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 March 31, 2001
------------------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-7416
VISHAY INTERTECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-1686453
-------- ----------
(State or other (IRS employer
jurisdiction of identification no.)
incorporation or
organization)
63 Lincoln Highway
Malvern, Pennsylvania 19355-2120
(Address of principal executive offices)
(610) 644-1300
(Registrant's telephone number, including area code)
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. Yes x No
As of May 10, 2001 registrant had 122,396,709 shares of its Common Stock and
15,518,546 shares of its Class B Common Stock outstanding.
VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q
MARCH 31, 2001
CONTENTS
Page Number
------------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Balance Sheets -
March 31, 2001 and December 31, 2000 3
Consolidated Condensed Statements of Operations -
Three Months Ended March 31, 2001 and 2000 5
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 2001 and 2000 6
Notes to Consolidated Condensed Financial 7
Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION 15
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited - In thousands)
March 31, December 31,
ASSETS 2001 2000
---------------- -------------
CURRENT ASSETS
Cash and cash equivalents $382,174 $337,213
Accounts receivable 467,612 452,579
Inventories:
Finished goods 217,632 179,286
Work in process 141,389 130,682
Raw materials 223,527 215,894
Deferred income taxes 30,975 32,051
Prepaid expenses and other current assets 148,696 127,169
---------------- -------------
TOTAL CURRENT ASSETS 1,612,005 1,474,874
PROPERTY AND EQUIPMENT - AT COST
Land 46,000 47,625
Buildings and improvements 263,614 265,311
Machinery and equipment 1,207,313 1,168,241
Construction in progress 68,303 83,768
Allowance for depreciation (608,329) (591,391)
---------------- -------------
976,901 973,554
GOODWILL 310,470 295,759
OTHER ASSETS 33,615 39,471
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$2,932,991 $2,783,658
================ =============
3
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000
------------- -------------
CURRENT LIABILITIES
Notes payable to banks $1,571 $8,250
Trade accounts payable 111,236 120,070
Payroll and related expenses 72,652 111,132
Other accrued expenses 156,612 146,157
Income taxes 39,443 31,915
Current portion of long-term debt 123 150
------------- -------------
TOTAL CURRENT LIABILITIES 381,637 417,674
LONG-TERM DEBT 252,993 140,467
DEFERRED INCOME TAXES 78,611 79,109
DEFERRED INCOME 59,083 55,162
MINORITY INTEREST 65,487 63,480
OTHER LIABILITIES 96,858 93,157
ACCRUED PENSION COSTS 95,410 100,754
STOCKHOLDERS' EQUITY
Common Stock 12,239 12,241
Class B Common Stock 1,552 1,552
Capital in excess of par value 1,318,813 1,319,426
Retained earnings 705,581 615,455
Accumulated other comprehensive loss (134,165) (113,571)
Unearned compensation (1,108) (1,248)
------------- -------------
1,902,912 1,833,855
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$2,932,991 $2,783,658
============= =============
See notes to consolidated condensed financial statements.
4
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
Three Months Ended
March 31,
2001 2000
----------- -----------
Net sales $558,465 $538,894
Costs of products sold 359,611 351,178
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GROSS PROFIT 198,854 187,716
Selling, general, and administrative expenses 72,229 67,944
Restructuring expense 5,971 -
Amortization of goodwill 2,915 3,136
----------- -----------
OPERATING INCOME 117,739 116,636
Other income (expense):
Interest expense (2,938) (12,515)
Other 4,737 (174)
----------- -----------
1,799 (12,689)
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EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST 119,538 103,947
Income taxes 26,921 23,454
Minority interest 2,491 6,222
----------- -----------
NET EARNINGS $90,126 $74,271
=========== ===========
Basic earnings per share $0.65 $0.57
Diluted earnings per share $0.65 $0.56
Weighted average shares outstanding - basic 137,690 130,038
Weighted average shares outstanding - diluted 138,916 132,743
See notes to consolidated condensed financial statements.
5
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
Three Months Ended
March 31,
2001 2000
------------------- -------------------
OPERATING ACTIVITIES
Net earnings $90,126 $74,271
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 39,493 38,219
Loss on disposal of property and equipment 19 100
Minority interest in net earnings of consolidated subsidiaries 2,491 6,222
Other 14,875 16,455
Changes in operating assets and liabilities (131,605) (68,032)
------------------- -------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 15,399 67,235
INVESTING ACTIVITIES
Purchases of property and equipment (54,311) (40,326)
Proceeds from sale of property and equipment 1,018 2,270
Purchase of business (18,251) -
------------------- -------------------
NET CASH USED IN INVESTING ACTIVITIES (71,544) (38,056)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 116 -
Principal payments on long-term debt - (1,170)
Net proceeds (payments) on revolving credit lines 112,356 (48,617)
Net changes in short-term borrowings (6,509) 8,497
Purchase of treasury stock (851) -
Proceeds from stock options exercised 188 33,466
------------------- -------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 105,300 (7,824)
Effect of exchange rate changes on cash (4,194) (1,671)
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INCREASE IN CASH AND
CASH EQUIVALENTS 44,961 19,684
Cash and cash equivalents at beginning of period 337,213 105,193
------------------- -------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $382,174 $124,877
=================== ===================
See notes to consolidated condensed financial statements.
6
10
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2001
Note 1: Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
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 generally accepted accounting principles for complete financial
statements. The information furnished reflects all adjustments (consisting only
of 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 period presented. The financial statements should
be read in conjunction with the financial statements and notes thereto filed
with the Company's Form 10-K for the year ended December 31, 2000. The results
of operations for the first three months of 2001 are not necessarily indicative
of the results to be expected for the full year.
Note 2: Change in Accounting Principle
On January 1, 2001, the Company adopted SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities" and two related statements. The
Company recorded a $51,435 derivative asset upon adoption, reflecting the
cumulative effect of this change in accounting principle relating to the fair
value of an interest-rate swap agreement.
Note 3: Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except earnings per share):
Three Months Ended
March 31,
2001 2000
-------- --------
Numerator:
Net income $ 90,126 $ 74,271
-------- --------
Denominator:
Denominator for basic earnings per share -
weighted average shares 137,690 130,038
Effect of dilutive securities:
Stock appreciation rights - 579
Employee stock options 1,065 1,942
Other 161 184
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Dilutive potential common shares 1,226 2,705
7
Denominator for diluted earnings per
share - adjusted weighted average shares 138,916 132,743
Basic earnings per share $ 0.65 $ 0.57
=========== ===========
Diluted earnings per share $ 0.65 $ 0.56
=========== ===========
Earnings per share amounts for all periods presented reflect the
three-for-two stock split paid on June 9, 2000.
Note 4: Business Segment Information
The Company designs, manufactures, and markets electronic components
that cover a wide range of products and technologies. The Company has two
reportable segments: Passive Electronic Components (Passives) and Active
Electronic Components (Actives). The Company evaluates performance and allocates
resources based on several factors, of which the primary financial measure is
business segment operating income excluding amortization of intangibles. The
corporate component of operating income represents corporate selling, general,
and administrative expenses.
Three Months Ended
March 31,
2001 2000
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Business Segment Information
(in thousands)
Net Sales:
Passives $ 393,485 $ 325,510
Actives 164,980 213,384
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$ 558,465 $ 538,894
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Operating Income:
Passives $ 100,020 $ 77,974
Actives 25,701 48,666
Corporate (5,067) (6,868)
Amortization of goodwill (2,915) (3,136)
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$ 117,739 $ 116,636
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8
Note 5: Comprehensive Income
Comprehensive income includes the following components (in thousands):
Three Months Ended
March 31,
2001 2000
------------- ---------------
Net Income $ 90,126 $ 74,271
Cumulative effect of change
in accounting principle 51 -
Other comprehensive income (loss):
Foreign currency translation adjustment (18,733) (14,007)
Unrealized loss on interest rate swap (2,238) -
Pension liability adjustment, net of tax 326 231
------------- ---------------
Total other comprehensive loss (20,645) (13,776)
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Comprehensive income $69,532 $60,495
============= ===============
Note 6: Restructuring Expense
The Company recorded restructuring expense of $5,971,000 for the
quarter ended March 31, 2001. Restructuring of European operations included
$4,568,000 of employee termination costs covering approximately 76 technical,
production, administrative and support employees located in France, Hungary,
Portugal, and Austria. The remaining $1,403,000 of restructuring expense related
to termination costs for approximately 350 technical, production, administrative
and support employees located in the United States. The restructuring expense
was part of the cost reduction programs currently being implemented by the
Company.
Note 7: Acquisition
In January 2001, the Company purchased Tansitor, a leading manufacturer
of wet tantalum electrolytic capacitors and miniature conformal coated solid
tantalum capacitors, for $18.2 million. The results of operations of Tansitor
are included in the Company's results from January 1, 2001. Goodwill of
$11,090,000 is being amortized over twenty years. The pro forma effect of this
acquisition is not material.
Note 8: Proposed Purchase of Siliconix Shares
On February 22, 2001, the Company announced its proposal to purchase
all remaining outstanding shares of common stock of Siliconix incorporated, of
which Vishay currently owns 80.4%, not already owned by Vishay. This proposal
continues to be evaluated by a special committee of directors of Siliconix
appointed in March 2001.
9
In February and March 2001, several purported class action complaints
were filed in the Court of Chancery in and for New Castle County, Delaware and
the Superior Court of the State of California against the Company, Siliconix,
and the directors of Siliconix in connection with the Company's announced
proposal to purchase all issued and outstanding shares of Siliconix not already
owned by the Company. The class actions, filed on behalf of all non-Vishay
Siliconix shareholders, allege, among other things, that the Company's proposed
offer is unfair and a breach of fiduciary duty. One of the Delaware class
actions also contains derivative claims against the Company on behalf of
Siliconix alleging self-dealing and waste because the Company purportedly
usurped Siliconix's inventory and patents, appropriated Siliconix's separate
corporate identity, and obtained a below-market loan from Siliconix. The actions
seek injunctive relief, damages and other relief.
The Company has not yet responded to the complaints in the Delaware
actions. On April 9, 2001, Vishay and those defendants that have been served
moved for a stay of the California actions. That motion is returnable on June
22, 2001. In management's opinion, the ultimate resolution of the
above-mentioned matter is not expected to have a material adverse effect on the
Company's consolidated financial condition or results of operations.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
Income statement captions as a percentage of sales, and the effective
tax rates, were as follows:
Three Months ended
March 31,
2001 2000
---- ----
Costs of products sold 64.4 % 65.2 %
Gross profit 35.6 34.8
Selling, general, and administrative
expenses 12.9 12.6
Operating income 21.1 21.6
Earnings before income taxes and minority
interest 21.4 19.3
Effective tax rate 22.5 22.6
Net earnings 16.1 13.8
Net Sales
First quarter net sales for 2001 increased $19,571,000 or 3.6% from the
first quarter of 2000. The passive components business net sales were
$393,485,000 for the first quarter of 2001 as compared to $325,510,000 for the
first quarter of 2000, a 20.9% increase. The increase in the passive components
business was primarily due to a strong backlog that existed at December 31,
2000. The active components business first quarter net sales for 2001 were
$164,980,000 as compared to $213,384,000 for the first quarter of 2000, a 22.7%
decrease. The decrease in the active sales for the quarter ended March 31, 2001
as compared to the prior year quarter was primarily due to the decrease in net
sales of Siliconix, of which Vishay owns 80.4%, whose net sales for the quarter
ended March 31, 2001 were $87,759,000 as compared to $114,500,000 for the first
quarter of 2000, a 23.4% decrease. During the first quarter of 2001, the Company
experienced a slowdown in orders, an increase in order cancellations, and orders
being pushed out from several end markets that the Company serves. Sales for the
first quarter of 2001 were reduced by $12,480,000 as a result of the
strengthening of the U.S. dollar against foreign currencies in comparison to the
first quarter of the prior year.
11
Costs of Products Sold
Costs of products sold for the first quarter of 2001 were 64.4% of net
sales, as compared to 65.2% for the first quarter of 2000. Gross profit as a
percentage of net sales increased to 35.6% compared to 34.8% for the first
quarter of 2000, with the passive components businesses responsible for the
increase.
The active components business gross margins for the first quarter of
2001 were 31.0% as compared to 37.1% for the first quarter of 2000. The
Siliconix operation was primarily responsible for this decrease. The gross
profit margin for Siliconix was 33.2 % for the quarter ended March 31, 2001 as
compared to 48.0% for the quarter ended March 31, 2000. The decrease in gross
margins resulted primarily from manufacturing overhead costs in excess of those
required to support the reduced demand in the quarter, as well as pricing
pressures caused by excess industry capacity.
The passive components business gross profit margins for the first
quarter of 2001 were 37.6% as compared to 33.4% for the first quarter of 2000.
This increase was mainly a result of increased demand for the passive products,
particularly resistors, tantalum capacitors, and multi-layer ceramic chip
capacitors. Average selling prices remained comparable with the first quarter of
2000.
Israeli government grants, recorded as a reduction of costs of products
sold, were $4,316,000 for the first quarter of 2001, as compared to $3,677,000
for the first quarter of 2000. Future grants and other incentive programs
offered to the Company by the Israeli government will likely depend on the
Company's continuing to increase capital investment and the number of Company
employees in Israel. Deferred income at March 31, 2001 relating to Israeli
government grants was $59,083,000, as compared to $55,162,000 at December 31,
2000.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses for the first quarter of
2001 were 12.9% of net sales, as compared to 12.6% of net sales for the first
quarter of 2000. The Company continues to implement cost reduction initiatives
company-wide, with particular emphasis placed on reducing headcount in high
labor cost countries.
Restructuring Expense
The Company recorded restructuring expense of $5,971,000 for the
quarter ended March 31, 2001. Restructuring of European operations included
$4,568,000 of employee termination costs covering approximately 76 technical,
production, administrative and support employees located in France, Hungary,
Portugal, and Austria. The remaining $1,403,000 of restructuring expense related
to termination costs for approximately 350 technical, production, administrative
and support employees located in the United States. The restructuring expense
was part of the cost reduction programs currently being implemented by the
Company. The Company expects to take additional restructuring charges during
2001.
12
Interest Expense
Interest expense for the first quarter of 2001 decreased by $9,577,000
as compared to the first quarter of 2000. This decrease was a result of lower
outstanding bank borrowings during the first quarter of 2001 as compared to the
first quarter of the prior year. The Company received net proceeds of
$395,449,000 from a Common Stock offering in May 2000, which were used to pay
down long-term debt.
Other Income
Other income was $4,737,000 for the quarter ended March 31, 2001 as
compared to an expense of $174,000 for the quarter ended March 31, 2000. The
2001 amount includes interest income of $4,625,000 as compared to interest
income of $944,000 for the first quarter of 2000. Foreign exchange gains were
$219,000 for the quarter ended March 31, 2001 as compared to foreign exchange
losses of $2,503,000 for the quarter ended March 31, 2000.
Minority Interest
Minority interest for the first quarter of 2001 decreased by $3,731,000
as compared to the first quarter of 2000 primarily due to the decrease in net
earnings of Siliconix.
Income Taxes
The effective tax rate for the first quarter of 2001 was 22.5% as
compared to 22.6% for the first quarter of 2000. The continuing low tax rates in
Israel applicable to the Company, as compared to the statutory rate in the
United States, resulted in increases in net earnings of $12,000,000 and
$12,853,000 for the first quarter of 2001 and 2000, respectively. The more
favorable Israeli tax rates are applied to specific approved projects and are
normally available for a period of ten or fifteen years.
Financial Condition and Liquidity
Cash flows from operations were $15,399,000 for the first quarter of
2001 as compared to $67,235,000 for the first quarter of 2000. The decrease in
cash generated from operations was attributable to increases in inventory and
accounts receivable, partially offset by an increase in net earnings from the
first quarter of 2000. In March 2001, the Company adjusted production to control
inventory levels due to the business slowdown. Net purchases of property and
equipment in the first quarter of 2001 were $54,311,000 as compared to
$40,326,000 in the first quarter of 2000, reflecting the Company's efforts
toward increasing capacity. The Company borrowed $112,356,000 on its revolving
credit lines during the first quarter of 2001, primarily to fund additions to
property and equipment and the acquisition of Tansitor. Cash and cash
equivalents increased by $44,961,000 as compared to December 31, 2000. The
Company's financial condition at March 31, 2001 was strong, with a current ratio
of 4.22 to 1. The Company's ratio of long-term debt, less current portion, to
stockholders' equity was .13 to 1 at March 31, 2001 as compared to .55 to 1 at
March 31, 2000 and .08 to 1 at December 31, 2000.
13
Inflation
Normally, inflation does not have a significant impact on the Company's
operations. The Company's products are not generally sold on long-term
contracts. Consequently, selling prices, to the extent permitted by competition,
can be adjusted to reflect cost increases caused by inflation.
Safe Harbor Statement
From time to time, information provided by the Company, including but
not limited to statements in this report, or other statements made by or on
behalf of the Company, 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 the Company's control, which may cause actual results, performance or
achievements to differ materially from those anticipated. The Company's 2000
Annual Report on Form 10-K identifies important factors that could cause the
Company's actual results, performance or achievements to differ materially from
those in any forward-looking statements made by or on behalf of the Company.
Market Risk Disclosure
The Company's cash flows and earnings are subject to fluctuations
resulting from changes in foreign currency exchange rates and interest rates.
The Company manages its exposure to these market risks through internally
established policies and procedures and, when deemed appropriate, through the
use of derivative financial instruments. The Company's policy does not allow
speculation in derivative instruments for profit or execution of derivative
instrument contracts for which there are no underlying exposures. The Company
does not use financial instruments for trading purposes and is not a party to
any leveraged derivatives. The Company monitors its underlying market risk
exposures on an ongoing basis and believes that it can modify or adapt its
hedging strategies as needed.
The Company is exposed to changes in U.S. dollar LIBOR interest rates
on its floating rate revolving credit facility. At March 31, 2001, the
outstanding balance under this facility was $252,411,000. On a selective basis,
the Company from time to time enters into interest rate swap or cap agreements
to reduce the potential negative impact that increases in interest rates could
have on its outstanding variable rate debt. At March 31, 2001, a fixed rate swap
agreement was in place on $100,000,000 of the Company's revolving credit
facility. The impact of interest rate instruments on the Company's results of
operations was not significant.
14
VISHAY INTERTECHNOLOGY, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In February and March 2001, several purported class action
complaints were filed in the Court of Chancery in and for New Castle
County, Delaware and the Superior Court of the State of California
against the Company, Siliconix, and the directors of Siliconix in
connection with the Company's announced proposal to purchase all issued
and outstanding shares of Siliconix not already owned by the Company.
The class actions, filed on behalf of all non-Vishay Siliconix
shareholders, allege, among other things, that the Company's proposed
offer is unfair and a breach of fiduciary duty. One of the Delaware
class actions also contains derivative claims against the Company on
behalf of Siliconix alleging self-dealing and waste because the Company
purportedly usurped Siliconix's inventory and patents, appropriated
Siliconix's separate corporate identity, and obtained a below-market
loan from Siliconix. The actions seek injunctive relief, damages and
other relief.
The Company has not yet responded to the complaints in the
Delaware actions. On April 9, 2001, Vishay and those defendants that
have been served moved for a stay of the California actions. That
motion is returnable on June 22, 2001. In management's opinion, the
ultimate resolution of the above-mentioned matter is not expected to
have a material adverse effect on the Company's consolidated financial
condition or results of operations.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3.1 - Amended and Restated By-Laws of
Vishay Intertechnology, Inc.
(b) Not applicable
15
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
(Duly Authorized and Chief Financial
Officer)
Date: May 11, 2001
16