SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|x| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-7416
VISHAY INTERTECHNOLOGY, INC.
----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 38-1686453
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
63 Lincoln Highway, Malvern, Pennsylvania 19355
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 644-1300
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes |x| No
As of November 13, 1998 registrant had 59,347,494 shares of its Common Stock and
8,321,654 shares of its Class B Common Stock outstanding.
<PAGE>
VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q SEPTEMBER 30, 1998
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Condensed Balance Sheets - 3-4
September 30, 1998 and December 31, 1997
Consolidated Condensed Statements of 5
Operations - Three Months Ended
September 30, 1998 and 1997
Consolidated Condensed Statements of 6
Operations - Nine Months Ended
September 30, 1998 and 1997
Consolidated Condensed Statements of 7
Cash Flows - Nine Months Ended
September 30, 1998 and 1997
Notes to Consolidated Condensed 8-10
Financial Statements
Item 2. Management's Discussion and Analysis 11-17
of Financial Condition and Results of
Operations
PART II. OTHER INFORMATION 18
<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited - In thousands)
<TABLE>
<CAPTION>
September 30 December 31
ASSETS 1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 121,915 $ 55,263
Accounts receivable 280,782 186,687
Inventories:
Finished goods 194,348 158,933
Work in process 157,375 84,245
Raw materials 104,194 96,193
Prepaid expenses and other current assets 109,563 64,650
----------- -----------
TOTAL CURRENT ASSETS 968,177 645,971
PROPERTY AND EQUIPMENT - AT COST
Land 59,276 41,378
Buildings and improvements 263,233 230,772
Machinery and equipment 1,031,227 744,983
Construction in progress 62,485 50,400
Allowance for depreciation (430,879) (358,391)
----------- -----------
985,342 709,142
GOODWILL 438,548 286,923
OTHER ASSETS 96,881 77,612
----------- -----------
$ 2,488,948 $ 1,719,648
=========== ===========
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
September 30 December 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
---------------------- ----------------------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable to banks $27,381 $29,926
Trade accounts payable 81,765 47,925
Payroll and related expenses 73,481 44,039
Other accrued expenses 120,540 52,485
Income taxes 23,942 12,003
Current portion of long-term debt 894 4,459
---------------------- ----------------------
TOTAL CURRENT LIABILITIES 328,003 190,837
LONG-TERM DEBT 837,668 347,463
DEFERRED INCOME TAXES 41,692 41,701
DEFERRED INCOME 62,652 59,300
OTHER LIABILITIES 83,473 56,217
ACCRUED PENSION COSTS 116,482 64,482
STOCKHOLDERS' EQUITY
Common stock 5,932 5,646
Class B common stock 832 793
Capital in excess of par value 990,059 920,165
Retained earnings 51,566 75,587
Accumulated other comprehensive income (28,405) (41,899)
Unearned compensation (1,006) (644)
---------------------- ----------------------
1,018,978 959,648
---------------------- ----------------------
$2,488,948 $1,719,648
====================== ======================
</TABLE>
See notes to consolidated condensed financial statements.
4
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VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1998 1997
---------------------- ----------------------
<S> <C> <C>
Net sales $399,499 $285,352
Costs of products sold 301,904 214,960
---------------------- ----------------------
GROSS PROFIT 97,595 70,392
Selling, general, and administrative expenses 62,946 35,324
Amortization of goodwill 3,048 2,117
---------------------- ----------------------
OPERATING INCOME 31,601 32,951
Other income (expense):
Interest expense (14,009) (5,566)
Other (1,204) 700
---------------------- ----------------------
(15,213) (4,866)
---------------------- ----------------------
EARNINGS BEFORE INCOME TAXES 16,388 28,085
Income taxes 4,267 7,390
---------------------- ----------------------
NET EARNINGS $12,121 $20,695
====================== ======================
Basic and diluted earnings per share $0.18 $0.30
====================== ======================
Weighted average shares outstanding - assuming dilution 67,640 67,868
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
----------------------- -----------------------
<S> <C> <C>
Net sales $1,161,087 $831,275
Costs of products sold 875,896 629,649
----------------------- -----------------------
GROSS PROFIT 285,191 201,626
Selling, general, and administrative expenses 173,234 102,941
Amortization of goodwill 8,587 5,133
----------------------- -----------------------
OPERATING INCOME 103,370 93,552
Other income (expense):
Interest expense (35,093) (12,831)
Other (5,312) 2,084
----------------------- -----------------------
(40,405) (10,747)
----------------------- -----------------------
EARNINGS BEFORE INCOME TAXES 62,965 82,805
Income taxes 17,542 22,504
----------------------- -----------------------
NET EARNINGS $45,423 $60,301
======================= =======================
Basic and diluted earnings per share $0.67 $0.89
======================= =======================
Weighted average shares outstanding - assuming dilution 67,635 67,689
</TABLE>
See notes to consolidated condensed financial statements.
6
<PAGE>
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
---------------------- ----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $45,423 $60,301
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 97,610 62,441
Other 385 983
Changes in operating assets and liabilities (28,345) 3,461
---------------------- ----------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 115,073 127,186
INVESTING ACTIVITIES
Purchases of property and equipment-net (103,684) (55,218)
Purchase of businesses, net of cash acquired (528,599) (122,377)
Sale of business 105,755 -
---------------------- ----------------------
NET CASH USED IN INVESTING ACTIVITIES (526,528) (177,595)
FINANCING ACTIVITIES
Net proceeds on revolving credit lines 479,563 159,194
Proceeds from long-term borrowings 6,571 5,485
Payments on long-term borrowings (6,771) (78,018)
Net payments on short-term borrowings (2,714) (9,945)
---------------------- ----------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 476,649 76,716
Effect of exchange rate changes on cash 1,458 (3,786)
---------------------- ----------------------
INCREASE IN CASH AND
CASH EQUIVALENTS 66,652 22,521
Cash and cash equivalents at beginning of period 55,263 20,945
---------------------- ----------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $121,915 $43,466
====================== ======================
</TABLE>
See notes to consolidated condensed financial statements.
7
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
Note 1: Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for presentation of financial
position, results of operations, and cash flows required by generally accepted
accounting principles for complete financial statements. The information
furnished reflects all adjustments (consisting of normal recurring adjustments)
which are, in the opinion of management, necessary for a fair summary of the
financial position, results of operations and cash flows for the interim periods
presented. The financial statements should be read in conjunction with the
financial statements and notes thereto filed with Form 10-K for the year ended
December 31, 1997.
Note 2: Earnings Per Share
The number of shares used in the calculation of basic earnings per common share
were 67,553,000 and 67,558,000 for the quarter and nine months ended September
30, 1998 and 67,549,000 and 67,530,000 for the comparable prior year periods.
The number of shares used in the calculation of diluted earnings per common
share were 67,640,000 and 67,635,000 for the quarter and nine months ended
September 30, 1998 and 67,868,000 and 67,689,000 for the comparable prior year's
periods. Options to purchase 1,218,000 shares of common stock at exercise prices
ranging from $22.88 to $41.14 per share were outstanding during 1998 but were
not included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of the common
shares. However, for the quarter and nine months ended September 30, 1997,
252,000 shares were included in the computation of diluted earnings per share
because the options' exercise price was greater than the average market price of
the common shares. Earnings per share amounts for all periods presented reflect
the 5% stock dividend paid on June 11, 1998.
Note 3: Acquisitions
In June 1998, the Company finalized its purchase of 80.4% of the capital stock
of Siliconix Incorporated (NASDAQ:SILI) and 100% of the capital stock of TEMIC
Semiconductor GmbH. On March 2, 1998 the Company paid an initial purchase price
of $497,186,000 based on net asset values at December 31, 1996. Since March, the
Company paid an additional $52,703,000 for the increase in net assets at March
2, 1998. On March 4, 1998 the Company sold the Integrated Circuits division of
TEMIC to Atmel Incorporated for an initial purchase price of $100,000,000. On
August 6, 1998, the Company received an additional $5,755,000, for a total
purchase price of $105,755,000.
The purchase of TEMIC and Siliconix("TEMIC") was funded from the Company's $1.1
billion revolving credit facilities made available to Vishay on March 2, 1998 by
a group of banks led by Comerica Bank, as administrative agent, Nationsbanc
Montgomery Securities
8
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LLC, as syndication agent, and Credit Lyonnais New York Branch, as documentation
agent.
The acquisition was accounted for under the purchase method of accounting. Under
purchase accounting, the assets and liabilities of Temic are required to be
adjusted from historical amounts to their estimated fair values. Purchase
accounting adjustments have been preliminarily estimated by management based
upon currently available information. There can be no assurance, however, that
estimated adjustments represent the final purchase accounting adjustments that
will be ultimately determined. Management is waiting for the results of
appraisals and other information that will be required to determine the final
purchase allocation. To the extent that a portion of the purchase price is
allocated to in-process research and development, a charge, which may be
material, would be recognized in this year.
The results of operations of TEMIC have been included in the Company's results
from March 1, 1998. Excess of cost over the fair value of assets acquired is
approximately $157,257,000 and is being amortized on a straight-line method over
an estimated useful life of forty years.
In July 1997, the Company purchased 65% of the common stock of Lite-On Power
Semiconductor Corporation (LPSC), a Republic of China (Taiwan) company, for
$130,000,000 in cash and stock appreciation rights with a fair value(at the time
of issuance) of $8,200,000. LPSC is a producer of discrete active electronic
components with manufacturing facilities in Taiwan, China and the United States.
LPSC owns 40.2% of Diodes, Inc.(AMEX:DIO), a public company traded on the
American Stock Exchange. The Company utilized existing credit facilities to
finance the cash portion ($130,000,000) of the purchase price. The acquisition
was accounted for under the purchase method of accounting.
The results of operations of LPSC have been included in the Company's results
from July 1, 1997. Excess of cost over the fair value of net assets acquired
($110,978,000) is being amortized on a straight-line method over an estimated
useful life of forty years.
Had the TEMIC and LPSC acquisitions been made at the beginning of 1997, the
Company's pro forma unaudited results for the three months ended September 30,
1997 and the nine months ended September 30, 1998 and 1997 would have been (in
thousands, except per share amounts):
Three Months Ended Nine Months Ended
Sept 30 Sept 30
1997 1998 1997
---- ---- ----
Net sales $425,895 $1,243,539 $1,270,671
Net earnings $ 23,742 $ 43,117 $ 62,028
Basic and diluted
earnings per share $ 0.35 $ 0.64 $ 0.92
The unaudited pro forma results are not necessarily indicative of the results
that would have been attained had the acquisitions occurred at the beginning of
1997 or of future results.
9
<PAGE>
Note 4: Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130
establishes rules for the reporting and presentation of comprehensive income and
its components. SFAS 130 requires foreign currency translation adjustments and
the additional minimum pension liability, which prior to adoption were reported
separately in stockholders' equity, to be included in other comprehensive
income. The accumulated foreign currency translation adjustment and the
additional minimum pension liability as of December 31, 1997 have been
reclassified to conform to the requirements of SFAS 130. The adoption of SFAS
130 did not impact the Company's net income or total stockholders' equity. Total
comprehensive income for the three and nine months ended September 30, 1998 were
$32,864,000 and $58,915,000, respectively, as compared to $16,711,000 and
$19,693,000 for the prior year's periods.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Income statement captions as a percentage of sales and the effective tax rates
were as follows:
Three Months Ended Nine Months Ended
Sept 30 Sept 30
1998 1997 1998 1997
---- ---- ---- ----
Costs of products sold 75.6% 75.3% 75.4% 75.7%
Gross profit 24.4 24.7 24.6 24.3
Selling, general and
administrative expenses 15.8 12.4 14.9 12.4
Operating income 7.9 11.5 8.9 11.3
Earnings before income taxes 4.1 9.8 5.4 10.0
Effective tax rate 26.0 26.3 27.9 27.2
Net earnings 3.0 7.3 3.9 7.3
Net sales for the quarter and nine months ended September 30, 1998 increased
$114,147,000 or 40.0% and $329,812,000 or 39.7% from the comparable periods of
the prior year. The increase in net sales relates primarily to the acquisition
of TEMIC. Net sales of TEMIC included in the Company's reported sales for the
quarter and nine months ended September 30, 1998 were $138,929,000 and
$326,584,000, respectively. LPSC was acquired by Vishay effective July 1, 1997.
Exclusive of TEMIC and LPSC, net sales would have decreased by $24,782,000 or
8.7% and $34,428,000 or 4.1% from the comparable prior year periods. The
strengthening of the U.S. dollar against foreign currencies for the quarter and
nine months ended September 30, 1998 in comparison to the prior year's periods,
resulted in decreases in reported sales of $3,084,000,and $21,080,000,
respectively. Moreover, the Company's net sales of passive components and
semiconductor components were negatively affected by the economic downturn in
Asia and substantial price erosion.
Costs of products sold for the quarter and nine months ended September 30, 1998
were 75.6% and 75.4% of net sales, respectively, as compared to 75.3% and 75.7%,
respectively, for the comparable prior year periods. Gross profit, as a
percentage of net sales, for the quarter ended September 30, 1998 decreased from
the comparable prior year period mainly due to the weakness in the passive
components business. Profitability for the passive components business was
negatively affected by price erosion and the depressed Asian market. Gross
profit of the passive components business was 21.6% for the quarter ended
September 30, 1998 compared to 25.0% for the comparable prior year period. Gross
profit, as a percentage of net sales, for the nine months ended September 30,
1998 increased from the comparable prior year period mainly due to the
acquisition of TEMIC. TEMIC recorded gross profit margins of 31.0% and 28.7%,
respectively, for the quarter and seven months ended September 30, 1998. The
results for semiconductor components were negatively affected by the economic
slowdown in the semiconductor industry, adjustments of high inventory levels at
distributors, the depressed Asian market, and a substantial price erosion. As a
result, the Company is considering whether to restructure some of its Asian
operations.
11
<PAGE>
Exclusive of TEMIC and LPSC, gross profits, as a percentage of net sales, for
the Vishay passive components were 23.5% for the nine months ended September 30,
1998, as compared to 24.4% in the comparable prior year period.
Israeli government grants, recorded as a reduction of costs of products sold,
were $3,423,000 and $9,694,000 for the quarter and nine months ended September
30, 1998, respectively, as compared to $2,970,000 and $8,395,000 for the
comparable prior year periods. Future grants and other incentive programs
offered to the Company by the Israeli government will likely depend on the
Company's continuing to increase capital investment and the number of the
Company's employees in Israel. Deferred income at September 30, 1998 relating to
Israeli government grants was $62,652,000 as compared to $59,300,000 at December
31, 1997.
Selling, general, and administrative expenses for the quarter and nine months
ended September 30, 1998 were 15.8% and 14.9% of net sales, respectively, as
compared to 12.4% for the comparable prior year periods. The increased selling,
general and administrative expenses were primarily due to the acquisition of
TEMIC, for which selling, general and administrative expenses were 20.7% and
20.1% of net sales, respectively, for the quarter and seven months ended
September 30, 1998.
Interest costs increased by $8,443,000 and $22,262,000 for the quarter and nine
months ended September 30, 1998, from the comparable prior year periods,
primarily due to the increase in bank borrowings necessary to fund the TEMIC and
LPSC acquisitions. The Company had net borrowings of $443,000,000 and
$130,000,000, respectively, from a group of banks to finance the acquisitions of
TEMIC and LPSC.
Other income decreased by $7,396,000 for the nine months ended September 30,
1998 as compared to the prior year period primarily due to a noncash loss of
$6,269,000 relating to a forward exchange contract (entered into to set the
purchase price in connection with the TEMIC acquisition, since the purchase
price was denominated in German Marks and payable in U.S. Dollars).
The effective tax rate for the nine months ended September 30, 1998 was 27.9% as
compared to 27.2% for the comparable prior year period. The continuing effect of
low tax rates in Israel (as compared to the statutory rate in the United States)
resulted in increases in net earnings of $3,097,000 and $4,939,000 for the
quarters ended September 30, 1998 and 1997, respectively, and $10,654,000 and
$9,390,000 for the nine months ended September 30, 1998 and 1997, respectively.
The more favorable Israeli tax rates are applied to specific approved projects
and normally continue to be available for a period of ten years.
Financial Condition
Cash flows from operations were $115,073,000 for the nine months ended September
30, 1998 compared to $127,186,000 for the prior year's period. The decrease in
cash flows from operations is attributable to: i) a decrease in net earnings for
the nine months ended September 30, 1998 as compared to the nine months ended
September 30, 1997; and ii) a decrease in accrued expenses due to payments on
restructuring programs instituted at Vishay over the last eighteen months. Net
purchases of property and equipment for
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the nine months ended September 30, 1998 were $103,684,000 compared to
$55,218,000 in the prior year's period. Net cash provided by financing
activities of $476,649,000 for the nine months ended September 30, 1998 includes
approximately $550,000,000 used to finance the acquisition of TEMIC. In August
1998, the Company finalized the sale of the IC Division of Temic and received
the remaining $5,755,000. In total, the Company received $105,755,000 for the
sale of the IC Division of Temic and used the proceeds to pay down debt.
The Company incurred restructuring expense of $12,605,000 for the year ended
December 31, 1997. Approximately $10,357,000 of this expense related to employee
termination costs covering approximately 324 employees located in Germany and
France. As of September 30, 1998, approximately 178 of such employees have been
terminated and $8,435,000 of the termination costs have been paid. The
restructuring plan is expected to be completed by the end of 1998. In connection
with the acquisition by Vishay, TEMIC recorded restructuring liabilities of
$39,051,000. Approximately $27,251,000 of this liability relates to employee
termination costs covering approximately 412 technical, production,
administrative and support employees located in the United States, Europe, and
the Far East. The remaining $11,800,000 relates to provisions for certain
assets, contract cancellations and other costs. As of September 30, 1998, 50
employees have been terminated and $8,181,000 of the termination costs were
paid. Additionally, $4,000,000 has been charged against the liability for the
write down of certain assets and other costs. The balance of $26,870,000 is
reflected in the consolidated financial statements in other accrued expenses and
is expected to be paid out in the next year. At September 30, 1998, $34,909,000
of restructuring costs are included in other accrued expenses.
The Company's financial condition at September 30, 1998 is strong, with a
current ratio of 2.95 to 1. The Company's ratio of long-term debt (less current
portion) to stockholders' equity was .82 to 1 at September 30, 1998 and .36 to 1
at December 31, 1997.
Management believes that available sources of credit, together with cash
expected to be generated from operations, will be sufficient to satisfy the
Company's anticipated financing needs for working capital and capital
expenditures during the next twelve months.
Year 2000
Many existing computer systems and software products, including many used by the
Company, accept only two digit entries in the date code field. As a result,
computer programs or hardware that have date-sensitive software or embedded
chips may not properly distinguish 21st century dates from 20th century dates.
This could result in system failure or miscalculations causing disruption of
operations.
The Company has completed an assessment of its core business information
systems, a portion of which are provided by outside suppliers, for year 2000
readiness and is extending that review to include a wide variety of other
information systems and related business processes used in its operations. The
Company is creating and implementing plans to make them year 2000 compliant.
Currently, the Company is in the process of making its European facilities year
pliant. As of September
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30, 1998, the Company is on target to complete this task. The Company is also
focusing on bringing its U.S., Asian and Israeli computer systems into year 2000
compliance. In August 1998, the Company began to implement the business
application software of SAP for all of its North American operations. SAP is
designed to add worldwide functionality and efficiency to the business processes
of the Company as well as address some of the issues of year 2000 compliance.
The first North American facility should be up and running with SAP by the first
quarter of 1999. The Company is currently operating SAP in most of Europe.
Management does not believe the Company will suffer any material loss of
customers or other material adverse effects as a result of these modifications.
The Company is also assessing the possible effect on its operations of the year
2000 readiness of critical suppliers of products and services. The Company's
reliance on its key suppliers, and therefore on the proper functioning of their
information systems and software, is increasing, and there can be no assurance
that another company's failure to address year 2000 issues could not have an
adverse effect on the Company.
The Company is currently in the process of estimating its year 2000 project
costs as part of its annual budget process. The Company believes that it is
unlikely to experience a material adverse impact on its financial condition or
results of operations due to year 2000 compliance issues. However, since the
assessment process is ongoing, year 2000 complications are not fully known, and
potential liability issues are not clear, the full potential impact of the year
2000 on the Company is not known at this time.
Management of the Company believes it has an effective program in place to
resolve the year 2000 issues in a timely manner. As noted above, the Company has
not yet completed all necessary phases of the year 2000 program. In the event
that the Company's systems are not rendered year 2000 compliant in a timely
manner, the Company may experience significant disruption in its operations
including taking customer orders, manufacturing and shipping products, invoicing
customers or collecting payments. In addition, disruptions in the economy
generally resulting from year 2000 issues could also materially affect the
Company. The Company could be subject to litigation for computer systems product
failure, for example, equipment shutdown or failure to properly date business
records. The amount of potential liability and lost revenue cannot be reasonably
estimated at this time.
The Company has contingency plans for certain critical applications and is
working on such plans for others. These contingency plans involve, among other
actions, manual workarounds and adjusting staffing strategies.
Inflation
Normally, inflation does not have a significant impact on the Company's
operations. The Company's products are not generally sold on long-term
contracts. Consequently, selling prices, to the
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extent permitted by competition, can be adjusted to reflect cost increases
caused by inflation.
Safe Harbor Statement
From time to time, information provided by the Company, including but not
limited to statements in this report, or other statements made by or on behalf
of the Company, may contain "forward-looking" information within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such statements involve a number of risks and
uncertainties. The Company's actual results could differ materially from those
discussed in the forward-looking statements. The cautionary statements set forth
below identify important factors that could cause actual results to differ
materially from those in any forward-looking statements made by or on behalf of
the Company.
o The Company offers a broad variety of products and services
to its customers. Changes in demand for, or in the mix of,
products and services comprising revenues could cause actual
operating results to vary from those expected.
o The Company's future operating results are dependent, in
part, on its ability to develop, produce and market new and
innovative products, to convert existing products to surface
mount devices and to customize certain products to meet
customer requirements. There are numerous risks inherent in
this complex process, including the need for the Company to
timely bring to market new products and applications to meet
customers' changing needs.
o The Company operates in a highly competitive environment,
which includes significant competitive pricing pressures and
intense competition for entry into new markets.
o A slowdown in demand for discrete active and or passive
electronic components or recessionary trends in the global
economy in general or in specific countries or regions where
the Company sells the bulk of its products, such as the
U.S., Germany, France or the Pacific Rim, could adversely
impact the Company's results of operations. The Company is
currently being affected by the weakness in the industry,
the economic problems in Asia, a strong U.S. Dollar, and
substantial price erosion.
o Many of the orders in the Company's backlog may be canceled
by its customers without penalty. Customers may on occasion
double and triple order components from multiple sources to
insure timely delivery when backlog is particularly long.
The Company's results of operations may be adversely
impacted if customers were to cancel a material portion of
such orders.
o Approximately 75% of the Company's revenues are derived from
operations and sales outside the United States. As a result,
currency exchange rate fluctuations, inflation, changes in
monetary policy and tariffs, potential changes in laws and
regulations affecting the Company's business in foreign
jurisdictions, trade restrictions or
15
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prohibitions, intergovernmental disputes, increased labor
costs and reduction or cancellation of government grants,
tax benefits or other incentives could impact the Company's
results of operations. During the past several years, the
increase in the value of the U.S. dollar against most
foreign currencies has had a negative impact on U.S. dollar
denominated revenues.
o Specifically, as a result of the increased production by the
Company's operations in Israel over the past several years,
the low tax rates in Israel (as compared to the statutory
rates in the U.S.) have had the effect of increasing the
Company's net earnings. In addition, the Company takes
advantage of certain incentive programs in Israel in the
form of grants designed to increase employment in Israel.
Any significant increase in the Israeli tax rates or
reduction or elimination of any of the Israeli grant
programs could have an adverse impact on the Company's
results of operations.
o The Company may experience underutilization of certain
plants and factories in high labor cost regions and capacity
constraints in plants and factories located in low labor
cost regions, resulting initially in production
inefficiencies and higher costs. Such costs include those
associated with work force reductions and plant closings in
the higher labor cost regions and start-up expenses,
manufacturing and construction delays, and increased
depreciation costs in connection with the start of
production in new plants and expansions in lower labor cost
regions. Moreover, capacity constraints may limit the
Company's ability to continue to meet demand for any of the
Company's products.
o When the Company restructures its operations in response to
changing economic conditions, particularly in Europe, labor
unrest or strikes may occur, which could have an adverse
effect on the Company.
o The Company's results of operations may be adversely
impacted by (i) difficulties in obtaining raw materials,
supplies, power, natural resources and any other items
needed for the production of the Company's products; (ii)
the effects of quality deviations in raw materials,
particularly tantalum powder, palladium and ceramic
dielectric materials; and (iii) the effects of significant
price increases for tantalum or palladium, or an inability
to obtain adequate supplies of tantalum or palladium from
the limited number of suppliers.
o The Company's historic growth in revenues and net earnings
have resulted in large part from its strategy to expand
through acquisitions. However, there is no assurance that
the Company will find or consummate transactions with
suitable acquisition candidates in the future. From time to
time, when the Company is in the process of pursuing a
strategic acquisition, the Company or the acquisition target
may feel compelled for securities and other legal reasons to
announce the potential acquisition or the Company's desire
to enter into a certain market prior to entering into formal
16
<PAGE>
agreements. As a result, there can be no assurance that the
Company will consummate any such acquisition.
o The Company's strategy also focuses on the reduction of
selling, general and administrative expenses through the
integration or elimination of redundant sales offices and
administrative functions at acquired companies and
achievement of significant production cost savings through
the transfer and expansion of manufacturing operations to
lower cost regions such as Israel, Mexico, Portugal, the
Czech Republic, Taiwan and the People's Republic of China.
The Company's inability to achieve any of these goals could
have an adverse effect on the Company's results of
operations.
o The Company may be adversely affected by the costs and other
effects associated with (i) legal and administrative cases
and proceedings (whether civil, such as environmental and
product-related, or criminal); (ii) settlements,
investigations, claims, and changes in those items; (iii)
developments or assertions by or against the Company
relating to intellectual property rights and intellectual
property licenses; and (iv) adoption of new, or changes in,
accounting policies and practices and the application of
such policies and practices.
o The Company's results of operations may also be affected by
(i) changes within the Company's organization, particularly
at the executive officer level, or in compensation and
benefit plans; and (ii) the amount, type and cost of the
financing which the Company maintains, and any changes to
the financing.
o The inherent risk of environmental liability and remediation
costs associated with the Company's manufacturing operations
may result in large and unforseen liabilities.
o The Company's operations may be adversely impacted by (i)
the effects of war or severe weather or other acts of God on
the Company's operations, including disruptions at
manufacturing facilities; (ii) the effects of a disruption
in the Company's computerized ordering systems; and (iii)
the effects of a disruption in the Company's communications
systems.
17
<PAGE>
VISHAY INTERTECHNOLOGY, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company has received notice from counsel representing the
Estate of Jerome H. Lemelson of alleged infringement by the
Company of various patents owned by the estate. The estate
recently settled litigation with several large Original Equipment
Manufacturers (O.E.M.) customers of the Company and has
approached many of the Company's competitors with claims of
alleged patent infringements. The patents, in general, relate to
bar-code readers and other automated inspection gear. The Company
is currently attempting to assess its potential liability, if
any, if the validity of the patents were to be upheld and the
extent to which such patents apply to the Company's manufacturing
methods. At this time the Company is unable to determine the
extent, or materiality of any liability under these claims.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Proposals of stockholders intended to be presented at the
Company's 1999 annual meeting of stockholders must be received at
the Company's principal executive offices not later than December
23, 1998 in order to be included in the Company's proxy statement
and form of proxy relating to the 1999 annual meeting.
Pursuant to new amendments to Rule 14a-4(c) of the Securities
Exchange Act of 1934, as amended, if a stockholder who intends to
present a proposal at the 1999 annual meeting of stockholders
does not notify the Company of such proposal on or prior to March
3, 1999, then management proxies would be allowed to use their
discretionary voting authority to vote on the proposal when the
proposal is raised at the annual meeting, even though there is no
discussion of the proposal in the 1999 proxy statement.
During the quarter ended September 30, 1998, Donald G. Alfson, a
director and Executive Vice President of Vishay Intertechnology,
Inc., upon mutual agreement, resigned from all positions with the
Company, in order to pursue other professional interests.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Not applicable
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VISHAY INTERTECHNOLOGY, INC.
/s/ Richard N. Grubb
-----------------------------------
Richard N. Grubb
Executive Vice President, Treasurer
(Duly Authorized and Chief Financial
Officer)
Date: November 13, 1998
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