Note 2 – Acquisition Activities

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

Holy Stone Polytech Co., Ltd.

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

Capella Microsystems Inc.

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

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

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

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

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

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

Goodwill	$	97,706

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

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

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

Pro Forma Results

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

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

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

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

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