SEC Filing | Vishay Intertechnology, Inc.

SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-7416 VISHAY INTERTECHNOLOGY, INC. (Exact name of registrant as specified in its charter) DELAWARE 38-1686453 (State or other jurisdiction (I.R.S. Employer Identification of incorporation or organization) Number) 63 Lincoln Highway, Malvern, Pennsylvania 19355 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (610) 644-1300 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No As of August 13, 1996 registrant had 53,710,562 shares of its Common Stock and 7,580,318 shares of its Class B Common Stock outstanding. VISHAY INTERTECHNOLOGY, INC. FORM 10-Q JUNE 30, 1996 CONTENTS Page No. PART I. FINANCIAL INFORMATION Item 1. Consolidated Condensed Balance Sheets - 3-4 June 30, 1996 and December 31, 1995 Consolidated Condensed Statements of 5 Operations - Three Months Ended June 30, 1996 and 1995 Consolidated Condensed Statements of 6 Operations - Six Months Ended June 30, 1996 and 1995 Consolidated Condensed Statements of 7 Cash Flows - Six Months Ended June 30, 1996 and 1995 Notes to Consolidated Condensed 8 Financial Statements Item 2. Management's Discussion and Analysis 9-13 of Financial Condition and Results of Operations PART II. OTHER INFORMATION 14-15

VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (Unaudited - In thousands) June 30 December 31 ASSETS 1996 1995 ----------- ----------- CURRENT ASSETS Cash and cash equivalents $33,714 $19,584 Accounts receivable 177,659 180,383 Inventories: Finished goods 186,059 148,846 Work in process 76,377 92,166 Raw materials 127,621 121,180 Prepaid expenses and other current assets 78,132 78,039 ----------- ----------- TOTAL CURRENT ASSETS 679,562 640,198 PROPERTY AND EQUIPMENT - AT COST Land 44,509 46,073 Buildings and improvements 209,403 197,164 Machinery and equipment 644,541 603,175 Construction in progress 83,339 76,564 Allowance for depreciation (282,105) (253,748) ----------- ----------- 699,687 669,228 GOODWILL 211,518 218,102 OTHER ASSETS 18,000 15,803 ----------- ----------- $1,608,767 $1,543,331 =========== ===========

LIABILITIES AND June 30 December 31 STOCKHOLDERS' EQUITY 1996 1995 ----------- ----------- CURRENT LIABILITIES Notes payable to banks $35,966 $22,174 Trade accounts payable 39,949 66,942 Payroll and related expenses 47,120 43,790 Other accrued expenses 62,819 51,102 Income taxes 13,667 7,083 Current portion of long-term debt 37,774 37,821 ----------- ----------- TOTAL CURRENT LIABILITIES 237,295 228,912 LONG-TERM DEBT 253,866 228,610 DEFERRED INCOME TAXES 40,654 42,044 OTHER LIABILITIES 80,013 59,866 ACCRUED RETIREMENT COSTS 73,186 76,046 STOCKHOLDERS' EQUITY Common stock 5,371 5,114 Class B common stock 758 722 Capital in excess of par value 825,850 734,316 Retained earnings 86,970 146,370 Foreign currency translation adjustment 11,706 28,487 Unearned compensation (495) (364) Pension adjustment (6,407) (6,792) ----------- ----------- 923,753 907,853 ----------- ----------- $1,608,767 $1,543,331 =========== =========== See notes to consolidated condensed financial statements.

VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Operations (Unaudited - In thousands except earnings per share) Three Months Ended June 30 1996 1995 ----------- ----------- Net sales $273,502 $315,461 Costs of products sold 201,638 231,935 ----------- ----------- GROSS PROFIT 71,864 83,526 Selling, general, and administrative expenses 38,466 40,523 Restructuring expenses 24,280 0 Amortization of goodwill 1,630 1,593 ----------- ----------- OPERATING INCOME 7,488 41,410 Other income (expense): Interest expense (4,569) (8,573) Other 1,022 (305) ----------- ----------- (3,547) (8,878) ----------- ----------- EARNINGS BEFORE INCOME TAXES 3,941 32,532 Income taxes 158 7,808 ----------- ----------- NET EARNINGS $3,783 $24,724 =========== =========== Net earnings per share $0.06 $0.45 =========== =========== Weighted average shares outstanding 61,303 55,354 See notes to consolidated condensed financial statements.

VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Operations (Unaudited - In thousands except earnings per share) Six Months Ended June 30 1996 1995 ----------- ----------- Net sales $584,162 $625,745 Costs of products sold 427,217 462,954 ----------- ----------- GROSS PROFIT 156,945 162,791 Selling, general, and administrative expenses 78,841 81,643 Restructuring expenses 24,280 0 Amortization of goodwill 3,260 3,193 ----------- ----------- OPERATING INCOME 50,564 77,955 Other income (expense): Interest expense (8,862) (16,892) Other 863 (318) ----------- ----------- (7,999) (17,210) ----------- ----------- EARNINGS BEFORE INCOME TAXES 42,565 60,745 Income taxes 10,741 13,987 ----------- ----------- NET EARNINGS $31,824 $46,758 =========== =========== Net earnings per share $0.52 $0.84 =========== =========== Weighted average shares outstanding 61,293 55,346 See notes to consolidated condensed financial statements. VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited - In thousands) Six Months Ended June 30 1996 1995 ----------- ----------- OPERATING ACTIVITIES Net earnings $31,824 $46,758 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 38,486 33,494 Other 19,227 16,316 Changes in operating assets and liabilities (40,867) (44,339) ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 48,670 52,229 INVESTING ACTIVITIES Purchases of property and equipment-net (77,546) (86,004) ------------ ----------- NET CASH USED IN INVESTING ACTIVITIES (77,546) (86,004) FINANCING ACTIVITIES Net proceeds from revolving credit lines 82,568 46,352 Proceeds from long-term borrowings 3,375 64 Payments on long-term borrowings (56,236) (11,329) Net proceeds (payments) on short-term borrowings 14,176 (1,193) ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 43,883 33,894 Effect of exchange rate changes on cash (877) 1,538 ----------- ----------- INCREASE IN CASH AND CASH EQUIVALENTS 14,130 1,657 Cash and cash equivalents at beginning of period 19,584 26,857 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $33,714 $28,514 =========== =========== See notes to consolidated condensed financial statements. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited) June 30, 1996 Note 1: Basis of Presentation The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for presentation of financial position, results of operations, and cash flows required by generally accepted accounting principles for complete financial statements. The information furnished reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair summary of the financial position, results of operations and cash flows for the interim periods presented. The financial statements should be read in conjunction with the financial statements and notes thereto filed with Form 10-K for the year ended December 31, 1995. Note 2: Earnings Per Share Earnings per share amounts for all periods reflect a 5% stock dividend paid on June 7, 1996. Earnings per share for the three and six month periods ended June 30, 1996 reflect the issuance of 5.75 million shares of common stock completed in September 1995. Note 3: Reclassifications Certain prior year amounts have been reclassified to conform with the current presentation. Note 4: Restructuring Expense The Company recorded a pretax restructuring charge of $24,280,000 ($16,000,000 after tax) in the quarter ended June 30, 1996. These expenses relate to a reduction in the Company's worldwide workforce of approximately 1,300 employees resulting, in part, from the worldwide slowdown in the demand for tantalum and multi-layer ceramic capacitors and the economic downturn in Germany. The Company also intends to close or downsize several facilities in North America and Europe. The restructuring expenses occurred in the Company's "higher tax rate" countries which lowered the Company's effective tax rate for the quarter to 4%.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net sales for the quarter and six months ended June 30, 1996 decreased $41,959,000 or 13.3.% and $41,583,000 or 6.6%, respectively, from the comparable periods of the prior year. The decrease in net sales is indicative of the worldwide slowdown in the demand for tantalum and multi-layer ceramic capacitors, the economic downturn in Germany, where a significant portion of the Company's products are sold, and the abrupt worldwide decline in demand in the personal computer and telecommunications markets, which started at the end of last year. In addition, the strengthening of the U.S. dollar against foreign currencies for the quarter ended June 30, 1996 in comparison to the prior year's quarter resulted in a decrease in reported sales of $9,163,000. For the six months ended June 30, 1996, the strengthening of the U.S. dollar against foreign currencies in comparison to the prior year period resulted in a decrease in reported sales of $7,685,000. Income statement captions as a percentage of sales and the effective tax rates were as follows: Three Months Ended Six Months Ended June 30 June 30 1996 1995 1996 1995 ------ ------ ------ ------ Costs of products sold 73.7 73.5 73.1 74.0 Gross profit 26.3 26.5 26.9 26.0 Selling, general and administrative expenses 14.1 12.8 13.5 13.0 Operating income 2.7 13.1 8.7 12.5 Earnings before income taxes 1.4 10.3 7.3 9.7 Effective tax rate 4.0 24.0 25.2 23.0 Net earnings 1.4 7.8 5.4 7.5 Costs of products sold for the quarter and six months ended June 30, 1996 were 73.7% and 73.1%, of net sales, respectively, as compared to 73.5% and 74.0%, respectively, for the comparable prior year periods. The increase in the quarter ended June 30, 1996 is due to the significant decrease in net sales as compared to the prior year quarter. The decrease for the six months ended June 30, 1996, despite the significant decrease in net sales, reflects an increase in production in Israel where labor costs are lower than in most other regions in which Vishay manufactures and the continued shift of sales mix to higher margin products. Israel government grants, recorded as a reduction of costs of products sold, were $2,061,000 and $4,201,000 for the quarter and six months ended June 30, 1996, respectively, as compared to $3,351,000 and $5,940,000 for the comparable prior year periods. Future grants and other incentive programs offered to the Company by the Israeli government will likely depend on the Company's continuing to increase capital investment and the number of the Company's employees in Israel. Deferred income at June 30, 1996 relating to Israeli government grants was $46,799,000 as compared to $30,849,000 at December 31, 1995. Selling, general, and administrative expenses for the quarter and six months ended June 30, 1996 were 14.1% and 13.5% of net sales, respectively, as compared to 12.8% and 13.0% for the comparable prior year periods. The percentages in 1996 are higher due to the significant decrease in net sales. However, in terms of absolute dollar amounts, selling, general and administrative expenses have decreased by $2,057,000 and $2,802,000, respectively, as compared to the prior year periods. The Company recorded a pretax restructuring charge of $24,280,000 ($16,000,000 after tax) in the quarter ended June 30, 1996 in connection with a reduction of approximately 1,300 employees in the Company's worldwide workforce. The Company also intends to close or downsize several facilities in North America and Europe. The components of the restructuring expenses are as follows: Severance pay $20,919,000 Machinery and equipment writeoff 3,098,000 Other 263,000 ----------- Total $24,280,000 =========== The Company has paid out $411,000 of severance as of June 30, 1996. The Company is scheduled to pay $12,385,000 of severance by December 31, 1996 with the remaining $8,123,000 to be paid by March 31, 1997. The Company has sufficient lines of credit to fund these payments. The machinery and equipment will be disposed of immediately. When fully implemented, the restructuring should reduce the Company's costs annually by approximately $25,000,000. These savings will be partially realized in 1996 and the remainder during 1997. Interest costs decreased by $4,004,000 and $8,030,000 for the quarter and six months ended June 30, 1996 from the comparable prior year periods primarily as a result of the net proceeds of $230,279,000 from a common stock offering completed in September 1995 which were used, in large part, to prepay bank indebtedness. Other income(expense) increased by $1,327,000 and $1,181,000 for the quarter and six months ended June 30, 1996, respectively, as compared to the prior years' periods. The increase is due to interest income of $800,000 and $991,000 and foreign exchange gains of $382,000 and $225,000, respectively, for the quarter and six months ended June 30, 1996. For the quarter and six months ended June 30, 1995 interest income was $170,000 and $799,000 and foreign exchange losses were $578,000 and $815,000, respectively. The effective tax rate for the six months ended June 30, 1996 was 25.2% compared to 23.0% for the comparable prior year period. The effective tax rate for calendar year 1995 was 24.6%. The lower tax rate for the quarter ended June 30, 1996 was due primarily to the restructuring charges recorded in higher tax rate countries. The continuing effect of low tax rates in Israel (as compared to the statutory rate in the United States) has been to increase net earnings by $4,165,000 and $4,123,000 for the quarters ended June 30, 1996 and 1995, respectively, and $8,538,000 and $8,195,000 for the six month periods ended June 30, 1996 and 1995, respectively. The period to period increases are primarily a result of increased earnings for the Israeli operations as a result of increased production. The more favorable Israeli tax rates are applied to specific approved projects and normally continue to be available for a period of ten years. New projects are continually being introduced. Financial Condition Cash flows from operations were $48,670,000 for the six months ended June 30, 1996 compared to $52,229,000 for the prior year's period. Net purchases of property and equipment for the six months ended June 30, 1996 were $77,546,000 compared to $86,004,000 in the prior year's period. This reflects the Company's on-going program to purchase additional equipment for surface mount components. Net cash provided by financing activities of $43,883,000 for the six months ended June 30, 1996 includes borrowings used primarily to finance the additions to property and equipment. The Company's financial condition at June 30, 1996 is strong, with a current ratio of 2.86 to 1. The Company's ratio of long-term debt (less current portion) to stockholders' equity was .27 to 1 at June 30, 1996 and .25 at December 31, 1995. Management believes that available sources of credit, together with cash expected to be generated from operations, will be sufficient to satisfy the Company's anticipated financing needs for working capital and capital expenditures during the next twelve months. Inflation Normally, inflation does not have a significant impact on the Company's operations. The Company's products are not generally sold on long-term contracts. Consequently, selling prices, to the extent permitted by competition, can be adjusted to reflect cost increases caused by inflation. Safe Harbor Statement From time to time, information provided by the Company, including but not limited to statements in this report, or other statements made by or on behalf of the Company, may contain "forward-looking" information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements involve a number of risks and uncertainties. The Company's actual results could differ materially from those discussed in the forward-looking statements. The cautionary statements set forth below identify important factors that could cause actual results to differ materially from those in any forward-looking statements made by or on behalf of the Company. The Company offers a broad variety of products and services to its customers. Changes in demand for, or in the mix of, products and services comprising revenues could cause actual operating results to vary from those expected. The Company's future operating results are dependent, in part, on its ability to develop, produce and market new and innovative products, to convert existing products to surface mount devices and to customize certain products to meet customer requirements. There are numerous risks inherent in this complex process, including rapid technological changes and the need for the Company to timely bring to market new products and applications to meet customers' changing needs. The Company operates in a highly competitive environment, which includes significant competitive pricing pressures and intense competition for entry into new markets. A slowdown in demand for passive electronic components or recessionary trends in the global economy in general or in specific countries or regions where the Company sells the bulk of its products, such as the U.S., Germany, France or the Pacific Rim, could adversely impact the Company's results of operations. Much of the orders in the Company's backlog may be canceled by its customers without penalty. Customers may on occasion double and triple order components from multiple sources to insure timely delivery when backlog is particularly long. The Company's results of operations may be adversely impacted if customers were to cancel a material portion of such orders. Approximately 50% of the Company's revenues are derived from operations and sales outside the United States. As a result, currency exchange rate fluctuations, inflation, changes in monetary policy and tariffs, potential changes in laws and regulations affecting the Company's business in foreign jurisdictions, trade restrictions or prohibitions, intergovernmental disputes, increased labor costs and reduction or cancellation of government grants, tax benefits or other incentives could impact the Company's results of operations. Specifically, as a result of the increased production by the Company's operations in Israel over the past several years, the low tax rates in Israel (as compared to the statutory rates in the U.S.) have had the effect of increasing the Company's net earnings. In addition, the Company takes advantage of certain incentive programs in Israel in the form of grants designed to increase employment in Israel. Any significant increase in the Israeli tax rates or reduction or elimination of any of the Israeli grant programs could have an adverse impact on the Company's results of operations. The Company may experience underutilization of certain plants and factories in high labor cost regions and capacity constraints in plants and factories located in low labor cost regions, resulting initially in production inefficiencies and higher costs. Such costs include those associated with work force reductions and plant closings in the higher labor cost regions and start-up expenses, manufacturing and construction delays, and increased depreciation costs in connection with the start of production in new plants and expansions in lower labor cost regions. Moreover, capacity constraints may limit the Company's ability to continue to meet demand for any of the Company's products. When the Company restructures its operation in response to changing economic conditions, particularly in Europe, labor unrest or strikes may occur, which could have an adverse effect on the Company. The Company's results of operations may be adversely impacted by (i) difficulties in obtaining raw materials, supplies, power, natural resources and any other items needed for the production of the Company's products; (ii) the effects of quality deviations in raw materials, particularly tantalum powder, palladium and ceramic dielectric materials; and (iii) the effects of significant price increases for tantalum or palladium, or an inability to obtain adequate supplies of tantalum or palladium from the limited number of suppliers. The Company's historic growth in revenues and net earnings have resulted in large part from its strategy to expand through acquisitions. However, there is no assurance that the Company will find or consummate transactions with suitable acquisition candidates in the future. The Company's strategy also focuses on the reduction of selling, general and administrative expenses through the integration or elimination of redundant sales offices and administrative functions at acquired companies and achievement of significant production cost savings through the transfer and expansion of manufacturing operations to lower cost regions such as Israel, Mexico, Portugal and the Czech Republic. The Company's inability to achieve any of these goals could have an adverse effect on the Company's results of operations. The Company may be adversely affected by the costs and other effects associated with (i) legal and administrative cases and proceedings (whether civil, such as environmental and product-related, or criminal); (ii) settlements, investigations, claims, and changes in those items; (iii) developments or assertions by or against the Company relating to intellectual property rights and intellectual property licenses; and (iv) adoption of new, or changes in, accounting policies and practices and the application of such policies and practices. The Company's results of operations may also be affected by (i) changes within the Company's organization, particularly at the executive officer level, or in compensation and benefit plans; and (ii) the amount, type and cost of the financing which the Company maintains, and any changes to the financing. The inherent risk of environmental liability and remediation costs associated with the Company's manufacturing operations may result in large and unforseen liabilities. The Company's operations may be adversely impacted by (i) the effects of war or severe weather or other acts of God on the Company's operations, including disruptions at manufacturing facilities; (ii) the effects of a disruption in the Company's computerized ordering systems; and (iii) the effects of a disruption in the Company's communications systems.

VISHAY INTERTECHNOLOGY, INC. PART II - OTHER INFORMATION Item 1. Legal Proceedings Not applicable Item 2. Changes in Securities Not applicable Item 3. Defaults Upon Senior Securities Not applicable Item 4. Submission of Matters to a Vote of Security Holders (a) The Company held its Annual Meeting of Stockholders on May 16, 1996. (b) Proxies for the meeting were solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended. There was no solicitation in opposition to management's nominees for the directors as listed in the definitive proxy statement of the Company dated April 15, 1996, and all such nominees were elected. (c) Briefly described below is each matter voted upon at the Annual Meeting of Stockholders. (i) Election of the following individuals to hold office as Directors of the Company until the next Annual Meeting of Stockholders: Total Class A Common Stock voted was 43,677,788. Broker For Against Abstain Non-Votes Felix Zandman 40,523,924 3,153,864 0 0 Donald G. Alfson 40,522,808 3,154,980 0 0 Avi D. Eden 40,520,200 3,157,588 0 0 Robert A. Freece 40,522,808 3,154,980 0 0 Richard N. Grubb 40,522,808 3,154,980 0 0 Eli Hurvitz 40,718,632 2,959,156 0 0 Gerald Paul 40,522,808 3,154,980 0 0 Edward Shils 40,715,650 2,962,138 0 0 Luella B. Slaner 40,716,140 2,961,648 0 0 Mark I. Solomon 40,721,070 2,956,718 0 0 Jean-Claude Tine 40,713,012 2,964,776 0 0 Total Class B Common Stock voted was 7,178,862 in favor, 0 against, 0 abstained, and 0 broker non-votes. (ii) Ratification of the appointment of Ernst & Young LLP, independent certified public accountants, to audit the books and accounts of the Company for the calendar year ending December 31, 1996. Total Class A Common Stock voted was 43,591,557 in favor, 30,366 against, 55,865 abstained, and 0 broker non-votes. Total Class B Common Stock voted was 7,178,862 in favor, 0 against, 0 abstained, and 0 broker non-votes. Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description of Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K Not applicable

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VISHAY INTERTECHNOLOGY, INC. /s/ Richard N. Grubb ------------------------------------ Richard N. Grubb Vice President, Treasurer (Duly Authorized and Chief Financial Officer) Date: August 13, 1996

5 1,000 6-MOS DEC-31-1996 JUN-30-1996 33714 0 184913 7254 390057 679562 981792 282105 1608767 237295 0 0 0 5371 918382 1608767 584162 584162 427217 427217 105518 0 8862 42565 10741 31824 0 0 0 31824 .52 .52