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Long-Term Debt
 6 Months Ended
Jun. 30, 2018
Long-Term Debt [Abstract]  
Long-Term Debt
Note 6 – Long-Term Debt

Long-term debt consists of the following:

  
June 30, 2018
  
December 31, 2017
 
       
Credit facility
 
$
96,000
  
$
150,000
 
Convertible senior debentures, due 2040
  
22,331
   
110,412
 
Convertible senior debentures, due 2041
  
57,275
   
56,641
 
Convertible senior debentures, due 2042
  
34,065
   
62,518
 
Convertible notes, due 2025
  
488,518
   
-
 
Deferred financing costs
  
(18,591
)
  
(9,101
)
   
679,598
   
370,470
 
Less current portion
  
-
   
-
 
  
$
679,598
  
$
370,470
 

Convertible Senior Notes due 2025

In June 2018, the Company issued $600,000 aggregate principal amount of 2.25% convertible senior notes due 2025 to qualified institutional investors. The Company used the net proceeds from this offering to repurchase $220,000 and $69,060 principal amounts of convertible senior debentures due 2040 and 2042, respectively, as further described below.
 
GAAP requires an issuer to separately account for the liability and equity components of the instrument in a manner that reflects the issuer's nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods. The resulting discount on the debt is amortized as non-cash interest expense in future periods.

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

  
Principal amount of the notes
  
Unamortized discount
  
Carrying value of liability component
  
Equity component - net carrying value
 
June 30, 2018
            
Due 2025
 
$
600,000
   
(111,482
)
 
$
488,518
  
$
85,262
 

Interest is payable on the convertible notes due 2025 semi-annually in arrears on June 15 and December 15 of each year, beginning December 15, 2018, at a rate of 2.25% per annum; however, the remaining debt discount is being amortized as additional non-cash interest expense using an effective annual interest rate of 5.5% based on the Company's estimated nonconvertible debt borrowing rate.

Interest expense for the fiscal quarter and six fiscal months ended June 30, 2018 related to the convertible notes is reflected on the consolidated statement of operations as follows:

 
Contractual
coupon interest
 
Non-cash amortization of debt discount
 
Non-cash amortization of deferred financing costs
 
Total interest expense related to the debentures
 
Due 2025
 
$
713
   
556
   
151
  
$
1,420
 

The convertible notes due 2025 will mature on June 15, 2025, unless earlier repurchased or converted.  Prior to December 15, 2024, such conversion is subject to the satisfaction of certain conditions set forth below.  The convertible notes due 2025 are not redeemable by the Company before the maturity date.


Prior to December 15, 2024, the holders may only convert their notes under the following circumstances: (1) during any fiscal quarter after the fiscal quarter ending September 29, 2018, if the sale price of Vishay common stock reaches 130% of the conversion price for a specified period (initially $40.94); (2) the trading price of the notes falls below 98% of the product of the sale price of Vishay's common stock and the conversion rate for a specified period; or (3) upon the occurrence of specified corporate transactions.

The convertible notes due 2025 are initially convertible into cash, shares of Vishay common stock, or a combination thereof, at the Company's option, at a conversion rate of 31.7536 shares of common stock per $1,000 principal amount of notes.  This initial conversion price represents a premium of 27.5% to the closing price of Vishay's common stock on June 8, 2018, which was $24.70 per share.  The conversion rate of the convertible notes is not adjusted for quarterly cash dividends equal to or less than $0.085 per share of common stock.  This represents an initial effective conversion price of approximately $31.49 per share.  At the direction of its Board of Directors, Vishay intends, upon conversion, to repay the principal amount of the notes in cash and settle any additional amounts in shares. Vishay must provide additional shares upon conversion if there is a "fundamental change" in the business as defined in the indenture governing the notes.

Convertible Senior Debentures

Vishay currently has three issuances of convertible senior debentures outstanding with generally congruent terms.

The Company used substantially all of the net proceeds of the June 2018 issuance of convertible senior notes due 2025 to repurchase $220,000 and $69,060 principal amounts of convertible senior debentures due 2040 and due 2042, respectively.  The net carrying value of the debentures repurchased were $89,276 and $29,037, respectively.  In accordance with the authoritative accounting guidance for convertible debentures, the aggregate repurchase payment of $584,991 was allocated between the liability ($133,647) and equity (including temporary equity, $451,344) components of the convertible debentures, using the Company's nonconvertible debt borrowing rate at the time of the repurchase.  As a result, the Company recognized a loss on extinguishment of convertible debentures of $17,309, including the write-off of a portion of unamortized debt issuance costs.

The quarterly cash dividend program of the Company results in adjustments to the conversion rate and effective conversion price for each issuance of the Company's convertible senior debentures effective as of the ex-dividend date of each cash dividend.

The following table summarizes some key facts and terms regarding the three series of outstanding convertible senior debentures following the adjustment made to the conversion rate of the debentures on the ex-dividend date of the June 28, 2018 dividend payment:

  
Due 2040
  
Due 2041
  
Due 2042
 
Issuance date
 
November 9, 2010
  
May 13, 2011
  
May 31, 2012
 
Maturity date
 
November 15, 2040
  
May 15, 2041
  
June 1, 2042
 
Principal amount as of June 30, 2018
 
$
55,000
  
$
150,000
  
$
80,940
 
Cash coupon rate (per annum)
  
2.25
%
  
2.25
%
  
2.25
%
Nonconvertible debt borrowing rate at issuance (per annum)
  
8.00
%
  
8.375
%
  
7.50
%
Conversion rate effective June 12, 2018 (per $1 principal amount)
  
77.7399
   
56.7305
   
91.4035
 
Effective conversion price effective June 12, 2018 (per share)
 
$
12.86
  
$
17.63
  
$
10.94
 
130% of the conversion price (per share)
 
$
16.72
  
$
22.92
  
$
14.22
 
Call date
 
November 20, 2020
  
May 20, 2021
  
June 7, 2022
 

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

The convertible debentures due 2042 became convertible subsequent to the December 31, 2016 evaluation of the conversion criteria, and have remained convertible for each subsequent quarterly evaluation through the June 30, 2018 evaluation, due to the sale price of Vishay's common stock exceeding 130% of the conversion price for the applicable periods.  The convertible debentures due 2040 became convertible subsequent to the September 30, 2017 evaluation of the conversion criteria, and have remained convertible for each subsequent quarterly evaluation through the June 30, 2018 evaluation, due to the sale price of Vishay's common stock exceeding 130% of the conversion price for the applicable periods.  The debentures due 2040 and due 2042 will remain convertible until September 29, 2018, at which time the conversion criteria will be reevaluated.  At the direction of its Board of Directors, the Company intends, upon future conversion of any of the convertible senior debentures, to repay the principal amounts of the convertible senior debentures in cash and settle any additional amounts in shares of Vishay common stock. The excess of the amount that the Company would pay to the holders of the debentures due 2040 and due 2042 upon conversion over the carrying value of the liability component of the debentures currently convertible has been reclassified as temporary equity on the consolidated condensed financial statements. The Company intends to finance the principal amount of any converted debentures using borrowings under its credit facility. Accordingly, the debt component of the convertible debentures due 2040 and due 2042 continues to be classified as a non-current liability on the consolidated condensed balance sheets.

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

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

  
Principal amount of
the debentures
  
Unamortized discount
  
Embedded derivative
  
Carrying value of liability component
  
Equity component (including temporary equity) - net carrying value
 
June 30, 2018
               
Due 2040
 
$
55,000
   
(32,696
)
  
27
  
$
22,331
  
$
22,019
 
Due 2041
 
$
150,000
   
(92,898
)
  
173
  
$
57,275
  
$
62,246
 
Due 2042
 
$
80,940
   
(46,919
)
  
44
  
$
34,065
  
$
31,229
 
Total
 
$
285,940
  
$
(172,513
)
 
$
244
  
$
113,671
  
$
115,494
 
                     
December 31, 2017
                    
Due 2040
 
$
275,000
   
(164,794
)
  
206
  
$
110,412
  
$
110,094
 
Due 2041
 
$
150,000
   
(93,573
)
  
214
  
$
56,641
  
$
62,246
 
Due 2042
 
$
150,000
   
(87,600
)
  
118
  
$
62,518
  
$
57,874
 
Total
 
$
575,000
  
$
(345,967
)
 
$
538
  
$
229,571
  
$
230,214
 

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

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

  
Contractual
coupon interest
  
Non-cash amortization of debt discount
  
Non-cash amortization of deferred financing costs
  
Non-cash change in value of derivative liability
  
Total interest expense related to the debentures
 
June 30, 2018
               
Due 2040
 
$
1,134
   
483
   
16
   
(33
)
 
$
1,600
 
Due 2041
 
$
844
   
341
   
12
   
(97
)
 
$
1,100
 
Due 2042
 
$
714
   
275
   
11
   
(26
)
 
$
974
 
Total
 
$
2,692
  
$
1,099
  
$
39
  
$
(156
)
 
$
3,674
 
                     
July 1, 2017
                    
Due 2040
 
$
1,547
   
613
   
22
   
(19
)
 
$
2,163
 
Due 2041
 
$
844
   
314
   
12
   
6
  
$
1,176
 
Due 2042
 
$
844
   
306
   
14
   
12
  
$
1,176
 
Total
 
$
3,235
  
$
1,233
  
$
48
  
$
(1
)
 
$
4,515
 

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

  
Contractual
coupon interest
  
Non-cash amortization of debt discount
  
Non-cash amortization of deferred financing costs
  
Non-cash change in value of derivative liability
  
Total interest expense related to the debentures
 
June 30, 2018
               
Due 2040
 
$
2,681
   
1,134
   
38
   
61
  
$
3,914
 
Due 2041
 
$
1,688
   
675
   
24
   
(41
)
 
$
2,346
 
Due 2042
 
$
1,558
   
599
   
24
   
(15
)
 
$
2,166
 
Total
 
$
5,927
  
$
2,408
  
$
86
  
$
5
  
$
8,426
 
                     
July 1, 2017
                    
Due 2040
 
$
3,094
   
1,215
   
44
   
(44
)
 
$
4,309
 
Due 2041
 
$
1,688
   
622
   
24
   
8
  
$
2,342
 
Due 2042
 
$
1,688
   
607
   
27
   
8
  
$
2,330
 
Total
 
$
6,470
  
$
2,444
  
$
95
  
$
(28
)
 
$
8,981