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 June 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 August 13, 1996 registrant had 53,710,562 shares of its
Common Stock and 7,580,318 shares of its Class B Common Stock
outstanding.
VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q JUNE 30, 1996
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Balance Sheets - 3-4
June 30, 1996 and December 31, 1995
Consolidated Condensed Statements of 5
Operations - Three Months Ended
June 30, 1996 and 1995
Consolidated Condensed Statements of 6
Operations - Six Months Ended June
30, 1996 and 1995
Consolidated Condensed Statements of 7
Cash Flows - Six Months Ended
June 30, 1996 and 1995
Notes to Consolidated Condensed 8
Financial Statements
Item 2. Management's Discussion and Analysis 9-13
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 14-15
<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited - In thousands)
June 30 December 31
ASSETS 1996 1995
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $33,714 $19,584
Accounts receivable 177,659 180,383
Inventories:
Finished goods 186,059 148,846
Work in process 76,377 92,166
Raw materials 127,621 121,180
Prepaid expenses and
other current assets 78,132 78,039
----------- -----------
TOTAL CURRENT ASSETS 679,562 640,198
PROPERTY AND EQUIPMENT - AT COST
Land 44,509 46,073
Buildings and improvements 209,403 197,164
Machinery and equipment 644,541 603,175
Construction in progress 83,339 76,564
Allowance for depreciation (282,105) (253,748)
----------- -----------
699,687 669,228
GOODWILL 211,518 218,102
OTHER ASSETS 18,000 15,803
----------- -----------
$1,608,767 $1,543,331
=========== ===========
<PAGE>
LIABILITIES AND June 30 December 31
STOCKHOLDERS' EQUITY 1996 1995
----------- -----------
CURRENT LIABILITIES
Notes payable to banks $35,966 $22,174
Trade accounts payable 39,949 66,942
Payroll and related expenses 47,120 43,790
Other accrued expenses 62,819 51,102
Income taxes 13,667 7,083
Current portion of long-term debt 37,774 37,821
----------- -----------
TOTAL CURRENT LIABILITIES 237,295 228,912
LONG-TERM DEBT 253,866 228,610
DEFERRED INCOME TAXES 40,654 42,044
OTHER LIABILITIES 80,013 59,866
ACCRUED RETIREMENT COSTS 73,186 76,046
STOCKHOLDERS' EQUITY
Common stock 5,371 5,114
Class B common stock 758 722
Capital in excess of par value 825,850 734,316
Retained earnings 86,970 146,370
Foreign currency
translation adjustment 11,706 28,487
Unearned compensation (495) (364)
Pension adjustment (6,407) (6,792)
----------- -----------
923,753 907,853
----------- -----------
$1,608,767 $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
June 30
1996 1995
----------- -----------
Net sales $273,502 $315,461
Costs of products sold 201,638 231,935
----------- -----------
GROSS PROFIT 71,864 83,526
Selling, general,
and administrative expenses 38,466 40,523
Restructuring expenses 24,280 0
Amortization of goodwill 1,630 1,593
----------- -----------
OPERATING INCOME 7,488 41,410
Other income (expense):
Interest expense (4,569) (8,573)
Other 1,022 (305)
----------- -----------
(3,547) (8,878)
----------- -----------
EARNINGS BEFORE INCOME TAXES 3,941 32,532
Income taxes 158 7,808
----------- -----------
NET EARNINGS $3,783 $24,724
=========== ===========
Net earnings per share $0.06 $0.45
=========== ===========
Weighted average shares outstanding 61,303 55,354
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)
Six Months Ended
June 30
1996 1995
----------- -----------
Net sales $584,162 $625,745
Costs of products sold 427,217 462,954
----------- -----------
GROSS PROFIT 156,945 162,791
Selling, general,
and administrative expenses 78,841 81,643
Restructuring expenses 24,280 0
Amortization of goodwill 3,260 3,193
----------- -----------
OPERATING INCOME 50,564 77,955
Other income (expense):
Interest expense (8,862) (16,892)
Other 863 (318)
----------- -----------
(7,999) (17,210)
----------- -----------
EARNINGS BEFORE INCOME TAXES 42,565 60,745
Income taxes 10,741 13,987
----------- -----------
NET EARNINGS $31,824 $46,758
=========== ===========
Net earnings per share $0.52 $0.84
=========== ===========
Weighted average shares outstanding 61,293 55,346
See notes to consolidated condensed financial statements.
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
Six Months Ended
June 30
1996 1995
----------- -----------
OPERATING ACTIVITIES
Net earnings $31,824 $46,758
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 38,486 33,494
Other 19,227 16,316
Changes in operating assets
and liabilities (40,867) (44,339)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 48,670 52,229
INVESTING ACTIVITIES
Purchases of property
and equipment-net (77,546) (86,004)
------------ -----------
NET CASH USED IN
INVESTING ACTIVITIES (77,546) (86,004)
FINANCING ACTIVITIES
Net proceeds from
revolving credit lines 82,568 46,352
Proceeds from long-term
borrowings 3,375 64
Payments on long-term
borrowings (56,236) (11,329)
Net proceeds (payments)
on short-term borrowings 14,176 (1,193)
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 43,883 33,894
Effect of exchange rate
changes on cash (877) 1,538
----------- -----------
INCREASE IN CASH AND
CASH EQUIVALENTS 14,130 1,657
Cash and cash equivalents
at beginning of period 19,584 26,857
----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $33,714 $28,514
=========== ===========
See notes to consolidated condensed financial statements.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
June 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 six month
periods ended June 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
The Company recorded a pretax restructuring charge of $24,280,000
($16,000,000 after tax) in the quarter ended June 30, 1996. These
expenses relate to a reduction in the Company's worldwide workforce of
approximately 1,300 employees resulting, in part, from the worldwide
slowdown in the demand for tantalum and multi-layer ceramic capacitors
and the economic downturn in Germany. The Company also intends to close
or downsize several facilities in North America and Europe.
The restructuring expenses occurred in the Company's "higher tax rate"
countries which lowered the Company's effective tax rate for the quarter
to 4%. <PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the quarter and six months ended June 30, 1996 decreased
$41,959,000 or 13.3.% and $41,583,000 or 6.6%, 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 in the personal computer and
telecommunications markets, which started at the end of last year.
In addition, the strengthening of the U.S. dollar against foreign
currencies for the quarter ended June 30, 1996 in comparison to the prior
year's quarter resulted in a decrease in reported sales of $9,163,000.
For the six months ended June 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 $7,685,000.
Income statement captions as a percentage of sales and the effective tax
rates were as follows:
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
------ ------ ------ ------
Costs of products sold 73.7 73.5 73.1 74.0
Gross profit 26.3 26.5 26.9 26.0
Selling, general and
administrative expenses 14.1 12.8 13.5 13.0
Operating income 2.7 13.1 8.7 12.5
Earnings before income taxes 1.4 10.3 7.3 9.7
Effective tax rate 4.0 24.0 25.2 23.0
Net earnings 1.4 7.8 5.4 7.5
Costs of products sold for the quarter and six months ended June 30,
1996 were 73.7% and 73.1%, of net sales, respectively, as compared to
73.5% and 74.0%, respectively, for the comparable prior year periods. The
increase in the quarter ended June 30, 1996 is due to the significant
decrease in net sales as compared to the prior year quarter. The decrease
for the six months ended June 30, 1996, despite the significant decrease
in net sales, reflects an increase in production in Israel where labor
costs are lower than in most other regions in which Vishay manufactures
and the continued shift of sales mix to higher margin products.
Israel government grants, recorded as a reduction of costs of products
sold, were $2,061,000 and $4,201,000 for the quarter and six months ended
June 30, 1996, respectively, as compared to $3,351,000 and $5,940,000 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 June 30,
1996 relating to Israeli government grants was $46,799,000 as compared to
$30,849,000 at December 31, 1995.
Selling, general, and administrative expenses for the quarter and six
months ended June 30, 1996 were 14.1% and 13.5% of net sales,
respectively, as compared to 12.8% and 13.0% 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 $2,057,000
and $2,802,000, 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 the quarter ended June 30, 1996 in connection
with a reduction of approximately 1,300 employees in the Company's
worldwide workforce. The Company also intends to close or downsize
several facilities in North America and Europe.
The components of the restructuring expenses are as follows:
Severance pay $20,919,000
Machinery and equipment writeoff 3,098,000
Other 263,000
-----------
Total $24,280,000
===========
The Company has paid out $411,000 of severance as of June 30, 1996. The
Company is scheduled to pay $12,385,000 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. The machinery and
equipment will be disposed of immediately.
When fully implemented, the restructuring should reduce the Company's
costs annually by approximately $25,000,000. These savings will be
partially realized in 1996 and the remainder during 1997.
Interest costs decreased by $4,004,000 and $8,030,000 for the quarter and
six months ended June 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 $1,327,000 and $1,181,000 for the
quarter and six months ended June 30, 1996, respectively, as compared to
the prior years' periods. The increase is due to interest income of
$800,000 and $991,000 and foreign exchange gains of $382,000 and
$225,000, respectively, for the quarter and six months ended June 30,
1996. For the quarter and six months ended June 30, 1995 interest income
was $170,000 and $799,000 and foreign exchange losses were $578,000 and
$815,000, respectively.
The effective tax rate for the six months ended June 30, 1996 was 25.2%
compared to 23.0% for the comparable prior year period. The effective tax
rate for calendar year 1995 was 24.6%. The lower tax rate for the quarter
ended June 30, 1996 was due primarily to the restructuring charges
recorded in higher tax rate countries.
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
$4,165,000 and $4,123,000 for the quarters ended June 30, 1996 and 1995,
respectively, and $8,538,000 and $8,195,000 for the six month periods
ended June 30, 1996 and 1995, respectively. The period to period
increases are primarily a result of increased earnings for the Israeli
operations as a result of increased production. The more favorable
Israeli tax rates are applied to specific approved projects and normally
continue to be available for a period of ten years. New projects are
continually being introduced.
Financial Condition
Cash flows from operations were $48,670,000 for the six months ended
June 30, 1996 compared to $52,229,000 for the prior year's period. Net
purchases of property and equipment for the six months ended June 30,
1996 were $77,546,000 compared to $86,004,000 in the prior year's period.
This reflects the Company's on-going program to purchase additional
equipment for surface mount components. Net cash provided by financing
activities of $43,883,000 for the six months ended June 30, 1996 includes
borrowings used primarily to finance the additions to property and
equipment.
The Company's financial condition at June 30, 1996 is strong, with a
current ratio of 2.86 to 1. The Company's ratio of long-term debt (less
current portion) to stockholders' equity was .27 to 1 at June 30, 1996
and .25 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 operation 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
(a) The Company held its Annual Meeting of Stockholders on
May 16, 1996.
(b) Proxies for the meeting were solicited pursuant to
Regulation 14A of the Securities Exchange Act of 1934, as amended. There
was no solicitation in opposition to management's nominees for the
directors as listed in the definitive proxy statement of the Company
dated April 15, 1996, and all such nominees were elected.
(c) Briefly described below is each matter voted upon at the
Annual Meeting of Stockholders.
(i) Election of the following individuals to hold office
as Directors of the Company until the next Annual Meeting of Stockholders:
Total Class A Common Stock voted was 43,677,788.
Broker
For Against Abstain Non-Votes
Felix Zandman 40,523,924 3,153,864 0 0
Donald G. Alfson 40,522,808 3,154,980 0 0
Avi D. Eden 40,520,200 3,157,588 0 0
Robert A. Freece 40,522,808 3,154,980 0 0
Richard N. Grubb 40,522,808 3,154,980 0 0
Eli Hurvitz 40,718,632 2,959,156 0 0
Gerald Paul 40,522,808 3,154,980 0 0
Edward Shils 40,715,650 2,962,138 0 0
Luella B. Slaner 40,716,140 2,961,648 0 0
Mark I. Solomon 40,721,070 2,956,718 0 0
Jean-Claude Tine 40,713,012 2,964,776 0 0
Total Class B Common Stock voted was 7,178,862 in
favor, 0 against, 0 abstained, and 0 broker non-votes.
(ii) Ratification of the appointment of Ernst & Young LLP,
independent certified public accountants, to audit the books and accounts
of the Company for the calendar year ending December 31, 1996. Total
Class A Common Stock voted was 43,591,557 in favor, 30,366 against,
55,865 abstained, and 0 broker non-votes. Total Class B Common Stock
voted was 7,178,862 in favor, 0 against, 0 abstained, and 0 broker non-votes.
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description of Exhibit
27 Financial Data Schedule
(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: August 13, 1996
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