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 Convertible Subordinated Notes, due 2023 are only convertible upon the occurrence of certain events. While none of these events has occurred as of July 1, 2006, certain conditions which could trigger conversion have been deemed to be non-substantive, and accordingly, the Company has always assumed the conversion of these notes in its diluted earnings per share computation during periods in which they are dilutive. EITF 04-8 also now requires the inclusion of these notes in the diluted earnings per share computation during periods in which they are dilutive.
As described in Note 5, the Company made a cash repurchase of all outstanding LYONs pursuant to the option of the holders to require the Company to repurchase the LYONs on June 4, 2006. In 2005, based on its action to settle the holders’ purchase option on the June 4, 2004 purchase date in common stock, the Company assumed for purposes of the earnings per share computation that all future purchase options for the LYONs would be settled in stock based on the settlement formula set forth in the indenture governing the LYONs. Due to the decision to utilize cash to repurchase the notes on the June 4, 2006, purchase date, the earnings per share computation for the 2006 periods are based on the 3,809,000 shares that would have been issued in a normal conversion, weighted for the period they were outstanding.
Note 13 – New Accounting Pronouncements
In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement No. 151, Inventory Costs—an amendment of ARB No. 43, Chapter 4, which amends and clarifies existing accounting literature regarding abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Vishay adopted this standard effective January 1, 2006. The provisions of this statement are to be applied prospectively. The adoption of this standard did not have a material effect on the Company’s financial position, results of operations, or liquidity.
Vishay adopted SFAS No. 123-R, Share-Based Payment, effective January 1, 2006. See Note 8.
In May 2005, the FASB issued Statement No. 154, Accounting Changes and Error Corrections. This statement replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements of the accounting for and reporting of a change in accounting principle. This statement also provides guidance on the accounting for and reporting of error corrections. Vishay adopted this standard effective January 1, 2006. The adoption of this standard did not have a material effect on the Company’s financial position, results of operations, or liquidity.
In June 2005, the Emerging Issues Task Force reached a consensus on Issue No. 05-5, Accounting for Early Retirement or Postemployment Programs with Specific Features (such as Terms Specified in Altersteilzeit Early Retirement Arrangements). Altersteilzeit (“ATZ”) in Germany is an early retirement program designed to create an incentive for employees, within a certain age group, to leave their employers before the legal retirement age. Although established by law, the actual arrangement between employers and employees is negotiated. The Task Force reached a consensus that the additional compensation under an ATZ arrangement should be accounted for as a postemployment benefit under SFAS No. 112, Employers’ Accounting for Postemployment Benefits. An entity should recognize the additional compensation over the period from the point at which the employee signs the ATZ contract until the end of the active service period. Vishay adopted this standard effective January 1, 2006. The adoption of this standard did not have a material effect on the Company’s financial position, results of operations, or liquidity.
In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006, and Vishay will adopt FIN 48 effective January 1, 2007. The Company is currently evaluating the provisions of FIN 48 to determine the impact, if any, the adoption will have on the Company’s financial statements.
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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, transistors, diodes, rectifiers, certain types of integrated circuits, optoelectronic components, resistors, capacitors, inductors, strain gages, load cells, force measurement sensors, displacement sensors, and photoelastic sensors. Semiconductors and electronic components manufactured by Vishay are used in virtually all types of electronic products, including those in the computer, telecommunications, military/aerospace, instrument, automotive, medical, and consumer electronics industries.
Vishay operates in two segments, Semiconductors and Passive Components. Semiconductors segment products include power MOSFETs, transistors, diodes, rectifiers, certain types of integrated circuits and optoelectronic products. Our Semiconductors segment includes our Siliconix subsidiary; we completed the acquisition of the 19.6% interest in Siliconix that we did not already own during the second quarter of 2005. Passive Components segment products include resistors, capacitors, and inductors. We include in this segment our Measurements Group, which manufactures and markets strain gages, load cells, transducers, instruments and weighing systems whose core components are resistors that are sensitive to various types of mechanical stress. The Passive Components business had historically predominated at Vishay until the purchase of General Semiconductor in November 2001, after which the lead position shifted to the Semiconductors business. With the acquisition of BCcomponents in December 2002, revenues from our Semiconductors and Passive Components businesses are essentially split evenly.
Net revenues for the second quarter of 2006 were $660.5 million, a 13% increase as compared to net revenues for the second quarter of 2005 of $582.4 million. Net earnings for the second quarter of 2006 were $42.8 million, or $0.22 per diluted share compared to net earnings of $9.7 million or $0.05 per diluted share for the second quarter of 2005. Net earnings for the second quarter of 2006 were impacted by pre-tax charges for restructuring and severance costs of $8.2 million, related asset write-downs of $3.8 million, losses resulting from adjustments to previously existing purchase commitments of $0.8 million, a loss on early extinguishment of debt of $2.9 million and an adjustment to increase the estimated cost of environmental remediation obligations associated with the 2001 General Semiconductor acquisition of $3.6 million. These items and their tax-related consequences had a negative $0.06 effect on earnings per share. Net earnings for the second quarter of 2005 were impacted by restructuring and severance costs and related asset write-downs of $9.4 million, charges for purchased in-process research and development of $9.2 million, Siliconix transaction-related expenses of $3.8 million, and by losses resulting from adjustments to previously existing purchase commitments of $1.3 million, partially offset by a gain on sale of land of $2.1 million. In addition, income tax expense for the second quarter of 2005 is net of a $3.7 million benefit, primarily due to a favorable foreign tax ruling. These items and their tax related consequences had a negative $0.07 effect on earnings per share.
Net revenues for the six fiscal months ended July 1, 2006 were $1,291.6 million, a 14% increase as compared to sales of $1,136.8 million for the comparable prior year period. Net earnings for the six fiscal months ended July 1, 2006 were $81.0 million or $0.41 per diluted share compared to net earnings of $15.4 million or $0.09 per diluted share for the comparable prior year period. Net earnings for the six fiscal months ended July 1, 2006 were impacted by pre-tax charges for restructuring and severance costs of $8.9 million, related asset write-downs of $3.9 million, losses resulting from adjustments to previously existing purchase commitments of $4.1 million, write-downs of tantalum inventories to current market value of $8.2 million, a loss on early extinguishment of debt of $2.9 million and an adjustment to increase the estimated cost of environmental remediation obligations associated with the 2001 General Semiconductor acquisition of $3.6 million. These items and their tax related consequences had a negative $0.12 effect on earnings per share. Net earnings for the six fiscal months ended July 2, 2005 were impacted by pretax charges for restructuring and severance costs and related asset write-downs of $14.4 million, charges for purchased in-process research and development of $9.2 million, Siliconix transaction-related expenses of $3.8 million, and losses resulting from adjustments to previously existing purchase commitments of $3.6 million, partially offset by a gain on sale of land of $2.1 million. In addition, income tax expense for the six fiscal months ended July 2, 2005 is net of a $3.7 million benefit, primarily due to a favorable foreign tax ruling. These items and their tax related consequences had a negative $0.10 effect on earnings per share.
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The electronic components industry is presently enjoying a very favorable business climate. All regions and practically all market segments are doing well. Revenues improved 13% versus the prior year’s second quarter, and improved 5% sequentially. As expected, our cost reduction efforts of the past several years are yielding margin improvements.
Financial Metrics
We utilize several financial measures and metrics to evaluate the performance and assess the future direction of our business. These key financial measures and metrics include sales, 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 sales. Gross profit is generally net sales less cost 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 sales, but also reflects our cost cutting programs and our ability to contain fixed costs.
End-of-period backlog is one indicator of future sales. We include in our backlog only open orders that have been released by the customer for shipment 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.
Another important indicator of demand in our industry is the book-to-bill ratio, which is the ratio of the amount of product ordered during a period as compared with the product that we ship during that period. A book-to-bill ratio that is greater than one indicates that our backlog is building and that we are likely to see increasing revenues in future periods. Conversely, a book-to-bill ratio that is less than one is an indicator of declining demand and may foretell declining sales.
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 cost 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 quarter-end balance) for this same period. The inventory balance used for computation of this ratio includes tantalum inventories in excess of one year supply, which are classified as other assets in the consolidated balance sheet. See Note 15 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2005. 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 of the industry. However, we attempt to offset this deterioration with ongoing cost reduction activities and new product introductions, as newer products typically yield larger gross margins.
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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 second quarter of 2005 through the second quarter of 2006 (dollars in thousands):
| | | 2nd Quarter 2005 | | | 3rd Quarter 2005 | | | 4th Quarter 2005 | | | 1st Quarter 2006 | | | 2nd Quarter 2006 | |
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Net revenues | | $ | 582,388 | | $ | 566,077 | | $ | 593,690 | | $ | 631,086 | | $ | 660,523 | |
Gross profit margin * | | | 22.7 | % | | 24.0 | % | | 24.1 | % | | 24.8 | % | | 27.2 | % |
End-of-period backlog | | $ | 451,300 | | $ | 490,100 | | $ | 511,300 | | $ | 600,000 | | $ | 653,700 | |
Book-to-bill ratio | | | 0.99 | | | 1.07 | | | 1.04 | | | 1.14 | | | 1.07 | |
Inventory turnover | | | 3.20 | | | 3.07 | | | 3.22 | | | 3.31 | | | 3.35 | |
Change in ASP vs. prior quarter | | | -1.4 | % | | -0.6 | % | | -1.7 | % | | -0.2 | % | | -1.3 | % |
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* Gross profit margin includes the impact of inventory write-downs, and gain (loss) on purchase commitments. |
See “Financial Metrics by Segment” below for net revenues, book-to-bill ratio, and gross profit margin broken out by segment.
We continued to experience very favorable economic conditions during the second quarter of 2006. All of our end-use markets appeared to be very strong. For the second quarter of 2006, the overall book-to-bill ratio remained above one, at 1.07. While we anticipate revenues to be essentially flat in the third quarter of 2006 due to normal seasonality, we are generally optimistic for the second half of 2006 and for next year. Orders from original equipment manufacturers continued to be strong in the second quarter of 2006, with a book-to-bill ratio of 1.05, compared to a ratio of 1.04 during the first quarter of 2006. During the second quarter of 2006, we noted some slow-down in orders from distributors, although the overall situation remains healthy, with worldwide distribution inventory turnover at approximately 4.0. The book-to-bill ratio for distribution customers is still above one, at 1.08 for the second quarter of 2006, a decrease from an outstanding ratio of 1.25 during the first quarter of 2006. We also perceive the distributors’ business to end-use customers to be strong, a major difference to our experience in 2004, where a ramp-up in distributor orders in the first half of the year resulted in excess inventory in the pipeline and sluggish sales in the second half of the year. Our backlog has continued to grow, with a low level of cancellations.
We experienced only modest pressure on selling prices. In certain product lines, we have even seen opportunities for price increases. We believe pricing will be stable to moderately lower for the rest of 2006.
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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 second quarter of 2005 through the second quarter of 2006 (dollars in thousands):
| | | 2nd Quarter 2005 | | | 3rd Quarter 2005 | | | 4th Quarter 2005 | | | 1st Quarter 2006 | | | 2nd Quarter 2006 | |
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Semiconductors | | | | | | | | | | | | | | | | |
Net revenues | | $ | 283,053 | | $ | 286,872 | | $ | 304,640 | | $ | 304,926 | | $ | 324,302 | |
Book-to-bill ratio | | | 1.00 | | | 1.09 | | | 1.04 | | | 1.21 | | | 1.15 | |
Gross profit margin | | | 23.5 | % | | 26.0 | % | | 25.5 | % | | 27.4 | % | | 27.8 | % |
Passive Components | | | | | | | | | | | | | | | | |
Net revenues | | $ | 299,335 | | $ | 279,205 | | $ | 289,050 | | $ | 326,160 | | $ | 336,221 | |
Book-to-bill ratio | | | 0.98 | | | 1.04 | | | 1.04 | | | 1.07 | | | 0.99 | |
Gross profit margin * | | | 21.8 | % | | 21.9 | % | | 22.5 | % | | 22.4 | % | | 26.7 | % |
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* Gross profit margin for the Passive Components segment includes the impact of inventory write-downs, and gain (loss) on purchase commitments. |
Capacity Utilization
Capacity utilization is a reflection of product demand and of available capacities.
Capacity load in the Passive Components segment is approximately the same as the first quarter of 2006, which represents improved capacity versus the second half of 2005. Our resistor lines continued to operate at an average of approximately 80% to 90% of capacity, with some specialty lines operating at or near full capacity. Our capacitor lines operated at between 75% and 90% of capacity.
We continue to operate near full capacity in most of our front-end Semiconductors facilities. We have made significant investments in expanding capacity in our Semiconductor facilities, which will ramp up in future quarters. Our Siliconix division has begun a project to add 8-inch silicon wafer manufacturing capabilities at the fabrication facility in Itzehoe, Germany. This project is expected to alleviate capacity constraints for high-cell-density wafers and reduce costs. Our Siliconix division also maintains long-term foundry agreements with subcontractors to ensure access to external front-end capacity.
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Acquisition Activity
As part of our growth strategy, we seek to expand through acquisition 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. Also as part of this growth strategy, we seek to explore opportunities with privately held developers of electronic components, whether through acquisition, investment in non-controlling interests, or strategic alliances.
We believe the strength of our balance sheet would enable us to acquire a larger target, and we are presently evaluating opportunities to do so.
We are also presently continuing to explore opportunities to acquire some 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. Consistent with this strategy, we acquired all of the outstanding capital stock of Phoenix do Brazil Ltda., a manufacturer of resistors, for approximately $17.5 million, effective July 31, 2006. The acquisition of Phoenix do Brazil provides Vishay with increased market presence in South America.
Second Quarter 2005 Acquisitions
As more fully described in our Annual Report on Form 10-K for the year ended December 31, 2005, Vishay acquired the 19.6% interest in Siliconix that it did not already own during the second quarter of 2006. The consolidated condensed statements of operations for the second quarter and six fiscal months ended July 2, 2005 include two items related to this transaction.
Both Vishay and Siliconix incurred expenses associated with the defense and settlement of stockholder litigation related to the Siliconix transaction. Additionally, Siliconix incurred expenses related to the exchange offer, including costs of the special committee of independent Siliconix directors appointed to evaluate the offer and the costs of the special committee’s financial and legal advisors. These costs do not represent Vishay’s direct costs of the acquisition, and accordingly are not included in the purchase price. These costs, aggregating $3.8 million, are included in a separate line in the consolidated condensed statements of operations.
Purchased in-process research and development represents the value assigned in a business combination to research and development projects of the acquired business that were commenced, but not completed, at the date of acquisition, for which technological feasibility has not been established, and which have no alternative future use in research and development activities or otherwise. Amounts assigned to purchased in-process research and development meeting the above criteria must be charged to expense at the date of consummation of the business combination. A charge of $9.2 million was recorded in the second quarter of 2005, equal to approximately 19.6% of the value of Siliconix in-process research and development at the time of the acquisition of the minority interest.
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Cost Management
We place a strong emphasis on reducing our costs. One way we do this is by moving 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 73.7% at the end of the second quarter of 2006, compared to 73.3% at the end of the first quarter of 2006, 72.8% at the end of 2005, 71.8% at the end of 2004, 69% at the end of 2003, 65% at the end of 2002, 61% at the end of 2001, and 57% at the end of 2000. Our long-term target is to have between 75% and 80% of our headcount in lower-labor-cost countries.
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.
During 2005 and the first quarter of 2006, we completed a broad-based fixed cost reduction program which will save Vishay approximately $50 million per year. In April 2005, we began evaluating additional restructuring initiatives to improve the results of underperforming divisions, which we expect will eventually generate additional annual cost savings of $50 million, of which we believe approximately $20 million will begin to be realized in 2006, an additional $20 million will begin to be realized in 2007, and an additional $10 million will begin to be realized in 2008. Our cost savings initiatives are expected to include a combination of production transfers, plant closures, and overhead streamlining.
Our restructuring plans for 2006 include moving certain back-end Siliconix division production from the Republic of China (Taiwan) to the People’s Republic of China; consolidating certain locations in Hungary and Germany; shifting production for a portion of our film capacitor product lines from Belgium to India and the People’s Republic of China; shifting production for a portion of our aluminum capacitor product lines from the Netherlands to Austria and/or sub-contractors; and completing a second phase of transferring our tantalum molded capacitor finishing operation from Israel to the People’s Republic of China. Many of these planned programs began in the second quarter and are proceeding according to plan. During the second quarter, we also announced our intent to close the wafer fabrication facility in Freiburg, Germany, and transfer production to other Vishay facilities. The commencement of the plan to close the Freiburg fabrication facility is pending successful negotiation with the workers’ council representing the affected employees.
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. Our cost management plans also include expansion of certain critical capacities, which we hope will reduce average materials and processing costs.
Results of Operations
Statement of operations captions as a percentage of sales and the effective tax rates were as follows:
| | Fiscal quarter ended | | Six fiscal months ended | |
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| | | July 1, 2006 | | | July 2, 2005 | | | July 1, 2006 | | | July 2, 2005 | |
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Cost of products sold | | | 72.6 | % | | 77.1 | % | | 73.6 | % | | 77.8 | % |
Gross profit | | | 27.2 | % | | 22.7 | % | | 26.0 | % | | 21.9 | % |
Selling, general & administrative expenses | | | 15.8 | % | | 16.5 | % | | 15.5 | % | | 16.9 | % |
Operating income | | | 9.6 | % | | 2.4 | % | | 9.6 | % | | 2.6 | % |
Earnings before taxes & minority interest | | | 8.5 | % | | 2.1 | % | | 8.6 | % | | 2.0 | % |
Net earnings | | | 6.5 | % | | 1.7 | % | | 6.3 | % | | 1.4 | % |
Effective tax rate | | | 22.9 | % | | 10.0 | % | | 26.9 | % | | 16.9 | % |
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Net Revenues
Net revenues for the quarter and six fiscal months ended July 1, 2006 were $660.5 million and $1,291.6 million, respectively, or 13% and 14% greater than net revenues for the respective prior year periods. Net revenues for the quarter and six fiscal months ended July 1, 2006 include royalty revenues of $0.9 million and $3.1 million, respectively, versus $0.7 and $1.4 million for the respective prior year periods. The increase in revenues is principally attributable to volume increases from the stronger, broad-based demand for our products, partially offset by decreases in average selling prices. For the second quarter of 2006, unit sales volume increased by 17.1% and average selling prices decreased by 2.4% versus the second quarter of 2005. For the six fiscal months ended July 1, 2006, unit sales volume increased by 19.2% and average selling prices decreased by 2.4% versus the comparable prior year period. The stronger U.S. dollar against foreign currencies in the quarter and six fiscal months ended July 1, 2006 (versus the comparable prior year periods) had the result of decreasing reported revenues by $3 million and $22 million, respectively. Compared to the first quarter of 2006, the weaker U.S. dollar increased reported quarterly revenues by $9 million sequentially.
Sales to each of our end-use markets during the second quarter and first half of 2006 improved compared to 2005. The industrial market continued to get stronger worldwide, following a good year in 2005. Sales for end-uses in the automotive sector have been solid on a global basis, with strength in Europe offsetting weak results in the U.S., where major customers restructure their operations. We continue to see strong results in the consumer sector (primarily impacting Asia) driven by end-use demand for MP3 players and LCD television sets. We also have seen excellent results in the telecommunications market, despite some delays in expansion of 3G mobile phones. We also saw continued upturn for laptop computers.
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 $27 million and $28 million for the six fiscal month periods ended July 1, 2006 and July 2, 2005, respectively, or 2.1% and 2.4% of gross sales, respectively. Actual credits issued under the programs (which were accrued at the time of sale) during the six fiscal month periods ended July 1, 2006 and July 2, 2005, respectively, were approximately $31 million and $29 million, respectively. Increases and decreases in these incentives are largely attributable to the then-current business climate. The decrease in the incentives as a percentage of sales compared to the prior year period is indicative of the generally improving business climate affecting our distributors and the electronic component industry.
Gross Profit and Margins
Cost of products sold as a percentage of net revenues for the quarter and six fiscal months ended July 1, 2006 was 72.6% and 73.6%, respectively, as compared to 77.1% and 77.8% for the respective comparable prior year periods. Gross profit as a percentage of net revenues for the quarter and six fiscal months ended July 1, 2006 was 27.2% and 26.0% respectively, as compared to 22.7% and 21.9% for the respective comparable prior year periods. The improvement in gross profit margins for the 2006 periods reflect increased sales volumes and the impact of our cost reduction programs, partially offset by lower average selling prices and higher precious metals costs. Gross profit margins for the second quarter of 2006 reflect losses on tantalum purchase commitments of $0.8 million; and gross profit margins for the six fiscal months ended July 1, 2006 reflect losses on tantalum purchase commitments of $4.1 million and adjustments of $8.2 million to write-down tantalum inventories to current market value. Gross profit margins for the quarter and six fiscal months ended July 2, 2005 also reflect losses on tantalum purchase commitments of $1.3 million and $3.6 million, respectively.
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Segments
Discussion and analysis of sales and gross profit margins for our Semiconductors and Passive Components segments are provided below.
Semiconductors
Net revenues of the Semiconductors segment for the quarter and six fiscal months ended July 1, 2006 were $324.3 million and $629.2 million, respectively, or 15% and 14% greater than net revenues for the respective prior year period. Our Siliconix division’s quarterly revenue in the second quarter of 2006 was an all-time record. The increase was driven primarily by increased sales volume, partially offset by lower average selling prices. For the second quarter of 2006, unit sales volume increased by 14.7% and average selling prices decreased by 4.1% versus the second quarter of 2005. For the six fiscal months ended July 1, 2006, unit sales volume increased by 14.3% and average selling prices decreased by 4.1% versus the comparable prior year period. The stronger U.S. dollar against foreign currencies in the quarter and six fiscal months ended July 1, 2006 had the result of decreasing reported revenues by $2 million and $9 million versus the comparable prior year periods.
Gross profit as a percentage of net revenues for the quarter and six fiscal months ended July 1, 2006 was 27.8% and 27.6%, respectively, versus 23.5% and 22.8% for the comparable prior year periods, principally due to increases in sales volume partially offset by the decline in average selling prices during the current year period.
We are benefiting from our recent capacity expansion in our Semiconductors segment, and the extremely strong demand makes continuing capacity expansion a first priority. With a book-to-bill ratio of 1.15 for our Semiconductors segment during the second quarter of 2006, and expansion efforts continuing on plan, we expect continued revenue growth in future quarters.
Passive Components
Net revenues of the Passive Components segment for the quarter and six fiscal months ended July 1, 2006 were $336.2 million and $662.4 million, respectively, or 12% and 13% greater than net revenues for the respective prior year periods. The increase was driven primarily by increased sales volume, partially offset by lower average selling prices. For the second quarter of 2006, unit sales volume increased by 13.4% and average selling prices decreased by 0.6% versus the second quarter of 2005. For the six fiscal months ended July 1, 2006, unit sales volume increased by 16.4% and average selling prices decreased by 0.7% versus the comparable prior year period. The stronger U.S. dollar against foreign currencies in the quarter and six fiscal months ended July 1, 2006 had the result of decreasing reported revenues by $1 million and $13 million versus the comparable prior year periods.
Gross profit as a percentage of net revenues for the quarter and six fiscal months ended July 1, 2006 was 26.7% and 24.6%, respectively, versus 21.8% and 20.8% for the comparable prior year periods, principally due to increases in sales volume partially offset by the decline in average selling prices and increased precious metals prices during the current year periods. Gross profit margins of the Passive Components segment for the second quarter of 2006 reflect losses on tantalum purchase commitments of $0.8 million; and gross profit margins for the six fiscal months ended July 1, 2006 reflect losses on tantalum purchase commitments of $4.1 million and adjustments of $8.2 million to write-down tantalum inventories to current market value. Gross profit margins of the Passive Components segment for the quarter and six fiscal months ended July 2, 2005 reflect losses on tantalum purchase commitments of $1.3 million and $3.6 million, respectively.
The improvements in margins are largely attributable to an increase in sales volume and the significant cost reduction programs that have been initiated in all Passive Components product lines. These programs have included and will continue to include combining facilities and shifting production to lower cost regions. The impact of these cost savings plans has been partially offset by the underutilization of capacity in commodity products.
With a book-to-bill ratio of 0.99 for our Passive Components segment during the second quarter of 2006, we expect sales to be essentially flat for the third quarter of 2006.
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Selling, General, and Administrative Expenses
Selling, general, and administrative (SG&A) expenses for the quarter and six fiscal months ended July 1, 2006 were 15.8% and 15.5% of net revenues as compared to 16.5% and 16.9% for the comparable prior year periods, partially due to an increased revenue base. Our cost reduction initiatives referred to above also target SG&A costs, and are reflected in this improvement. SG&A expenses for the quarter and six fiscal months ended July 1, 2006 include $3.6 million of adjustments to increase the estimated cost of environmental remediation obligations associated with the 2001 General Semiconductor acquisition.
Restructuring and Severance Costs and Related Asset Write-Downs
Our restructuring activities have been designed to reduce both fixed and variable costs, particularly in response to the reduced demand for products occasioned by the electronics industry downturn experienced from 2001 to 2003. 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 expect to continue to restructure our operations and incur restructuring and severance costs as explained in “Cost Management” above and in Note 4 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2005, and in Note 3 to our consolidated condensed financial statements included in Part I of this Form 10-Q.
We continued our restructuring activities during the first half of 2006, recording restructuring and severance costs of $8.9 million, and recording related asset write-downs of $3.9 million. We are presently implementing cost savings initiatives to generate an additional $50 million in annual cost savings by 2008. Approximately $20 million of these annual savings are expected to be realized beginning in 2006.
Our restructuring program has been on-going since 2001. We recorded restructuring and severance costs for the years ended December 31, 2005, 2004, 2003, 2002 and 2001 of $29.8 million, $47.3 million, $28.5 million, $18.6 million, and $40.9 million, respectively. We also recorded asset write-downs of $11.4 million, $27.3 million, $1.0 million, $12.4 million, and $21.0 million during the years ended December 31, 2005, 2004, 2003, 2002, and 2001, respectively. We have realized, and expect to continue to realize, annual cost savings associated with the restructuring activities initiated in 2001, 2002, 2003, 2004, and 2005.
Other Income (Expense)
Interest expense for the six fiscal months ended July 1, 2006 increased by $0.5 million versus the comparable prior year period. Interest expense marginally decreased in the second quarter of 2006 versus the comparable prior year quarter. These changes are primarily due to debt assumed in the acquisition of Alpha Electronics in the fourth quarter of 2005, as well as increases in the variable rate paid on the exchangeable notes due 2102, partially offset by the impact of lower amounts outstanding under our revolving credit facility during the periods ending July 1, 2006.
On June 4, 2006, the holders of our Liquid Yield Option™ Notes had the option to require us to repurchase the notes for their accreted value on that date. All LYONs holders exercised their option. As a result of this repurchase, we recorded a loss on early extinguishment of debt to write-off unamortized debt issuance costs of $2.9 million associated with the LYONs. This non-cash write-off is reported in a separate line item in the condensed consolidated statement of operations for the second quarter and six fiscal months ended July 1, 2006. The early extinguishment of the LYONs is expected to result in annual interest savings of approximately $4.1 million.
33
The following tables analyze the components of the line “Other” on the consolidated condensed statement of operations (in thousands):
| | Fiscal quarter ended | | | | |
| |
| | | | |
| | July 1,
2006 | | July 2,
2005 | | Change | |
| |
|
| |
|
| |
|
| |
Foreign exchange (loss) gain | | $ | (2,701 | ) | $ | 976 | | $ | (3,677 | ) |
Interest income | | | 5,354 | | | 3,272 | | | 2,082 | |
Gain on disposal of property and equipment | | | 368 | | | 2,440 | | | (2,072 | ) |
Other | | | 702 | | | (95 | ) | | 797 | |
| |
|
| |
|
| |
|
| |
| | $ | 3,723 | | $ | 6,593 | | $ | (2,870 | ) |
| |
|
| |
|
| |
|
| |
| | Six fiscal months ended | | | | |
| |
| | | | |
| | July 1,
2006 | | July 2,
2005 | | Change | |
| |
|
| |
|
| |
|
| |
Foreign exchange (loss) gain | | $ | (4,478 | ) | $ | 1,872 | | $ | (6,350 | ) |
Interest income | | | 10,040 | | | 6,106 | | | 3,934 | |
Dividend income | | | 98 | | | 168 | | | (70 | ) |
Gain on disposal of property and equipment | | | 1,306 | | | 2,463 | | | (1,157 | ) |
Other | | | 1,038 | | | (363 | ) | | 1,401 | |
| |
|
| |
|
| |
|
| |
| | $ | 8,004 | | $ | 10,246 | | $ | (2,242 | ) |
| |
|
| |
|
| |
|
| |
Minority Interest
Minority interest in earnings decreased $0.7 million and $3.2 million for the quarter and six fiscal months ended July 1, 2006 as compared to the comparable prior year periods, due to the acquisition of the minority interest in Siliconix during the second quarter of 2005.
Income Taxes
The effective tax rate, based on earnings before income taxes and minority interest, for the second quarter and the six fiscal months ended July 1, 2006 was 22.9% and 26.9%, respectively, as compared to 10.0% and 16.9% for the comparable prior year periods. We operate in an international environment with significant operations in various locations outside the U.S. 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. Also, for the quarter and six fiscal months ended July 2, 2005, income tax expense was impacted by a net one-time benefit of items totaling $3.7 million, principally consisting of a favorable settlement of certain tax issues with the Israeli government. 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 are available to offset future taxable income. Under applicable accounting principles, 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. We recorded no tax benefit associated with the losses on tantalum purchase commitments in the quarters and six fiscal months ended July 1, 2006 and July 2, 2005, respectively; nor with the write-down of tantalum inventories to current market value in the first quarter of 2006.
The effective tax rates for the quarter and six fiscal months ended July 2, 2005 also reflect the non-deductibility of certain items, including the write-off of in-process research and development and Siliconix transaction-related expenses.
34
Financial Condition and Liquidity
Cash and cash equivalents were $575.0 million as of July 1, 2006, as compared to $622.6 million as of December 31, 2005. We had an additional $9.9 million invested in highly-liquid short-term investments as of December 31, 2005. Approximately $558.4 million (97%) of our cash balance at July 1, 2006 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 indefinitely. The relatively low U.S. cash balance is a result of the payment of $138 million to repurchase our LYONs on June 4, 2006.
Our financial condition as of July 1, 2006 continued to be strong, with a current ratio (current assets to current liabilities) of 3.6 to 1, as compared to a ratio of 3.4 to 1 at December 31, 2005. The increase in this ratio is primarily due to increases in receivables and inventories and decreases in various current liabilities. Our ratio of debt to stockholders’ equity was 0.21 to 1 at July 1, 2006, compared to 0.26 to 1 at December 31, 2005, primarily due to the repurchase of our LYONs on June 4, 2006.
Cash flows provided by operations were $130.5 million for the six fiscal months ended July 1, 2006, as compared to cash flows provided by operations of $43.3 million for the comparable prior year period. This improvement is largely attributable to increased earnings.
Cash paid for property and equipment for the six fiscal months ended July 1, 2006 was $70.1 million, as compared to $53.1 million in the comparable prior year period. Our capital expenditures are projected to be approximately $180 million in 2006, principally to expand capacity in the Semiconductors businesses. Purchase of businesses, net of cash acquired, or $18.4 million for the six fiscal months ended July 2, 2005 represents the cash paid to acquire SI Technologies and cash paid for direct acquisition costs related to the purchase of the minority interest of Siliconix.
Our debt levels decreased by $138 million due to the repurchase of our LYONs. The holders of our LYONs had the option to require us to repurchase all or a portion of their LYONs on June 4, 2006 at their accreted value of $639.76 per $1,000 principal amount at maturity. All LYONs holders exercised their option. The purchase price was paid in cash from cash on-hand. The early extinguishment of the LYONs is expected to reduce annual interest expense by approximately $4.1 million.
We maintain a secured revolving credit facility, which expires in May 2007. At December 31, 2005, the maximum commitment under the revolving credit facility was $400 million. In light of our current liquidity, we unilaterally reduced the amount available under the revolving credit facility by half, to $200 million, effective March 16, 2006. The option to unilaterally reduce the amount of the commitment was included in the original revolving credit facility agreement.
Interest on the revolving credit facility is payable at prime or other variable interest rate options. The Company is required to pay facility commitment fees. The reduction in the commitment amount is expected to reduce facility commitment fees by approximately $1 million over the remaining term of the agreement.
The revolving credit facility restricts us from paying cash dividends and requires us to comply with other covenants, including the maintenance of specific financial ratios. We were in compliance with all covenants at July 1, 2006. Pursuant to the amended and restated credit facility agreement, we must maintain a tangible net worth of $850 million plus 50% of net income (without offset for losses) and 75% of net proceeds of equity offerings since July 1, 2003. Our tangible net worth at July 1, 2006, as calculated pursuant to the terms of the credit facility, was $1,371 million, which is $392 million more than the minimum required under the related credit facility covenant.
Borrowings under the revolving credit facility are secured by 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 revolving credit facility. Certain of our subsidiaries are also permitted to borrow under the revolving credit facility. Any borrowings of these subsidiaries under the credit facility are guaranteed by Vishay and other subsidiaries.
35
While the timing and location of scheduled payments for certain liabilities may require us to draw on our revolving credit facilities from time to time, for the next twelve months, management expects that cash flows from operations will be sufficient to meet our normal operating requirements, to meet our obligations under restructuring and acquisition integration programs, and to fund our research and development and capital expenditure plans. Acquisition activity may require additional borrowing under our revolving credit facilities or may otherwise require us to incur additional debt.
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, particularly in the markets that we serve; the availability of appropriate acquisition opportunities on terms that the Company considers attractive; difficulties in integrating acquired companies; difficulties in implementing our cost reduction strategies such as labor unrest or legal challenges to our lay-off or termination plans; under-utilization of production facilities in lower-labor-cost countries, operation of redundant facilities due to difficulties in transferring production to lower-labor-cost countries; difficulties in new product development; an inability to attract and retain highly qualified personnel; the current hostilities in Israel where the Company conducts certain of its businesses; and other factors affecting the Company’s operations, markets, products, services, and prices that are set forth in its Annual Report on Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission. You are urged to refer to the Company’s Form 10-K for a detailed discussion of these factors. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
36
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Market Risk Disclosure
Our cash flows and earnings are subject to fluctuations resulting from changes in foreign currency exchange rates and interest rates. We manage our exposure to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. Our policies do not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there are no underlying exposures. We do not use financial instruments for trading purposes and we are not a party to any leveraged derivatives. We monitor our underlying market risk exposures on an ongoing basis and believe that we can modify or adapt our hedging strategies as needed.
We are exposed to changes in interest rates on our floating rate revolving credit facility. No amounts were outstanding under this facility at July 1, 2006 or at December 31, 2005. On a selective basis, we from time to time enter into interest rate swap or cap agreements to reduce the potential negative impact that increases in interest rates could have on our outstanding variable rate debt. As of July 1, 2006 and December 31, 2005, we did not have any outstanding interest rate swap or cap agreements.
Commodity Price Risk
Many of our products require the use of raw materials that are produced in only a limited number of regions around the world or are available from only a limited number of suppliers. Our results of operations may be materially and adversely affected if we have difficulty obtaining these raw materials, the quality of available raw materials deteriorates, or there are significant price increases for these raw materials. For example, the prices for tantalum and palladium, two raw materials that we use in our capacitors, are subject to fluctuation. For periods in which the prices of these raw materials are rising, we may be unable to pass on the increased cost to our customers which would result in decreased margins for the products in which they are used. For periods in which the prices are declining, we may be required to write down our inventory carrying cost of these raw materials, since we record our inventory at the lower of cost or market. Depending on the extent of the difference between market price and our carrying cost, this write-down could have a material adverse effect on our net earnings. We recorded substantial write-downs of tantalum and palladium in the economic downturn from 2001 to 2003, and recorded more modest write-downs in 2004. We recorded a write-down of tantalum inventories during the first quarter of 2006.
Foreign Exchange Risk
We are exposed to foreign currency exchange rate risks. Our significant foreign subsidiaries are located in Germany, France, Israel and Asia. In most locations, we have introduced a “netting” policy where subsidiaries pay all intercompany balances within thirty days. As of July 1, 2006 and December 31, 2005, we did not have any outstanding foreign currency forward exchange contracts.
In the normal course of business, our financial position is routinely subjected to a variety of risks, including market risks associated with interest rate movements, currency rate movements on non-U.S. dollar denominated assets and liabilities and collectibility of accounts receivable.
Item 4. | 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 report.
There were no changes in our internal control over financial reporting during the second quarter of 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
37
PART II - OTHER INFORMATION
Stockholder Class Action Lawsuit
On April 11, 2006, a class action complaint was filed in the Delaware Court of Chancery against Vishay and the members of its Board of Directors. The complaint opposed Vishay’s proposals to be presented at its May 11, 2006 annual meeting of stockholders to authorize a new Class C common stock and to amend Vishay’s charter to give the directors the exclusive right to determine the size of the board. The plaintiff asked the court to enjoin the annual meeting, to invalidate the authorization of the Class C shares and the charter amendment, and to enjoin any issuance of Class C shares. Vishay’s Board of Directors decided to withdraw the two charter amendment proposals prior to the meeting.
Siliconix Shareholder Matters
Tender Offer Litigation
On May 12, 2005, Vishay successfully completed a tender offer for shares of Siliconix not owned by Vishay. Following the March 3, 2005 announcement of Vishay’s intention to make the tender offer for the remaining shares of Siliconix that Vishay did not already own, several purported class-action complaints were filed in the Delaware Court of Chancery against Vishay, Siliconix, and the Siliconix directors, alleging, among other things, that the intended offer was unfair and a breach of fiduciary duty, and seeking, among other things, to enjoin the transaction. The Delaware actions were consolidated into a single class action. The parties to the Delaware consolidated action subsequently entered into a settlement agreement, which was approved by the court on October 25, 2005.
A single stockholder class action also was filed in California state court challenging the tender offer. On April 26, 2005, the California Superior Court granted Vishay’s motion to stay the purported class action filed in California challenging the offer. The California action was formally dismissed in April 2006.
Proctor Litigation
In January 2005, an amended class action complaint was filed in the California Superior Court on behalf of all non-Vishay stockholders of Siliconix against Vishay, Ernst & Young LLP (the independent registered public accounting firm that audits the Company’s financial statements), Dr. Felix Zandman, Chairman and Chief Technical and Business Development Officer of Vishay, and, as a nominal defendant, Siliconix. The suit purports to state various derivative and class claims against the defendants including the purported taking by Vishay of Siliconix sales subsidiaries and the profits of those subsidiaries; the purported taking by Vishay of Siliconix’s SAP software system without compensation to Siliconix; the alleged use by Vishay of Siliconix’s assets as security for Vishay loans without compensation to Siliconix; the purported misappropriation by Vishay of Siliconix’s identity; the alleged taking by Vishay of Siliconix testing equipment; the alleged use by Vishay of Siliconix to save Vishay certain credits made available by an Israeli business development agency; the alleged misuse by Vishay of Siliconix’s patents to help Vishay acquire General Semiconductor; and the allegedly improper identification of Dr. Zandman as a co-inventor on certain Siliconix patents. The action seeks injunctive relief and unspecified damages.
On April 1, 2005, Vishay (i) demurred to the class action claim in the amended complaint, on the ground that plaintiffs lack standing to bring a direct claim, (ii) moved to strike some of the allegations in the derivative cause of action as barred by the applicable statutes of limitation, and (iii) moved to dismiss the complaint on the ground that plaintiffs failed to prosecute their claims in a timely manner. Also on April 1, 2005, defendant Ernst & Young moved to dismiss the claims against it and, in the alternative, for a stay of the litigation so that the causes of action asserted against Ernst & Young may first be arbitrated. On June 10, 2005, Vishay and Ernst & Young separately demurred to the derivative claim on the ground that as a consequence of the merger of Siliconix with a subsidiary of Vishay, plaintiffs no longer had standing to pursue a derivative claim. At a hearing on August 2, 2005, the Court sustained the parties’ demurrers to the direct and the derivative claims and granted plaintiffs leave to replead both claims.
38
An amended complaint was filed in November 2005. On March 7, 2006, the California Superior Court rejected Vishay’s motion to dismiss the claim and required Vishay to answer the complaint. On May 25, 2006, Vishay filed its answer to the complaint, denying the allegations of the amended complaint and asserting various defenses. On June 13, 2006, the Delaware Court of Chancery issued an anti-suit injunction based on the settlement agreement that was reached in connection with the tender offer litigation filed by the Siliconix minority shareholders in Delaware. The injunction prevents the Proctor litigation from continuing. On July 10, 2006, a purported former shareholder filed a notice of appeal of the injunction order with the Supreme Court of Delaware.
Except as noted below, there have been no material changes from the risk factors previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2005.
We supplement the risk factor, “We are subject to the risks of political, economic and military instability in countries outside the United States in which we operate,” which appears on page 23 of our Annual Report on Form 10-K. We have significant manufacturing operations in Israel. We have never experienced any material interruption in our Israeli operations in our over 35 years of operations there, in spite of several Middle East crises, including wars. However, we might be adversely affected as a result of the current hostilities in the region.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Not applicable
Item 3. | Defaults Upon Senior Securities |
Not applicable
39
Item 4. | Submission of Matters to a Vote of Security Holders |
The Company held its Annual Meeting of Stockholders on May 11, 2006, at which stockholders voted on the election of four directors to hold office until 2009, the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2006, and a stockholder proposal asking the Board of Directors to retain an investment banker to develop a plan for a recapitalization to result in one vote per share for all outstanding stock .
Election of Directors
| | For | | Withheld | |
| |
|
| |
|
| |
Ziv Shoshani | | | | | | | |
Common stock | | | 146,296,155 | | | 15,941,699 | |
Class B common stock | | | 14,598,871 | | | 2 | |
| |
|
| |
|
| |
Total voting power | | | 292,284,865 | | | 15,941,719 | |
| |
|
| |
|
| |
Thomas C. Wertheimer | | | | | | | |
Common stock | | | 155,372,947 | | | 6,864,906 | |
Class B common stock | | | 14,598,871 | | | 2 | |
| |
|
| |
|
| |
Total voting power | | | 301,361,657 | | | 6,864,926 | |
| |
|
| |
|
| |
Marc Zandman | | | | | | | |
Common stock | | | 147,154,529 | | | 15,083,325 | |
Class B common stock | | | 14,598,871 | | | 2 | |
| |
|
| |
|
| |
Total voting power | | | 293,143,239 | | | 15,083,345 | |
| |
|
| |
|
| |
Ruta Zandman | | | | | | | |
Common stock | | | 144,488,719 | | | 17,749,134 | |
Class B common stock | | | 14,598,871 | | | 2 | |
| |
|
| |
|
| |
Total voting power | | | 290,477,429 | | | 17,749,154 | |
| |
|
| |
|
| |
Ratification of Independent Registered Public Accounting Firm
| | For | | Against | | Abstain | |
| |
|
| |
|
| |
|
| |
Common stock | | | 160,457,179 | | | 1,683,651 | | | 97,022 | |
Class B common stock | | | 14,598,871 | | | — | | | 2 | |
| |
|
| |
|
| |
|
| |
Total voting power | | | 306,445,889 | | | 1,683,651 | | | 97,042 | |
| |
|
| |
|
| |
|
| |
Stockholder Proposal
| | For | | Against | | Abstain | | Broker
Non-Votes | |
| |
|
| |
|
| |
|
| |
|
| |
Common stock | | | 71,373,732 | | | 62,892,222 | | | 1,479,497 | | | 26,495,492 | |
Class B common stock | | | 36,246 | | | 14,562,316 | | | 2 | | | — | |
| |
|
| |
|
| |
|
| |
|
| |
Total voting power | | | 71,736,192 | | | 208,515,382 | | | 1,479,517 | | | 26,495,492 | |
| |
|
| |
|
| |
|
| |
|
| |
The Company’s proxy statement included two proposed charter amendments authorizing shares of new Class C common stock and placing sole authority for determining the number of directors in the hands of the Board of Directors. The Board decided to withdraw the two charter amendment proposals because of indications that the proposals lacked a sufficient level of support from the Company’s unaffiliated stockholders. Representatives of the Board and the Company’s management intend to continue their dialogue with stockholders on capital structure and governance matters, and the relationship of these matters to the Company’s continuing growth. Based on these discussions, the Board may revisit these or similar proposals for presentation to stockholders in the future.
40
Not applicable
31.1 | Certification pursuant to Rules 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 Rules 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 - Richard N. Grubb, 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 – Richard N. Grubb, Chief Financial Officer. |
41
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/ Richard N. Grubb |
|
|
| Richard N. Grubb, Executive Vice President,
Treasurer, and Chief Financial Officer |
| (Principal Financial and Accounting Officer) |
| |
| |
Date: August 8, 2006 | |
42
