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 --------------- -------------- 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) <TABLE> <CAPTION> March 31, December 31, ASSETS 2001 2000 ---------------- ------------- <S> <C> <C> 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 ---------------- ------------- $2,932,991 $2,783,658 ================ ============= </TABLE> 3
<TABLE> <CAPTION> March 31, December 31, LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000 ------------- ------------- <S> <C> <C> 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 ------------- ------------- $2,932,991 $2,783,658 ============= ============= </TABLE> 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) <TABLE> <CAPTION> Three Months Ended March 31, 2001 2000 ----------- ----------- <S> <C> <C> Net sales $558,465 $538,894 Costs of products sold 359,611 351,178 ----------- ----------- 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) ----------- ----------- 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 </TABLE> See notes to consolidated condensed financial statements. 5
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited - In thousands) <TABLE> <CAPTION> Three Months Ended March 31, 2001 2000 ------------------- ------------------- <S> <C> <C> 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) ------------------- ------------------- 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 =================== =================== </TABLE> 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 -------- -------- 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 --------------- ------------- Business Segment Information (in thousands) Net Sales: Passives $ 393,485 $ 325,510 Actives 164,980 213,384 ------------ --------------- $ 558,465 $ 538,894 ------------- --------------- Operating Income: Passives $ 100,020 $ 77,974 Actives 25,701 48,666 Corporate (5,067) (6,868) Amortization of goodwill (2,915) (3,136) ------------- --------------- $ 117,739 $ 116,636 ------------- --------------- 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) ------------- --------------- 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: <TABLE> <CAPTION> Three Months ended March 31, 2001 2000 ---- ---- <S> <C> <C> 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 </TABLE> 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