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 September 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 November 6, 1996 registrant had 53,726,776 shares of its Common Stock and 7,564,818 shares of its Class B Common Stock outstanding.

VISHAY INTERTECHNOLOGY, INC. FORM 10-Q SEPTEMBER 30, 1996 CONTENTS Page No. -------- PART I. FINANCIAL INFORMATION Item 1. Consolidated Condensed Balance Sheets - 3-4 September 30, 1996 and December 31, 1995 Consolidated Condensed Statements of 5 Operations - Three Months Ended September 30, 1996 and 1995 Consolidated Condensed Statements of 6 Operations - Nine Months Ended September 30, 1996 and 1995 Consolidated Condensed Statements of 7 Cash Flows - Nine Months Ended September 30, 1996 and 1995 Notes to Consolidated Condensed 8 Financial Statements Item 2. Management's Discussion and Analysis 9-15 of Financial Condition and Results of Operations PART II. OTHER INFORMATION 16

VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (Unaudited - In thousands) September 30 December 31 ASSETS 1996 1995 ------------ ----------- CURRENT ASSETS Cash and cash equivalents $33,880 $19,584 Accounts receivable 173,617 180,383 Inventories: Finished goods 191,250 148,846 Work in process 70,834 92,166 Raw materials 118,690 121,180 Prepaid expenses and other current 82,362 78,039 ------------ ----------- TOTAL CURRENT ASSETS 670,633 640,198 PROPERTY AND EQUIPMENT - AT COST Land 44,235 46,073 Buildings and improvements 220,592 197,164 Machinery and equipment 680,886 603,175 Construction in progress 69,039 76,564 Allowance for depreciation (299,284) (253,748) ------------ ----------- 715,468 669,228 GOODWILL 210,568 218,102 OTHER ASSETS 17,370 15,803 ------------ ----------- $1,614,039 $1,543,331 ============ ===========

September 30 December 31 LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995 ------------ ----------- CURRENT LIABILITIES Notes payable to banks $34,336 $22,174 Trade accounts payable 37,550 66,942 Payroll and related expenses 42,207 43,790 Other accrued expenses 61,711 51,102 Income taxes 20,532 7,083 Current portion of long-term debt 38,973 37,821 ------------ ----------- TOTAL CURRENT LIABILITIES 235,309 228,912 LONG-TERM DEBT 240,580 228,610 DEFERRED INCOME TAXES 41,045 42,044 DEFERRED INCOME 52,400 30,849 OTHER LIABILITIES 31,757 29,017 ACCRUED RETIREMENT COSTS 73,887 76,046 STOCKHOLDERS' EQUITY Common stock 5,371 5,114 Class B common stock 758 722 Capital in excess of par value 825,857 734,316 Retained earnings 101,454 146,370 Foreign currency translation adjust 12,501 28,487 Unearned compensation (428) (364) Pension adjustment (6,452) (6,792) ------------ ----------- 939,061 907,853 ------------ ----------- $1,614,039 $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 September 30, 1996 1995 ------------ ----------- Net sales $259,889 $300,629 Costs of products sold 198,712 221,364 ------------ ----------- GROSS PROFIT 61,177 79,265 Selling, general, and administrative expenses 35,834 39,586 Amortization of goodwill 1,639 1,622 ------------ ----------- OPERATING INCOME 23,704 38,057 Other income (expense): Interest expense (4,455) (7,959) Other 115 (322) ------------ ----------- (4,340) (8,281) ------------ ----------- EARNINGS BEFORE INCOME TAXES 19,364 29,776 Income taxes 4,880 7,444 ------------ ----------- NET EARNINGS $14,484 $22,332 ============ =========== Net earnings per share $0.24 $0.40 ============ =========== Weighted average shares outstanding 61,291 56,062 See notes to consolidated condensed financial statements.

VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Operations (Unaudited - In thousands except earnings per share) Nine Months Ended September 30, 1996 1995 ------------ ----------- Net sales $844,051 $926,374 Costs of products sold 625,929 684,318 ------------ ----------- GROSS PROFIT 218,122 242,056 Selling, general, and administrative expenses 114,675 121,229 Restructuring expenses 24,280 0 Amortization of goodwill 4,899 4,815 ------------ ----------- OPERATING INCOME 74,268 116,012 Other income (expense): Interest expense (13,317) (24,851) Other 978 (640) ------------ ----------- (12,339) (25,491) ------------ ----------- EARNINGS BEFORE INCOME TAXES 61,929 90,521 Income taxes 15,621 21,431 ------------ ----------- NET EARNINGS $46,308 $69,090 ============ =========== Net earnings per share $0.76 $1.24 ============ =========== Weighted average shares outstanding 61,292 55,587 See notes to consolidated condensed financial statements.

VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited - In thousands) Nine Months Ended September 30, 1996 1995 ------------ ----------- OPERATING ACTIVITIES Net earnings $46,308 $69,090 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 59,130 51,498 Other 21,709 15,629 Changes in operating assets and liabilities (31,777) (46,500) ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 95,370 89,717 INVESTING ACTIVITIES Purchases of property and equipment-net (110,093) (118,554) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (110,093) (118,554) FINANCING ACTIVITIES Net proceeds (payments) on revolving credit lines 80,050 (130,801) Proceeds from long-term borrowings 3,378 63 Payments on long-term borrowings (66,360) (55,057) Net proceeds (payments) on short-term borrowings 12,488 (11,164) Proceeds from sale of common stock - 230,863 ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 29,556 33,904 Effect of exchange rate changes on cash (537) 1,351 ----------- ----------- INCREASE IN CASH AND CASH EQUIVALENTS 14,296 6,418 Cash and cash equivalents at beginning of period 19,584 26,857 ------------ ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $33,880 $33,275 ============ =========== See notes to consolidated condensed financial statements. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited) September 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 nine month periods ended September 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 For the nine months ended September 30, 1996, the Company has recorded a pretax restructuring charge of $24,280,000 ($16,000,000 after tax) in June 1996. These expenses relate to a reduction in the Company's worldwide workforce of approximately 1,700 employees resulting, in part, from the worldwide slowdown in the demand for tantalum and multi-layer ceramic capacitors and the economic downturn in Germany. As of September 30, 1996, 806 of the 1,700 employees have left the Company. The Company has paid out $2,287,000 of severance as of September 30, 1996. The Company is scheduled to pay $10,509,000 of severance by December 31, 1996 with the remaining $8,123,000 to be paid by March 31, 1997. Depending on future economic conditions, the Company may continue to downsize or close existing facilities in North America and Europe.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net sales for the quarter and nine months ended September 30, 1996 decreased $40,740,000 or 13.6% and $82,323,000 or 8.9%, 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 for passive electronic components by personal computer and telecommunications manufacturers, which started at the end of last year. In addition, the strengthening of the U.S. dollar against foreign currencies for the quarter ended September 30, 1996, in comparison to the prior year's quarter, resulted in a decrease in reported sales of $5,017,000. For the nine months ended September 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 $12,702,000. Income statement captions as a percentage of sales and the effective tax rates were as follows: Three Months Ended Nine Months Ended September 30 September 30 1996 1995 1996 1995 ---- ---- ---- ---- Costs of products sold 76.5 73.6 74.2 73.9 Gross profit 23.5 26.4 25.8 26.1 Selling, general and administrative expenses 13.8 13.2 13.6 13.1 Operating income 9.1 12.7 8.8 12.5 Earnings before income taxes 7.5 9.9 7.3 9.8 Effective tax rate 25.2 25.0 25.2 23.7 Net earnings 5.6 7.4 5.5 7.5 Costs of products sold for the quarter and nine months ended September 30, 1996 were 76.5% and 74.2%, of net sales, respectively, as compared to 73.6% and 73.9%, respectively, for the comparable prior year periods. Costs of products sold for the quarter and nine months ended September 30, 1996 were negatively affected by an inventory decrease of $10,000,000 during the quarter ended September 30, 1996 causing unabsorbed overhead costs. Furthermore, ineffiencies created by legal constraints which prevented us from immediately terminating laid-off employees also affected costs of products sold. Israeli government grants, recorded as a reduction of costs of products sold, were $2,215,000 and $6,416,000 for the quarter and nine months ended September 30, 1996, respectively, as compared to $3,693,000 and $9,633,000 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, 1996 relating to Israeli government grants was $52,400,000 as compared to $30,849,000 at December 31, 1995. Selling, general, and administrative expenses for the quarter and nine months ended September 30, 1996 were 13.8% and 13.6% of net sales, respectively, as compared to 13.2% and 13.1% 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 $3,752,000 and $6,554,000, 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 June 1996 in connection with a reduction of approximately 1,700 employees in the Company's worldwide workforce. As of September 30, 1996, 806 of the 1,700 employees have left the Company. Depending on future economic conditions, the Company may continue to downsize or close existing facilities in North America and Europe. The components of the restructuring expenses were as follows: Severance pay $20,919,000 Machinery and equipment write-off 3,098,000 Other 263,000 ----------- Total $24,280,000 =========== The Company has paid out $2,287,000 of severance as of September 30, 1996. The Company is scheduled to pay $10,509,000 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. When fully implemented, the restructuring should reduce the Company's costs by approximately $25,000,000 annually. The Company expects that these savings will likely commence to be realized in the fourth quarter of 1996. Interest costs decreased by $3,504,000 and $11,534,000 for the quarter and nine months ended September 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 $437,000 and $1,618,000 for the quarter and nine months ended September 30, 1996, respectively, as compared to the prior year periods. The increase is due to interest income of $291,000 and $1,282,000 and foreign exchange gains(losses) of ($89,000) and $136,000, respectively, for the quarter and nine months ended September 30, 1996. For the quarter and nine months ended September 30, 1995 interest income was $307,000 and $1,106,000 and foreign exchange losses were $678,000 and $1,493,000, respectively. The effective tax rate for the quarter and nine months ended September 30, 1996 was 25.2% as compared to 25.0% and 23.7%, respectively, for the comparable prior year periods. The effective tax rate for calendar year 1995 was 24.6%. 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 $1,747,000 and $4,595,000 for the quarters ended September 30, 1996 and 1995, respectively, and $10,285,000 and $12,790,000 for the nine month periods ended September 30, 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. Financial Condition Cash flows from operations were $95,370,000 for the nine months ended September 30, 1996 compared to $89,717,000 for the prior year's period. Net purchases of property and equipment for the nine months ended September 30, 1996 were $110,093,000 compared to $118,554,000 in the prior year's period. This reflects the Company's ongoing program to purchase additional equipment for surface mount components. Net cash provided by financing activities of $29,556,000 for the nine months ended September 30, 1996 includes borrowings used primarily to finance the additions to property and equipment. The Company's financial condition at September 30, 1996 is strong, with a current ratio of 2.85 to 1. The Company's ratio of long-term debt (less current portion) to stockholders' equity was .26 to 1 at September 30, 1996 and .25 to 1 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 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. 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 Not applicable Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Not applicable (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: November 6, 1996

5 1,000 9-MOS DEC-31-1996 SEP-30-1996 33880 0 180565 6948 380775 670633 1014752 299284 1614039 235308 0 0 0 5371 933690 1614039 259889 259889 198712 198712 37359 0 4454 19364 4880 14484 0 0 0 14484 .24 .24