay stockholders of $85.7 million, or $0.46 per share for the nine fiscal months ended September 26, 2009.

The net earnings (loss) attributable to Vishay stockholders for the fiscal quarter and nine fiscal months ended September 26, 2009 includes various items affecting comparability as listed in the reconciliation below. There were no such items for the fiscal quarter and nine fiscal months ended October 2, 2010. The reconciliation below includes certain financial measures which are not recognized in accordance with generally accepted accounting principles (“GAAP”), including adjusted net earnings (loss) and adjusted net earnings (loss) 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 (loss) and adjusted net earnings (loss) 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 for per share):

	Fiscal quarters ended					Nine fiscal months ended
	October 2, 2010		September 26, 2009			October 2, 2010		September 26, 2009
GAAP net earnings (loss) attributable to Vishay stockholders	$	89,799	$	2,323		$	211,878	$	(85,669	)

Reconciling items affecting operating margin:
Restructuring and severance costs	$	-	$	3,478		$	-	$	34,501
Settlement agreement gain		-		-			-		(28,195	)
Executive employment agreement charge		-		-			-		57,824

Reconciling items affecting tax expense (benefit):
Tax effects of items above and other one-time tax expense (benefit)	$	-	$	(973	)	$	-	$	(6,710	)

Adjusted net earnings (loss)	$	89,799	$	4,828		$	211,878	$	(28,249	)

Adjusted weighted average diluted shares outstanding		193,062		193,001			193,080		186,594

Adjusted earnings (loss) per diluted share *	$	0.47	$	0.03		$	1.10	$	(0.15	)

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

Our results for the third fiscal quarter and nine fiscal months ended September 26, 2009 were substantially impacted by the global economic recession. Due to our quick reaction to the recession, we mitigated the loss of volume that we experienced through significant reductions of fixed costs and inventories, we continued to generate positive cash flows from operations, and following several quarters of experiencing losses we began to recover from the global economic recession and produced positive net earnings beginning in the third fiscal quarter of 2009. Our results for the third fiscal quarter and nine fiscal months ended October 2, 2010 represent the continuation of the upturn of our business due to increased overall demand for electronic components over previous periods and the effects of the cost reductions initiated in the prior year that enabled us to achieve significantly higher earnings than before the beginning of the global economic recession at the same sales volume.

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, 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.

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. Only orders that are expected to ship in the next twelve months are included in the computation of the book-to-bill ratio. 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. The inventory balance used for computation of this ratio includes tantalum inventories in excess of a one year supply, which are classified as other assets in the consolidated balance sheet. See Note 14 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2009. 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 the Semiconductors industry. 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, end-of-period backlog, book-to-bill ratio, inventory turnover, and changes in ASP for our business as a whole during the five quarters beginning with the third fiscal quarter of 2009 through the third fiscal quarter of 2010 (dollars in thousands):

	3rd Quarter		4th Quarter		1st Quarter		2nd Quarter		3rd Quarter
	2009		2009		2010		2010		2010
Net revenues (1)	$	525,304	$	606,960	$	640,460	$	701,655	$	694,365

Gross profit margin		19.9%		22.6%		26.1%		30.0%		31.5%

End-of-period backlog (2)	$	502,200	$	630,100	$	907,700	$	987,900	$	1,009,900

Book-to-bill ratio		1.11		1.22		1.46		1.15		1.04

Inventory turnover		3.53		4.12		4.22		4.35		4.55

Change in ASP vs. prior quarter		-0.8%		-0.1%		-0.5%		1.9%		2.0%

____________________

(1) Net revenues include VPG through the second fiscal quarter of 2010. See “Financial Metrics by Segment” for further information on VPG net revenues.

(2) End-of-period backlog includes backlog attributable to VPG of $30.1 million, $32.7 million, $36.2 million, and $38.4 million for the third fiscal quarter of 2009, fourth fiscal quarter of 2009, first fiscal quarter of 2010, and second fiscal quarter of 2010, respectively.

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

We experienced the continuation of an excellent business environment in the third fiscal quarter of 2010. Shortages of supply of electronic components have created a favorable pricing environment and led to an increase in average selling prices versus the second fiscal quarter of 2010 and third fiscal quarter of 2009. The favorable pricing environment, continued historically high levels of overall market demand for electronic components, and faster than expected capacity ramp-up at our manufacturing facilities allowed us to slightly exceed our revenue expectations for the fiscal quarter and to increase net revenues sequentially over the previous quarters, excluding VPG. Net revenues exclusive of VPG for the second fiscal quarter of 2010 and third fiscal quarter of 2009 were $648.7 million and $485.2 million, respectively.

Due to the continued increase in volume to pre-crisis sales levels, favorable pricing environment, and continued low fixed costs resulting from the restructuring and other cost cutting initiatives implemented in prior periods, gross margins continued to grow sequentially to the highest level in ten years.

Although we expect the current level of revenues to continue, there is no assurance that we will be able to continue to generate cash flows from operations and free cash going forward if the current recovery stalls or does not continue as expected.

The book-to-bill ratio remained strong in the third fiscal quarter of 2010. Due in part to some normalization of orders and increases in average sales prices in the third fiscal quarter, the book-to-bill ratio declined to 1.04 from 1.15 in the second fiscal quarter of 2010 despite continued strong overall volume demand for our products. The book-to-bill ratios for distributors and original equipment manufacturers (“OEM”) were 0.95 and 1.16, respectively, versus ratios of 1.17 and 1.14, respectively, during the second fiscal quarter of 2010. We expect our current revenue trends to continue despite the decline in the book-to-bill ratio due to historically high backlogs for our products.

Based on our backlog and a lower number of working days, we anticipate revenues of between $650 million and $690 million at performance levels close to those of the third fiscal quarter for the fourth fiscal quarter of 2010.

Financial Metrics by Segment

The following table shows net revenues, book-to-bill ratio, and gross profit margin broken out by segment for the five quarters beginning with the third fiscal quarter of 2009 through the third fiscal quarter of 2010 (dollars in thousands):

	3rd Quarter		4th Quarter		1st Quarter		2nd Quarter		3rd Quarter
	2009		2009		2010		2010		2010
MOSFETs
Net revenues	$	123,017	$	124,348	$	127,624	$	153,255	$	181,965
Book-to-bill ratio		1.13		1.39		1.65		0.75		1.17
Gross profit margin		15.0%		18.4%		21.2%		30.6%		34.5%

Diodes
Net revenues	$	110,408	$	128,374	$	140,246	$	151,026	$	157,193
Book-to-bill ratio		1.14		1.28		1.63		1.35		0.91
Gross profit margin		15.4%		14.9%		19.7%		23.7%		25.5%

Optoelectronic Components
Net revenues	$	43,320	$	49,117	$	58,429	$	57,684	$	56,836
Book-to-bill ratio		1.14		1.21		1.25		1.26		0.86
Gross profit margin		23.7%		25.0%		33.6%		35.2%		33.9%

Resistors and Inductors
Net revenues	$	107,481	$	135,866	$	148,655	$	153,430	$	158,455
Book-to-bill ratio		1.13		1.18		1.26		1.22		1.01
Gross profit margin		23.6%		30.9%		34.9%		36.0%		35.3%

Capacitors
Net revenues	$	100,973	$	122,407	$	117,331	$	133,346	$	139,916
Book-to-bill ratio		1.07		1.07		1.54		1.31		1.11
Gross profit margin		20.5%		21.4%		20.2%		24.4%		28.9%

Vishay Precision Group
Net revenues	$	40,105	$	46,848	$	48,175	$	52,914		n/a
Book-to-bill ratio		1.05		1.06		1.12		1.06		n/a
Gross profit margin		31.6%		32.0%		35.4%		37.8%		n/a

Acquisition and Divestiture Activity

As part of our growth strategy, we seek to expand through targeted and synergistic 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 smaller targets to gain market share, effectively penetrate different geographic markets, enhance new product development, round out our 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 exploit synergies. To limit our financial exposure, we have implemented a policy not to pursue acquisitions if our post-acquisition debt would exceed 2.5x our pro forma earnings before interest, taxes, depreciation, and amortization (“EBITDA”). For these purposes, we will calculate pro forma EBITDA as the adjusted EBITDA of Vishay and the target for Vishay’s four preceding fiscal quarters, with a pro forma adjustment for savings which management estimates would have been achieved had the target been acquired by Vishay at the beginning of the four fiscal quarter period.

Due to deteriorating economic conditions that began in the fourth fiscal quarter of 2008, we did not actively pursue acquisitions from the fourth fiscal quarter of 2008 to the third fiscal quarter of 2009. Due to improving economic conditions, our strong liquidity and cash position, and our ability to generate free cash in every quarter of 2009, we returned to our strategy of exploring synergistic acquisition opportunities in the fourth fiscal quarter of 2009, but did not announce or complete any acquisitions in 2009 or the nine fiscal months ended October 2, 2010. There is no assurance that we will be able to identify and acquire suitable acquisition candidates at price levels and on terms and conditions we consider acceptable.

Spin-off of Vishay Precision Group, Inc.

On October 27, 2009, we announced that we intended to spin off our measurements and foil resistors businesses into an independent, publicly-traded company to be named Vishay Precision Group, Inc.

On July 6, 2010, we completed the spin-off through a tax-free stock dividend to our stockholders. Our common stockholders received 1 share of VPG common stock for every 14 shares of Vishay common stock they held on the record date, June 25, 2010, and our Class B common stockholders received 1 share of VPG Class B common stock for every 14 shares of Vishay Class B common stock they held on the record date. Upon completion of the spin-off certain executive officers received bonuses aggregating approximately $2.1 million, which is reflected in the results for the nine fiscal months ended October 2, 2010.

Until July 6, 2010, VPG was part of Vishay and its assets, liabilities, results of operations, and cash flows are included in the balances reported in the accompanying consolidated condensed financial statements for periods prior to the spin-off. The product lines that comprise VPG are included in the VPG reporting segment. See Note 9 to our accompanying consolidated condensed financial statements for further information on the effect that VPG had on our consolidated results.

Cost Management

We place a strong emphasis on reducing our costs. Since 2001, we have been implementing aggressive cost reduction programs to enhance our competitiveness, particularly in light of the erosion of average selling prices of established products that is typical of the industry.

Historically, our primary cost reduction technique was through the transfer of production to the extent possible from high-labor-cost markets, such as the United States and Western Europe, to lower-labor-cost markets, such as the Czech Republic, Israel, India, Malaysia, Mexico, the People’s Republic of China, and the Philippines. The percentage of our total headcount in lower-labor-cost countries is a measure of the extent to which we are successful in implementing this program. This percentage was 76.7% at the end of the third fiscal quarter of 2010 as compared to 74.6% at the end of 2009 and 2008, and 57% when this program began in 2001. Our target is to have between 75% and 80% of our headcount in lower-labor-cost countries. As we maintain this target headcount allocation, our cost reduction efforts are more directed towards consolidating facilities and other cost cutting measures to control fixed costs, rather than transfers of production to lower-labor-cost markets.

Our cost management strategy also includes a focus on reducing selling, general, and administrative expenses through the integration or elimination of redundant sales offices and administrative functions at acquired companies, achieving significant production cost savings through the transfer and expansion of manufacturing operations to countries where we can benefit from available tax and other government-sponsored incentives, and expansion of certain critical capacities, which will reduce average materials and processing costs.

Production transfers and other restructuring activities may require us to initially incur significant severance and other exit costs and to record losses on excess buildings and equipment. We evaluate potential restructuring projects based on an expected payback period. The payback period represents the number of years of annual cost savings necessary to recover the initial cash outlay for severance and other exit costs plus the noncash expenses recognized for asset write-downs. In general, a restructuring project must have a payback period of less than 3 years to be considered beneficial. On average, our restructuring projects have a payback period of between 1 and 1.5 years.

Between 2001 and 2009, we recorded, in the consolidated statements of operations, restructuring and severance costs totaling $323 million and related asset write-downs totaling $87 million in order to reduce our cost structure going forward. We have realized, and expect to continue to realize, significant annual net cost savings associated with these restructuring activities. These programs to improve our profitability also involve certain risks which could materially impact our future operating results, as further detailed in Item 1A, “Risk Factors,” of our Annual Report on Form 10-K.

In response to the economic downturn during the latter half of 2008, we undertook significant measures to cut costs. This included a strict adaptation of manufacturing capacity to sellable volume, limiting the building of product for inventory. It also included permanent employee terminations, temporary layoffs and shutdowns, and minimizing the use of foundries and subcontractors in order to maximize the load of our owned facilities.

Our significant cost-cutting measures continued into 2009 as we initiated restructuring programs that included headcount reductions in virtually every facility and every country in which we operate, as well as selected plant closures. We closed two facilities in the United States and consolidated manufacturing for these product lines into other facilities. We also consolidated our optoelectronics packaging facilities in Asia. We successfully closed a film capacitor plant in Shanghai and increased production on existing equipment in Loni, India to replace the production volume of the closed plant.

We incurred restructuring and severance costs of $28.6 million during the fourth fiscal quarter of 2008, and incurred additional restructuring and severance costs of $37.9 million during the year ended December 31, 2009. These costs were incurred as part of our goal to reduce manufacturing and SG&A fixed costs in 2009 by $200 million compared to the year ended December 31, 2008 in response to the economic downturn. Our fixed costs for the year ended December 31, 2009 decreased by $176 million versus the comparable prior year. Of these amounts, approximately 45% reduced costs of products sold and approximately 55% reduced SG&A expenses. Some of our cost reductions realized in 2009 are the result of temporary measures, which we intend to replace with more permanent actions, and certain components of our costs, while fixed in that they do not vary with changes in volume, are subject to volatility. This would include, for example, the effect of certain assets that are marked-to-market through the statement of operations, and certain transactions in foreign currencies. Accordingly, there is no assurance that all of the cost reductions achieved in 2009 will be maintained in 2010.

Since the beginning of the economic downturn, we have drastically reduced our break-even point by approximately $400 million to $500 million. While streamlining and reducing fixed overhead, we are exercising caution so that we will not negatively impact our customer service or our ability to further develop products and processes.

The perpetual erosion of average selling prices of established products that is typical of our industry makes it imperative that we continually seek ways to reduce our costs. Furthermore, our long-term strategy is to grow through the integration of acquired businesses, and GAAP requires plant closure and employee termination costs that we incur in connection with our acquisition activities to be recorded as expenses in our consolidated statement of operations, as such expenses are incurred. For these reasons, we expect to have some level of future restructuring expenses. However, we do not anticipate any material restructuring expenses during 2010 or 2011.

We did not initiate any new restructuring projects in the third fiscal quarter of 2010 and thus did not record any restructuring and severance expenses during the fiscal quarter.

Foreign Currency Translation

We are exposed to foreign currency exchange rate risks, particularly due to transactions in currencies other than the functional currencies of certain subsidiaries. While we have in the past used forward exchange contracts to hedge a portion of our projected cash flows from these exposures, we generally have not done so in recent periods.

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

Foreign Subsidiaries which use the Local Currency as the Functional Currency

We finance our operations in Europe and certain locations in Asia in local currencies, and accordingly, these subsidiaries utilize the local currency as their functional currency. For those subsidiaries where the local currency is the functional currency, assets and liabilities in the consolidated balance sheets have been translated at the rate of exchange as of the balance sheet date. Translation adjustments do not impact the results of operations and are reported as a separate component of stockholders’ equity. The general strength of the U.S. dollar at the end of the third fiscal quarter of 2010 compared to December 31, 2009 has decreased the accumulated other comprehensive income recorded on our consolidated condensed balance sheet.

For those subsidiaries where the local currency is the functional currency, revenues and expenses are translated at the average exchange rate for the year. While the translation of revenues and expenses into U.S. dollars does not directly impact the statement of operations, the translation effectively increases or decreases the U.S. dollar equivalent of revenues generated and expenses incurred in those foreign currencies. The dollar generally has been stronger during the first nine fiscal months and third fiscal quarter of 2010 compared to the prior year periods, with the translation of foreign currency revenues and expenses into U.S. dollars decreasing reported revenues and expenses versus the comparable prior year periods. The dollar generally has been weaker during the third fiscal quarter of 2010 sequentially compared to the prior fiscal quarter, with the translation of foreign currency revenues and expenses into U.S. dollars increasing reported revenues and expenses versus the prior fiscal 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 first nine fiscal months of 2010 have been slightly favorably impacted (compared to the prior year period) by local currency transactions of subsidiaries which use the U.S. dollar as their functional currency.

Results of Operations

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

	Fiscal quarters ended		Nine fiscal months ended
	October 2, 2010	September 26, 2009	October 2, 2010	September 26, 2009
Cost of products sold	68.5%	80.1%	70.7%	82.5%
Gross profit	31.5%	19.9%	29.3%	17.5%
Selling, general & administrative expenses	12.6%	17.1%	14.7%	18.2%
Operating income (loss)	18.9%	2.1%	14.6%	-5.1%
Income (loss) before taxes and noncontrolling interest	17.8%	1.7%	14.3%	-5.2%
Net earnings (loss) attributable to Vishay stockholders	12.9%	0.4%	10.4%	-6.0%
__________
Effective tax rate	27.1%	71.9%	27.0%	-14.6%

Net Revenues

Net revenues were as follows (dollars in thousands):

	Fiscal quarters ended				Nine fiscal months ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Net revenues	$	694,365	$	525,304	$	2,036,480	$	1,435,073
Change versus comparable prior year period	$	169,061			$	601,407
Percentage change versus
comparable prior year period		32.2%				41.9%

Changes in net revenues were attributable to the following:

	vs. Prior Year	vs. Prior
	Quarter	Year-to-Date
Change attributable to:
Increase in volume	40.4%	44.0%
Increase in average selling prices	4.2%	1.3%
Absence of VPG	-7.6%	-2.8%
Foreign currency effects	-3.6%	-1.3%
Other	-1.2%	0.7%
Net change	32.2%	41.9%

The recovery of our business that we began experiencing in the second half of 2009 continued in the third fiscal quarter of 2010 due to historically high overall demand for electronic components, a favorable pricing environment, and the effects of the cost reductions initiated in the prior year that enabled us to achieve our best results in ten years. Our results have dramatically improved versus the third fiscal quarter of 2009 results, which were substantially impacted by the global economic recession. Overall demand remains strong especially in the automotive, industrial, military and aerospace, and telecom network markets, although demand in the computer and segments of the consumer market have slowed. We expect our current revenue levels to continue despite the slight decline in demand due to historically high backlogs for our products.

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 sales under our distributor incentive programs of $56 million and $44 million for the nine fiscal months ended October 2, 2010 and September 26, 2009 respectively, or 2.7% and 3.0% of gross sales, respectively. Actual credits issued under the programs during the nine fiscal months ended October 2, 2010 and September 26, 2009, were $41 million and $51 million, respectively. Increases and decreases in these incentives are largely attributable to the then-current business climate.

As a result of a concentrated effort to defend our intellectual property and generate additional licensing income, we began receiving royalties in the fourth fiscal quarter of 2004. Royalty revenues, included in net revenues on the consolidated condensed statements of operations, were approximately $4.2 million and $3.4 million for the nine fiscal months ended October 2, 2010 and September 26, 2009, respectively.

Gross Profit and Margins

Gross profit margins for the fiscal quarter and nine fiscal months ended October 2, 2010 were 31.5% and 29.3%, versus 19.9% and 17.5%, respectively, for the comparable prior year periods. The gross profit margin for the nine fiscal months ended October 2, 2010 was 28.9% excluding VPG. The increase in gross profit margin reflects manufacturing efficiencies from significantly higher volume, increased average selling prices, and the effects of our fixed cost reduction programs initiated in prior periods.

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
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Net revenues	$	181,965	$	123,017	$	462,844	$	302,833
Change versus comparable prior year period	$	58,948			$	160,011
Percentage change versus
comparable prior year period		47.9%				52.8%

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

	vs. Prior Year	vs. Prior
	Quarter	Year-to-Date
Change attributable to:
Increase in volume	35.0%	45.5%
Increase in average selling prices	7.7%	3.7%
Foreign currency effects	-1.1%	-0.4%
Other	6.3%	4.0%
Net change	47.9%	52.8%

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

	Fiscal quarters ended		Nine fiscal months ended
	October 2, 2010	September 26, 2009	October 2, 2010	September 26, 2009
Gross margin percentage	34.5%	15.0%	29.5%	11.4%

The increase in gross profit margin reflects significantly higher volume, increased average selling prices, and the effects of our fixed cost reduction programs initiated in prior periods.

Our MOSFETs segment suffered significantly from low sales volume during the global economic recession. Following three fiscal quarters of accelerated recovery, the business has normalized after reaching pre-crisis levels of manufacturing and sales in the third fiscal quarter of 2010. Strong demand, shortages of supply, and customer requested expedites have led to price increases over the prior quarter and prior year periods. Based on a book-to-bill ratio of 1.17 and a high backlog, we expect continued strong segment net revenues.

Diodes

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

	Fiscal quarters ended				Nine fiscal months ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Net revenues	$	157,193	$	110,408	$	448,465	$	282,041
Change versus comparable prior year period	$	46,785			$	166,424
Percentage change versus
comparable prior year period		42.4%				59.0%

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

	vs. Prior Year	vs. Prior
	Quarter	Year-to-Date
Change attributable to:
Increase in volume	37.2%	57.9%
Increase in average selling prices	5.1%	1.2%
Foreign currency effects	-3.2%	-1.2%
Other	3.3%	1.1%
Net change	42.4%	59.0%

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

	Fiscal quarters ended		Nine fiscal months ended
	October 2, 2010	September 26, 2009	October 2, 2010	September 26, 2009
Gross margin percentage	25.5%	15.4%	23.1%	11.4%

The increase in gross profit margin reflects significantly higher volume, increased average selling prices, and the effects of our fixed cost reduction programs initiated in prior periods.

Our Diodes segment suffered significantly from low sales volume during the global economic recession. Following the substantial recovery, the business has normalized after reaching pre-economic crisis level of sales in the second fiscal quarter of 2010. Strong demand, shortages of supply, and customer requested expedites have led to price increases over the prior quarter and prior year periods. Despite a book-to-bill ratio below 1.0 for the third fiscal quarter of 2010, we continue to expect strong segment net revenues due to a very high backlog.

Optoelectronic Components

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

	Fiscal quarters ended				Nine fiscal months ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Net revenues	$	56,836	$	43,320	$	172,949	$	118,213
Change versus comparable prior year period	$	13,516			$	54,736
Percentage change versus
comparable prior year period		31.2%				46.3%

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

	vs. Prior Year	vs. Prior
	Quarter	Year-to-Date
Change attributable to:
Increase in volume	38.3%	52.8%
Decrease in average selling prices	0.0%	-1.6%
Foreign currency effects	-5.1%	-1.9%
Other	-2.0%	-3.0%
Net change	31.2%	46.3%

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

	Fiscal quarters ended		Nine fiscal months ended
	October 2, 2010	September 26, 2009	October 2, 2010	September 26, 2009
Gross margin percentage	33.9%	23.7%	34.2%	21.1%

The increase in gross profit margin reflects significantly higher volume and the effects of our fixed cost reduction programs initiated in prior periods, partially offset by modestly lower average selling prices.

Our Optoelectronic Components segment suffered significantly from low sales volume during the global economic recession. Following the substantial recovery, the business has normalized after reaching pre-economic crisis levels. The average selling prices have been stable versus the second fiscal quarter of 2010 and third fiscal quarter of 2009. Despite a book-to-bill ratio below 1.0 for the third fiscal quarter of 2010, we continue to expect strong segment net revenues due to a high backlog.

Resistors and Inductors

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

	Fiscal quarters ended				Nine fiscal months ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Net revenues	$	158,455	$	107,481	$	460,540	$	308,360
Change versus comparable prior year period	$	50,974			$	152,180
Percentage change versus
comparable prior year period		47.4%				49.4%

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

	vs. Prior Year	vs. Prior
	Quarter	Year-to-Date
Change attributable to:
Increase in volume	56.3%	52.9%
Decrease in average selling prices	-0.1%	-0.3%
Foreign currency effects	-6.1%	-2.2%
Other	-2.7%	-1.0%
Net change	47.4%	49.4%

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

	Fiscal quarters ended		Nine fiscal months ended
	October 2, 2010	September 26, 2009	October 2, 2010	September 26, 2009
Gross margin percentage	35.3%	23.6%	35.3%	21.8%

The increase in gross profit margin reflects significantly higher volume, the effects of our fixed cost reduction programs initiated in prior periods, and improved product mix, partially offset by foreign currency effects and modestly lower average selling prices.

In light of the economic challenges experienced in 2009, our Resistors and Inductors segment maintained a respectable gross margin percentage. Average selling prices have been generally stable versus the second fiscal quarter of 2010 and third fiscal quarter of 2009. The business has achieved pre-economic crisis sales levels and continues to enjoy strong demand from the automotive and industrial markets. Based on a book-to-bill ratio of 1.01 and a high backlog, we expect the business to stabilize on a high level.

Capacitors

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

	Fiscal quarters ended				Nine fiscal months ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Net revenues	$	139,916	$	100,973	$	390,593	$	298,483
Change versus comparable prior year period	$	38,943			$	92,110
Percentage change versus
comparable prior year period		38.6%				30.9%

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

	vs. Prior Year	vs. Prior
	Quarter	Year-to-Date
Change attributable to:
Increase in volume	35.5%	29.8%
Increase in average selling prices	5.7%	2.3%
Foreign currency effects	-5.0%	-1.8%
Other	2.4%	0.6%
Net change	38.6%	30.9%

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

	Fiscal quarters ended		Nine fiscal months ended
	October 2, 2010	September 26, 2009	October 2, 2010	September 26, 2009
Gross margin percentage	28.9%	20.5%	24.8%	18.3%

Significantly higher volume, increased average selling prices, and the effects of our fixed cost reduction programs initiated in prior periods, partially offset by foreign currency effects, have led to the highest gross margin results for the Capacitors segment in recent history.

In light of the economic challenges experienced in 2009, our Capacitors segment maintained a respectable gross margin percentage. Continued strong demand, shortages of supply, and customer requested expedites have led to substantial price increases versus the second fiscal quarter of 2010 and prior year periods. The business has achieved pre-economic crisis sales levels and continues to enjoy strong demand from the automotive and industrial markets. Due to a strong book-to-bill ratio and high backlog, we continue to expect strong segment net revenues.

Vishay Precision Group

We completed the spin-off of VPG on July 6, 2010. Net revenues and gross margin percentage for the periods that VPG was included in our consolidated condensed results were as follows (dollars in thousands):

	Fiscal quarter ended		Nine fiscal months ended
	September 26, 2009		October 2, 2010		September 26, 2009
Net revenues	$	40,105	$	101,089	$	125,143
Gross margin percentage		31.6%		36.6%		30.1%

Selling, General, and Administrative Expenses

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

	Fiscal quarters ended				Nine fiscal months ended
	October 2, 2010		September 26, 2009		October 2, 2010		September 26, 2009
Total SG&A expenses	$	87,475	$	89,667	$	298,629	$	260,873
as a percentage of revenues		12.6%		17.1%		14.7%		18.2%

VPG accounted for $35.4 million (including $8.4 million of costs associated with the spin-off) of SG&A expenses for the nine fiscal months ended October 2, 2010 and $10.3 million and $31.4 million, respectively, of SG&A expenses for the fiscal quarter and nine fiscal months ended September 26, 2009. The overall increase in SG&A expenses, excluding VPG, is primarily attributable to the resumption of bonus programs and the discontinuation of short-work and temporary shut-downs, which is partially offset by the effects of our cost containment initiatives. The decrease in SG&A as a percentage of revenues is primarily due to the increase in revenues and the effects of our cost containment initiatives. Additionally, 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
	October 2, 2010		September 26, 2009			October 2, 2010		September 26, 2009
Amortization of intangible assets	$	4,511	$	5,843		$	15,241	$	17,102
Net (gain) loss on sales of assets		268		(188	)		176		51
Costs associated with the VPG spin-off		300		1,200			8,400		1,900

Restructuring and Severance Costs and Related Asset Write-Downs

Our restructuring activities have been designed to reduce both fixed and variable costs. These activities include the closing of facilities and the termination of employees. Because costs are recorded based upon estimates, actual expenditures for the restructuring activities may differ from the initially recorded costs. If the initial estimates are too low or too high, we could be required either to record additional expenses in future periods or to reverse previously recorded expenses. We anticipate that we will realize the benefits of our restructuring through lower labor costs and other operating expenses in future periods. We did not initiate any new programs during the nine fiscal months ended October 2, 2010 and thus did not record any restructuring and severance costs expenses during the nine fiscal months.

Other Income (Expense)

Interest expense for the fiscal quarter and nine fiscal months ended October 2, 2010 decreased by $0.1 million and $0.9 million, respectively, versus the comparable prior year periods. The decrease is primarily due to lower interest rates on our variable rate debt and lower principal amounts outstanding.

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

	Fiscal quarters ended
	October 2, 2010			September 26, 2009			Change
Foreign exchange gain (loss)	$	(5,612	)	$	(389	)	$	(5,223	)
Interest income		627			874			(247	)
Dividend income		-			-			-
Other		269			(158	)		427
	$	(4,716	)	$	327		$	(5,043	)

	Nine fiscal months ended
	October 2, 2010			September 26, 2009			Change
Foreign exchange gain (loss)	$	(625	)	$	5,235		$	(5,860	)
Interest income		1,805			2,730			(925	)
Dividend income		97			-			97
Other		7			(265	)		272
	$	1,284		$	7,700		$	(6,416	)

Income Taxes

For the fiscal quarter and nine fiscal months ended October 2, 2010, the effective tax rate was 27.1% and 27.0%, respectively. The effective tax rate is less than the U.S. statutory rate primarily because of earnings in foreign jurisdictions. For the nine fiscal months ended September 26, 2009, we recorded a negative effective tax rate, tax expense on a pre-tax loss, primarily because we recorded tax expense on earnings in certain jurisdictions while realizing losses in other jurisdictions without recording tax benefits. For the same reason, the effective tax rate for the fiscal quarter ended September 26, 2009 was 71.9%.

We recognized no tax benefit associated with the executive employment agreement charge of $57.8 million discussed in Note 10 to our consolidated condensed financial statements. We recorded no tax expense associated with the gain of $28.2 million recognized upon reimbursement of purchase price described in Note 2 to our consolidated condensed financial statements.

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

The effective tax rates reflect the fact that we could not recognize for accounting purposes the tax benefit of losses incurred in certain jurisdictions, although these losses may be available to offset future taxable income. Under applicable accounting guidance, we may not recognize deferred tax assets for loss carryforwards in jurisdictions where there is a recent history of cumulative losses, where there is no taxable income in the carryback period, where there is insufficient evidence of future earnings to overcome the loss history, and where there is no other positive evidence, such as the likely reversal of taxable temporary differences, that would result in the utilization of loss carryforwards for tax purposes.

During the nine fiscal months ended October 2, 2010, the liabilities for unrecognized tax benefits were unchanged on a net basis, principally due to settlements and foreign exchange effects.

Financial Condition, Liquidity, and Capital Resources

We focus on our ability to generate cash flows from operations. The cash generated from operations is used to fund our capital expenditure plans, and cash in excess of our capital expenditure needs is available to fund our acquisition strategy and to reduce debt levels. We have generated cash flows from operations in excess of $200 million in each of the past 8 years, and cash flows from operations in excess of $100 million in each of the past 15 years. A portion of the cash flows from operations was generated by the Vishay Precision Group that was spun off on July 6, 2010.

We refer to the amount of cash generated from operations in excess of our capital expenditure needs and net of proceeds from the sale of assets as “free cash,” a measure which management uses to evaluate our ability to fund acquisitions and repay debt. Vishay has generated positive “free cash” in each of the past 13 years, and “free cash” in excess of $80 million in each of the past 8 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 strong cash flows from operations and free cash during the fiscal quarter ended October 2, 2010. There is no assurance, however, that we will be able to continue to generate cash flows from operations and free cash going forward if the current recovery stalls or does not continue as expected.

Our debt balance has decreased by $37.6 million from December 31, 2009 to October 2, 2010 due to principal payments of $26.0 million and the assumption by VPG of approximately $12 million of debt in connection with the spin-off (including approximately $10 million of exchangeable unsecured notes due 2102).

The following table summarizes the components of net debt (cash) at October 2, 2010 and December 31, 2009 (in thousands):

	October 2,			December 31,
	2010			2009
Credit facility - revolving debt	$	125,000		$	125,000
Credit facility - term loan		75,000			87,500
Exchangeable unsecured notes, due 2102		95,042			105,000
Convertible subordinated notes, due 2023		-			1,870
Other debt		3,500			16,736
Total debt		298,542			336,106

Cash and cash equivalents		745,371			579,189

Net debt (cash)	$	(446,829	)	$	(243,083	)

Measurements such as “free cash” and “net 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 and repay debt, and that an analysis of “net debt” assists investors in understanding aspects of our cash and debt management. These measures, as calculated by Vishay, may not be comparable to similarly titled measures used by other companies.

Substantially all of the October 2, 2010 cash and cash equivalents balance was held by our non-U.S. subsidiaries. At the present time, we expect the cash and profits generated by foreign subsidiaries will continue to be reinvested outside of the United States indefinitely. If additional cash is needed to be repatriated to the United States, we would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits), state income taxes, incremental foreign income taxes, and withholding taxes payable to various foreign countries.

Our financial condition as of October 2, 2010 continued to be strong, with a current ratio (current assets to current liabilities) of 2.9 to 1, as compared to a ratio of 3.5 to 1 at December 31, 2009. This decrease is primarily due to changes in the classification of our debt due to the timing of scheduled repayments. Our ratio of total debt to Vishay stockholders’ equity was 0.19 to 1 at October 2, 2010 as compared to a ratio of 0.22 to 1 at December 31, 2009. This decrease is primarily due to an increase in stockholder’s equity primarily driven by net income available to Vishay stockholders and a decrease in debt due to principal payments made in the fiscal period.

Cash flows provided by continuing operating activities were $339.1 million for the nine fiscal months ended October 2, 2010, as compared to cash flows provided by continuing operating activities of $178.6 million for the comparable prior year period. This increase is principally due to more favorable operating results (adjusted for noncash expenses and charges) in the nine fiscal months ended October 2, 2010 compared to the prior year period, partially offset by unfavorable changes in net working capital during the 2010 period.

Cash paid for property and equipment for the nine fiscal months ended October 2, 2010 was $80.1 million, as compared to $26.3 million for the comparable prior year period. As a result of the economic uncertainty and to preserve cash, we limited our capital spending in 2009 to $50.3 million. The reduced level of capital spending was temporary and not sustainable. We estimate that 2010 capital expenditures will be approximately $150 million.

On November 3, 2010, we announced the offering of $275 million principal amount of 2.25% convertible senior debentures due 2040 to qualified institutional investors. We used the net proceeds from this offering, together with new net borrowings under our credit facility and cash on hand, to repurchase 21,721,959 shares of common stock for an aggregate purchase price of $275 million. The transactions closed on November 9, 2010. See Note 13 to our Consolidated Condensed Financial Statements in Part I.

We maintain a credit facility, which provides a revolving commitment of up to $250 million through April 20, 2012, and a term loan which requires semi-annual principal payments through 2011. At October 2, 2010, the term loan balance was $75.0 million, and $125 million was outstanding under the revolving credit facility as compared to a term loan balance of $87.5 million and $125 million outstanding under the revolving credit facility as of December 31, 2009.

Under the terms of our credit facility, we were required to apply an amount equal to 50% of the net cash proceeds from the November 3, 2010 offering to prepay the outstanding amount under our term loan ($75 million), and once the outstanding term loan amount was reduced to zero, to repay a portion of the outstanding amount under our revolving loan. The repayment of the outstanding revolving loan does not reduce the lenders’ revolving credit commitment, and the amount repaid was simultaneously re-borrowed.

The issuance of the debentures and the execution of the share repurchases required us to enter into a consent letter with the lenders under our credit facility.

Interest on the credit facility is payable at prime or other variable interest rate options. We are required to pay facility commitment fees. As a result of the amendment to the credit facility entered effective June 11, 2010, the interest rates applicable to amounts outstanding under the revolving credit commitment were increased by 47.5 basis points (to LIBOR plus 1.875% based on the July 3, 2010 leverage ratio). The interest rates applicable to amounts outstanding under the term loan arrangement did not change (LIBOR plus 2.50% based on the July 3, 2010 leverage ratio).

The credit facility restricts us from paying cash dividends and requires us to comply with other covenants, including the maintenance of specific financial measures and ratios.

In connection with the amendment of the credit facility entered effective June 11, 2010, the tangible net worth covenant was revised to reflect the decrease in tangible net worth expected to occur upon the spin-off of VPG. The financial maintenance covenants now include (a) tangible net worth (as defined in the credit facility) of $1 billion plus 75% of net proceeds of equity offerings since July 6, 2010 plus, commencing with the fiscal quarter ending March 31, 2011, 50% of net income (without offset for losses) for each fiscal quarter ending after December 31, 2010; (b) a leverage ratio of not more than 3.50 to 1; (c) a fixed charges coverage ratio (“FCCR”) of not less than 2.50 to 1; (d) and a senior debt (as defined in the credit facility) to consolidated EBITDA ratio of not more than 2.00 to 1. The computation of these ratios is prescribed in Article 7 of the Vishay Intertechnology, Inc. Fourth Amended and Restated Credit Agreement, which has been filed with the SEC as Exhibit 10.1 to our current report on Form 8-K filed June 25, 2008. The Consent and Third Amendment to the Vishay Intertechnology, Inc. Fourth Amended and Restated Credit Agreement effective June 11, 2010 has been filed with the SEC as Exhibit 10.1 to our current report on Form 8-K filed June 14, 2010.

We were in compliance with all covenants at October 2, 2010. Our tangible net worth, calculated pursuant to the terms of the credit facility, was $1,339 million, which is $339 million more than the minimum required under the related credit facility covenant. Our leverage ratio, fixed charge coverage ratio, and senior debt ratio were 0.57 to 1, 12.23 to 1, and 0.39 to 1, respectively.

We expect to continue to be in compliance with these covenants based on current projections. We also have mechanisms, including deferral of capital expenditures and other discretionary spending, to facilitate on-going compliance.

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 have cross-default provisions that could accelerate repayment in the event the indebtedness under the credit facility is accelerated.

Borrowings under the credit facility are secured by accounts receivable, inventory, machinery and equipment, and general intangibles (but excluding real estate and bank accounts) of Vishay and subsidiaries located in the United States, pledges of stock in certain significant subsidiaries, and certain guarantees by significant subsidiaries. The subsidiaries would be required to perform under the guarantees in the event that Vishay failed to make principal or interest payments under the credit facility. Certain of our subsidiaries are permitted to borrow up to a limit of $125 million under the credit facility. Any borrowings by these subsidiaries under the credit facility are guaranteed by Vishay.

In conjunction with the acquisition of the wet tantalum capacitor business of KEMET on September 15, 2008, we issued a three-year term loan of $15 million to KEMET. On May 5, 2010, KEMET prepaid the entire principal amount of the term loan plus interest.

While the timing and location of scheduled payments for certain liabilities has required and will require us to draw additional amounts on our credit facility from time to time, for the next twelve months, management expects that cash on-hand and cash flows from operations will be sufficient to meet our normal operating requirements, to meet our obligations under restructuring and acquisition integration programs, to fund scheduled debt maturities, and to fund our research and development and capital expenditure plans. Acquisition activity may require additional borrowing under our credit facility or may otherwise require us to incur additional debt.

Contractual Commitments

Our Annual Report on Form 10-K includes a table of contractual commitments as of December 31, 2009. There were no material changes to these commitments during the nine fiscal months ended October 2, 2010.

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. Such statements involve a number of risks, uncertainties, and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those anticipated.

Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results 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, changes in the current pace of economic recovery, including if such recovery stalls or does not continue as expected; difficulties in integrating acquired companies, the inability to realize anticipated synergies and expansion possibilities, and other unanticipated conditions adversely affecting the operation of these companies; 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; changes in foreign currency exchange rates; difficulties in implementing our cost reduction strategies such as labor unrest or legal challenges to our lay-off or termination plans, underutilization of production facilities in lower-labor-cost countries, operation of redundant facilities due to difficulties in transferring production to lower-labor-cost countries; and other factors affecting our operations, markets, products, services, and prices that are set forth in our Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission (the “SEC”). We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the market risks previously disclosed in 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, 2009, filed with the SEC on February 26, 2010.

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

Not applicable.

Item 1A. Risk Factors

Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on February 26, 2010, as amended by Item 1A of our Quarterly Report on Form 10-Q for the quarter ended July 3, 2010, filed with the SEC on August 10, 2010, contains risk factors identified by Vishay.

There have been no material changes from the risk factors previously disclosed.

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

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Removed and Reserved

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

10.1		Tax Matters Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Intertechnology, Inc. Incorporated by reference to Exhibit 10.1 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.

10.2		Trademark License Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Intertechnology, Inc. Incorporated by reference to Exhibit 10.2 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.

10.3		Transition Services Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Intertechnology, Inc. Incorporated by reference to Exhibit 10.3 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.

10.4		Supply Agreement, dated July 6, 2010, between Vishay Advanced Technology, Ltd. and Vishay Dale Electronics, Inc. Incorporated by reference to Exhibit 10.4 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.*

10.5		Secondment Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Intertechnology, Inc. Incorporated by reference to Exhibit 10.5 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.

10.6		Patent License Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Dale Electronics, Inc. Incorporated by reference to Exhibit 10.6 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.*

10.7		Lease Agreement, dated July 4, 2010, between Vishay Advanced Technology, Ltd. and V.I.E.C. Ltd. Incorporated by reference to Exhibit 10.7 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.

10.8		Supply Agreement, dated July 6, 2010, between Vishay Dale Electronics, Inc. and Vishay Advanced Technology, Ltd. Incorporated by reference to Exhibit 10.8 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.*

10.9		Supply Agreement, dated July 6, 2010, between Vishay Measurements Group, Inc. and Vishay S.A. Incorporated by reference to Exhibit 10.9 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.*

10.10		Manufacturing Agreement, dated July 6, 2010, between Vishay S.A. and Vishay Precision Foil GmbH. Incorporated by reference to Exhibit 10.10 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.*

10.11		Intellectual Property License Agreement, dated July 6, 2010, between Vishay S.A. and Vishay Precision Foil GmbH. Incorporated by reference to Exhibit 10.11 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.

10.12		Supply Agreement, dated July 6, 2010, between Vishay Precision Foil GmbH and Vishay S.A. Incorporated by reference to Exhibit 10.12 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.*

10.13		Intellectual Property License Agreement, dated July 6, 2010, between Vishay S.A. and Vishay Measurements Group, Inc. Incorporated by reference to Exhibit 10.13 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.*

10.14		Lease Agreement between Vishay Alpha Electronics Corporation and Vishay Japan Co., Ltd. Incorporated by reference to Exhibit 10.14 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.

10.15		Lease Agreement, dated July 6, 2010, between Vishay Intertechnology, Inc. and Vishay Precision Group, Inc. Incorporated by reference to Exhibit 10.15 to Vishay Precision Group, Inc.’s current report on Form 8- K filed July 7, 2010.

10.16		Lease Agreement, dated July 4, 2010, between Vishay Precision Israel, Ltd. and Vishay Israel, Ltd. Incorporated by reference to Exhibit 10.16 to Vishay Precision Group, Inc.’s current report on Form 8-K filed July 7, 2010.

10.17		Amendment to Employment Agreement, dated August 8, 2010, between Vishay Intertechnology, Inc. and Dr. Felix Zandman. Incorporated by reference to Exhibit 10.4 to our quarterly report on Form 10-Q for the fiscal quarter ended July 3, 2010.

10.18		Amendment to Employment Agreement, dated August 8, 2010, between Vishay Europe GmbH (an indirect wholly owned subsidiary of Vishay Intertechnology, Inc.) and Dr. Gerald Paul. Incorporated by reference to Exhibit 10.5 to our quarterly report on Form 10-Q for the fiscal quarter ended July 3, 2010.

10.19		Amendment to Employment Agreement, dated August 8, 2010, between Vishay Israel Ltd. (a wholly owned subsidiary of Vishay Intertechnology, Inc.) and Marc Zandman. Incorporated by reference to Exhibit 10.6 to our quarterly report on Form 10-Q for the fiscal quarter ended July 3, 2010.

10.20		Amendment to Employment Agreement, dated August 8, 2010, between Vishay Intertechnology, Inc. and Dr. Lior E. Yahalomi. Incorporated by reference to Exhibit 10.7 to our quarterly report on Form 10-Q for the fiscal quarter ended July 3, 2010.

10.21		Press release, dated July 21, 2010, announcing the terms of the replacement notes to be issued to holders of Vishay’s exchangeable floating-rate unsecured notes due 2102 and revised terms of its outstanding warrants as required due to the spin-off of Vishay Precision Group, Inc. on July 6, 2010. Incorporated by reference to Exhibit 99 to our current report on Form 8-K filed July 22, 2010.

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 - Dr. Lior E. Yahalomi, 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 – Dr. Lior E. Yahalomi, Chief Financial Officer.

101		Interactive Data File (Quarterly Report on Form 10-Q, for the quarterly period ended October 2, 2010, furnished in XBRL (eXtensible Business Reporting Language)).

____________________

*Confidential treatment has been requested by, and accorded to, VPG with respect to certain portions of this Exhibit. Omitted portions have been filed separately by VPG with the Securities and Exchange Commission.

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/ Lior E. Yahalomi
	Dr. Lior E. Yahalomi
	Executive Vice President and Chief Financial Officer
	(as a duly authorized officer and principal financial officer)


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

Date: November 9, 2010