<PAGE> 1
SCHEDULE 14ADR
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
VISHAY INTERTECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
$0
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
Schedule 14ADR -- preliminary proxy statement
- --------------------------------------------------------------------------------
(3) Filing party:
Registrant
- --------------------------------------------------------------------------------
(4) Date filed:
April 4, 1997
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<PAGE> 2
VISHAY INTERTECHNOLOGY, INC.
63 LINCOLN HIGHWAY
MALVERN, PENNSYLVANIA 19355-2120 USA
Vishay Logo
April 18, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Vishay Intertechnology, Inc. (the "Company") to be held at 10:30 a.m.
Philadelphia time on the 19th day of May, 1997, at The Four Seasons Hotel,
Ballroom, Lobby Level, One Logan Square, Philadelphia, Pennsylvania 19103. Your
Board of Directors looks forward to greeting personally those stockholders able
to be present.
At the Annual Meeting (the "Annual Meeting") you will be asked to elect
eleven Directors, to approve an amendment to the Company's Certificate of
Incorporation and to approve the appointment of Ernst & Young LLP as Auditors
for the Company's next audited fiscal year.
The Board of Directors unanimously recommends that you vote FOR the
election of all eleven nominees as Directors, FOR the approval of the amendment
to the Company's Certificate of Incorporation and FOR the approval of the
appointment of the Auditors.
Regardless of the number of shares you may own, it is important that they
are represented and voted at the Annual Meeting. Therefore, please sign, date
and mail the enclosed proxy in the return envelope provided.
At the Annual Meeting, we will also report to you on the Company's current
operations and outlook. Members of the Board and management will be pleased to
respond to any questions you may have.
Your cooperation is appreciated.
Sincerely,
/s/ William J. Spires
William J. Spires
Secretary
<PAGE> 3
VISHAY INTERTECHNOLOGY, INC.
63 LINCOLN HIGHWAY
MALVERN, PENNSYLVANIA 19355-2120
------------------------
NOTICE OF ANNUAL MEETING OF THE STOCKHOLDERS
TO BE HELD MAY 19, 1997
------------------------
Notice is hereby given that the Annual Meeting of Stockholders of Vishay
Intertechnology, Inc. (the
"Company") will be held at The Four Seasons Hotel, Ballroom, Lobby Level, One
Logan Square, Philadelphia, Pennsylvania 19103, on the 19th day of May, 1997 at
10:30 a.m. Philadelphia time, for the following purposes:
1. to elect eleven Directors for a term of one year and until their
successors are elected and qualified; and
2. to approve an amendment to the Company's Certificate of
Incorporation to increase the number of shares of common stock
which the Company is authorized to issue from 65,000,000 shares to
75,000,000 shares; and
3. to approve the appointment of Auditors for the Company's next
audited fiscal year.
Action will also be taken upon such other business, if any, as may properly
come before the meeting. The Board of Directors is not presently aware of any
such other business.
The stockholders of record at the close of business on April 7, 1997 will
be entitled to vote at the Annual Meeting or at any adjournment thereof. If you
do not expect to attend the meeting in person, please complete, date and sign
the enclosed proxy and return it without delay in the enclosed envelope which
requires no additional postage if mailed in the United States.
By Order of the Board of Directors,
/s/ William J. Spires
William J. Spires
Secretary
Malvern, Pennsylvania
April 18, 1997
<PAGE> 4
VISHAY INTERTECHNOLOGY, INC.
63 LINCOLN HIGHWAY
MALVERN, PENNSYLVANIA 19355-2120
------------------------
PROXY STATEMENT
------------------------
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of VISHAY
INTERTECHNOLOGY, INC. ("Vishay" or the "Company") for use at the Annual Meeting
of Stockholders (the "Annual Meeting") to be held at The Four Seasons Hotel,
Ballroom, Lobby Level, One Logan Square, Philadelphia, Pennsylvania 19103, on
the 19th day of May, 1997, at 10:30 a.m. Philadelphia time, and any adjournments
thereof. Stockholders of record at the close of business on April 7, 1997 shall
be entitled to vote at the Annual Meeting.
A list of stockholders entitled to vote at the Annual Meeting will be
available for examination by stockholders of the Company during ordinary
business hours for a period of ten days prior to the Annual Meeting at the
offices of the Company, 63 Lincoln Highway, Malvern, Pennsylvania 19355-2120. A
stockholder list will also be available for examination at the Annual Meeting.
The cost of solicitation of proxies will be borne by the Company. The Board
of Directors may use the services of the Company's Directors, Officers and other
regular employees to solicit proxies personally or by telephone. Arrangements
will be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation material to the beneficial owners of the
shares held of record by such fiduciaries, and the Company will reimburse them
for the reasonable expenses incurred by them in so doing.
The shares represented by the accompanying proxy will be voted as directed
with respect to the election of Directors, with respect to the approval of the
proposed amendment to the Company's Certificate of Incorporation and with
respect to the approval of the appointment of Ernst & Young LLP as independent
auditors of the Company (the "Auditors"), OR, if no direction is indicated, will
be voted FOR the election as Directors of the nominees listed below, FOR the
approval of the amendment to the Company's Certificate of Incorporation and FOR
the appointment of the Auditors. Each proxy executed and returned by a
stockholder may be revoked at any time thereafter by giving written notice of
such revocation to the Secretary of the Company, by delivering to the Company a
properly executed and timely submitted proxy bearing a later date or by
attending the Annual Meeting and electing to vote in person, except as to any
matter or matters upon which, prior to such revocation, a vote shall have been
cast pursuant to the authority conferred by such proxy.
This Proxy Statement was preceded or is accompanied by the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1996. This Proxy
Statement and the enclosed form of proxy are being furnished commencing on or
about April 18, 1997.
VOTING OF SHARES
The holders of a majority of the outstanding shares entitled to vote,
present in person or represented by proxy, will constitute a quorum for the
transaction of business. Shares represented by proxies that are marked "abstain"
will be counted as shares present for purposes of determining the presence of a
quorum on all matters. Brokers holding shares for beneficial owners in "street
name" must vote those shares according to specific instructions they receive
from the owners. If instructions are not received, brokers may vote the shares,
in their discretion, depending on the type of proposals involved. "Broker
non-votes" result when brokers are precluded by the New York Stock Exchange from
exercising their discretion on certain types of proposals. However, brokers have
discretionary authority to vote on all the proposals being submitted hereby to
the stockholders. Shares that are voted by brokers on some but not all of the
matters will be treated as shares
<PAGE> 5
present for purposes of determining the presence of a quorum on all matters, but
will not be treated as shares entitled to vote at the annual meeting on those
matters as to which authority to vote is withheld by the broker.
The election of each nominee for Director requires a plurality of votes
cast. Accordingly, abstentions and Broker non-votes will not affect the outcome
of the election. Approval of the proposed amendment to the Company's Certificate
of Incorporation requires the affirmative vote of the majority of the
outstanding shares entitled to vote. The affirmative vote of the holders of a
majority of the votes cast is required for the approval of appointment of the
Auditors. On these matters the abstentions will have the same effect as a
negative vote. Because Broker non-votes will not be treated as shares that are
present and entitled to vote with respect to a specific proposal a Broker
non-vote will have no effect on the outcome.
The Company has appointed an inspector to act at the Annual Meeting who
shall: (1) ascertain the number of shares outstanding and the voting powers of
each; (2) determine the shares represented at the Annual Meeting and the
validity of the proxies and ballots; (3) count all votes and ballots; (4)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determinations by such inspector; and (5) certify his
determination of the number of shares represented at the Annual Meeting and his
count of all votes and ballots.
Dr. Felix Zandman directly, beneficially and through a Voting Trust
Agreement and Mrs. Luella Slaner directly, beneficially and as an Executrix for
the estate of her late husband, Alfred Slaner, have voting power over 58.8% of
the total voting power of the Company's shares and intend to vote FOR the
election of the eleven nominees as Directors, FOR the approval of the amendment
to the Company's Certificate of Incorporation and FOR the approval of the
appointment of the Auditors. Such shares are sufficient to approve each proposal
regardless of how the other shares are voted.
2
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
On April 7, 1997, the Company had outstanding 53,743,954 shares of Common
Stock, par value $.10 per share ("Common Stock"), each of which entitles the
holder to one vote, and 7,563,720 shares of Class B Common Stock, par value $.10
per share ("Class B Stock"), each of which entitles the holder to ten votes.
Voting is not cumulative.
The following table provides certain information, as of April 7, 1997, as
to the beneficial ownership of the Common Stock or the Class B Stock of the
Company for (a) each Director and nominee, (b) each Executive Officer named in
the Summary Compensation Table, (c) the Directors and Executive Officers of the
Company as a group and (d) any person owning more than 5% of the Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK CLASS B STOCK
---------------------- ----------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF PERCENT
BENEFICIAL PERCENT BENEFICIAL PERCENT OF TOTAL
NAME OWNERSHIP OF CLASS OWNERSHIP OF CLASS VOTING POWER
- ------------------------------------ --------- -------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Felix Zandman(1)(2)................. 553 * 4,233,313 56.0% 41.6%
Donald G. Alfson(1)................. 19,309 * -- -- *
Avi D. Eden(1)(2)................... 23,296 * -- -- *
Robert A. Freece(1)................. 51,190 * -- -- *
Richard N. Grubb(1)................. 18,527 * -- -- *
Eliyahu Hurvitz(1).................. 2,205 * -- -- *
Henry V. Landau(1).................. 57,356 * -- -- *
Gerald Paul(1)...................... 18,567 * -- -- *
Edward B. Shils(1).................. 34,965 * -- -- *
Luella B. Slaner(1)(3).............. 1,047,163 2.0% 2,116,357 28.0% 17.2%
Mark I. Solomon(1).................. 4,410 * -- -- *
Jean-Claude Tine(1)................. 4,233 * -- -- *
All Directors and Executive
Officers as a group (14
persons)....................... 1,289,928 2.4% 6,349,670 84.0% 59.0%
</TABLE>
- ---------------
* Represents less than 1% of the outstanding shares of such class.
(1) The address of each of the referenced individuals is: c/o Vishay
Intertechnology, Inc., 63 Lincoln Highway, Malvern, PA 19355-2120.
(2) Class B Stock Amount and Nature of Beneficial Ownership and Percent of Class
does not include 816,507 shares of Class B Stock held in various trusts for
the benefit of Mrs. Luella Slaner's children and grandchildren and 336,000
shares of Class B Stock directly owned by Mrs. Slaner's children in which
Dr. Zandman is a trustee and/or has sole voting power and Mr. Eden is his
successor in trust (together, the "Trustee") under a Voting Trust Agreement
among the Trustee, Mrs. Slaner and certain stockholders (the "Voting Trust
Agreement"). The Voting Trust Agreement will remain in effect until the
earlier of (x) February 1, 2050 or (y) the death or resignation or inability
to act of the last of Dr. Zandman and Mr. Eden to serve as Trustee, but
shall terminate at any earlier time upon the due execution and
acknowledgment by the Trustee of a deed of termination, duly filed with the
registered office of the Company. Percent of Total Voting Power includes
said 1,152,507 shares of Class B stock over which Dr. Zandman has sole
voting control. Dr. Zandman and Mr. Eden disclaim beneficial ownership of
such shares of Class B Stock.
(3) Includes 573 shares of Common Stock and 891,812 shares of Class B Stock
directly owned by Mrs. Slaner, and 1,046,590 shares of Common Stock and
1,224,545 shares of Class B Stock held in the estate of her late husband,
Mr. Alfred Slaner, of which she is the Executrix. Does not include 816,507
shares of Class B Stock held in various trusts for the benefit of her
children and grandchildren, for which she disclaims beneficial ownership.
3
<PAGE> 7
PROPOSAL 1 -- ELECTION OF DIRECTORS
It is proposed to elect a Board of eleven Directors for the following year
and until their successors are elected and qualified. Although the Company's
By-laws provide for up to 12 Directors, the Board has determined that it is in
the Company's best interest for no more than 11 Directors to serve at this time
in order to give the Board of Directors flexibility to appoint an additional
Director if the need arises. Accordingly, proxies may not be voted for a greater
number of persons than the number of nominees named. All of the nominees, set
forth in the table below, are currently members of the Board of Directors. It is
intended that the accompanying form of proxy will be voted for the election of
the eleven nominees unless other instructions are given. Voting is not
cumulative. If any nominee should become unavailable, discretionary authority is
reserved by the individuals named in the proxy to vote for a substitute. The
following sets forth information regarding principal occupation and other major
affiliations during the past five years, as well as the age of each of the
nominees.
DIRECTORS AND NOMINEES FOR
ELECTION AS DIRECTORS
<TABLE>
<CAPTION>
YEAR FIRST
PRINCIPAL OCCUPATION ELECTED
NAME AGE AND OTHER DIRECTORSHIPS DIRECTOR
- --------------------------------- --- ------------------------------------------------------ ----------
<S> <C> <C> <C>
Felix Zandman(1)................. 68 Chairman of the Board, President and Chief Executive 1962
Officer of the Company. President and Chief Executive
Officer since the Company's inception. Chairman of the
Board since 1989.
Donald G. Alfson(1).............. 51 Executive Vice President and Chief Business 1992
Development Officer of the Company since August 1996.
Vice President of the Company from 1993 to August
1996. President -- Vishay Electronic Components, North
America and Asia, from April 1992 to August 1996.
Employed since 1972 by Dale Electronics, Inc., a
subsidiary of the Company.
Avi D. Eden(1)................... 49 Vice Chairman of the Board and Executive Vice 1987
President of the Company since August 1996. General
Counsel to the Company for more than the past five
years.
Robert A. Freece(1).............. 56 Senior Vice President of the Company since May 1994. 1972
Vice President of the Company from 1972 until 1994.
Richard N. Grubb(1).............. 50 Vice President, Treasurer and Chief Financial Officer 1994
of the Company since May 1994. Executive Vice
President of the Company since August 1996. Mr. Grubb
has been associated with the Company in various
capacities since 1972.
Eliyahu Hurvitz.................. 64 President and Chief Executive Officer, Teva 1994
Pharmaceutical Industries Ltd. for more than the past
five years.
Gerald Paul(1)................... 48 Chief Operating Officer and Executive Vice President 1993
of the Company since August 1996. Vice President of
the Company from 1993 to August 1996.
President -- Vishay Electronic Components, Europe from
January 1994 to August 1996. Employed by Draloric
since February 1978.
Edward B. Shils(2)(3)(4)(5)...... 81 Consultant; Ph.D.; Director -- Wharton Entrepreneurial 1981
Center and George W. Taylor Professor Emeritus of
Entrepreneurial Studies, The Wharton School,
University of Pennsylvania.
Luella B. Slaner................. 77 Investor for more than the past five years. 1989
Mark I. Solomon(2)(3)(4)(5)...... 57 Chairman of CMS Companies for more than the past five 1993
years.
Jean-Claude Tine................. 78 Investor for more than the past five years. 1988
</TABLE>
- ---------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Employee Stock Plan Committee.
(4) Member of the Compensation Committee.
(5) Member of the Stock Option Committee.
4
<PAGE> 8
COMPENSATION OF DIRECTORS
Directors who received annual compensation for their services as Directors
are Dr. Shils and Messrs. Hurvitz, Solomon and Tine who each received $2,500 for
each Board meeting attended. In addition, Dr. Shils and Mr. Solomon received
$2,500 for each Audit Committee and each Compensation Committee meeting
attended. Directors who are also employees of the Company do not receive any
compensation for their role as Directors and are compensated as other executive
officers and key management as described under "Compensation Committee and
Employee Stock Plan Committee Report on Executive Compensation -- Executive
Officers and Key Management."
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Board of Directors met five times during the twelve months ended
December 31, 1996. The Executive Committee met once during the same period. The
Executive Committee is authorized to exercise all functions of the Board of
Directors in the intervals between meetings of the Board of Directors to the
extent permitted by Delaware law.
The Audit Committee met twice during the twelve months ended December 31,
1996. The functions of the Audit Committee include recommending independent
auditors to the Board of Directors, reviewing with the independent auditors the
scope and results of the audit, reviewing the independence of the auditors,
considering the range of audit and non-audit fees and reviewing the adequacy of
the Company's systems of internal accounting controls.
The Employee Stock Plan Committee met twice during the twelve months ended
December 31, 1996. The Employee Stock Plan Committee is authorized, within the
limits of the 1986 stock plans of the Company and its subsidiary, Dale
Electronics, Inc. (the "Stock Plans"), to determine the individuals who are to
receive grants and the vesting requirements with respect to the Stock Plans and
to administer and interpret the Stock Plans.
The Compensation Committee met once during the twelve months ended December
31, 1996. The Compensation Committee is authorized to establish and approve
management compensation. See "Compensation Committee and Employee Stock Plan
Committee Report on Executive Compensation."
The Stock Option Committee met once during the twelve months ended December
31, 1996.
The Board does not have a nominating committee.
No Director attended less than 75% of the meetings of the Board and any
committees on which such Director served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The two members of the Employee Stock Plan Committee and the Stock Option
Committee are Dr. Shils and Mr. Solomon, who are independent Directors of the
Company and who also may not be awarded Common Stock under the Stock Plans and
the Stock Option Program. Dr. Shils and Mr. Solomon are also the two members of
the Compensation Committee.
LEGAL PROCEEDING
An indictment relating to tax issues has been filed by the Jerusalem
district attorney's office against Promedico Ltd. ("Promedico"), as well as
certain of its officers, including Mr. Eliyahu Hurvitz, a member of the Board of
Directors of the Company and the President and CEO of Teva Pharmaceutical
Industries Ltd. ("Teva"), who served during the period in which Promedico was
owned by Teva (1980-1986) as the chairman of Promedico. The charges allege:
failure to report commissions allegedly received by Promedico, failure to
register such commissions in Promedico's books, failure to pay taxes which may
be due on such commissions, and fraudulent actions regarding the foregoing. The
charges are attributed to Mr. Hurvitz by reason of his serving as the chairman
of the board of directors of Promedico between the years 1980-1986. Mr. Hurvitz
denies any culpability in regard to this matter, and the board of directors of
Teva has expressed its fullest confidence and support of his ability to continue
managing Teva and that Mr. Hurvitz will be fully and completely exonerated.
5
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all compensation for the fiscal years ended
December 31, 1996, 1995 and 1994 awarded or paid to the Chief Executive Officer
and the individuals who, in fiscal 1996, were the other four highest paid
executive officers of the Company (collectively the "Five Named Officers"). As a
result of the Company's not achieving specified net after-tax profit goals in
calendar 1996, none of the Five Named Officers, except Mr. Alfson, will receive
a bonus in 1997 and, in addition, Dr. Zandman's base salary for 1997 has been
reduced to $722,500. See "Compensation Committee and Employee Stock Plan
Committee Report on Executive Compensation."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------------
ANNUAL COMPENSATION RESTRICTED
------------------------------------------- STOCK
NAME AND CAPACITIES OTHER ANNUAL AWARDS OPTIONS/ LTIP ALL OTHER
IN WHICH SERVED YEAR SALARY BONUS(1) COMPENSATION $(2) SARS(#) PAYOUTS COMPENSATION
- ---------------------------- ---- -------- ---------- ------------ ---------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Felix Zandman 1996 $850,000 $1,000,000 (3) None None None $3,000(4)
Chairman of the Board, 1995 $787,500 $ 839,470 (3) None 529,200 None $3,000(4)
President and Chief 1994 $600,000 $ 600,000 (3) None None None $3,000(4)
Executive Officer
Avi D. Eden(5)(6) 1996 $190,000 $ 133,000 (3) $ 28,000 None None None
Vice Chairman of the Board 1995 $ -- $ -- (3) $ -- -- -- --
and Executive Vice
President 1994 $ -- $ -- (3) $ -- -- -- --
Donald G. Alfson(7) 1996 $189,230 $ 270,000 (3) $ 28,000 None None $3,000(4)
Director, Executive Vice 1995 $180,000 $ 165,000 (3) $ 45,750 132,300 None $3,000(4)
President and Chief
Business 1994 $164,231 $ 185,250 (3) None None None $3,000(4)
Development Officer
Richard N. Grubb(8)(9) 1996 $190,000 $ 133,000 (3) $ 28,000 None None $3,000(4)
Director, Executive Vice 1995 $160,000 $ 56,900 (3) $ 65,000 132,300 None $1,600(4)
President, Treasurer and 1994 $160,000 $ 112,100 (3) None None None None
Chief Financial Officer
Gerald Paul(10)(11) 1996 $312,000 $ 126,000 (3) $ 28,000 None None None
Director, Executive Vice 1995 $282,400 $ 53,500 (3) $ 45,750 132,300 None None
President and Chief 1994 $246,800 $ 80,450 (3) None None None None
Operating Officer
</TABLE>
- ---------------
(1) Bonuses paid in any calendar year are based on the results of the previous
calendar year. See "Compensation Committee and Employee Stock Plan
Committee Report on Executive Compensation" which describes
performance-based bonuses awarded to the Five Named Officers.
(2) Dividends accumulate on the restricted stock awards but are paid only upon
the vesting of such awards.
(3) The Company has concluded that the aggregate amount of perquisites and
other personal benefits paid in such period did not exceed the lesser of
10% of such officer's total annual salary and bonus for each of 1996, 1995
and 1994, respectively, or $50,000. Such perquisites have not been included
in the table.
(4) Represents amounts contributed in 1996, 1995, and 1994 under the Company's
401(k) plan under which the Company matches, up to the annual federally
mandated maximum amounts, an employee's contributions of up to 2% of such
employee's annual salary.
(5) Mr. Eden became an executive officer of the Company during 1996. The amount
listed under his 1996 salary combines amounts paid to him as an employee of
the Company and as a consultant. Mr. Eden received consulting fees of
$165,000 and $291,600 for 1995 and 1994, respectively. In addition, in 1995
Mr. Eden received a restricted stock award of $111,900 and options under
the 1995 Stock Option Program.
(6) Mr. Eden held an aggregate of 1,050 shares of restricted stock with a value
of $24,412 at fiscal year-end 1996.
(7) Mr. Alfson held an aggregate of 2,744 shares of restricted stock with a
value of $63,797 at fiscal year-end 1996.
(8) Mr. Grubb became an executive officer of the Company during 1994. The
amount listed under his 1994 salary combines amounts paid to him as an
employee of the Company and as a consultant.
(9) Mr. Grubb held an aggregate of 3,517 shares of restricted stock with a
value of $81,769 at fiscal year-end 1996.
(10) Amounts are paid in foreign currency and converted into U.S. dollars at the
weighted average exchange rate for each 12-month period.
(11) Dr. Paul held an aggregate of 2,744 shares of restricted stock with a value
of $63,797 at fiscal year-end 1996.
6
<PAGE> 10
RETIREMENT PLANS
Dale Electronics, Inc., a wholly owned subsidiary of the Company ("Dale"),
maintains a defined benefit plan for substantially all of its U.S. full-time
employees. The benefits under the plan are based on the employees' compensation
and mandatory contributions to the plan during all years of participation. For
each year of participation, an employee accrues an annual benefit equal to 2.1%
of earnings up to $10,000 and 2.64% of earnings in excess of $10,000. The plan
requires a mandatory contribution by the employee equal to 3.5% of earnings up
to $10,000 and 4.4% of earnings in excess of $10,000, up to the maximum
allowable federal limit. Mr. Alfson is the only executive officer or Director of
the Company to participate in the plan. As of January 1, 1996, Mr. Alfson became
a terminated vested participant of this plan and elected to participate in the
Vishay nonqualified defined benefit retirement plan described below. The
estimated annual benefit payable from the Dale plan, upon Mr. Alfson's
retirement at age 65, would be $28,449.
The Company maintains a nonqualified defined benefit retirement plan for
certain highly compensated employees in the United States. Mr. Grubb and Mr.
Alfson are the only executive officers named in the Summary Compensation Table
to participate in the plan. Mr. Grubb and Mr. Alfson elected to participate in
the plan as of July 1, 1995 and January 1, 1996, respectively. During 1996, Mr.
Grubb and Mr. Alfson deferred compensation of $6,510, respectively, under the
plan and additionally the Company accrued an aggregate liability of $14,075 for
each. The estimated annual benefit payable upon Mr. Grubb's and Mr. Alfson's
retirement at age 65, assuming they (i) continue to be employed by the Company,
(ii) continue to earn the same compensation each earned in 1996 and (iii) make
all mandatory contributions under the plan, would be $63,703 and $61,591,
respectively.
Draloric Electronic GmbH, a German subsidiary of the Company ("Draloric"),
has a noncontributory defined benefit pension plan governed under German law
covering its management and executive employees. The pension benefit is 15% of
accrued premiums paid by the employer, plus earnings on plan assets; each annual
premium is 5.5% of annual salary and bonus of up to DM 24,000 ($15,949*). The
estimated annual benefit payable upon Dr. Paul's retirement at age 65 is DM
15,411 ($10,241). Dr. Paul also has an individual contractual pension
arrangement with Draloric that will pay an annual benefit upon retirement at age
65 based on his years of service (up to 25) and average salary and bonus in the
highest 3 of his final 10 years of employment ("final average compensation").
The retirement benefit will not exceed 40% of such final average compensation.
This pension is reduced by the amount of the pension benefit described above.
Dr. Paul has voluntarily agreed to a maximum limit of DM 350,000 per year in
respect of such final average compensation. Dr. Zandman may, however, in his
sole discretion, elect to increase the DM 350,000 limitation to reflect Dr.
Paul's actual salary and bonus, to take into account cost of living adjustments,
or as he may otherwise deem appropriate. The following table shows the annual
pension payable at age 65 based on years of service and level of final average
compensation. At December 31, 1996, Dr. Paul had 19 years of service.
<TABLE>
<CAPTION>
PENSIONABLE YEARS OF SERVICE OF
---------------------------------------------------------------
FINAL AVERAGE COMPENSATION 10 15 20 25 30 35
- ----------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
100% of pensionable income in 1996 $ 65,813 $ 78,979 $ 92,145 $105,303 $122,075 $141,518
110% of pensionable income in 1996 $ 72,395 $ 86,877 $101,360 $115,833 $134,283 $155,670
120% of pensionable income in 1996 $ 78,976 $ 94,775 $110,574 $126,364 $146,490 $169,822
150% of pensionable income in 1996 $ 98,724 $118,469 $138,214 $157,959 $183,118 $212,284
200% of pensionable income in 1996 $131,635 $157,959 $184,290 $210,614 $244,159 $283,047
</TABLE>
- ---------------
* All U.S. dollar amounts relating to Dr. Paul's retirement plans, including
those listed on the following chart, have been converted at the weighted
average exchange rate for the 12 months ended December 31, 1996.
7
<PAGE> 11
STOCK OPTIONS
The following table sets forth certain information regarding the exercise
of stock options granted to certain executive officers named in the Summary
Compensation Table (the "Named Executive Officers") during the Company's 1996
fiscal year and the 1996 fiscal year-end value of unexercised options, provided
on an aggregated basis.
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND 1996 FISCAL YEAR-END OPTION
VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT 1996 FISCAL IN-THE-MONEY OPTIONS
SHARES YEAR-END(3) AT FISCAL YEAR-END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Felix Zandman.................. (2) -- 529,200 -- $ 0 --
Avi D. Eden.................... (2) -- 132,300 -- $ 0 --
Donald G. Alfson............... (2) -- 132,300 -- $ 0 --
Richard N. Grubb............... (2) -- 132,300 -- $ 0 --
Gerald Paul.................... (2) -- 132,300 -- $ 0 --
</TABLE>
- ---------------
(1) Each Named Executive Officer listed in the table received a grant of three
options on March 19, 1995, each at a different exercise price, pursuant to
the Company's 1995 Stock Option Program approved by the stockholders on May
19, 1995. The options are fully vested. Prior to March 1, 1999, no option
may be exercised upon less than six months advance notice. In addition, the
right to exercise any option expires and terminates immediately if the
recipient is terminated from the Company's services for cause or voluntarily
leaves the Company. If a recipient leaves the Company for any reason other
than cause or voluntary termination, then options may be exercised by that
recipient after 24 months have elapsed from the date of termination,
provided the recipient adheres to a non-competition agreement. If such
recipient fails to comply, his options expire and terminate immediately. Any
of these foregoing provisions, however, may be waived at the discretion of
the Stock Option Committee.
(2) No stock options were exercised by any of the Named Executive Officers
during the Company's 1996 fiscal year.
(3) Adjusted for 5% stock dividend paid on June 7, 1996.
COMPENSATION COMMITTEE AND EMPLOYEE STOCK PLAN COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors, comprised of two
independent Directors, is responsible for establishing and approving the
compensation and benefits provided to the Chief Executive Officer and certain
other executive officers and key management of the Company. The Employee Stock
Plan Committee of the Board of Directors, comprised of two independent
Directors, recommends awards under the Stock Plans and whether such stock should
be restricted.
The Company's executive officers and key management generally receive a
base salary and a performance-based annual cash and/or stock (restricted and
unrestricted) bonus. This compensation formula is designed to attract and retain
management talent capable of achieving the Company's business objectives, while
motivating management to lead the Company to meet or exceed annual performance
goals, thereby enhancing stockholder value. On March 3, 1995, the Board of
Directors approved a stock option program (the "Stock Option Program") for
certain selected individuals, including the Chief Executive Officer, which was
approved by the stockholders at the Company's 1995 annual meeting. The plan
provided specified individuals believed to be key to the success of the Company
with a one time grant of options to purchase shares of the Company's Common
Stock at various exercise prices. The purpose of the program is to enhance the
long-term performance of the Company and to provide selected individuals an
incentive to remain in the service of the Company by acquiring an additional
proprietary interest in the Company.
Chief Executive Officer
Dr. Zandman's compensation is determined under the terms of his employment
contract (see "Employment Contract") and under a performance-based compensation
plan for the Chief Executive Officer (the "162(m) Cash Bonus Plan") recommended
by the Compensation Committee and approved by the Company's stockholders in
1994.
8
<PAGE> 12
Dr. Zandman's base salary is determined primarily by considering (i) the
Company's financial performance in view of the performance of companies similar
in size and character, (ii) the compensation of officers of companies similar in
size and character, including some of the companies listed as peer group
companies, (iii) Dr. Zandman's 35 years of dedication and service to the Company
from the date of its incorporation and (iv) the Company's financial performance
in comparison to previous years. For 1997, Dr. Zandman's base salary will be
$722,500. This represents a 15% reduction from Dr. Zandman's 1996 base salary as
a result of the Company's failure to achieve its targeted after-tax profits.
Under the 162(m) Cash Bonus Plan, the Chief Executive Officer's performance
bonus has been structured so that Dr. Zandman's aggregate annual compensation
will depend in large part on the annual after-tax profits of the Company. The
Compensation Committee has focused in recent years particularly on the net
earnings of the Company because the Committee believes net earnings to be a
strong gauge of the growth and success of the Company. Since the Company's net
earnings in 1996 decreased from net earnings in 1995, in addition to his
reduction in base salary, Dr. Zandman will receive no bonus in 1997 for the
Company's 1996 performance.
Under the formula approved by the Compensation Committee for 1997, Dr.
Zandman will be awarded a cash performance bonus if the Company achieves
after-tax profits above $42 million. The bonus will be a cash amount equal to 3%
of net after-tax profits above $42 million. Applying this formula, the cash
bonus has been capped at $1,250,000 for 1997. If, however, the Company's
after-tax profits are $42 million or less, Dr. Zandman's base salary shall be
reduced by 15%. The Compensation Committee set these after-tax profit targets by
considering the Company's historical growth and that growth in relation to
growth in the Company's industry in general, and setting thresholds in relation
thereto that it believes will allow the Chief Executive Officer to earn a base
salary at or above the median for surveyed companies with an opportunity to
attain levels generally higher than those of Chief Executive Officers for
surveyed companies if Vishay achieves certain after-tax profits. This formula
may only be adjusted or waived by the Board of Directors upon recommendation of
the Compensation Committee following each fiscal year.
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code ("Section 162(m)") limits to $1
million the annual tax deduction for compensation paid to the Chief Executive
Officer and any of the four highest paid other executive officers unless certain
requirements for performance-based compensation are met. The Compensation
Committee considered these requirements and designed the 162(m) Cash Bonus Plan
of the Chief Executive Officer and the Stock Option Program accordingly,
although the changes required to the already existing performance bonus plan for
the Chief Executive Officer were minimal. The Committee currently intends to
continue to comply with the requirements of Section 162(m) but reserves the
right to alter the 162(m) Cash Bonus Plan and the Stock Option Program if doing
so would be in the best interests of the Company and its stockholders.
Executive Officers and Key Management
For the other executive officers and certain key management of Vishay, base
salaries are set annually essentially by considering the average compensation of
similarly situated officers of companies similar in size and character including
some of the companies listed as peer group companies. Performance bonuses are
also awarded annually to these individuals. The performance bonus is primarily
based upon the after-tax profits of the Company as a whole. In addition, from
time to time, Dr. Zandman may, together with an executive, devise a project, the
goal of which, if achieved, would entitle the executive to an additional bonus.
Under the formula approved for 1997, certain of the key management will be
entitled to performance bonuses equal to 0.4% of after-tax profits above $42
million. Any bonus awarded may be granted in cash and/or in Common Stock of the
Company, in addition to Common Stock available through the Stock Plans. The
portion of each bonus paid in cash and the portion awarded in stock (which may
be either restricted or unrestricted stock) is determined by the Employee Stock
Plan Committee, in its discretion, relying in large part, however, upon the
9
<PAGE> 13
recommendation of Dr. Zandman. The base salaries and performance bonuses are
structured to balance the Company's desire to give the executive officers and
key management the incentive to maximize the operating and after-tax profits of
the discrete business units and the after-tax profits of the Company as a whole
with optimum fiscal efficiency. Accordingly, base salaries are set at or below
the median for the surveyed companies, with an opportunity for total
compensation at or above the median when after-tax profit targets are met.
Respectfully submitted,
<TABLE>
<S> <C>
THE COMPENSATION COMMITTEE THE EMPLOYEE STOCK PLAN COMMITTEE
Edward B. Shils Edward B. Shils
Mark I. Solomon Mark I. Solomon
</TABLE>
EMPLOYMENT CONTRACT
On March 15, 1985, the Company and Dr. Zandman entered into a long-term
employment agreement. The agreement, which was for an initial term of seven
years, provides for automatic annual extensions through 1996 of such seven-year
period. The agreement also provides that the Board of Directors may increase Dr.
Zandman's compensation (including his bonus) from time to time as it deems
advisable, subject to certain parameters, including a required comparison every
three years of Dr. Zandman's compensation to that of officers of companies of
similar size and character. Dr. Zandman's compensation under the agreement may
not be less than $250,000 per year. The agreement may terminate prior to its
expiration date in the event of death, disability or cause. In the event that
the agreement is terminated other than as a result of death, disability, cause
or pursuant to voluntary termination by Dr. Zandman, or as a result of a breach
of the agreement by the Company, Dr. Zandman will be entitled to a royalty from
the date of such termination or breach to the later to occur of (i) the tenth
anniversary of such date or (ii) Dr. Zandman's 75th birthday. The amount of such
royalty, based on the gross sales by the Company of products incorporating any
inventions made by Dr. Zandman after the date of the agreement, payable
quarterly, shall be equal to 5% of the gross sales, less returns and allowances,
for each such year of products of the Company that incorporate Dr. Zandman's
inventions after the date of the agreement.
10
<PAGE> 14
PERFORMANCE GRAPH
The line graph below compares the cumulative total shareholder return on
the Company's Common Stock over a 5-year period with the return on the Standard
& Poor's 500 Stock Index and with the return on a peer group of companies
selected by Westergaard Research Corp. utilizing BRIDGE Information Systems,
Inc. Network I275 industry grouping. The peer group is made up of 24
publicly-held manufacturers of semiconductors, capacitors, resistors and other
electronic components, including the Company.(1) The return of each peer issuer
has been weighted according to the respective issuer's stock market
capitalization. The line graph assumes that $100 had been invested at December
31, 1991 and assumes that all dividends were reinvested.
[Performance Graph]
<TABLE>
<CAPTION> 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Vishay Intertechnology, Inc. $100.00 $199.05 $215.13 $315.12 $425.41 $329.69
S&P 500 $100.00 $107.62 $118.46 $120.03 $165.13 $203.05
Peer Group (1) $100.00 $123.80 $173.29 $237.27 $283.92 $290.18
</TABLE>
- ---------------
(1) Advanced Micro Devices, Inc., Alpha Industries, American Annuity Group,
American Technical Ceramics Corp., Analog Devices, Inc., Appian Technology
Inc. (bankrupt), CTS Corp., Cypress Semiconductor Corp., Dallas
Semiconductor Corporation, Dense-Pac Microsystems Inc., Diodes Inc., EA
Industries (formerly Electronic Associates Inc.), International Rectifier
Corporation, Jetronic Industries Inc., Kyocera Corp., LSI Logic Corporation,
M/A Com Inc., National Semiconductor Corporation, Semtech Corp., Solitron
Devices Inc., Texas Instruments Incorporated, Unitrode Corporation, Varian
Associates Inc., Vishay Intertechnology, Inc.
11
<PAGE> 15
PROPOSAL 2 -- AMENDMENT OF COMPANY'S
CERTIFICATE OF INCORPORATION
It is proposed that the Company's Certificate of Incorporation be amended
to increase the number of shares of Common Stock, $.10 par value, which the
Company is authorized to issue, from 65,000,000 shares to 75,000,000 shares (the
"Common Stock Amendment"). Neither the holders of Common Stock nor the holders
of Class B Stock have any preemptive rights to subscribe for additional shares
of capital stock of the Company.
The text of the resolution which is proposed to be approved is:
RESOLVED, that the first paragraph of Article FOURTH of the Composite
Amended and Restated Certificate of Incorporation of the Company be amended
to read as follows:
FOURTH: SECTION 1. CLASSES AND NUMBER OF SHARES. The total number of
shares of all classes of stock which the Corporation shall have authority
to issue is 91,000,000 shares. The classes and the aggregate number of
shares of stock of each class which the Corporation shall have authority to
issue are as follows:
(i) 75,000,000 shares of Common Stock, $0.10 par value per share
(hereinafter the "Common Stock");
(ii) 15,000,000 shares of Class B Common Stock, $0.10 par value per
share (hereinafter the "Class B Stock"); and
(iii) 1,000,000 shares of Preferred Stock, $1.00 par value per
share, with such rights, privileges, restrictions and preferences as the
Board of Directors may authorize from time to time (hereinafter the
"Preferred Stock").
The Company at present has authorized capital stock consisting of
65,000,000 shares of Common Stock, $.10 par value per share, 15,000,000 shares
of Class B Stock, $.10 par value per share, and 1,000,000 shares of Preferred
Stock, $1.00 par value per share. On April 7, 1997, 53,743,954 shares of Common
Stock, 7,563,720 shares of Class B Stock and no shares of Preferred Stock were
outstanding.
In 1995, the Company amended its Certificate of Incorporation to increase
the authorized Common Stock of the Company from 35,000,000 shares to 65,000,000
shares. Since that time, the Company has issued 31,116,557 shares of Common
Stock, including 22,794,074 shares of Common Stock issued in connection with a 2
for 1 stock split in June 1995, 5,750,000 shares issued through a public
offering in September 1995 and 2,558,068 shares issued as a 5% stock dividend in
June 1996. As a result of these issuances of Common Stock, the number of
authorized, non-reserved shares of Common Stock available for issuance by the
Company in the future has been substantially reduced. Hence, much of the
flexibility with respect to possible future stock splits, equity financings,
stock-for-stock acquisitions, stock dividends or other transactions that involve
the issuance of Common Stock of the Company gained by the 1995 amendment has
been lost. The proposed amendment to increase the number of authorized shares of
Common Stock, if adopted, will restore the Company's flexibility to take such
actions. The Company continually reviews acquisition opportunities in the
ordinary course of its business, some of which may involve stock consideration
and some of which are currently under investigation. Other than in connection
with any possible acquisitions, the Company has no current plans for the
issuance of additional shares of Common Stock. Subject to compliance with
applicable laws and regulations, the Board of Directors in most instances could
authorize the issuance of all or part of such shares at any time for any proper
corporate purpose without further stockholder action, although certain large
issuances of shares may require stockholder approval to maintain the listing of
the Common Stock under New York Stock Exchange listing provisions.
If the Common Stock Amendment is adopted by the Company's stockholders,
such amendment will become effective on the date a certificate of amendment is
filed in Delaware, the Company's state of incorporation. It is anticipated that
such filing will occur on or about May 20, 1997.
The proposed amendment will not in any way affect the 1,000,000 shares of
Preferred Stock that the Company is authorized to issue under its existing
Composite Amended and Restated Certificate of Incorporation with such rights and
preferences as may be determined by the Board of Directors of the
12
<PAGE> 16
Company. The terms of such Preferred Stock if and when issued, could include
provisions which could have an anti-takeover effect.
The availability for issuance of the additional shares of Common Stock and
any issuance thereof, or both, could render more difficult or discourage an
attempt to obtain control of the Company by means of a tender offer or proxy
contest directed at the Company. Thus, the amendment could be characterized as
having an anti-takeover effect.
In addition, the Company's existing Composite Amended and Restated
Certificate of Incorporation also includes certain other provisions (although no
action is being taken with respect thereto), which could be characterized as
having an anti-takeover effect, specifically the terms and provisions of Class B
Stock.
Holders of Common Stock are entitled to one vote for each share held.
Holders of Class B Stock are entitled to ten votes for each share held. Since
the Class B Stock carries additional voting rights, the holders of Class B Stock
will be able to cause the election of the Directors of the Company regardless of
how the holders of the Common Stock vote. The existence of the Class B Stock may
make the Company less attractive as a target for a takeover proposal and may
render more difficult or discourage a merger proposal, proxy contest or the
removal of the incumbent directors, even if such actions were favored by the
stockholders of the Company other than the Class B stockholders. Accordingly,
the existence of the Class B Stock may deprive the holders of Common Stock of an
opportunity they might otherwise have to sell their shares at a premium over the
prevailing market price in connection with a merger or acquisition. The Common
Stock and the Class B Stock vote together as one class on all matters subject to
stockholder approval, except that the approval of the holders of Common Stock
and of Class B Stock each voting separately as a class is required to authorize
issuances of additional shares of Class B Stock other than in connection with
stock splits and stock dividends. Under Delaware law and the Company's Composite
Amended and Restated Certificate of Incorporation, the approval by a majority of
the votes of the outstanding shares of stock of the Company entitled to vote is
required in order to consummate certain major corporation transactions, such as
a merger or a sale of substantially all assets of the Company. Dr. Felix Zandman
and Mrs. Luella Slaner, directly, beneficially, and through a Voting Trust
Agreement, currently hold voting power over a sufficient number of shares of
Class B Stock to enable them to approve or disapprove such a transaction
regardless of how shares of Common Stock are voted.
Holders of Common Stock and Class B Stock are entitled to receive, and
share ratably on a per share basis in, dividends and other distributions in
cash, stock or property of the Company as may be declared by the Board of
Directors from time to time out of assets or funds legally available therefor,
and in distributions upon liquidation of the Company. In the event of a stock
dividend or stock split, holders of Common Stock will receive shares of Common
Stock and holders of Class B Stock will receive shares of Class B Stock. Neither
the Common Stock nor the Class B Stock will be split, divided or combined unless
the other is split, divided or combined equally and no shares of Common Stock
will be paid as a dividend on the outstanding shares of Common Stock unless
concurrently shares of Class B Stock are paid as a dividend in the same ratio on
the outstanding shares of Class B Stock.
Shares of Class B Stock are convertible into shares of Common Stock on a
one-to-one basis at any time at the option of the holder thereof. The Class B
Stock is not transferable except to the holder's spouse, certain of such
holder's relatives, certain trusts established for their benefits, corporations
and partnerships beneficially owned and controlled by such holder, charitable
organizations and such holder's estate. Upon any transfer made in violation of
those restrictions, shares of Class B Stock will be automatically converted into
shares of Common Stock.
In order for the proposal to amend the Company's Certificate of
Incorporation to increase the authorized Common Stock to be adopted, the
affirmative vote of the majority of the votes of the outstanding shares of
Common Stock and Class B Stock entitled to vote thereon at a meeting of
stockholders, voting together as a single class, is required. The shares
represented by the proxies solicited by the Board of Directors of the Company
will be voted as instructed on the form of proxy or, if no direction is
indicated, will be voted "FOR" the approval of the amendment.
13
<PAGE> 17
PROPOSAL 3 -- ELECTION OF INDEPENDENT AUDITORS
The Board of Directors recommends that the public accounting firm of Ernst
& Young LLP be appointed independent auditors of the Company for the Company's
next audited fiscal year ending December 31, 1997. Ernst & Young LLP have been
the Company's auditors since 1968. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting to respond to appropriate questions
from the Company's stockholders and will have the opportunity to make a
statement at the Annual Meeting if they desire to do so.
OTHER BUSINESS
As of the date of this Proxy Statement, the only business which the Board
of Directors intends to present and knows that others will present at the Annual
Meeting is that hereinabove set forth. If any other matter or matters are
properly brought before the Annual Meeting or any adjournment thereof, it is the
intention of the person named in the accompanying form of proxy to vote the
proxy on such matters in accordance with their judgment on such matters.
AVAILABILITY OF FORM 10-K
Information regarding the executive officers of the Company is hereby
incorporated by reference to the Company's most recent Report on Form 10-K. The
Company will provide to any stockholder, upon written request and without
charge, a copy of such report, including the financial statements, as filed with
the Securities and Exchange Commission. All requests for such reports should be
directed to Richard N. Grubb, Executive Vice President, Vishay Intertechnology,
Inc., 63 Lincoln Highway, Malvern, Pennsylvania 19355-2120, telephone number
(610) 644-1300.
AVAILABILITY OF ANNUAL REPORT TO SECURITY HOLDERS
The financial statements and the schedules thereto of the Company are
hereby incorporated by reference to the Company's annual report to security
holders, a copy of which will be furnished to the Securities and Exchange
Commission and delivered to security holders together with this proxy statement.
PROPOSALS OF SECURITY HOLDERS
Any stockholder proposal intended to be presented at the Company's 1998
Annual Meeting should be sent to the Company at 63 Lincoln Highway, Malvern,
Pennsylvania 19355-2120 and must be received on or prior to December 23, 1997,
to be eligible for inclusion in the Company's Proxy Statement and form of proxy
to be used in connection with the 1998 Annual Meeting.
William J. Spires
Secretary
April 18, 1997
14
<PAGE> 18
VISHAY INTERTECHNOLOGY, INC.
ANNUAL MEETING OF STOCKHOLDERS
---------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Felix Zandman and Richard N. Grubb, or
if only one is present, then that individual, with full power of
substitution, to vote all shares of VISHAY INTERTECHNOLOGY, INC. (the
"Company"), which the undersigned is entitled to vote at the Company's
Annual Meeting to be held at The Four Seasons Hotel, Ballroom, Lobby
Level, One Logan Square, Philadelphia, Pennsylvania 19103, on the 19th day
of May, 1997 at 10:30 a.m. Philadelphia time, and at any adjournment
thereof, hereby ratifying all that said proxies or their substitutes may
do by virtue hereof, and the undersigned authorizes and instructs said
proxies to vote as follows:
1. ELECTION OF DIRECTORS: To elect the nominees for Director below for a
term of one year;
<TABLE>
<S> <C>
FOR ALL NOMINEES LISTED BELOW WITHHOLD AUTHORITY
(except as marked to the contrary below) [ ] to vote for all nominees listed below [ ]
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Felix Zandman, Donald G. Alfson, Avi D. Eden, Robert A. Freece,
Richard N. Grubb, Eliyahu Hurvitz, Gerald Paul, Edward B. Shils,
Luella B. Slaner, Mark I. Solomon, Jean-Claude Tine
2. AMENDMENT OF CERTIFICATE OF INCORPORATION: To approve the amendment of
the Company's Certificate of Incorporation to increase the number of
shares of common stock which the Company is authorized to issue from
65,000,000 shares to 75,000,000 shares;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. APPROVAL OF AUDITORS: To approve the appointment of Ernst & Young LLP
as auditors of the Company for the fiscal year ended December 31, 1997;
FOR [ ] AGAINST [ ] ABSTAIN [ ]
and in their discretion, upon any other matters that may properly come
before the meeting or any adjournments thereof.
(Continued and to be dated and signed on the other side.)
<PAGE> 19
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR
PROPOSALS 2 AND 3.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Receipt of the Notice of Annual Meeting and of the Proxy Statement and
Annual Report of the Company accompanying the same is hereby acknowledged.
Dated: , 1997
(Signature of Stockholder)
(Signature of Stockholder)
Your signature should appear the
same as your name appears herein.
If signing as attorney, executor,
administrator, trustee or
guardian, please indicate the
capacity in which signing. When
signing as joint tenants, all
parties to the joint tenancy must
sign. When the proxy is given by
a corporation, it should be
signed by an authorized officer.
<PAGE> 20
Financial and Other Information pursuant to Item 13 of Schedule 14A
Incorporated By Reference to Financial Statements and Schedules thereto
Contained in Company's Annual Report to Security Holders.
<PAGE> 21
Vishay Intertechnology, Inc.
Consolidated Statements of Operations
(In thousands, except per share and share amounts)
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
---------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 1,097,979 $ 1,224,416 $ 987,837
Costs of products sold 825,866 902,518 748,135
---------------------------------------------------------------------
Gross profit 272,113 321,898 239,702
Selling, general, and
administrative expenses 141,765 158,821 137,124
Amortization of goodwill 6,494 6,461 4,609
Restructuring expense 38,030 4,200 --
---------------------------------------------------------------------
85,824 152,416 97,969
Other income (expense):
Interest expense (17,408) (29,433) (24,769)
Other 1,941 (9) 916
---------------------------------------------------------------------
(15,467) (29,442) (23,853)
---------------------------------------------------------------------
Earnings before income taxes 70,357 122,974 74,116
Income taxes 17,741 30,307 15,169
---------------------------------------------------------------------
Net earnings $ 52,616 $ 92,667 $ 58,947
=====================================================================
Earnings per share $ 0.86 $ 1.62 $ 1.14
=====================================================================
Weighted average shares
outstanding 61,292,000 57,045,000 51,553,000
=====================================================================
</TABLE>
See accompanying notes.
1
<PAGE> 22
Vishay Intertechnology, Inc.
Consolidated Balance Sheets
(In thousands, except per share and share amounts)
December 31
1996 1995
--------------------------------
Assets
Current assets:
Cash and cash equivalents $ 20,945 $ 19,584
Accounts receivable, less allowances
of $7,561 and $6,915 163,164 180,383
Inventories:
Finished goods 182,722 148,846
Work in process 73,606 92,166
Raw materials 100,418 112,572
Prepaid expenses and other current
assets 82,310 86,647
--------------------------------
Total current assets 623,165 640,198
Property and equipment--at cost:
Land 43,705 46,073
Buildings and improvements 222,743 197,164
Machinery and equipment 695,084 603,175
Construction in progress 57,891 76,564
--------------------------------
1,019,423 922,976
Less allowances for depreciation (308,761) (253,748)
--------------------------------
710,662 669,228
Goodwill 201,574 218,102
Other assets 20,646 15,803
--------------------------------
$ 1,556,047 $ 1,543,331
================================
2
<PAGE> 23
December 31
1996 1995
-----------------------------
Liabilities and stockholders' equity
Current liabilities:
Notes payable to banks $ 31,212 $ 22,174
Trade accounts payable 33,930 66,942
Payroll and related expenses 35,973 43,790
Other accrued expenses 55,381 51,102
Income taxes 7,076 7,083
Current portion of long-term debt 25,394 37,821
-----------------------------
Total current liabilities 188,966 228,912
Long-term debt--less current portion 229,885 228,610
Deferred income taxes 33,113 42,044
Deferred income 58,570 30,849
Other liabilities 30,534 29,017
Accrued pension costs 69,749 76,046
Stockholders' equity:
Preferred Stock, par value $1.00 a share:
Authorized--1,000,000 shares; none
issued
Common Stock, par value $.10 a share:
Authorized--65,000,000 shares;
53,727,874 and 51,139,826 shares
outstanding after deducting 13,248
and 209,881 shares in treasury 5,373 5,114
Class B convertible Common Stock, par
value $.10 a share: Authorized--
15,000,000 shares; 7,563,720 and
7,222,035 shares outstanding after
deducting 221,809 and 229,518
shares in treasury 756 722
Capital in excess of par value 825,949 734,316
Retained earnings 107,762 146,370
Foreign currency translation adjustment 9,106 28,487
Unearned compensation (370) (364)
Pension adjustment (3,346) (6,792)
-----------------------------
945,230 907,853
-----------------------------
$ 1,556,047 1,543,331
=============================
See accompanying notes.
3
<PAGE> 24
Vishay Intertechnology, Inc.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net earnings $ 52,616 $ 92,667 $ 58,947
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 77,247 69,547 57,742
Changes in operating assets and liabilities:
Accounts receivable 12,541 (8,147) (12,921)
Inventories (11,575) (48,123) (44,195)
Prepaid expenses and other
current assets 3,438 (14,023) (23,119)
Accounts payable (31,573) 998 3,023
Other current liabilities (942) (7,442) (12,420)
Other 20,434 30,034 19,410
-----------------------------------------------------
Net cash provided by operating activities 122,186 115,511 46,467
Investing activities
Purchases of property and equipment (123,984) (165,699) (91,571)
Purchases of businesses, net of cash acquired -- -- (179,847)
-----------------------------------------------------
Net cash used in investing activities (123,984) (165,699) (271,418)
Financing activities
Proceeds from long-term borrowings 3,476 245 186,271
Principal payments on long-term debt (86,026) (118,226) (142,961)
Net proceeds (payments) on revolving credit lines 76,502 (59,800) 83,300
Net changes in short-term borrowings 10,066 (7,188) 3,879
Purchases of common stock -- (3,578) --
Proceeds from sale of common stock -- 230,279 109,738
-----------------------------------------------------
Net cash provided by financing activities 4,018 41,732 240,227
Effect of exchange rate changes on cash (859) 1,183 650
-----------------------------------------------------
Increase (decrease) in cash and cash equivalents 1,361 (7,273) 15,926
Cash and cash equivalents at beginning of year 19,584 26,857 10,931
-----------------------------------------------------
Cash and cash equivalents at end of year $ 20,945 $ 19,584 $ 26,857
=====================================================
</TABLE>
See accompanying notes.
4
<PAGE> 25
Vishay Intertechnology, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
----------------------------------------------------------
<S> <C> <C> <C>
Common Stock:
Beginning balance $ 5,114 $ 2,257 $ 1,763
Shares issued (10,556; 5,777,300; and 5,602,500 shares) 1 576 280
Stock dividends (2,558,069; 1,091; and 3,915,440 shares) 256 -- 196
Stock split -- 2,275 --
Shares repurchased (110,000 shares) -- (11) --
Conversions from Class B (19,423; 325,509; and 349,824
shares) 2 17 18
----------------------------------------------------------
Ending balance 5,373 5,114 2,257
Class B convertible Common Stock:
Beginning balance 722 377 359
Stock dividends (361,108 and 716,904 shares) 36 -- 36
Stock split -- 362 --
Conversions to Common (19,423; 325,509; and 349,824
shares) (2) (17) (18)
----------------------------------------------------------
Ending balance 756 722 377
Capital in excess of par value:
Beginning balance 734,316 509,966 288,980
Shares issued 618 230,534 110,012
Stock dividends 90,932 -- 110,830
Stock split -- (2,637) --
Shares repurchased -- (3,567) --
Tax effects relating to stock plan 83 20 144
----------------------------------------------------------
Ending balance 825,949 734,316 509,966
Retained earnings:
Beginning balance 146,370 53,734 105,849
Net earnings 52,616 92,667 58,947
Stock dividends (91,224) (31) (111,062)
----------------------------------------------------------
Ending balance 107,762 146,370 53,734
Foreign currency translation adjustment:
Beginning balance 28,487 4,584 (13,109)
Translation adjustment for the year (19,381) 23,903 17,693
----------------------------------------------------------
Ending balance 9,106 28,487 4,584
Unearned compensation:
Beginning balance (364) (20) (60)
Shares issued under stock plans (10,556; 27,300; and 4,000
shares) (262) (519) (70)
Amounts expensed during the year 256 175 110
----------------------------------------------------------
Ending balance (370) (364) (20)
Pension adjustment:
Beginning balance (6,792) (5,810) (7,279)
Pension adjustment for the year 3,446 (982) 1,469
----------------------------------------------------------
Ending balance (3,346) (6,792) (5,810)
----------------------------------------------------------
Total stockholders' equity $ 945,230 $ 907,853 $ 565,088
==========================================================
See accompanying notes.
</TABLE>
5
<PAGE> 26
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements
December 31, 1996
Vishay Intertechnology, Inc. is a leading international manufacturer and
supplier of passive electronic components, particularly resistors, capacitors
and inductors, offering its customers access to one of the most comprehensive
passive electronic component lines of any manufacturer in the United States or
Europe. Passive electronic components, together with semiconductors (integrated
circuits), which the Company does not produce, are the primary elements of
electronic circuits. Components manufactured by the Company are used in
virtually all types of electronic products, including those in the computer,
telecommunications, military/aerospace, instrument, automotive, medical and
consumer electronics industries.
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements of Vishay Intertechnology, Inc. include
the accounts of the Company and its subsidiaries, after elimination of all
significant intercompany transactions, accounts, and profits.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Inventories
Inventories are stated at the lower of cost, determined by the first-in,
first-out method, or market.
Depreciation
Depreciation is computed principally by the straight-line method based upon the
estimated useful lives of the assets. Depreciation of capital lease assets is
included in total depreciation expense. Depreciation expense was $68,688,000,
$60,155,000, and $51,301,000, for the years ended December 31, 1996, 1995, and
1994, respectively.
6
<PAGE> 27
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Construction in Progress
The estimated cost to complete construction in progress at December 31, 1996 is
$34,178,000.
Goodwill
Goodwill, representing the excess of purchase price over net assets of
businesses acquired, is being amortized on a straight-line basis over 40 years.
Accumulated amortization amounted to $29,726,000 and $23,737,000 at December 31,
1996 and 1995, respectively. The recoverability of goodwill is evaluated at the
operating unit level by an analysis of operating results and consideration of
other significant events or changes in the business environment. If an operating
unit has current operating losses and based upon projections there is a
likelihood that such operating losses will continue, the Company will determine
whether impairment exists on the basis of undiscounted expected future cash
flows from operations before interest for the remaining amortization period. If
impairment exists, goodwill will be reduced by the estimated shortfall of cash
flows.
Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers demand
deposits and all highly liquid investments with maturities of three months or
less when purchased to be cash equivalents.
Research and Development Expenses
The amount charged to expense aggregated $10,429,000, $10,430,000, and
$7,205,000, for the years ended December 31, 1996, 1995, and 1994, respectively.
The Company spends additional amounts for the development of machinery and
equipment for new processes and for cost reduction measures.
Grants
Grants received from governments by certain foreign subsidiaries, primarily in
Israel, are recognized as income in accordance with the purpose of the specific
contract and in the period in which the related expense is incurred. Grants
received from the government of Israel and recognized as a reduction of costs of
products sold were $9,449,000
7
<PAGE> 28
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Grants (continued)
$13,243,000, and $10,999,000 for the years ended December 31, 1996, 1995, and
1994, respectively. Grants receivable of $23,163,000 and $20,585,000 are
included in other current assets at December 31, 1996 and 1995, respectively.
Deferred grant income is $58,570,000 and $30,849,000 at December 31, 1996 and
1995, respectively. The grants are subject to conditions, including maintaining
specified levels of employment for periods up to ten years. Noncompliance with
such conditions could result in repayment of grants, however, management expects
that the Company will comply with all terms and conditions of grants.
Share and Per Share Amounts
All numbers of common shares and per share amounts have been adjusted to give
retroactive effect to a 2-for-1 stock split distributed on June 16, 1995.
Earnings per share is based on the weighted average number of common shares
outstanding during the period. No material dilution of earnings per share would
result if it were assumed that all outstanding stock options were exercised.
Earnings per share amounts for all periods presented reflect the 1995 2-for-1
stock split and 5% stock dividends paid on June 7, 1996, March 31, 1995, and
June 13, 1994. Earnings per share reflect the weighted effect of the issuance of
5,750,000 shares of Common Stock in September 1995 and the issuance of 5,576,000
shares of Common Stock in August 1994.
Stock Options
In October 1995, the FASB issued Statement No. 123, "Accounting for Stock- Based
Compensation" (FAS 123). This Statement establishes a fair value method of
accounting for stock-based compensation plans. As permitted by FAS 123, the
Company has elected to continue to account for stock-based compensation plans
according to the provisions of Accounting Principles Board Statement No. 25,
"Accounting for Stock Issued to Employees" (APB 25). The effect of applying the
fair value method of FAS 123 results in net income and earnings per share that
are not materially different from amounts reported.
Reclassifications
Certain prior-year amounts have been reclassified to conform with the current
presentation.
8
<PAGE> 29
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions
In July 1994, the Company purchased all of the capital stock of Vitramon,
Incorporated and Vitramon Limited, U.K. (collectively, "Vitramon") for
$184,000,000 in cash. Vitramon is a leading producer of multilayer ceramic chip
capacitors with manufacturing facilities primarily in the United States, France,
Germany, and the United Kingdom. In connection with the acquisition of Vitramon,
the Company borrowed an aggregate of $200,000,000 from a group of banks, of
which $100,000,000 was a bridge facility that was subsequently paid off with
proceeds from an equity offering completed in August 1994 and $100,000,000 was a
nonamortizing term loan which has been paid off as of December 31, 1996.
The acquisition was accounted for under the purchase method of accounting. The
operating results of Vitramon are included in the Company's consolidated results
of operations from July 1, 1994. Excess of cost over the fair value of net
assets acquired ($104,582,000) is being amortized on a straight-line basis over
forty years.
Had the Vitramon acquisition been made at the beginning of 1994, the Company's
pro forma unaudited results for the year ended December 31, 1994 would have been
(in thousands, except per share amount):
Net sales $ 1,056,520
Net earnings 64,573
Earnings per share $ 1.17
The unaudited pro forma results are not necessarily indicative of the results
that would have been attained had the acquisition occurred at the beginning of
1994 or of future results.
3. Restructuring Expense
Restructuring expense of $38,030,000 in 1996 results from a downsizing of the
Company's worldwide operations. Approximately $28,953,000 of these expenses
relate to employee termination costs covering approximately 2,600 technical,
production, administrative, and support employees located in the United States,
Canada, France, and Germany. Approximately 1,939 employees had been terminated
and $12,822,000 of the termination costs paid as of December 31, 1996. The
remaining $9,077,000 of restructuring expense relates to facilities closure
costs in North America and Europe. The restructuring plan is expected to be
completed by the end of 1997. At December 31, 1996, $21,931,000 of restructuring
costs are included in other accrued expenses.
9
<PAGE> 30
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
3. Restructuring Expense (continued)
Restructuring expense of $4,200,000 in 1995 resulted from the downsizing of some
of the Company's European operations and represented employee termination costs
covering 276 technical, production, administrative, and support employees
located primarily in France and Germany. This downsizing was completed during
the year ended December 31, 1996.
4. Income Taxes
Earnings before income taxes consists of the following components (in
thousands):
1996 1995 1994
------------------------------------
Domestic $ 42,406 $ 34,926 $ 19,650
Foreign 27,951 88,048 54,466
------------------------------------
$ 70,357 $122,974 $ 74,116
====================================
Significant components of income taxes are as follows (in thousands):
Year ended December 31
1996 1995 1994
-------------------------------------
Current:
U.S. Federal $ 13,836 $ 10,578 $ 5,187
Foreign 8,098 10,927 3,251
State 1,586 1,082 882
-------------------------------------
23,520 22,587 9,320
Deferred:
U.S. Federal 1,632 2,247 1,889
Foreign (7,793) 5,082 3,858
State 382 391 102
-------------------------------------
(5,779) 7,720 5,849
-------------------------------------
$ 17,741 $ 30,307 $ 15,169
====================================
10
<PAGE> 31
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets are as follows (in thousands):
December 31
1996 1995
---------------------------
Deferred tax liabilities:
Tax over book depreciation $ 77,402 $ 71,060
Other--net 7,325 7,640
---------------------------
Total deferred tax liabilities 84,727 78,700
Deferred tax assets:
Pension and other retiree obligations 25,358 25,461
Net operating loss carryforwards 84,574 53,638
Restructuring reserves 7,698 3,631
Other accruals and reserves 16,120 16,368
---------------------------
Total deferred tax assets 133,750 99,098
Valuation allowance for deferred tax assets (59,021) (45,700)
---------------------------
Net deferred tax assets 74,729 53,398
---------------------------
Net deferred tax liabilities $ 9,998 $ 25,302
===========================
A reconciliation of income tax expense at the U.S. federal statutory income tax
rate to actual income tax expense is as follows (in thousands):
Year ended December 31
1996 1995 1994
-----------------------------------------
Tax at statutory rate $ 24,625 $ 43,041 $ 25,941
State income taxes, net of U.S.
federal tax benefit 1,413 1,094 684
Effect of foreign income tax rates (9,717) (13,801) (13,194)
Benefit of net operating loss
carryforwards (817) (2,054) --
Other 2,237 2,027 1,738
-----------------------------------------
$ 17,741 $ 30,307 $ 15,169
=========================================
11
<PAGE> 32
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
At December 31, 1996, the Company has net operating loss carryforwards for tax
purposes of $134,055,000 in Germany (no expiration date), $26,823,000 in France
(expire December 31, 2001), and $10,021,000 in Portugal (expire December 31,
2001). Approximately $80,224,000 of the carryforward in Germany, and $5,054,000
of the carryforward in Portugal, resulted from the Company's acquisition of
Roederstein. For financial reporting purposes, the deferred tax asset for net
operating losses increased due primarily to a reorganization in Germany which
resulted in a local tax loss and a higher effective tax rate in Germany.
Valuation allowances of $59,021,000 and $45,700,000 have been recognized at
December 31, 1996 and 1995, respectively, for deferred tax assets related to
foreign net operating loss carryforwards. In 1996, tax benefits recognized
through reductions of the valuation allowance had the effect of reducing
goodwill of acquired companies by $5,723,000. If additional tax benefits are
recognized in the future through further reduction of the valuation allowance,
$38,187,000 of such benefits will reduce goodwill.
At December 31, 1996, no provision has been made for U.S. federal and state
income taxes on approximately $302,475,000 of foreign earnings which are
expected to be reinvested indefinitely. Upon distribution of those earnings in
the form of dividends or otherwise, the Company would be subject to U.S. income
taxes (subject to an adjustment for foreign tax credits) and withholding taxes
payable to the various foreign countries. Determination of the amount of
unrecognized deferred U.S. income tax liability is not practicable because of
the complexities associated with its hypothetical calculation.
Income taxes paid were $22,141,000, $30,272,000, and $11,125,000 for the years
ended December 31, 1996, 1995, and 1994, respectively.
5. Long-Term Debt
Long-term debt consisted of the following (in thousands):
December 31
1996 1995
----------------------------
Multicurrency Revolving Credit Loan $121,039 $ 29,722
Term Loan 77,500 87,500
Term Loan II -- 50,000
Deutsche Mark Revolving Credit Loan 25,974 27,778
Deutsche Mark Term Loan 9,426 35,775
Other Debt and Capital Lease Obligations 21,340 35,656
----------------------------
255,279 266,431
Less current portion 25,394 37,821
----------------------------
$229,885 $228,610
============================
12
<PAGE> 33
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt (continued)
As of December 31, 1996, four facilities were available under the Company's
amended and restated Revolving Credit and Term Loan and Deutsche Mark Revolving
Credit and Term Loan agreements with a group of banks; a multicurrency revolving
credit loan (interest 5.89% on U.S. dollar borrowings and 3.60% on Deutsche Mark
borrowings at December 31, 1996), a U.S. term loan (interest 5.99% at December
31, 1996), a Deutsche Mark revolving credit loan (interest 3.60% at December 31,
1996), and a Deutsche Mark term loan (interest 3.70% at December 31, 1996). The
terms of the four facilities are summarized below. The first facility is a
$400,000,000 multicurrency revolving credit facility which is available to the
Company until December 31, 2001. The Company had outstanding $110,000,000 and DM
17,000,000 ($11,039,000) under the multicurrency revolving credit loan at
December 31, 1996. The Company can request one-year extensions of the facility
annually from 1997 through 2002. Each extension granted by the banks extends the
maturity of the facility by one year. Interest is payable at prime or at other
interest rate options. The Company is required to pay certain commitment and
facility fees on the used and unused portion of this credit facility. The second
facility is a $77,500,000 term loan, with interest payable at prime or at other
interest rate options. Principal payments are due as follows: 1997--$15,000,000;
1998--$20,000,000; 1999--$20,000,000; 2000-- $22,500,000. Additional principal
payments may be required based on excess cash flow as defined in the agreement.
The loan agreements also provide a German subsidiary of the Company with two
Deutsche Mark ("DM") facilities. The first DM facility is a DM 40,000,000
($25,974,000) revolving credit facility which is available until December 31,
2001. The Company can request one-year extensions of the facility annually from
1997 through 2002. Each extension granted by the banks extends the maturity of
the facility by one year. Interest is based on DM market rates. The Company is
required to pay certain commitment and facility fees on the used and unused
portion of this credit facility. The second DM facility is a DM 14,516,000
($9,426,000) term loan. Interest is based on DM market rates. A principal
payment of DM 14,516,000 ($9,426,000) is due on or before December 31, 1997.
Under the loan agreements, the Company is restricted from paying cash dividends
and must comply with other covenants, including the maintenance of specific
ratios. The Company is in compliance with the restrictions and limitations under
the terms of loan agreements, as amended.
Other debt and capital lease obligations include borrowings under short-term
credit lines of $3,120,000 and $30,254,000 at December 31, 1996 and 1995,
respectively, which are classified as long-term based on the Company's intention
and ability to refinance the obligations on a long-term basis.
13
<PAGE> 34
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt (continued)
Aggregate annual maturities of long-term debt, excluding payments which may be
required based on excess cash flow, are as follows: 1997--$25,394,000; 1998--
$22,269,000; 1999--$21,305,000; 2000--$22,896,000; 2001--$162,257,000;
thereafter--$1,158,000.
At December 31, 1996, the Company has committed and uncommitted short-term
credit lines with various U.S. and foreign banks aggregating $170,733,000, of
which $136,401,000 was unused. The weighted average interest rate on short-term
borrowings outstanding as of December 31, 1996 and 1995 was 5.60% and 6.31%,
respectively.
Interest paid was $17,736,000, $29,459,000, and $24,150,000 for the years ended
December 31, 1996, 1995, and 1994, respectively.
6. Stockholders' Equity
On May 19, 1995, the Company's shareholders approved an increase in the number
of shares of Common Stock, $.10 par value, which the Company is authorized to
issue, from 35,000,000 shares to 65,000,000 shares.
The Company's Class B Stock carries ten votes per share while the Common Stock
carries one vote per share. Class B shares are transferable only to certain
permitted transferees while the Common Stock is freely transferable. Class B
shares are convertible on a one-for-one basis at any time to Common Stock.
Unearned compensation relating to Common Stock issued under employee stock plans
is being amortized over periods ranging from three to five years. At December
31, 1996, 237,677 shares are available for issuance under stock plans.
In 1995, certain key executives of the Company were granted options to purchase
1,104,700 shares of the Company's Common Stock, all of which remain outstanding
at December 31, 1996. These options expire March 1, 2000, with one-third
exercisable at $25.23, one-third exercisable at $31.74, and one-third
exercisable at $45.35.
14
<PAGE> 35
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
7. Other Income
Other income (expense) consists of the following (in thousands):
Year ended December 31
1996 1995 1994
------------------------------------
Foreign exchange gains (losses) $ 371 $(2,022) $ 440
Investment income 1,586 1,529 229
Other (16) 484 247
------------------------------------
$ 1,941 $ (9) $ 916
====================================
8. Employee Retirement Plans
The Company maintains various defined benefit pension plans covering
substantially all full-time U.S. employees. The benefits under these plans are
based on the employees' compensation during all years of participation.
Participants in these plans, other than U.S. employees of Vitramon, are required
to contribute an amount based on annual earnings. The Company's funding policy
is to contribute annually amounts that satisfy the funding standard account
requirements of ERISA. The assets of these plans are invested primarily in
mutual funds and guaranteed investment contracts issued by an insurance company.
Net pension cost for the Plans included the following components (in thousands):
Year ended December 31
1996 1995 1994
---------------------------------
Annual service cost--benefits
earned for the period $ 5,091 $ 3,613 $2,547
Less: Employee contributions 1,842 1,459 1,142
---------------------------------
Net service cost 3,249 2,154 1,405
Interest cost on projected benefit obligation 6,014 5,702 5,153
Actual return on Plan assets (10,737) (11,892) (1,702)
Net amortization and deferral 4,213 7,211 (3,349)
---------------------------------
Net pension cost $ 2,739 $ 3,175 $1,507
=================================
The expected long-term rate of return on assets was 8.5% - 9.5%.
15
<PAGE> 36
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
8. Employee Retirement Plans (continued)
The following table sets forth the funded status of the Plans and amounts
recognized in the Company's financial statements (in thousands):
December 31
1996 1995
-----------------------
Accumulated benefit obligation, including vested
benefits of $80,046 and $75,636 $ 80,343 $ 75,949
=======================
Actuarial present value of projected benefit obligations $(87,740) $(82,105)
Plan assets at fair value 87,369 78,686
-----------------------
Projected benefit obligations in excess of Plan assets (371) (3,419)
Unrecognized (gain) loss (238) 3,043
Unrecognized prior service cost 601 834
Unrecognized net obligation at transition date, being
recognized over 15 years 246 356
-----------------------
Accrued pension liability $ 238 $ 814
=======================
The following assumptions have been used in the actuarial determinations of the
Plans:
1996 1995
-----------------------
Discount rate 7.50% 7.25%
Rate of increase in compensation levels 4.5%-5.0% 4.5% - 5.0%
Many of the Company's U.S. employees are eligible to participate in 401(k)
Savings Plans, some of which provide for Company matching under various
formulas. The Company's matching expense for the plans was $2,250,000,
$2,314,000, and $2,282,000 for the years ended December 31, 1996, 1995, and
1994, respectively.
The Company provides pension and similar benefits to employees of certain
foreign subsidiaries consistent with local practices. German subsidiaries of the
Company have
16
<PAGE> 37
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
8. Employee Retirement Plans (continued)
noncontributory defined benefit pension plans covering management and employees.
Pension benefits are based on years of service. Net pension cost for the German
Plans included the following components (in thousands):
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Annual service cost--benefits earned for the period $ 126 $ 164 $ 138
Interest cost on projected benefit obligation 5,082 5,267 4,496
Actual return on plan assets (1,174) (854) (1,039)
Net amortization and deferral 133 (220) 83
--------------------------------------
Net pension cost $ 4,167 $ 4,357 $ 3,678
======================================
</TABLE>
The expected long-term rate of return on assets was 2.0%.
The following table sets forth the funded status of the German Plans and amounts
recognized in the Company's financial statements (in thousands):
<TABLE>
<CAPTION>
December 31
1996 1995
---------------------------
<S> <C> <C>
Accumulated benefit obligation, including vested
benefits of $69,477 and $76,556 $ 70,122 $ 77,445
===========================
Actuarial present value of projected benefit obligations $(70,398) $(77,791)
Plan assets at fair value 15,508 15,331
---------------------------
Projected benefit obligations in excess of plan assets (54,890) (62,460)
Unrecognized loss 4,155 4,935
Unrecognized prior service cost 414 571
Unrecognized net asset at transition date, being
recognized over 15 years (29) (36)
Additional minimum liability, recognized as a
reduction of stockholders' equity (3,346) (6,792)
---------------------------
Accrued pension liability $(53,696) $(63,782)
===========================
</TABLE>
The following assumptions have been used in the actuarial determinations of the
German Plans:
1996 1995
--------------------------
Discount rate 7.0% 7.0%
Rate of increase in compensation levels 2.5% 3.0%
17
<PAGE> 38
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
9. Postretirement Medical Benefits
The Company pays limited health care premiums for certain eligible retired U.S.
employees. Net postretirement benefit cost included the following components (in
thousands):
December 31
1996 1995 1994
-------------------------
Service cost $236 $215 $214
Interest cost 485 497 453
Net amortization and deferral 264 245 230
-------------------------
Net postretirement benefit cost $985 $957 $897
=========================
The status of the plan and amounts recognized in the Company's consolidated
balance sheet were as follows (in thousands):
December 31
1996 1995
-------------------------
Accumulated postretirement benefit obligation:
Retirees $(2,313) $(2,075)
Actives eligible to retire (1,519) (1,402)
Other actives (3,145) (3,712)
-------------------------
Total (6,977) (7,189)
Unrecognized loss 925 1,440
Unrecognized transition obligation, being amortized
over 20 years 3,421 3,635
-------------------------
Accrued postretirement benefit liability $(2,631) $(2,114)
=========================
18
<PAGE> 39
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
9. Postretirement Medical Benefits (continued)
The discount rates used in the calculations were 7.50% and 7.25% for 1996 and
1995, respectively.
10. Leases
Total rental expense under operating leases was $9,679,000, $9,984,000, and
$8,871,000, for the years ended December 31, 1996, 1995, and 1994, respectively.
Future minimum lease payments for operating leases with initial or remaining
noncancelable lease terms in excess of one year are as follows:
1997--$7,289,000; 1998--$5,441,000; 1999--$3,751,000; 2000--$3,233,000;
2001--$2,885,000; thereafter--$9,915,000.
11. Financial Instruments
Financial instruments with potential credit risk consist principally of accounts
receivable. Concentrations of credit risk with respect to receivables are
limited due to the Company's large number of customers and their dispersion
across many countries and industries. At December 31, 1996 and 1995, the Company
had no significant concentrations of credit risk. The amounts reported in the
balance sheet for cash and cash equivalents and for short-term and long-term
debt approximate fair value.
12. Current Vulnerability Due to Certain Concentrations
Sources of Supply
Although most materials incorporated in the Company's products are available
from a number of sources, certain materials (particularly tantalum and
palladium) are available only from a relatively limited number of suppliers.
Tantalum, a metal, is the principal material used in the manufacture of tantalum
capacitor products. It is purchased in powder form primarily under annual
contracts with domestic suppliers at prices that are subject to periodic
adjustment. The Company is a major consumer of the world's annual tantalum
production. There are currently three major suppliers that process tantalum ore
into capacitor grade tantalum powder. Although the Company believes that there
is currently a surplus of tantalum ore reserves and a sufficient number of
tantalum processors relative to foreseeable demand, and that the tantalum
required by the Company has generally been available in sufficient quantities to
meet requirements, the
19
<PAGE> 40
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
12. Current Vulnerability Due to Certain Concentrations (continued)
Sources of Supply (continued)
limited number of tantalum powder suppliers could lead to increases in tantalum
prices that the Company may not be able to pass on to its customers. In an
attempt to ensure that the Company will have access to a long-term, stable
supply of low-cost tantalum, the Company is negotiating joint venture agreements
for a tantalum mine, a refinery, and capacitor production facilities in China.
Palladium is primarily purchased on the spot and forward markets, depending on
market conditions. Palladium is considered a commodity and is subject to price
volatility. Although palladium is currently found in South Africa and Russia,
the Company believes that there are a sufficient number of domestic and foreign
suppliers from which the Company can purchase palladium. However, an inability
on the part of the Company to pass on increases in palladium costs to its
customers could have an adverse effect on the margins of those products using
the metal.
Geographic Concentration
To address the increasing demand for its products and in order to lower its
costs, the Company has expanded, and plans to continue to expand, its
manufacturing operations in Israel in order to take advantage of that country's
lower wage rates, highly skilled labor force, government-sponsored grants, as
well as various tax abatement programs. These incentive programs have
contributed substantially to the growth and profitability of the Company. The
Company might be materially and adversely affected if these incentive programs
were no longer available to the Company or if hostilities were to occur in the
Middle East that materially interfere with the Company's operations in Israel.
20
<PAGE> 41
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
13. Segment and Geographic Information
Vishay operates in one line of business--the manufacture of electronic
components. Information about the Company's operations in different geographic
areas is as follows (in thousands):
<TABLE>
<CAPTION>
United States Europe Israel Other Elimination Consolidated
------------- ------ ------ ----- ----------- ------------
Year ended
December 31, 1996
- - -----------------
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated
customers $ 557,935* $ 504,397 $ 8,118 $ 27,529 $ -- $ 1,097,979
Net sales between
geographic areas 67,839 45,682 235,219 11,243 (359,983) --
-------------------------------------------------------------------------------------------
Total net sales $ 625,774 $550,079 $243,337 $ 38,772 $(359,983) $ 1,097,979
===========================================================================================
Operating profit $ 60,868 $ (13,755) $ 49,562 $ 3,854 $ -- $ 100,529
=====================================================================
General corporate
expenses (12,764)
Interest expense (17,408)
------------------
Earnings before income
taxes $ 70,357
==================
Identifiable assets $ 617,484 $570,004 $347,053 $ 21,506 $ -- $ 1,556,047
============================================================================================
United States Europe Israel Other Elimination Consolidated
------------- ------ ------ ----- ----------- ------------
Year ended
December 31, 1995
- - -----------------
Net sales to unaffiliated
customers $ 597,154* $589,488 $ 5,684 $ 32,090 $ -- $ 1,224,416
Net sales between
geographic areas 74,283 53,883 214,322 341 (342,829) --
---------------------------------------------------------------------------------------------------
Total net sales $ 671,437 $643,371 $220,006 $ 32,431 $(342,829) $ 1,224,416
====================================================================================================
Operating profit $ 59,877 $ 31,759 $ 66,640 $ 5,528 $ -- $ 163,804
==============================================================================
General corporate
expenses (11,397)
Interest expense (29,433)
------------------
Earnings before income
taxes $ 122,974
==================
Identifiable assets $ 610,106 $653,395 $255,268 $ 24,562 $ -- $ 1,543,331
===================================================================================================
</TABLE>
21
<PAGE> 42
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
13. Segment and Geographic Information (continued)
<TABLE>
<CAPTION>
United States Europe Israel Other Elimination Consolidated
------------- ----------- ------------ --------- ------------ ------------
Year ended
December 31, 1994
- - -----------------
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated
customers $ 495,004* $ 466,552 $ 3,687 $ 22,594 $ -- $ 987,837
Net sales between
geographic areas 25,339 65,705 139,615 -- (230,659) --
--------------------------------------------------------------------------------------------
Total net sales $ 520,343 $ 532,257 $ 143,302 $ 22,594 $(230,659) $ 987,837
============================================================================================
Operating profit $ 43,889 $ 15,129 $ 45,091 $ 4,842 $ -- $ 108,951
==========================================================================
General corporate
expenses (10,066)
Interest expense (24,769)
------------------
Earnings before income
taxes $ 74,116
==================
Identifiable assets $ 555,418 $ 614,998 $ 152,329 $ 22,325 $ $ 1,345,070
============================================================================================
</TABLE>
* Includes export sales of $112,402, $123,387, $107,196 for the years ended
December 31, 1996, 1995, and 1994, respectively.
Sales between geographic areas are priced to result in operating profit that
would be achieved on sales to unaffiliated customers. Operating profit is total
revenue less operating expenses. In computing operating profit, general
corporate expenses, interest expense, and income taxes were not deducted.
22
<PAGE> 43
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
14. Summary of Quarterly Financial Information (Unaudited)
Quarterly financial information for the years ended December 31, 1996 and 1995
is as follows:
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter Total Year
--------------------- ------------------- -------------------- -------------------- -------------------
1996 1995 1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $310,660 $310,284 $273,502 $315,461 $259,889 $300,629 $253,928 $298,042 $1,097,979 $1,224,416
Gross profit 85,081 79,265 71,864 83,526 61,177 79,265 53,991 79,842 272,113 321,898
Net earnings (1) 28,041 22,034 3,783 24,724 14,484 22,332 6,308 23,577 52,616 92,667
Earnings per
share (1), (2):
Net earnings $.46 $.40 $.06 $.45 $.24 $.40 $.10 $.38 $.86 $1.62
</TABLE>
(1) Includes restructuring expense of $24,826,000 ($.26 per share) and
$13,204,000 ($.17 per share) in the second and fourth quarters of 1996,
respectively, and restructuring expense of $800,000 ($.01 per share) and
$3,400,000 ($.04 per share) in the third and fourth quarters of 1995,
respectively.
(2) Adjusted to give retroactive effect to 5% stock dividend in June 1996 and
the 2-for-1 stock split distributed on June 16, 1995.
23
<PAGE> 44
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION AND BACKGROUND
The Company's sales and net income increased significantly through 1995
primarily as a result of its acquisitions. Following each acquisition, the
Company implemented programs to take advantage of distribution and operating
synergies among its businesses. This implementation was reflected in increases
in the Company's sales and in the decline in selling, general, and
administrative expenses as a percentage of the Company's sales.
From mid-1990 through the end of 1993, sales of most of the Company's
products were adversely affected by the worldwide slowdown in the electronic
components industry, which reflected general recessionary trends in all major
industrialized countries. In addition, sales to defense-related industries
declined from the end of the first quarter of 1991 until the second half of
1993. Despite this slowdown, Vishay realized record net earnings in each year
throughout this period. This was a result of its acquisitions and focus on the
bottom-line, including the implementation of operating efficiencies.
In 1995, the Company's growth was fueled not only by its acquisition of
Vitramon, but also by the dramatic expansion in the electronic components
industry. This resulted in Vishay's record net earnings of $92.7 million in
1995.
However, beginning with the last quarter of 1995 and continuing into
the first quarter of 1997, the Company has experienced a decline in demand for
its products, resulting in a decrease in revenues, earnings and backlogs. The
Company believes this may be primarily a result of the worldwide slowdown in
demand for tantalum and multi-layer ceramic chip 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.
In order to address the slowdown in demand, the Company implemented a
restructuring program in 1996 that included the downsizing and closing of
manufacturing facilities in North America and Europe. In connection with the
restructuring, the Company incurred $38,030,000 of pretax charges for the year
ended December 31, 1996 relating to employee termination and facility closure
costs. When the restructuring program is fully implemented, the Company believes
that by reducing overhead costs and improving manufacturing efficiency, it will
reduce costs by approximately $38 million per year. Depending on future economic
conditions, the Company may continue to downsize or close existing facilities in
North America, Europe or elsewhere.
24
<PAGE> 45
The Company's strategy contemplates transferring some of its
manufacturing operations from countries with high labor costs and tax rates
(such as the United States, France and Germany) to Israel, Mexico, Portugal and
the Czech Republic in order to benefit from lower labor costs and, in the case
of Israel, to take advantage of various government incentives, including
government grants and tax incentives. The Company may further reduce its costs
in the face of a decline in demand by accelerating the transfer of production to
countries with lower labor costs and more favorable tax environments.
The Company realizes approximately 49% of its revenues outside the
United States. As a result, fluctuations in currency exchange rates can
significantly affect the Company's reported sales and to a lesser extent
earnings. Currency fluctuations impact the Company's net sales and other income
statement amounts, as denominated in U.S. dollars, including other income as it
relates to foreign exchange gains or losses. Generally, in order to minimize the
effect of currency fluctuations on profits, the Company endeavors to (i) borrow
money in the local currencies and markets where it conducts business, and (ii)
minimize the time for settling intercompany transactions. The Company does not
purchase foreign currency exchange contracts or other derivative instruments to
hedge foreign currency exposures.
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 rate in the United States) have had the effect of increasing the
Company's net earnings. The more favorable Israeli tax rates are applied to
specific approved projects and normally continue to be available for a period of
ten years or, if the investment in the project is over $20 million, for a period
of 15 years, which has been the case for most of the Company's projects in
Israel since 1994. New projects are continually being introduced. In addition,
the Israeli government offers certain incentive programs in the form of grants
designed to increase employment in Israel. However, the Israeli government has
recently scaled back or discontinued some of its incentive programs.
Accordingly, there can be no assurance that in the future the Israeli government
will continue to offer new incentive programs applicable to the Company or that,
if it does, such programs will provide the same level of benefits the Company
has historically received or that the Company will continue to be eligible to
take advantage of them. Although the Company might be materially adversely
affected if these incentive programs were no longer available to the Company for
new projects, because a majority of the Company's projects in Israel already
benefit from government incentive programs, the Company does not anticipate that
any cutbacks in the incentive programs would have an adverse impact on its
earnings and operations for at least several years.
Israeli government grants, recorded as a reduction of costs of products
sold, were $9,449,000 for the year ended December
25
<PAGE> 46
31, 1996, as compared to $13,243,000 for the prior year. To the extent the
Israeli government continues its grant and incentive programs, future benefits
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.
RESULTS OF OPERATIONS
Income statement captions as a percentage of sales and the effective
tax rates were as follows:
Year Ended December 31,
1996 1995 1994
---- ---- ----
Costs of products sold 75.2% 73.7% 75.7%
Gross profit 24.8 26.3 24.3
Selling, general and
administrative expenses 12.9 13.0 13.9
Operating income 7.8 12.4 9.9
Earnings before income taxes 6.4 10.0 7.5
Effective tax rate 25.2 24.6 20.5
Net earnings 4.8 7.6 6.0
YEAR ENDED DECEMBER 31, 1996 COMPARED TO
YEAR ENDED DECEMBER 31, 1995
Net sales for the year ended December 31, 1996 decreased $126,437,000
or 10.3% from the prior year. The decrease in net sales is indicative of the
worldwide slowdown in the demand for tantalum and multi-layer ceramic chip
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 1995.
The strengthening of the U.S. dollar against foreign currencies for the
year ended December 31, 1996 in comparison to the prior year resulted in a
decrease in reported sales of $20,712,000.
Net sales, exclusive of foreign currency fluctuations, decreased 8.6%
over the prior year.
Costs of products sold for the year ended December 31, 1996 were 75.2%
of net sales, as compared to 73.7% for the prior year. Costs of products sold
for the year ended December 31, 1996 were negatively affected by, among other
things, a difficult pricing environment and start-up costs of the Company's new
capacitor plant in Israel.
26
<PAGE> 47
Israeli government grants, recorded as a reduction of costs of products
sold, were $9,449,000 for the year ended December 31, 1996, as compared to
$13,243,000 for the prior year. To the extent the Israeli government continues
these grant and incentive programs, future benefits 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 December 31, 1996 relating to Israeli government grants was
$58,570,000 as compared to $30,849,000 at December 31, 1995.
Selling, general and administrative expenses for the year ended
December 31, 1996 were 12.9% of net sales, as compared to 13.0% for the prior
year. Selling, general and administrative expenses have decreased by
$17,056,000, as compared to the prior year, as a result of a cost reduction
program instituted in the fourth quarter 1995, lower sales and a reduction in
management incentives.
The Company incurred a pretax restructuring charge of $38,030,000 for
the year ended December 31, 1996. Approximately $28,953,000 of those 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 December 31, 1996, approximately 1,939
employees had been terminated and $12,822,000 of the termination costs were
paid. The remaining $9,077,000 of restructuring expense relates to facility
closure costs in North America and Europe. The restructuring plan is expected to
be completed by the end of 1997. The Company has sufficient lines of credit to
fund these payments. Depending on future economic conditions, the Company may
continue to downsize or close existing facilities in North America, Europe or
elsewhere.
When fully implemented, the restructuring is expected to reduce the
Company's costs by approximately $38,000,000 annually.
Interest costs decreased by $12,025,000 for the year ended December 31,
1996 from the prior year 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 $1,950,000 for the year ended
December 31, 1996, as compared to the prior year. The increase is primarily due
to foreign exchange gains of $371,000 for the year ended December 31, 1996 as
compared to foreign exchange losses of $2,022,000 for the year ended December
31, 1995.
The effective tax rate for the year ended December 31, 1996 was 25.2%
as compared to 24.6% for the prior year. The continuing effect of low tax rates
in Israel (as compared to the statutory rate in the United States) has been to
increase net
27
<PAGE> 48
earnings by $10,109,000 and $19,183,000 for the years ended December 31, 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. The Israeli tax effect benefit was more pronounced in 1995 primarily
as a result of increased proportional earnings in Israel. See "Description of
Business--Manufacturing Operations".
YEAR ENDED DECEMBER 31, 1995 COMPARED TO
YEAR ENDED DECEMBER 31, 1994
Net sales for the year ended December 31, 1995 increased $236,579,000
or 23.9% from the prior year. The increase reflects the strong performance of
Vitramon, acquired July 1, 1994, and Vishay's other surface mount components
businesses. Net sales for the year ended December 31, 1995 includes $87,753,000
of net sales relating to Vitramon for the first six months of 1995.
The weakening of the U.S. dollar against foreign currencies for the
year ended December 31, 1995 in comparison to the prior year resulted in an
increase in reported sales of $57,128,000.
Net sales, exclusive of foreign currency fluctuations, increased 18.2%
over the prior year. Net sales, exclusive of foreign currency fluctuations and
Vitramon sales for the first six months, increased 9.3% over the prior year. Net
bookings for the year ended December 31, 1995 increased 7.8% over the prior
year.
Costs of products sold for the year ended December 31, 1995 were 73.7%,
of net sales, as compared to 75.7% for the prior year. The factors contributing
to this decrease included: (i) the effect of the Mexican peso devaluation, which
contributed approximately $4,100,000 to gross profit for 1995, (ii) the fact
that gross profits for Vitramon were higher than Vishay's other operating
companies, (iii) Israeli government grants of $13,243,000 for the year ended
December 31, 1995, as compared to $10,999,000 for the prior year, and (iv) an
increase in production in Israel where labor costs are lower than in most other
regions in which Vishay manufactures. The increase in Israeli government grants
resulted from a significant increase in the Company's manufacturing operations
in Israel. Deferred income at December 31, 1995 relating to Israeli government
grants was $30,849,000.
Selling, general, and administrative expenses, for the year ended
December 31, 1995 were 13.0% of net sales, as compared to 13.9% for the prior
year. Management continues to explore additional cost-saving opportunities.
Restructuring expenses of $4,200,000 in 1995 resulted from downsizing
of some of the Company's European operations and represent employee termination
benefits covering approximately 276 technical, production, administrative and
support employees located
28
<PAGE> 49
primarily in France and Germany. This downsizing was completed during the year
ended December 31, 1996.
Interest costs increased by $4,664,000 for the year ended December 31,
1995 over the prior year as a result of an increase in average debt outstanding
resulting from the acquisition of Vitramon in July 1994 and purchases of
property and equipment.
The effective tax rate for the year ended December 31, 1995 was 24.6%
compared to 20.5% for the prior year. The higher effective tax rate for 1995
reflects increased earnings in higher tax rate countries.
The effect of low tax rates in Israel (as compared to the statutory
rate in the United States) has been to increase net earnings by $19,183,000 and
$15,291,000 for the years ended December 31, 1995 and 1994, respectively. The
Israeli tax effect was more pronounced in 1995 primarily as a result of
increased earnings for the Israeli operations as a result of increased
production. See "Description of Business--Manufacturing Operations".
FINANCIAL CONDITION AND LIQUIDITY
Cash flows from operations were $122,186,000 for the year ended
December 31, 1996 compared to $115,511,000 for the prior year. Net purchases of
property and equipment for the year ended December 31, 1996 were $123,984,000
compared to $165,699,000 in the prior year. Capital expenditures of $105.0
million in 1996 related principally to construction of new facilities in Israel
and the purchase of equipment to increase capacity and maximize automation in
the Company's plants. The Company has substantially completed its current
restructuring/expansion program. Net cash provided by financing activities was
$4,018,000 for the year ended December 31, 1996.
See Note 5 to the Company's Consolidated Financial Statements elsewhere
herein for additional information with respect to Vishay's loan agreements,
long-term debt and available short-term credit lines.
The Company's financial condition at December 31, 1996 is strong, with
a current ratio of 3.30 to 1. The Company's ratio of long-term debt (less
current portion) to stockholders' equity was .24 to 1 at December 31, 1996 and
.25 to 1 at December 31, 1995.
Management believes that the Company's 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.
29
<PAGE> 50
INFLATION
Normally, inflation has not had 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.
30
<PAGE> 51
COMMON STOCK MARKET PRICES
1996 1995
------------------ -------------------
High Low High Low
-------- -------- -------- ---------
First Quarter............. $30.95 $22.86 $27.50 $21.89
Second Quarter............ 32.62 20.25 36.08 26.19
Third Quarter............. 25.00 17.38 42.27 31.19
Fourth quarter............ 23.38 17.50 40.12 23.70
On November 27, 1995, the Company commenced a stock repurchase program
pursuant to which the Company was authorized to repurchase up to 750,000 shares
of its Common Stock for an aggregate amount not to exceed $30 million. The
purchases of Common Stock by the Company under the repurchase program are made
in accordance with the rules of the Securities and Exchange Commission and at
the discretion of management. As of December 31, 1996, the Company had
repurchased 110,000 shares at an approximate cost of $3,578,000. No repurchases
were made in 1994 or 1996.
The Company's Common Stock is listed on the New York Stock Exchange
under the symbol VSH. The table shown above sets forth the high and low sale
prices for the Company's Common Stock as reported on the New York Stock Exchange
Composite Tape for the calendar periods indicated. Stock prices have been
restated to reflect stock dividends and stock splits. The Company does not
presently pay cash dividends on its capital stock. Under the terms of certain
loan agreements, the Company is restricted from paying cash dividends (see Note
5 to the consolidated financial statements). Holders of record of the Company's
Common Stock totaled approximately 2,100 at March 25, 1997.
SAFE HARBOR STATEMENT
The Private Securities Litigation Reform Act of 1995 provides a new
"safe harbor" for certain forward- looking statements. The Company wishes to
caution its readers that any statements in this report that relate to the
Company's future performance, including, without limitation, statements with
respect to the Company's anticipated ongoing cost reductions, the implementation
of the Chinese joint venture and improvements in the electronic components
market, shall be deemed forward-looking statements within the Act, as a number
of important factors affecting the Company's business and financial results
could cause actual results to differ materially from those stated in the
forward-looking statements. Those factors primarily include decline in demand
for the Company's products, competitive pressures, recessionary trends, currency
fluctuations, changes in law, cancellation of government grants or tax benefits,
labor unrest, factory under-utilization and capacity restraints. Please see the
Company's December 31, 1996 Report on Form 10-K filed with the Securities and
Exchange Commission (and available through the SEC's web site address:
hffp:/www.sec.gov) for a more comprehensive list of these factors.
31
<PAGE> 52
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
Year ended December 31
-------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
(in thousands, except per share amounts) 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales.................................... $1,097,979 $1,224,416 $ 987,837 $856,272 $664,226
Costs of products sold....................... 825,866 902,518 748,135 663,239 508,018
-------------------------------------------------------------------------------------
Gross profit............................... 272,113 321,898 239,702 193,033 156,208
Selling, general, and administrative expenses 141,765 158,821 137,124 118,906 101,327
Amortization of goodwill..................... 6,494 6,461 4,609 3,294 2,380
Restructuring expense........................ 38,030 4,200 -- 6,659 --
Unusual items................................ -- -- -- (7,221) --
-------------------------------------------------------------------------------------
Operating margin............................. 85,824 152,416 97,969 71,395 52,501
Other income (expense):
Interest expense........................... (17,408) (29,433) (24,769) (20,624) (19,110)
Other...................................... 1,941 (9) 916 123 4,533
-------------------------------------------------------------------------------------
Total other income (expense)............ (15,467) (29,442) (23,853) (20,501) (14,577)
-------------------------------------------------------------------------------------
Earnings before income taxes and cumulative
effect of accounting change................ 70,357 122,974 74,116 50,894 37,924
Income taxes................................. 17,741 30,307 15,169 8,246 7,511
-------------------------------------------------------------------------------------
Earnings before cumulative effect of
accounting change.......................... 52,616 92,667 58,947 42,648 90,413
Cumulative effect of accounting change....... -- -- -- 1,427 --
-------------------------------------------------------------------------------------
Net earnings................................. $ 52,616 $ 92,667 $ 58,947 $ 44,075 $ 30,413
Earnings per share:
Before cumulative effect of accounting
change.................................. $0.86 $1.62 $1.14 $0.87 $0.74
Accounting change for income taxes......... -- -- -- 0.03 --
-------------------------------------------------------------------------------------
Net earnings............................... $0.86 $1.62 $1.14 $0.90 $0.74
Weighted average number of shares
outstanding.................................. 61,292 57,045 51,553 49,146 44,837
FINANCIAL DATA (in thousands, except ratios)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and short-term investments.............. $ 20,945 $ 19,584 $ 26,876 $ 10,949 $ 15,994
Working capital.............................. 434,199 411,286 328,322 205,806 145,327
Current ratio................................ 3.30 2.80 2.41 2.09 2.02
Property and equipment--net................... 710,662 669,228 543,402 422,668 271,619
Capital expenditures--net..................... 123,984 165,699 91,571 79,377 49,801
Depreciation and amortization................ 77,247 69,547 57,742 48,578 36,062
Total assets................................. 1,556,047 1,543,331 1,345,070 950,670 661,643
Long term debt............................... 229,885 228,610 402,337 266,999 139,540
Stockholders' equity......................... 945,230 907,853 565,088 376,503 346,625
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: This table should be read in conjunction with the related consolidated
financial statements and accompanying notes and management's discussion and
analysis of financial condition and results of operations. Includes the results
of Vitramon from July 1, 1994, the results of Roederstein from January 1, 1993
and the results of the businesses acquired from Sprague Technologies, Inc. from
January 1, 1992. Earnings per share amounts and weighted average shares
outstanding have been retroactively restated for stock dividends and a 2-for-1
stock split in June 1995.
32
<PAGE> 53
<TABLE>
<CAPTION>
Six Months
ended
Year ended December 31 December 31 Year ended June 30
-----------
- - ----------------------------------------- ---------------------------------------
1991 1990 1989 1988 1988 1987 1986
- - -------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 442,283 $ 445,596 $ 415,619 $ 175,820 $ 108,951 $ 59,043 $ 58,855
318,166 312,925 290,801 123,802 68,552 32,079 31,834
- - -------------------------------------------------------------------------------------------
124,117 132,671 124,818 52,018 40,399 26,964 27,021
75,973 77,740 75,423 33,712 26,430 18,725 18,307
1,695 1,552 1,502 551 -- -- --
3,700 -- 1,044 -- -- -- --
-- 2,441 802 -- -- -- --
- - -------------------------------------------------------------------------------------------
42,749 50,938 46,047 17,755 13,969 8,239 8,714
(15,207) (19,426) (21,068) (9,577) (2,351) (1,588) (2,292)
(289) 2,344 1,439 3,462 9,778 5,550 4,915
- - -------------------------------------------------------------------------------------------
(15,496) (17,082) (19,629) (6,115) 7,427 3,962 2,623
- - -------------------------------------------------------------------------------------------
27,253 33,856 26,418 11,640 21,396 12,201 11,337
6,363 10,655 8,651 3,557 5,879 1,959 2,000
- - -------------------------------------------------------------------------------------------
20,890 23,201 17,767 8,083 15,517 10,242 9,337
-- -- -- -- -- -- --
- - -------------------------------------------------------------------------------------------
20,890 23,201 17,767 8,083 15,517 10,242 9,337
===========================================================================================
$ 0.54 $ 0.64 $ 0.53 $ 0.24 $ 0.46 $ 0.33 $ 0.30
-- -- -- -- -- -- --
- - -------------------------------------------------------------------------------------------
$ 0.54 $ 0.64 $ 0.53 $ 0.24 $ 0.46 $ 0.33 $ 0.30
- - -------------------------------------------------------------------------------------------
38,548 41,584 33,233 33,438 33,405 31,185 30,616
- - -------------------------------------------------------------------------------------------
$ 14,438 $ 16,306 $ 27,779 $ 29,761 $ 23,476 $ 24,031 $ 24,711
128,733 120,384 115,945 118,990 52,501 47,238 43,753
2.65 2.42 2.35 2.50 2.21 4.42 3.89
171,951 166,346 150,912 145,723 35,135 18,936 19,042
26,660 28,999 21,605 13,585 864 2,640 3,659
27,056 26,157 22,288 9,494 4,492 2,782 2,408
448,771 440,656 419,958 409,487 179,353 101,431 93,318
127,632 140,212 186,182 202,551 26,974 7,255 16,952
201,366 177,839 117,984 104,488 94,529 77,609 58,931
- - -------------------------------------------------------------------------------------------
</TABLE>
33
