SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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 jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
63 Lincoln Highway, Malvern, Pennsylvania 19355
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 644-1300
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 November 6, 1996 registrant had 53,726,776 shares of its
Common Stock and 7,564,818 shares of its Class B Common Stock
outstanding.<PAGE>
VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q SEPTEMBER 30, 1996
CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Balance Sheets - 3-4
September 30, 1996 and December 31, 1995
Consolidated Condensed Statements of 5
Operations - Three Months Ended
September 30, 1996 and 1995
Consolidated Condensed Statements of 6
Operations - Nine Months Ended
September 30, 1996 and 1995
Consolidated Condensed Statements of 7
Cash Flows - Nine Months Ended
September 30, 1996 and 1995
Notes to Consolidated Condensed 8
Financial Statements
Item 2. Management's Discussion and Analysis 9-15
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 16<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited - In thousands)
September 30 December 31
ASSETS 1996 1995
------------ -----------
CURRENT ASSETS
Cash and cash equivalents $33,880 $19,584
Accounts receivable 173,617 180,383
Inventories:
Finished goods 191,250 148,846
Work in process 70,834 92,166
Raw materials 118,690 121,180
Prepaid expenses and
other current 82,362 78,039
------------ -----------
TOTAL CURRENT ASSETS 670,633 640,198
PROPERTY AND EQUIPMENT - AT COST
Land 44,235 46,073
Buildings and improvements 220,592 197,164
Machinery and equipment 680,886 603,175
Construction in progress 69,039 76,564
Allowance for depreciation (299,284) (253,748)
------------ -----------
715,468 669,228
GOODWILL 210,568 218,102
OTHER ASSETS 17,370 15,803
------------ -----------
$1,614,039 $1,543,331
============ ===========<PAGE>
September 30 December 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
------------ -----------
CURRENT LIABILITIES
Notes payable to banks $34,336 $22,174
Trade accounts payable 37,550 66,942
Payroll and related expenses 42,207 43,790
Other accrued expenses 61,711 51,102
Income taxes 20,532 7,083
Current portion of long-term debt 38,973 37,821
------------ -----------
TOTAL CURRENT LIABILITIES 235,309 228,912
LONG-TERM DEBT 240,580 228,610
DEFERRED INCOME TAXES 41,045 42,044
DEFERRED INCOME 52,400 30,849
OTHER LIABILITIES 31,757 29,017
ACCRUED RETIREMENT COSTS 73,887 76,046
STOCKHOLDERS' EQUITY
Common stock 5,371 5,114
Class B common stock 758 722
Capital in excess of par value 825,857 734,316
Retained earnings 101,454 146,370
Foreign currency translation adjust 12,501 28,487
Unearned compensation (428) (364)
Pension adjustment (6,452) (6,792)
------------ -----------
939,061 907,853
------------ -----------
$1,614,039 $1,543,331
============ ===========
See notes to consolidated condensed financial statements.
<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
Three Months Ended
September 30,
1996 1995
------------ -----------
Net sales $259,889 $300,629
Costs of products sold 198,712 221,364
------------ -----------
GROSS PROFIT 61,177 79,265
Selling, general,
and administrative expenses 35,834 39,586
Amortization of goodwill 1,639 1,622
------------ -----------
OPERATING INCOME 23,704 38,057
Other income (expense):
Interest expense (4,455) (7,959)
Other 115 (322)
------------ -----------
(4,340) (8,281)
------------ -----------
EARNINGS BEFORE INCOME TAXES 19,364 29,776
Income taxes 4,880 7,444
------------ -----------
NET EARNINGS $14,484 $22,332
============ ===========
Net earnings per share $0.24 $0.40
============ ===========
Weighted average shares outstanding 61,291 56,062
See notes to consolidated condensed financial statements.<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
Nine Months Ended
September 30,
1996 1995
------------ -----------
Net sales $844,051 $926,374
Costs of products sold 625,929 684,318
------------ -----------
GROSS PROFIT 218,122 242,056
Selling, general,
and administrative expenses 114,675 121,229
Restructuring expenses 24,280 0
Amortization of goodwill 4,899 4,815
------------ -----------
OPERATING INCOME 74,268 116,012
Other income (expense):
Interest expense (13,317) (24,851)
Other 978 (640)
------------ -----------
(12,339) (25,491)
------------ -----------
EARNINGS BEFORE INCOME TAXES 61,929 90,521
Income taxes 15,621 21,431
------------ -----------
NET EARNINGS $46,308 $69,090
============ ===========
Net earnings per share $0.76 $1.24
============ ===========
Weighted average shares outstanding 61,292 55,587
See notes to consolidated condensed financial statements.<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
Nine Months Ended
September 30,
1996 1995
------------ -----------
OPERATING ACTIVITIES
Net earnings $46,308 $69,090
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 59,130 51,498
Other 21,709 15,629
Changes in operating assets
and liabilities (31,777) (46,500)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 95,370 89,717
INVESTING ACTIVITIES
Purchases of property and equipment-net (110,093) (118,554)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (110,093) (118,554)
FINANCING ACTIVITIES
Net proceeds (payments) on
revolving credit lines 80,050 (130,801)
Proceeds from long-term borrowings 3,378 63
Payments on long-term borrowings (66,360) (55,057)
Net proceeds (payments) on
short-term borrowings 12,488 (11,164)
Proceeds from sale of common stock - 230,863
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 29,556 33,904
Effect of exchange rate changes on cash (537) 1,351
----------- -----------
INCREASE IN CASH AND
CASH EQUIVALENTS 14,296 6,418
Cash and cash equivalents at
beginning of period 19,584 26,857
------------ -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $33,880 $33,275
============ ===========
See notes to consolidated condensed financial statements.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
September 30, 1996
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 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 periods presented. The financial statements should be read
in conjunction with the financial statements and notes thereto filed with Form
10-K for the year ended December 31, 1995.
Note 2: Earnings Per Share
Earnings per share amounts for all periods reflect a 5% stock dividend paid
on June 7, 1996. Earnings per share for the three and nine month periods
ended September 30, 1996 reflect the issuance of 5.75 million shares of common
stock completed in September 1995.
Note 3: Reclassifications
Certain prior year amounts have been reclassified to conform with the current
presentation.
Note 4: Restructuring Expense
For the nine months ended September 30, 1996, the Company has recorded a
pretax restructuring charge of $24,280,000 ($16,000,000 after tax) in June
1996. These expenses relate to a reduction in the Company's worldwide
workforce of approximately 1,700 employees resulting, in part, from the
worldwide slowdown in the demand for tantalum and multi-layer ceramic
capacitors and the economic downturn in Germany. As of September 30, 1996, 806
of the 1,700 employees have left the Company. The Company has paid out
$2,287,000 of severance as of September 30, 1996. The Company is scheduled to
pay $10,509,000 of severance by December 31, 1996 with the remaining
$8,123,000 to be paid by March 31, 1997. Depending on future economic
conditions, the Company may continue to downsize or close existing facilities
in North America and Europe.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the quarter and nine months ended September 30, 1996 decreased
$40,740,000 or 13.6% and $82,323,000 or 8.9%, respectively, from the
comparable periods of the prior year. The decrease in net sales is indicative
of the worldwide slowdown in the demand for tantalum and multi-layer ceramic
capacitors, the economic downturn in Germany, where a significant portion of
the Company's products are sold, and the abrupt worldwide decline in demand
for passive electronic components by personal computer and telecommunications
manufacturers, which started at the end of last year.
In addition, the strengthening of the U.S. dollar against foreign currencies
for the quarter ended September 30, 1996, in comparison to the prior year's
quarter, resulted in a decrease in reported sales of $5,017,000. For the nine
months ended September 30, 1996, the strengthening of the U.S. dollar against
foreign currencies in comparison to the prior year period resulted in a
decrease in reported sales of $12,702,000.
Income statement captions as a percentage of sales and the effective tax rates
were as follows:
Three Months Ended Nine Months Ended
September 30 September 30
1996 1995 1996 1995
---- ---- ---- ----
Costs of products sold 76.5 73.6 74.2 73.9
Gross profit 23.5 26.4 25.8 26.1
Selling, general and
administrative expenses 13.8 13.2 13.6 13.1
Operating income 9.1 12.7 8.8 12.5
Earnings before income taxes 7.5 9.9 7.3 9.8
Effective tax rate 25.2 25.0 25.2 23.7
Net earnings 5.6 7.4 5.5 7.5
Costs of products sold for the quarter and nine months ended September 30,
1996 were 76.5% and 74.2%, of net sales, respectively, as compared to 73.6%
and 73.9%, respectively, for the comparable prior year periods. Costs of
products sold for the quarter and nine months ended September 30, 1996 were
negatively affected by an inventory decrease of $10,000,000 during the quarter
ended September 30, 1996 causing unabsorbed overhead costs. Furthermore,
ineffiencies created by legal constraints which prevented us from immediately
terminating laid-off employees also affected costs of products sold.
Israeli government grants, recorded as a reduction of costs of products sold,
were $2,215,000 and $6,416,000 for the quarter and nine months ended September
30, 1996, respectively, as compared to $3,693,000 and $9,633,000 for the
comparable prior year periods. 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 the
Company's employees in Israel. Deferred income at September 30, 1996 relating
to Israeli government grants was $52,400,000 as compared to $30,849,000 at
December 31, 1995.
Selling, general, and administrative expenses for the quarter and nine months
ended September 30, 1996 were 13.8% and 13.6% of net sales, respectively, as
compared to 13.2% and 13.1% for the comparable prior year periods. The
percentages in 1996 are higher due to the significant decrease in net sales.
However, in terms of absolute dollar amounts, selling, general and
administrative expenses have decreased by $3,752,000 and $6,554,000,
respectively, as compared to the prior year periods.
The Company recorded a pretax restructuring charge of $24,280,000 ($16,000,000
after tax) in June 1996 in connection with a reduction of approximately 1,700
employees in the Company's worldwide workforce. As of September 30, 1996, 806
of the 1,700 employees have left the Company. Depending on future economic
conditions, the Company may continue to downsize or close existing facilities
in North America and Europe.
The components of the restructuring expenses were as follows:
Severance pay $20,919,000
Machinery and equipment write-off 3,098,000
Other 263,000
-----------
Total $24,280,000
===========
The Company has paid out $2,287,000 of severance as of September 30, 1996. The
Company is scheduled to pay $10,509,000 of severance by December 31, 1996 with
the remaining $8,123,000 to be paid by March 31, 1997. The Company has
sufficient lines of credit to fund these payments.
When fully implemented, the restructuring should reduce the Company's costs
by approximately $25,000,000 annually. The Company expects that these savings
will likely commence to be realized in the fourth quarter of 1996.
Interest costs decreased by $3,504,000 and $11,534,000 for the quarter and
nine months ended September 30, 1996 from the comparable prior year periods
primarily as a result of the net proceeds of $230,279,000 from a common stock
offering completed in September 1995 which were used, in large part, to
prepay bank indebtedness.
Other income(expense) increased by $437,000 and $1,618,000 for the quarter and
nine months ended September 30, 1996, respectively, as compared to the prior
year periods. The increase is due to interest income of $291,000 and
$1,282,000 and foreign exchange gains(losses) of ($89,000) and $136,000,
respectively, for the quarter and nine months ended September 30, 1996. For
the quarter and nine months ended September 30, 1995 interest income was
$307,000 and $1,106,000 and foreign exchange losses were $678,000 and
$1,493,000, respectively.
The effective tax rate for the quarter and nine months ended September 30,
1996 was 25.2% as compared to 25.0% and 23.7%, respectively, for the
comparable prior year periods. The effective tax rate for calendar year 1995
was 24.6%.
The continuing effect of low tax rates in Israel (as compared to the statutory
rate in the United States) has been to increase net earnings by $1,747,000 and
$4,595,000 for the quarters ended September 30, 1996 and 1995, respectively,
and $10,285,000 and $12,790,000 for the nine month periods ended September 30,
1996 and 1995, respectively. The more favorable Israeli tax rates are applied
to specific approved projects and normally continue to be available for a
period of ten years.
Financial Condition
Cash flows from operations were $95,370,000 for the nine months ended
September 30, 1996 compared to $89,717,000 for the prior year's period. Net
purchases of property and equipment for the nine months ended September 30,
1996 were $110,093,000 compared to $118,554,000 in the prior year's period.
This reflects the Company's ongoing program to purchase additional equipment
for surface mount components. Net cash provided by financing activities of
$29,556,000 for the nine months ended September 30, 1996 includes borrowings
used primarily to finance the additions to property and equipment.
The Company's financial condition at September 30, 1996 is strong, with a
current ratio of 2.85 to 1. The Company's ratio of long-term debt (less
current portion) to stockholders' equity was .26 to 1 at September 30, 1996
and .25 to 1 at December 31, 1995.
Management believes that available sources of credit, together with cash
expected to be generated from operations, will be sufficient to satisfy the
Company's anticipated financing needs for working capital and capital
expenditures during the next twelve months.
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 Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such statements involve a number of risks and
uncertainties. The Company's actual results could differ materially from
those discussed in the forward-looking statements. The cautionary statements
set forth below identify important factors that could cause actual results to
differ materially from those in any forward-looking statements made by or on
behalf of the Company.
The Company offers a broad variety of products and
services to its customers. Changes in demand for, or
in the mix of, products and services comprising
revenues could cause actual operating results to vary
from those expected.
The Company's future operating results are dependent,
in part, on its ability to develop, produce and market new and
innovative products, to convert existing products to surface
mount devices and to customize certain products to meet customer
requirements. There are numerous risks inherent in this complex
process, including rapid technological changes and the need for
the Company to timely bring to market new products and
applications to meet customers' changing needs.
The Company operates in a highly competitive environment, which
includes significant competitive pricing pressures and intense
competition for entry into new markets.
A slowdown in demand for passive electronic components or
recessionary trends in the global economy in general or in
specific countries or regions where the Company sells the bulk
of its products, such as the U.S., Germany, France or the
Pacific Rim, could adversely impact the Company's results
of operations.
Much of the orders in the Company's backlog may be canceled by
its customers without penalty. Customers may on occasion double
and triple order components from multiple sources to insure
timely delivery when backlog is particularly long. The Company's
results of operations may be adversely impacted if customers
were to cancel a material portion of such orders.
Approximately 50% of the Company's revenues are derived from
operations and sales outside the United States. As a result,
currency exchange rate fluctuations, inflation, changes in
monetary policy and tariffs, potential changes in laws and
regulations affecting the Company's business in foreign
jurisdictions, trade restrictions or prohibitions,
intergovernmental disputes, increased labor costs and reduction
or cancellation of government grants, tax benefits or other
incentives could impact the Company's results of operations.
Specifically, as a result of the increased production by the
Company's operations in Israel over the past several years,
the low tax rates in Israel (as compared to the statutory
rates in the U.S.) have had the effect of increasing
the Company's net earnings. In addition, the Company takes
advantage of certain incentive programs in Israel in the form
of grants designed to increase employment in Israel. Any
significant increase in the Israeli tax rates or reduction or
elimination of any of the Israeli grant programs could have an
adverse impact on the Company's results of operations.
The Company may experience underutilization of certain plants
and factories in high labor cost regions and capacity constraints in
plants and factories located in low labor cost regions, resulting
initially in production inefficiencies and higher costs. Such
costs include those associated with work force reductions and
plant closings in the higher labor cost regions and start-up
expenses, manufacturing and construction delays, and increased
depreciation costs in connection with the start of production in
new plants and expansions in lower labor cost regions. Moreover,
capacity constraints may limit the Company's ability to
continue to meet demand for any of the Company's products.
When the Company restructures its operations in response to
changing economic conditions, particularly in Europe, labor
unrest or strikes may occur, which could have an adverse effect
on the Company.
The Company's results of operations may be adversely impacted by
(i) difficulties in obtaining raw materials, supplies, power,
natural resources and any other items needed for the production
of the Company's products; (ii) the effects of quality
deviations in raw materials, particularly tantalum powder,
palladium and ceramic dielectric materials; and (iii) the
effects of significant price increases for tantalum or palladium,
or an inability to obtain adequate supplies of tantalum or
palladium from the limited number of suppliers.
The Company's historic growth in revenues and net earnings
have resulted in large part from its strategy to expand through
acquisitions. However, there is no assurance that the Company
will find or consummate transactions with suitable acquisition
candidates in the future.
The Company's strategy also focuses on the reduction of selling,
general and administrative expenses through the integration or
elimination of redundant sales offices and administrative
functions at acquired companies and achievement of significant
production cost savings through the transfer and expansion of
manufacturing operations to lower cost regions such as Israel,
Mexico, Portugal and the Czech Republic. The Company's inability to
achieve any of these goals could have an adverse effect on the
Company's results of operations.
The Company may be adversely affected by the costs and other
effects associated with (i) legal and administrative cases
and proceedings (whether civil, such as environmental and
product-related, or criminal); (ii) settlements, investigations,
claims, and changes in those items; (iii) developments or
assertions by or against the Company relating to intellectual
property rights and intellectual property licenses; and (iv)
adoption of new, or changes in, accounting policies and practices
and the application of such policies and practices.
The Company's results of operations may also be affected by
(i) changes within the Company's organization, particularly
at the executive officer level, or in compensation and benefit
plans; and (ii) the amount, type and cost of the financing
which the Company maintains, and any changes to the financing.
The inherent risk of environmental liability and remediation
costs associated with the Company's manufacturing operations
may result in large and unforseen liabilities.
The Company's operations may be adversely impacted by (i) the
effects of war or severe weather or other acts of God on the
Company's operations, including disruptions at manufacturing
facilities; (ii) the effects of a disruption in the Company's
computerized ordering systems; and (iii) the effects of a
disruption in the Company's communications systems.
<PAGE>
VISHAY INTERTECHNOLOGY, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
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
Not applicable
(b) Reports on Form 8-K
Not applicable
<PAGE>
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
Vice President, Treasurer
(Duly Authorized and Chief Financial Officer)
Date: November 6, 1996
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