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 September 30, 1997
OR
[ ] 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
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 12, 1997 registrant had 56,457,094 shares of its Common Stock and
7,926,898 shares of its Class B Common Stock outstanding.
<PAGE>
VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q SEPTEMBER 30, 1997
CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Balance Sheets - 3-4
September 30, 1997 and December 31, 1996
Consolidated Condensed Statements of 5
Operations - Three Months Ended
September 30, 1997 and 1996
Consolidated Condensed Statements of 6
Operations - Nine Months Ended
September 30, 1997 and 1996
Consolidated Condensed Statements of 7
Cash Flows - Nine Months Ended
September 30, 1997 and 1996
Notes to Consolidated Condensed 8-9
Financial Statements
Item 2. Management's Discussion and Analysis 10-14
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 15
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<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited - In thousands)
<TABLE>
<CAPTION>
September 30 December 31
ASSETS 1997 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $43,466 $20,945
Accounts receivable 188,706 163,164
Inventories:
Finished goods 163,048 182,722
Work in process 86,839 73,606
Raw materials 94,022 100,418
Prepaid expenses and other current assets 90,658 82,310
------------ ------------
TOTAL CURRENT ASSETS 666,739 623,165
PROPERTY AND EQUIPMENT - AT COST
Land 41,958 43,705
Buildings and improvements 226,895 222,743
Machinery and equipment 753,214 695,084
Construction in progress 56,732 57,891
Allowance for depreciation (358,693) (308,761)
------------ ------------
720,106 710,662
GOODWILL 296,455 201,574
OTHER ASSETS 44,949 20,646
------------ ------------
$1,728,249 $1,556,047
============ ============
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
September 30 December 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
------------- ------------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable to banks $42,803 $31,212
Trade accounts payable 44,684 33,930
Payroll and related expenses 48,183 35,973
Other accrued expenses 39,463 55,381
Income taxes 22,962 7,076
Current portion of long-term debt 9,242 25,394
------------- ------------
TOTAL CURRENT LIABILITIES 207,337 188,966
LONG-TERM DEBT 342,707 229,885
DEFERRED INCOME TAXES 33,027 33,113
DEFERRED INCOME 62,638 58,570
OTHER LIABILITIES 45,634 30,534
ACCRUED RETIREMENT COSTS 63,364 69,749
STOCKHOLDERS' EQUITY
Common stock 5,645 5,373
Class B common stock 793 756
Capital in excess of par value 920,052 825,949
Retained earnings 82,586 107,762
Foreign currency translation adjustment (31,924) 9,106
Unearned compensation (686) (370)
Pension adjustment (2,924) (3,346)
------------- ------------
973,542 945,230
------------- ------------
$1,728,249 $1,556,047
============= ============
</TABLE>
See notes to consolidated condensed financial statements.
-4-
<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
------------ ----------
<S> <C> <C>
Net sales $285,352 $259,889
Costs of products sold 214,960 198,712
------------ ----------
GROSS PROFIT 70,392 61,177
Selling, general, and administrative expenses 35,324 35,834
Amortization of goodwill 2,117 1,639
------------ ----------
OPERATING INCOME 32,951 23,704
Other income (expense):
Interest expense (5,566) (4,455)
Other 700 115
------------ ----------
(4,866) (4,340)
------------ ----------
EARNINGS BEFORE INCOME TAXES 28,085 19,364
Income taxes 7,390 4,880
------------ ----------
NET EARNINGS $20,695 $14,484
============ ==========
Net earnings per share $0.32 $0.23
============ ==========
Weighted average shares outstanding 64,636 64,356
</TABLE>
See notes to consolidated condensed financial statements.
-5-
<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
------------ ---------
<S> <C> <C>
Net sales $831,275 $844,051
Costs of products sold 629,649 625,929
------------ ---------
GROSS PROFIT 201,626 218,122
Selling, general, and administrative expenses 102,941 114,675
Restructuring expenses 0 24,280
Amortization of goodwill 5,133 4,899
------------ ---------
OPERATING INCOME 93,552 74,268
Other income (expense):
Interest expense (12,831) (13,317)
Other 2,084 978
------------ ---------
(10,747) (12,339)
------------ ---------
EARNINGS BEFORE INCOME TAXES 82,805 61,929
Income taxes 22,504 15,621
------------ ---------
NET EARNINGS $60,301 $46,308
============ =========
Net earnings per share $0.94 $0.72
============ =========
Weighted average shares outstanding 64,466 64,357
</TABLE>
See notes to consolidated condensed financial statements.
-6-
<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1997 1996
------------ ---------
OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $60,301 $46,308
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 62,441 59,130
Other 983 21,709
Changes in operating assets and liabilities 3,461 (31,777)
------------ ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 127,186 95,370
INVESTING ACTIVITIES
Purchases of property and equipment-net (55,218) (110,093)
Purchase of businesses, net of cash acquired (122,377) -
------------ ---------
NET CASH USED IN INVESTING ACTIVITIES (177,595) (110,093)
FINANCING ACTIVITIES
Net proceeds on revolving credit lines 159,194 80,050
Proceeds from long-term borrowings 5,485 3,378
Payments on long-term borrowings (78,018) (66,360)
Net (payments) proceeds on short-term borrowings (9,945) 12,488
------------ ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 76,716 29,556
Effect of exchange rate changes on cash (3,786) (537)
------------ ---------
INCREASE IN CASH AND
CASH EQUIVALENTS 22,521 14,296
Cash and cash equivalents at beginning of period 20,945 19,584
------------ ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $43,466 $33,880
============ =========
</TABLE>
See notes to consolidated condensed financial statements.
-7-
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1997
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, 1996.
Note 2: Earnings Per Share
Earnings per share amounts for all periods reflect a 5% stock dividend paid on
June 9, 1997.
Note 3: Acquisitions
On July 17, 1997, the Company consummated its acquisition of 65% of Lite-On
Power Semiconductor Corporation, a Republic of China (Taiwan) company ("LPSC"),
and a member of Taiwan's Lite-On Group of companies, for a net cash purchase
price of approximately US$130 million.
LPSC produces diodes, primarily in the Far East, with manufacturing facilities
in Taipei, Taiwan; Shanghai, China; and Lee's Summit, Missouri. LPSC also owns
approximately 40.2% of Diodes, Inc. (AMEX: DIO), located in Westlake,
California. Diodes is a U.S. public company traded on the American Stock
Exchange.
Diodes are discrete semiconductor components used to convert electrical currents
from AC to DC and are used in all electronic equipment that requires such
conversion.
Pursuant to the Stock Purchase Agreement, dated April 25, 1997, among LPSC,
Silitek Corporation ("Silitek"), Lite-On Technology Corporation, Dyna Investment
Co., Ltd., Lite-On Inc. and other shareholders' as Sellers, and the Company, as
Purchaser (the "Stock Purchase Agreement"), the Company, through two Singapore
entities, acquired approximately 100% of the issued and outstanding shares of
capital stock of LPSC for cash consideration of US$200 million. The purchase was
made by a Singapore company (the "Joint Venture Company"), whose capital stock
at the time of the acquisition was 50% owned directly by the Company, and 50%
owned by another Singapore company ( the "Holding Company"), which at the time
was a wholly-owned subsidiary of the Company.
Concurrently with the consummation of the acquisition, pursuant to the terms of
the Joint Venture Agreement, dated April 25, 1997,
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<PAGE>
between the Company and a company formed by Silitek and certain other
shareholders of LPSC, Lite-On JV Corporation, ("JV"), which agreement was
amended as of July 17, 1997 (as amended, the "Joint Venture Agreement"), JV
purchased from the Company 35% of its interest in the Holding Company and 17.5%
in the Joint Venture Company for cash consideration of $70 million.
In connection therewith, JV received stock appreciation rights("SARs") in the
Company, which represent the right to receive in stock the increase in value on
the equivalent of 1,625,000 shares of the Company's stock above $23 per share.
Subject to certain annual and other adjustments, the Company may redeem the SARs
if the Company's stock trades above $43 per share. At that price, the SAR's
would entitle JV to 755,813 shares of the Company's common stock.
The Joint Venture Agreement also defines the terms of the management of LPSC and
its subsidiaries and the agreement between the Company and JV to market the
Company's products in Asia and LPSC's products throughout the world.
The results of operations of LPSC have been included in the Company's results
from July 1, 1997. Excess of cost over the fair value of assets ($108,355,000)
is being amortized on a straight-line method over an estimated useful life not
to exceed forty years.
The Company financed the cash portion ($130 million) of the LPSC acquisition
from current availability under the Company's credit facilities.
During the period, the Company further amended its credit facilities in
connection with, among other things, adjusting certain financial covenants and
extending the maturity dates of the credit facilities.
The summary of the amendment to the Company's credit facilities is qualified in
its entirety by reference to the text of such amendment, which is filed as an
exhibit hereto and which is incorporated herein by reference.
-9-
<PAGE>
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 Nine Months Ended
September 30 September 30
1997 1996 1997 1996
---- ---- ---- ----
Costs of products sold 75.3% 76.5% 75.7% 74.2%
Gross profit 24.7 23.5 24.3 25.8
Selling, general and
administrative expenses 12.4 13.8 12.4 13.6
Operating income 11.5 9.1 11.3 8.8
Earnings before income taxes 9.8 7.5 10.0 7.3
Effective tax rate 26.3 25.2 27.2 25.2
Net earnings 7.3 5.6 7.3 5.5
Net sales for the quarter ended September 30, 1997 increased $25,463,000 or 9.8%
from the comparable period of the prior year. The increase in net sales relates
primarily to the acquisition of LPSC. Net sales of LPSC for the quarter ended
September 30, 1997 were $19,634,000. Exclusive of LPSC, net sales would have
increased by $5,829,000 or 2.2%. The strengthening of the U.S. dollar against
foreign currencies for the quarter ended September 30, 1997 in comparison to the
prior year's quarter, resulted in a decrease in reported sales of $17,196,000.
Net sales for the nine months ended September 30, 1997 decreased $12,776,000 or
1.5% from the comparable period of the prior year. The strengthening of the U.S.
dollar against foreign currencies for the nine months ended September 30, 1997
in comparison to the prior year's period, resulted in a decrease in reported
sales of $41,483,000.
Costs of products sold for the quarter and nine months ended September 30, 1997
were 75.3% and 75.7% of net sales, respectively, as compared to 76.5% and 74.2%,
respectively, for the comparable prior year periods. Gross profit, as a
percentage of net sales, for the quarter ended September 30, 1997 increased from
the comparable prior year period mainly due to the restructuring programs taken
in 1996 to reduce manufacturing costs. The acquisition of LPSC did not have a
material impact on the gross margins of the Company. The gross profits for the
nine months ended September 30, 1997 as compared to the prior year period, were
negatively affected by a difficult pricing environment.
Israeli government grants, recorded as a reduction of costs of products sold,
were $2,970,000 and $8,395,000 for the quarter and nine months ended September
30, 1997, respectively, as compared to $2,215,000 and $6,416,000 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, 1997 relating to
Israeli government grants was $62,638,000 as compared to $58,570,000 at December
31, 1996.
-10-
<PAGE>
Selling, general, and administrative expenses for the quarter and nine months
ended September 30, 1997 were 12.4% of net sales, as compared to 13.8% and
13.6%, respectively, for the comparable prior year periods. LPSC's selling,
general and administrative expenses did not have a material impact to the
Company. Exclusive of LPSC's selling, general, and administrative expenses, the
expenses decreased by $2,497,000 and $13,721,000, respectively, as compared to
the prior year periods, as a result of the cost reduction program instituted in
1996.
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 closed or downsized several facilities in North America and Europe.
Interest costs increased by $1,111,000 for the quarter ended September 30, 1997,
from the comparable prior year period, due to the acquisition of LPSC. The
Company borrowed $130,000,000 from a group of banks to finance the acquisition
of LPSC. Interest costs have decreased by $486,000 for the nine months ended
September 30, 1997 as compared to the prior year period.
The effective tax rate for the nine months ended September 30, 1997 was 27.2% as
compared to 25.2% for the comparable prior year period. The effective tax rate
for calendar year 1996 was 25.2%. The lower tax rate for the nine months ended
September 30, 1996 was due primarily to the restructuring charges recorded in
the higher tax rate countries, where the Company conducts its business. 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 $4,939,000 and
$1,747,000 for the quarters ended September 30, 1997 and 1996, respectively, and
$9,389,000 and $10,285,000 for the nine month periods ended September 30, 1997
and 1996, 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 $127,186,000 for the nine months ended September
30, 1997 compared to $95,370,000 for the prior year's period. The increase in
cash flows from operations is primarily due to increased earnings and a decrease
in inventory for the nine months ended September 30, 1997 as compared to an
increase in inventory for the nine months ended September 30, 1996. Net
purchases of property and equipment for nine months ended September 30, 1997
were $55,218,000 compared to $110,093,000 in the prior year's period. This
decrease reflects the fact that the Company has substantially completed its
current restructuring/expansion program. Net cash provided by financing
activities of $76,716,000 for the nine months ended September 30, 1997 includes
$130,000,000 used to finance the acquisition of LPSC.
The Company incurred a pretax restructuring charge of $38,030,000 for the year
ended December 31, 1996. Approximately $28,953,000 of these charges relate to
employee termination costs covering approximately 2,600 technical, production,
administrative and support employees located in the United States, Canada,
France and Germany. As of September 30, 1997, approximately 2,290 employees have
been terminated and $21,888,000 of the termination costs have
-11-
<PAGE>
been paid. The restructuring plan is expected to be completed by the end of
1997.
The Company's financial condition at September 30, 1997 is strong, with a
current ratio of 3.22 to 1. The Company's ratio of long-term debt (less current
portion) to stockholders' equity was .35 to 1 at September 30, 1997 and .24 to 1
at December 31, 1996.
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.
o 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.
o 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 the need for the Company to timely bring to market new
products and applications to meet customers' changing needs.
o The Company operates in a highly competitive environment, which
includes significant competitive pricing pressures and intense
competition for entry into new markets.
o 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
-12-
<PAGE>
impact the Company's results of operations.
o 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.
o 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.
o 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.
o 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.
o 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.
o 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
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<PAGE>
significant price increases for tantalum or palladium, or an
inability to obtain adequate supplies of tantalum or palladium
from the limited number of suppliers.
o 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.
o 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.
o 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.
o 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.
o The inherent risk of environmental liability and remediation
costs associated with the Company's manufacturing operations may
result in large and unforseen liabilities.
o 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.
-14-
<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
10.1 - Fourth Amendment to Vishay Loan Agreement,
dated as of September 29, 1997.
27 - Financial Data Schedule.
(b) Reports on Form 8-K
Not applicable
-15-
<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
Executive Vice President, Treasurer
(Duly Authorized and Chief Financial
Officer)
Date: November 12, 1997
-16-
EXECUTION COPY
================================================================================
FOURTH AMENDMENT TO
VISHAY LOAN AGREEMENT
DATED AS OF SEPTEMBER 29, 1997
COMERICA BANK, AS AGENT
NATIONSBANK OF NORTH CAROLINA, N.A., AS CO-AGENT
BHF-BANK AKTIENGESELLSCHAFT, AS LEAD MANAGER
<PAGE>
FOURTH AMENDMENT TO VISHAY LOAN AGREEMENT
THIS FOURTH AMENDMENT ("Fourth Amendment") is made as of this 29th day
of September, 1997 by and among Vishay Intertechnology, Inc., a Delaware
corporation ("Company"), Comerica Bank, successor by merger to Manufacturers
Bank, N.A., formerly known as Manufacturers National Bank of Detroit
("Comerica"), the banks signatory hereto, and Comerica Bank, as agent for the
Banks (in such capacity, "Agent").
RECITALS:
A. Company, Agent and the banks signatory thereto (herein, the "Banks")
entered into that certain Amended and Restated Vishay Intertechnology, Inc.
$302,500,000 Revolving Credit and Term Loan Agreement dated as of July 18, 1994
(as amended by that certain First Amendment dated as of June 27, 1995 (herein,
the "First Amendment"), and that certain Second Amendment dated as of March 14,
1996 and that certain Third Amendment dated as of June 30, 1997, the "Vishay
Loan Agreement") under which the Banks renewed and extended (or committed to
extend) credit to the Company and the Permitted Borrowers, as set forth therein.
B. In connection therewith,
(1) the Banks, Agent and Company entered into that certain
Vishay Intertechnology, Inc. Acquisition Loan Agreement dated as of
July 18, 1994 (as amended) under which the Banks extended credit to the
Company consisting of a Bridge Loan and a Non-Amortizing Term Loan (as
therein defined), both such loans having been subsequently repaid;
(2) the Banks, Agent and Vishay Beteiligungs GmbH ("VBG"), now
known as Vishay Europe GmbH, and formerly known as Draloric Electronic
GmbH, entered into that certain Amended and Restated Draloric/VBG
Revolving Credit and Term Loan Agreement dated as of July 18, 1994 (as
amended by that certain First Amendment to such loan agreement dated as
of June 27, 1995, the "DM Loan Agreement") under which the Banks
renewed and extended (or committed to extend) to VBG a revolving credit
facility (still outstanding) and a term loan (subsequently repaid), as
set forth therein; and
(3) the Banks, Agent and VBG entered into that certain Amended
and Restated Roederstein Term Loan Agreement dated as of July 18, 1994
(as amended by that certain First Amendment to such loan agreement
dated as of June 27, 1995, the "Roederstein Loan Agreement") under
which the Banks renewed and extended credit (still outstanding) to VBG
as set forth therein.
C. Pursuant to the Vishay Loan Agreement, Company and the Permitted
Borrowers each issued to the Banks their respective Revolving Credit Notes as
specified therein, and Company issued to the Banks the Term Notes and the Bid
Notes described therein.
<PAGE>
D. At the Company's request, Agent and the Banks signatory to this
Fourth Amendment have agreed with the Company and the Permitted Borrowers to
make certain amendments to the terms and conditions of the Vishay Loan
Agreement, including without limitation, increasing the Revolving Credit
provided by the Banks to the Company and the Permitted Borrowers thereunder by
the amount of Indebtedness presently outstanding under the Term Loan made by the
Banks to the Company pursuant to Section 3 of the Vishay Loan Agreement in
connection with the concurrent repayment (by renewal) by the Company of the Term
Loan, but only on the terms and conditions set forth in this Fourth Amendment.
NOW, THEREFORE, Company, the Permitted Borrowers, Agent and the Banks
agree:
1. Section 1 of the Vishay Loan Agreement is amended as follows:
(a) Section 1.6 (the definition of "Activation Fee") is deleted
and replaced in its entirety by the word "[Reserved]".
(b) Section 1.7 (the definition of "Adjusted Total Indebtedness")
is amended to delete, from the fourth line thereof, the words "average
of the".
(c) Section 1.15 (the definition of "Applicable Fee Percentage")
is amended to delete in its entirety the proviso added to said section
by the First Amendment.
(d) Section 1.17 (the definition of "Applicable Margin") is
amended and restated in its entirety, as follows:
"1.17 'Applicable Margin' shall mean, as of any date
of determination thereof, (i) with respect to the Revolving
Credit and the Term Loan, the applicable interest rate margin,
determined by reference to the appropriate columns in the
Pricing Matrix attached to this Agreement as Schedule 4.1, and
(ii) with respect to Eurocurrency Bid Advances, the
Eurocurrency Bid Margin."
(e) Section 1.19 (the definition of "Banks") is amended to add
PNC Bank, National Association and The Bank of Tokyo-Mitsubishi, Ltd.
New York Branch as additional Banks ("Additional Banks") and to delete
Credit Suisse and ABN AMRO Bank N.V. New York Branch ("Former Banks")
as Banks.
(f) Section 1.64 (the definition of "Excess Cash Flow") is
amended and restated in its entirety, as follows:
"1.64 'Excess Cash Flow' shall mean zero, whether or
not the Company's operating activities produce any net cash or
otherwise."
(g) Section 1.66 (the definition of "Fees") is amended to
delete the references to "the Activation Fee" and "the Revolving Credit
Commitment Fee".
2
<PAGE>
(h) Section 1.67 (the definition of "Fixed Charge Coverage
Ratio") is amended to replace the words (in the second and third lines
thereof), "the Operating Income of the Company, plus depreciation and
amortization, each" with the term "EBITDA".
(i) Sections 1.121 through 1.123 (the definitions of "Rating
Levels 1, 2 and 3") are amended and restated in their entirety, as
follows:
"1.121. 'Rating Level 1' shall mean an S&P rating of A- (or
higher) and a Moody's rating of A3 (or higher).
"1.122. 'Rating Level 2' shall mean an S&P rating of BBB+
(or higher) and a Moody's rating of Baa1 (or higher).
"1.123. 'Rating Level 3' shall mean an S&P rating of BBB (or
higher) and a Moody's rating of Baa2 (or higher)."
(j) Section 1.130 (the definition of "Revolving Credit") is
amended and restated in its entirety as follows:
"1.130 'Revolving Credit' shall mean the revolving credit
loan to be advanced to the Company or the Permitted Borrowers by
the Banks pursuant to Section 2.1 hereof, in an aggregate amount,
subject to the terms hereof, not to exceed the Revolving Credit
Aggregate Commitment."
(k) Section 1.131 (the definition of "Revolving Credit Aggregate
Commitment") is amended and restated in its entirety as follows:
"1.131 'Revolving Credit Aggregate Commitment' shall mean,
as of the applicable date of determination, the sum of Four
Hundred Seventy Million Dollars ($470,000,000), less any
reductions in the Revolving Credit Aggregate Commitment under
Section 2.16 hereof.
(l) Sections 1.132 (the definition of "Revolving Credit
Commitment Fee") and 1.133 (the definition of "Revolving Credit
Designated Portion") are deleted in their entirety and replaced with
the word "[Reserved]."
(m) Section 1.135 (the definition of "Revolving Credit Maturity
Date") is amended to extend the Revolving Credit Maturity Date
presently in effect from December 31, 2001 to December 31, 2002 and to
change the reference to "Revolving Credit Maximum Amount" (in the
fourth line thereof) to "Revolving Credit Aggregate Commitment".
3
<PAGE>
(n) Section 1.136 (the definition of "Revolving Credit Maximum
Amount") is deleted in its entirety and replaced with the word
"[Reserved]."
2. Section 2 of the Vishay Loan Agreement is amended as follows:
(a) Section 2.14 (establishing the Revolving Credit Commitment
Fee) is deleted in its entirety and replaced with the word
"[Reserved]".
(b) Section 2.15 is amended to delete clause (i) of subparagraph
(a) and to redesignate clauses (ii) and (iii) of subparagraph (a) as
clauses (i) and (ii), respectively.
(c) Section 2.16 is amended to change each reference in said
Section to the "Revolving Credit Maximum Amount" to the "Revolving
Credit Aggregate Commitment", to change the reference to the
"Revolving Credit Commitment Fee" (in the tenth and eleventh lines
thereof) to the "Revolving Credit Facility Fee" and to delete the last
sentence of said Section 2.16 in its entirety.
(d) Sections 2.17 and 2.18 are deleted in their entirety and, in
each case, replaced with the word "[Reserved]."
3. Replacement Schedule 4.1 (Pricing Matrix) attached to this Fourth
Amendment shall replace existing Schedule 4.1 to the Vishay Loan Agreement and
Schedule 4.1A (added to the Vishay Loan Agreement by the First Amendment) is
hereby deleted; new Exhibit "G" in the form attached to this Fourth Amendment
(setting forth the applicable Percentages) shall replace existing Exhibit "G" to
the Vishay Loan Agreement; and the existing Schedules to the Vishay Loan
Agreement are hereby restated and replaced in their entirety by the Schedules
contained in Attachment "1" hereto.
4. Company and each of the Permitted Borrowers ratify and confirm, as
of the date hereof, each of the representations and warranties set forth in
Sections 6.1 through 6.21, inclusive, of the Vishay Loan Agreement (as amended
by this Fourth Amendment), and acknowledge that such representations and
warranties are and shall remain continuing representations and warranties during
the entire life of the Vishay Loan Agreement, and Agent and the Banks confirm
that, as of the Effective Date (defined below), the Term Loan under Section 3 of
the Vishay Loan Agreement has been paid by renewal according to the terms
hereof.
5. Except as specifically set forth above, this Fourth Amendment shall
not be deemed to amend or alter in any respect the terms and conditions of the
Vishay Loan Agreement, any of the Notes issued thereunder, or any of the other
Loan Documents, or to constitute a waiver by Banks or Agent of any right or
remedy under the Vishay Loan Agreement, any of the Notes issued thereunder or
any of the other Loan Documents.
6. This Fourth Amendment shall become effective as of September 30,
1997 (the "Effective Date"), subject to the satisfaction by Company and each of
the Permitted Borrowers
4
<PAGE>
of the following conditions (which Company covenants and agrees to satisfy) on
or before such date:
(a) Agent shall have received counterpart originals of this
Fourth Amendment, duly executed and delivered by Company, Permitted
Borrowers and the Banks, and in form satisfactory to Agent and the
Banks;
(b) Company and each of the Permitted Borrowers (with respect to
the Revolving Credit) and Company (with respect to the Bid Notes)
shall have executed and delivered to each of the Banks renewal and
replacement Notes substantially in the forms of Exhibit B-1, B-2 and
C-4 to the Vishay Loan Agreement, as applicable, each of such Notes to
be dated as of the Effective Date (with appropriate insertions
acceptable to the Banks in form and substance) and (i) in the case of
the Revolving Credit, in the face amount of each Bank's respective
Percentage of the Revolving Credit Aggregate Commitment, reflecting
the increase which is to become effective on the Effective Date of
this Fourth Amendment and the aforesaid changes in the Percentages and
(ii) in the case of the Bid Notes, in the full amount of the Revolving
Credit Aggregate Commitment, reflecting such increase and the
aforesaid changes in the Percentages. Upon receipt of the renewal and
replacement Notes ("New Notes"), as aforesaid (which New Notes are to
be in exchange for and not in payment of the predecessor Revolving
Credit Notes, Bid Notes and the Term Notes issued by Company and the
Revolving Credit Notes issued by the Permitted Borrowers), the Banks
(other than the Additional Banks) shall return such predecessor Notes
to Agent which shall stamp such Notes "Exchanged" and deliver said
notes to the Company;
(c) Agent shall have received from Company and the Permitted
Borrowers, as applicable, copies, certified by a duly authorized
officer to be true and complete as of the date hereof, of records of
all action taken by Company and the Permitted Borrowers, as the case
may be, to authorize the execution and delivery of this Fourth
Amendment and to issue replacement Notes hereunder;
(d) Agent shall have received a written legal opinion, addressed
to Agent and each of the Banks and dated as of the date hereof, from
counsel for Company and the Permitted Borrowers in form and substance
satisfactory to Agent and the Banks;
(e) Company shall have paid to Agent, for distribution to the
Banks (excluding the Additional Banks, but including the Former Banks)
pro rata based on the Percentages in effect immediately prior to the
Effective Date, the Fees in effect under the Vishay Loan Agreement
prior to the date on which this Fourth Amendment shall become
effective, accrued to such date; and
(f) The conditions to the effectiveness of that certain Second
Amendment to the DM Loan Agreement and the Roederstein Loan Agreement,
to be executed and delivered concurrently herewith, shall have been
satisfied.
5
<PAGE>
If the foregoing conditions have not been satisfied on or before September 30,
1997, this Fourth Amendment shall be deemed null and void and of no further
force and effect.
7. Concurrently with the Effective Date of this Fourth Amendment
pursuant to Section 6 hereof,
(a) each Additional Bank shall become a "Bank" under and for
all purposes of the Credit Agreement, shall have all the rights and
obligations of a party to the Vishay Loan Agreement, as if it were an
original signatory thereto, and shall agree to be bound by the terms
and conditions set forth in the Vishay Loan Agreement as if it were an
original signatory thereto, and to the extent the Banks parties to the
Vishay Loan Agreement prior to the Effective Date hereof shall have
exercised any consent or approval rights prior to Effective Date, such
Additional Bank agrees to be bound by such consent or approval, to the
extent that copies thereof have been provided to such additional Bank;
and
(b) each Bank (including the Additional Banks) shall have (i) a
Percentage equal to the Percentage set forth in new Exhibit G hereto
and (ii) Advances of the Revolving Credit in its Percentage thereof
outstanding on the Effective Date. To facilitate the foregoing, each
Bank (including the Additional Banks) which as a result of the
adjustments of Percentages evidenced by new Exhibit G is to have a
greater principal amount of Advances of the Revolving Credit
outstanding than such Bank had outstanding under the Vishay Loan
Agreement immediately prior to the Effective Date of this Fourth
Amendment shall deliver to the Agent immediately available funds to
cover such Advances (and the Agent shall, to the extent of the funds
so received, disburse funds to each Bank, including the Former Banks,
which, as a result of the adjustment of the Percentages, is to have a
lesser principal amount of Indebtedness (or no Indebtedness in the
case of the Former Banks) outstanding than such Bank had under the
Vishay Loan Agreement immediately prior to the Effective Date of the
Fourth Amendment). Each Additional Bank agrees that all interest and
fees accrued under the Vishay Loan Agreement prior to the Effective
Date are the property of the Banks which were parties to the Vishay
Loan Agreement prior to the Effective Date of this Fourth Amendment.
8. Unless otherwise expressly defined to the contrary herein, all
capitalized terms used in this Fourth Amendment shall have the meaning set forth
in the Vishay Loan Agreement.
9. By executing this Fourth Amendment, each of the Permitted Borrowers
consents to and acknowledges and agrees to be bound by the terms and conditions
of this Fourth Amendment.
10. This Fourth Amendment may be executed in counterpart, in accordance
with Section 13.10 of the Vishay Loan Agreement.
6
<PAGE>
IN WITNESS WHEREOF, Company, the undersigned Banks and Agent have each
caused this Fourth Amendment to be executed by their respective duly authorized
officers or agents, as applicable, all as of the date first set forth above.
COMPANY: AGENT:
VISHAY INTERTECHNOLOGY, INC. COMERICA BANK, as Agent
By: /s/ Richard N. Grubb By: /s/ Dan M. Roman
------------------------- ------------------------
Richard N. Grubb Dan M. Roman
Its: Executive Vice President Its: Vice President
63 Lincoln Highway One Detroit Center
Malvern, Pennsylvania 19355 500 Woodward Avenue
Detroit, Michigan 48226
Attention: National Division
NATIONSBANK OF NORTH
CAROLINA, N.A.
By: /s/ Yousef Omar
-------------------
Yousef Omar
Its: Senior Vice President
BHF-BANK AKTIENGESELLSCHAFT
By: /s/ Linda Pace
-------------------------
Linda Pace
Its: Vice President
By: /s/ John Sykes
-------------------------
John Sykes
Its: Vice President
7
<PAGE>
BANK HAPOALIM B.M.
By: /s/ Carl Kopfinger
-------------------------
Carl Kopfinger
Its: Vice President
By: /s/ Jonathan Kulka
-------------------------
Jonathan Kulka
Its: First Vice President
SIGNET BANK/MARYLAND
By: /s/ Janice E. Godwin
-------------------------
Janice E. Godwin
Its: Vice President
CORESTATES BANK, N.A.
By:/s/ Kathleen Stucy
-------------------------
Kathleen Stucy
Its: Senior Vice President
8
<PAGE>
BANK LEUMI le-ISRAEL B.M.
By: /s/ Y. Apleker
-------------------------
Y. Apleker
/s/ M. Fink
-------------------------
M. Fink
PNC BANK, NATIONAL ASSOCIATION
By:/s/ Gary Tyrrell
-------------------------
Gary Tyrrell
Its: Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Scott Chappelka
-------------------------
Scott Chappelka
Its: Vice President
THE BANK OF TOKYO-MITSUBISHI,
LTD. NEW YORK BRANCH
By: /s/ Christopher Wilkens
-------------------------
Christopher Wilkens
Its: Attorney-In-Fact
9
<PAGE>
FLEET NATIONAL BANK, formerly known
as SHAWMUT BANK, N.A.
By: /s/ Frank Benesh III
-------------------------
Frank Benesh III
Its: Vice President
ACKNOWLEDGED AND AGREED
BY THE PERMITTED BORROWERS:
VISHAY EUROPE GmbH
By:/s/ Richard N. Grubb
--------------------------------
Richard N. Grubb
Its: Attorney-in-Fact
VISHAY ELECTRONIC GmbH,
formerly known as DRALORIC ELECTRONIC GmbH
By: /s/ Richard N. Grubb
--------------------------------
Richard N. Grubb
Its: Attorney-in-Fact
10
<PAGE>
EXHIBIT "G"
to Fourth Amendment to Vishay Loan Agreement
Percentages
Comerica Bank 16.67%
NationsBank of North Carolina, N.A. 15.75%
CoreStates Bank 12.50%
BHF-Bank Aktiengesellschaft 9.68%
Bank Hapoalim, B.M. 8.33%
Credit Lyonnais New York Branch 8.33%
Fleet National Bank 7.49%
Bank Leumi le-Israel, B.M. 6.00%
Signet Bank/Maryland 5.25%
Bank of Tokyo-Mitsubishi 5.00%
PNC Bank 5.00%
Total 100.00%
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
SCHEDULE 4.1 (VISHAY LOAN AGREEMENT)
PRICING MATRIX (DETERMINATION OF PRICING LEVELS)
- --------------------------------------------------------------------------------------------------------------------------
APPLICABLE MARGIN FOR
ADVANCES APPLICABLE FEE PERCENTAGE FOR
OF THE REVOLVING CREDIT
- ------------------------------------------------------------------------------------
Prime-based Eurocurrency- Revolving Credit Facility Fee
Rate based Rate
==========================================================================================================================
<S> <C> <C> <C>
If Leverage Ratio is less than 1.25:1.0
OR
If Rating Level 1 is in effect 0.00% .165% .085%
- --------------------------------------------------------------------------------------------------------------------------
If Leverage Ratio is greater than or
equal to 1.25:1.0, but less than
2.0:1.0 0.00% .20% .10%
OR
If Rating Level 2 is in effect
- --------------------------------------------------------------------------------------------------------------------------
If Leverage Ratio is greater than or
equal to 2.0:1.0, but less than 2.75:1.0
OR 0.00% .25% .125%
- --
If Rating Level 3 is in effect
- --------------------------------------------------------------------------------------------------------------------------
If Leverage Ratio is greater than or
equal to 2.75
OR 0.00% .30% .180%
- --
If Rating Level 4 is in effect
==========================================================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 43,466
<SECURITIES> 0
<RECEIVABLES> 193,738
<ALLOWANCES> (5,032)
<INVENTORY> 343,909
<CURRENT-ASSETS> 666,739
<PP&E> 1,078,799
<DEPRECIATION> (358,693)
<TOTAL-ASSETS> 1,728,249
<CURRENT-LIABILITIES> 207,337
<BONDS> 0
0
0
<COMMON> 5,645
<OTHER-SE> 967,897
<TOTAL-LIABILITY-AND-EQUITY> 1,728,249
<SALES> 831,275
<TOTAL-REVENUES> 831,275
<CGS> 629,649
<TOTAL-COSTS> 629,649
<OTHER-EXPENSES> 105,990
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,831
<INCOME-PRETAX> 82,805
<INCOME-TAX> 22,504
<INCOME-CONTINUING> 60,301
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,301
<EPS-PRIMARY> .94
<EPS-DILUTED> .94
</TABLE>
