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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
--------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ------------
Commission File Number 1-7416
VISHAY INTERTECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-1686453
- -------------------------------------------- --------------------------
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer
Identification Number)
63 Lincoln Highway
Malvern, PA 19355-2120 610-644-1300
------------------------------------- --------------------------
(Address of Principal Executive Offices) (Registrant's Area Code
and Telephone Number)
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 __
Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act).Yes x No __
As of November 13, 2003 registrant had 144,508,424 shares of its Common Stock
and 15,941,202 shares of its Class B Common Stock outstanding.
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VISHAY INTERTECHNOLOGY, INC.
FORM 10-Q
SEPTEMBER 30, 2003
CONTENTS
--------
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
(Unaudited) - September 30, 2003 and
December 31, 2002 3
Consolidated Condensed Statements of Operations
(Unaudited) - Three Months Ended September 30,
2003 and 2002 5
Consolidated Condensed Statements of Operations
(Unaudited) - Nine Months Ended September 30,
2003 and 2002 6
Consolidated Condensed Statements of Cash Flows
(Unaudited) - Nine Months Ended September 30,
2003 and 2002 7
Notes to Consolidated Condensed Financial
Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 23
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 34
Item 4. Controls and Procedures 34
PART II. OTHER INFORMATION 35
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited - In thousands)
September 30, December 31,
ASSETS 2003 2002
------------ -----------
CURRENT ASSETS
Cash and cash equivalents $ 529,380 $ 339,938
Accounts receivable, net 391,252 343,511
Inventories:
Finished goods 180,266 219,769
Work in process 155,928 142,846
Raw materials 177,017 191,451
Deferred income taxes 45,554 47,297
Prepaid expenses and other current assets 151,398 188,881
----------- -----------
TOTAL CURRENT ASSETS 1,630,795 1,473,693
PROPERTY AND EQUIPMENT - AT COST
Land 106,744 118,000
Buildings and improvements 344,848 339,869
Machinery and equipment 1,624,113 1,609,931
Construction in progress 70,072 61,830
Allowance for depreciation (972,105) (854,780)
----------- -----------
1,173,672 1,274,850
GOODWILL 1,449,072 1,356,293
OTHER INTANGIBLE ASSETS, NET 113,906 122,417
OTHER ASSETS 129,537 87,906
----------- -----------
$ 4,496,982 $ 4,315,159
=========== ===========
3
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2003 2002
------------ -----------
CURRENT LIABILITIES
Notes payable to banks $ 17,106 $ 18,161
Trade accounts payable 126,830 123,999
Payroll and related expenses 119,009 103,184
Other accrued expenses 281,209 303,609
Income taxes 13,788 8,734
Current portion of long-term debt 1,387 18,550
----------- -----------
TOTAL CURRENT LIABILITIES 559,329 576,237
LONG-TERM DEBT 835,134 706,316
DEFERRED INCOME TAXES 48,502 52,935
DEFERRED INCOME 30,359 42,345
MINORITY INTEREST 81,159 75,985
OTHER LIABILITIES 273,483 279,462
ACCRUED PENSION COSTS 239,119 223,092
STOCKHOLDERS' EQUITY
Common Stock 14,433 14,429
Class B Common Stock 1,538 1,538
Capital in excess of par value 1,911,254 1,910,994
Retained earnings 539,857 523,354
Accumulated other comprehensive loss (36,920) (91,115)
Unearned compensation (265) (413)
----------- -----------
2,429,897 2,358,787
----------- -----------
$ 4,496,982 $ 4,315,159
=========== ===========
See Notes to Consolidated Condensed Financial Statements.
4
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
Three Months Ended
September 30,
2003 2002
--------- ---------
Net sales $ 533,168 $ 471,419
Costs of products sold 419,313 364,192
Loss on long-term purchase commitments 11,392 --
--------- ---------
GROSS PROFIT 102,463 107,227
Selling, general, and administrative expenses 91,993 78,247
Restructuring expense 6,313 2,567
--------- ---------
OPERATING INCOME 4,157 26,413
Other income (expense):
Interest expense (9,727) (7,166)
Loss on extinguishment of debt (9,910) --
Gain on insurance claim 30,361 --
Other (951) 2,126
--------- ---------
9,773 (5,040)
--------- ---------
EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST 13,930 21,373
Income taxes 5,211 5,487
Minority interest 1,944 2,772
--------- ---------
NET EARNINGS $ 6,775 $ 13,114
========= =========
Basic earnings per share $ 0.04 $ 0.08
Diluted earnings per share $ 0.04 $ 0.08
Weighted average shares outstanding - basic 159,610 159,525
Weighted average shares outstanding - diluted 160,356 160,303
See Notes to Consolidated Condensed Financial Statements.
5
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited - In thousands except earnings per share)
Nine Months Ended
September 30,
2003 2002
----------- -----------
Net sales $ 1,603,398 $ 1,363,436
Costs of products sold 1,247,734 1,061,707
Loss on long-term purchase commitments 11,392 --
----------- -----------
GROSS PROFIT 344,272 301,729
Selling, general, and administrative expenses 284,538 228,583
Restructuring expense 19,258 7,498
----------- -----------
OPERATING INCOME 40,476 65,648
Other income (expense):
Interest expense (29,191) (21,156)
Loss on extinguishment of debt (9,910) --
Gain on insurance claim 30,361 --
Other (14) 4,755
----------- -----------
(8,754) (16,401)
----------- -----------
EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST 31,722 49,247
Income taxes 9,380 11,499
Minority interest 5,839 6,597
----------- -----------
NET EARNINGS $ 16,503 $ 31,151
=========== ===========
Basic earnings per share $ 0.10 $ 0.20
Diluted earnings per share $ 0.10 $ 0.19
Weighted average shares outstanding - basic 159,585 159,371
Weighted average shares outstanding - diluted 160,168 160,725
See Notes to Consolidated Condensed Financial Statements.
6
VISHAY INTERTECHNOLOGY, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
Nine Months Ended
September 30,
2003 2002
--------- ---------
OPERATING ACTIVITIES
Net earnings $ 16,503 $ 31,151
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 145,873 137,304
Gain on disposal of property and equipment (333) (541)
Amortization of imputed interest 6,695 6,967
Loss on long-term purchase commitments 11,392 --
Writedowns of tantalum and palladium inventories 5,770 --
Gain on insurance claim (30,361) --
Loss on extinguishment of debt 9,910 --
Minority interest in net earnings of consolidated
subsidiaries 5,839 6,597
Other (5,727) (10,845)
Changes in operating assets and liabilities 10,956 127,304
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 176,517 297,937
INVESTING ACTIVITIES
Purchase of property and equipment (71,592) (54,198)
Proceeds from sale of property and equipment 15,584 17,297
Purchase of businesses, net of cash acquired (25,602) (98,449)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (81,610) (135,350)
FINANCING ACTIVITIES
Proceeds from long-term borrowings, net of
issuance costs 484,208 352
Principal payments on long-term debt (284,263) (1,674)
Net payments on revolving credit lines (111,000) (125,062)
Net changes in short-term borrowings (881) (7,954)
Proceeds from stock options exercised 170 3,105
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 88,234 (131,233)
Effect of exchange rate changes on cash 6,301 9,602
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 189,442 40,956
Cash and cash equivalents at beginning of period 339,938 367,115
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 529,380 $ 408,071
========= =========
See Notes to Consolidated Condensed Financial Statements.
7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2003
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 accounting principles generally accepted in the United States for
complete financial statements. The information furnished reflects all
adjustments (consisting of normal recurring accruals) 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 period presented. The financial
statements should be read in conjunction with the financial statements and notes
thereto filed with the Company's Form 10-K/A for the year ended December 31,
2002. The results of operations for the three months and nine months ended
September 30, 2003 are not necessarily indicative of the results to be expected
for the full year.
Note 2: Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except earnings per share):
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
--------- -------- -------- --------
Numerator:
Net earnings $ 6,775 $ 13,114 $ 16,503 $ 31,151
Denominator:
Denominator for basic earnings per share -
weighted average shares 159,610 159,525 159,585 159,371
Effect of dilutive securities:
Employee stock options 661 673 505 1,250
Other 85 105 78 104
-------- -------- -------- --------
Dilutive potential common shares 746 778 583 1,354
Denominator for diluted earnings per
share - adjusted weighted average shares 160,356 160,303 160,168 160,725
Basic earnings per share $ 0.04 $ 0.08 $ 0.10 $ 0.20
======== ======== ======== ========
Diluted earnings per share $ 0.04 $ 0.08 $ 0.10 $ 0.19
======== ======== ======== ========
8
Diluted earnings per share do not reflect the following, as the effect
would be antidilutive for the periods presented:
o Assumed conversion of the Company's zero coupon subordinated
convertible notes for the three and nine month periods ended
September 30, 2003 and 2002, respectively. At September 30, 2002,
these notes were convertible into 9,718,000 shares of the
Company's Common Stock. As described in Note 10, the Company
repurchased some of these notes during the third quarter of 2003.
At September 30, 2003, the outstanding notes were convertible
into 6,609,000 shares of the Company's Common Stock.
o Assumed conversion of the convertible notes of General
Semiconductor, acquired November 2, 2001, for the three and nine
month periods ended September 30, 2003 and 2002, respectively. At
September 30, 2002, these notes were convertible into 6,245,000
shares of the Company's Common Stock. As described in Note 10,
these notes were fully redeemed on September 10, 2003.
o Assumed exchange under the terms of a put and call agreement of
the Company's floating rate unsecured loan notes issued in
connection with the acquisition of BCcomponents on December 13,
2002, for the three and nine month periods ended September 30,
2003. At September 30, 2003, these notes were exchangeable for
6,176,000 shares of the Company's Common Stock.
o Outstanding warrants of 8,824,000, issued in connection with the
acquisition of BCcomponents, for the three and nine month periods
ended September 30, 2003.
o Outstanding stock options of 6,494,000 and 7,047,000 for the
three and nine month periods ended September 30, 2003, and
6,496,000 and 2,941,000 for the three and nine month periods
ended September 30, 2002.
o As described in Note 10, the Company issued subordinated notes in
the third quarter of 2003, which are convertible into 23,496,000
shares of Common Stock upon the occurrence of certain events.
None of these events had occurred as of September 30, 2003.
9
Note 3: Business Segment Information
The Company designs, manufactures, and markets electronic components that
cover a wide range of products and technologies. The Company has two reportable
segments: Passive Electronic Components (passives) and Active Electronic
Components (actives). The Company evaluates performance and allocates resources
based on several factors, of which the primary financial measure is business
segment operating income exclusive of restructuring charges and unusual and
non-recurring items. The corporate component of operating income represents
corporate selling, general, and administrative expenses.
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
------------ ----------- ----------- -----------
Business Segment Information
(in thousands)
Net Sales:
Passives $ 268,368 $ 196,702 $ 823,298 $ 568,704
Actives 264,800 274,717 780,100 794,732
----------- ----------- ----------- -----------
$ 533,168 $ 471,419 $ 1,603,398 $ 1,363,436
----------- ----------- ----------- -----------
Operating Income:
Passives $ (18,631) $ (7,106) $ (25,603) $ (27,273)
Actives 28,565 38,483 82,465 106,973
Corporate (5,777) (4,964) (16,386) (14,052)
----------- ----------- ----------- -----------
$ 4,157 $ 26,413 $ 40,476 $ 65,648
----------- ----------- ----------- -----------
Restructuring Expense:
Passives $ 5,525 $ 2,652 $ 17,826 $ 7,277
Actives 788 (85) 1,432 221
----------- ----------- ----------- -----------
$ 6,313 $ 2,567 $ 19,258 $ 7,498
----------- ----------- ----------- -----------
Operating income for the passives segment for the three and nine months
ended September 30, 2003 includes $11,392,000 for loss on future purchase
commitments of tantalum, as well as $4,185,000 to write down inventories of
tantalum on hand to market value.
BCcomponents, acquired December 13, 2002, contributed $60.8 million of net
sales and $9.9 million of operating income to the passives segment for the
quarter ended September 30, 2003, and $193.7 million of net sales and $11.0
million of operating income to the passives segment for the nine months ended
September 30, 2003.
10
Note 4: Comprehensive Income
Comprehensive income includes the following components (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
-------- -------- -------- --------
Net Earnings $ 6,775 $ 13,114 $ 16,503 $ 31,151
Other comprehensive income (loss):
Foreign currency translation adjustment (775) (7,926) 50,487 42,626
Unrealized gain (loss) on interest rate swap 702 77 2,462 (3,130)
Pension liability adjustment, net of tax 1,782 66 1,246 152
-------- -------- -------- --------
Total other comprehensive income (loss) 1,709 (7,783) 54,195 39,648
-------- -------- -------- --------
Comprehensive income $ 8,484 $ 5,331 $ 70,698 $ 70,799
======== ======== ======== ========
Note 5: Restructuring Expense
Restructuring expense reflects the cost reduction programs currently being
implemented by the Company. These include the closing of facilities and the
termination of employees. Effective January 1, 2003, restructuring costs are
accounted for under Statement of Financial Accounting Standards (SFAS) No. 146,
Accounting for Costs Associated with Exit or Disposal Activities. This Statement
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Because these costs are
recorded based upon estimates, our actual expenditures for the restructuring
activities may differ from the initially recorded costs. If the initial
estimates were too low or too high, we could be required either to record
additional expenses in future periods or to reverse part of the previously
recorded charges.
Quarter Ended September 30, 2003
The Company recorded restructuring expense of $6,313,000 for the quarter
ended September 30, 2003. Restructuring of European and Asian operations
included $5,021,000 of employee termination costs covering 134 technical,
production, administrative and support employees located in Germany, France,
Hungary, Portugal, the United Kingdom, Austria and the Far East. The remaining
restructuring expense relates to $281,000 of termination costs for 47 technical,
production, administrative and support employees located in the United States,
and $1,011,000 for asset impairment charges. The restructuring expense was
incurred as part of the cost reduction programs currently being implemented by
the Company.
Nine Months Ended September 30, 2003
The Company recorded restructuring expense of $19,258,000 for the nine
months ended September 30, 2003. Restructuring of European and Asian operations
included $16,921,000 of employee termination costs covering 480 technical,
production, administrative and support employees located in Germany, France,
Hungary, Portugal, the United Kingdom, Austria and the Far East. The remaining
restructuring expense relates to $1,326,000 of termination costs for 151
11
technical, production, administrative and support employees located in the
United States, and $1,011,000 for asset impairment charges. The restructuring
expense was incurred as part of the cost reduction programs currently being
implemented by the Company. Activity related to these costs for the nine months
ended September 30, 2003 is as follows (in thousands, except number of
employees):
Number of
Workforce Asset Employees
Reduction Impairment Terminated Total
-------------------------------------------------------------
Restructuring expense $ 18,247 $ 1,011 631 $ 19,258
Utilized (4,845) (1,011) (465) (5,856)
Foreign currency effect 555 -- -- 555
-------------------------------------------------------------
Balance at September 30, 2003 $ 13,957 $ -- 166 $ 13,957
=============================================================
The remaining $13,957,000 of restructuring liability, currently shown in
other accrued expenses, is expected to be paid by December 31, 2003.
Quarter Ended September 30, 2002
The Company recorded restructuring expense of $2,567,000 for the quarter
ended September 30, 2002. Restructuring of European and Israeli operations
included $1,739,000 of employee termination costs covering approximately 90
technical, production, administrative and support employees located in Czech
Republic, France, Hungary, Israel, Portugal, and Austria. The remaining $828,000
of restructuring expense related to termination costs for approximately 110
technical, production, administrative and support employees located in the
United States. The restructuring expense was incurred as part of the cost
reduction programs currently being implemented by the Company.
Nine Months Ended September 30, 2002
Restructuring expense was $7,498,000 for the nine months ended September
30, 2002. Restructuring of European and Israeli operations included $4,274,000
of employee termination costs covering approximately 425 technical, production,
administrative and support employees located in Czech Republic, France, Hungary,
Israel, Portugal, and Austria. The remaining $3,224,000 of restructuring expense
related to termination costs for approximately 376 technical, production,
administrative and support employees located in the United States. The
restructuring expense was incurred as part of the cost reduction programs
currently being implemented by the Company.
Year Ended December 31, 2002
Restructuring expense was $30,970,000 for the year ended December 31,
2002. Restructuring of European and Israeli operations included $10,698,000 of
employee termination costs covering approximately 778 technical, production,
administrative and support employees located in the Czech Republic, France,
Hungary, Israel, Portugal and Austria. An additional $7,909,000 of restructuring
expense related to termination costs for approximately 660 technical,
production, administrative and support employees in the United States. The
remaining $12,363,000
12
of restructuring expense related to the noncash write-down of buildings and
equipment that were no longer in use. The restructuring expense was incurred as
part of the cost reduction programs being implemented by the Company. The
restructuring activities related to existing business were designed to reduce
both fixed and variable costs, particularly in response to the reduced demand
for the Company's products occasioned by the electronics industry downturn which
began in 2001. Activity related to these costs is as follows (in thousands,
except number of employees):
Number of
Workforce Asset Employees
Reduction Impairment Terminated Total
-----------------------------------------------------------
Restructuring expense $ 18,607 $ 12,363 1,438 $ 30,970
Utilized (6,420) (12,363) (783) (18,783)
-----------------------------------------------------------
Balance at December 31, 2002 12,187 -- 655 12,187
Utilized (8,619) -- (443) (8,619)
Changes in estimates 453 -- -- 453
Foreign currency effect 661 -- -- 661
-----------------------------------------------------------
Balance at September 30, 2003 $ 4,682 $ -- 212 $ 4,682
===========================================================
The remaining $4,682,000 in severance costs, currently shown in other
accrued expenses, is expected to be paid by December 31, 2003.
Year Ended December 31, 2001
Restructuring expense was $61,908,000 for the year ended December 31,
2001. Restructuring of European, Asia Pacific and Israeli operations included
$27,064,000 of employee termination costs covering approximately 3,778
technical, production, administrative and support employees located in France,
Hungary, Portugal, Austria, the Philippines, Germany and Israel. The European
operations also recorded $2,191,000 of non-cash costs associated with the
write-down of buildings and equipment that were no longer in use. An additional
$13,870,000 of restructuring expense related to termination costs for
approximately 1,885 technical, production, administrative and support employees
in the United States. The remaining $18,783,000 of restructuring expense related
to the non-cash write-down of buildings and equipment in the United States that
were no longer in use. Activity related to these costs is as follows (in
thousands, except number of employees):
13
Number of
Workforce Asset Employees
Reduction Impairment Terminated Total
--------------------------------------------------------------
Restructuring expense $ 40,934 $ 20,974 5,663 $ 61,908
Utilized (18,114) (20,974) (4,913) (39,088)
--------------------------------------------------------------
Balance at December 31, 2001 22,820 -- 750 22,820
Utilized (19,865) -- (612) (19,865)
Changes in estimates (1,391) -- -- (1,391)
--------------------------------------------------------------
Balance at December 31, 2002 1,564 -- 138 1,564
Utilized (1,586) -- (50) (1,586)
Changes in estimates 22 -- (88) 22
--------------------------------------------------------------
Balance at September 30, 2003 $ -- $ -- -- $ --
==============================================================
Note 6: Acquisitions
As part of its growth strategy, the Company seeks to expand through the
acquisition of other manufacturers of electronic components that have
established positions in major markets, reputations for product quality and
reliability, and product lines with which the Company has substantial marketing
and technical expertise. In the past two years, the Company has taken advantage
of the downturn in the electronics industry and the strength of its own balance
sheet to acquire businesses for consideration that it believes was lower than
what it would have been required to pay in other economic environments. In
pricing an acquisition, the Company focuses primarily on the target's revenues
and customer base, the strategic fit of its product line with the Company's
existing product offerings, opportunities for cost cutting and integration with
the Company's existing operations and production and other post-acquisition
synergies, rather than on the target's assets, such as its property, equipment
and inventory. As a result, the fair value of the acquired assets may correspond
to a relatively smaller portion of the acquisition price, with the Company
recording a substantial amount of goodwill related to the acquisition.
These principles apply in particular to acquisitions in the passive
segment. The passive electronics business is a mature industry that, in general,
has a slow organic growth rate linked to macro-economic trends. The Company's
business strategy for growth in the passive segment relies primarily upon the
acquisition of other electronic components manufacturers whose operations
satisfy the Company's acquisition criteria. Rather than focusing on the assets
of the acquired company, the Company seeks to capture its sales and customers,
which it expects to service in substantial measure with its own long-term assets
and personnel. In this regard, the Company anticipates that, following an
acquisition, it will be able to maintain sales levels on the strength of its
relationships with original equipment manufacturers (OEMs), distributors and
electronic manufacturers' supply (EMS) companies. The Company also anticipates
that it will be able to achieve fairly rapid cost reductions by eliminating or
combining redundant sales offices, sales personnel, commission representatives,
and administrative staff; eliminating or consolidating manufacturing facilities;
and transferring manufacturing operations from high labor countries to low labor
jurisdiction. These savings and synergies are made possible in the current
environment of depressed activity in the electronics industry by low utilization
of manufacturing and distribution
14
capacity in the passive segment. The plant, property and equipment of the
acquired company are expected to be eliminated or substantially reduced and are
valued accordingly. The result for acquisitions in the passive segment is
recognition of a substantial amount of goodwill.
On November 2, 2001, the Company acquired General Semiconductor, Inc., a
leading manufacturer of rectifiers and power management devices, following
approval of the transaction and related matters by the stockholders of the two
companies, for $554.8 million, including acquisition expenses of $7.0 million.
In connection with the General Semiconductor acquisition, the Company recorded
restructuring liabilities of $94,643,000 relating to an exit plan that
management began to formulate prior to the acquisition date. The goal of the
Company is to achieve significant production cost savings through the transfer
and expansion of manufacturing operations to regions such as Israel, the Czech
Republic and the People's Republic of China, where the Company can take
advantage of lower labor costs and available tax and other government-sponsored
incentives. The Company's exit plan also includes reducing selling, general and
administrative expenses through the integration or elimination of redundant
sales offices and administrative functions at General Semiconductor.
Approximately $88,242,000 of the restructuring liabilities recorded in
connection with the acquisition related to employee termination costs covering
approximately 1,460 technical, production, administrative and support employees
located in the United States, Europe and the Pacific Rim. The remaining
$6,401,000 of restructuring liabilities related to provisions for lease
cancellations and other costs. The restructuring liability is included in other
accrued expenses on the consolidated balance sheet. The workforce reduction
costs are expected to be paid out by March 31, 2004. The outbreak of the SARS
disease has caused the Company's workforce reduction plans to be pushed back by
one quarter. The other costs are expected to be paid out by 2005. A rollforward
of the activity related to these restructuring liabilities is as follows (in
thousands, except number of employees):
Number of
Workforce Employees
Reduction Other Terminated Total
----------------------------------------------------------
Balance at December 31, 2001 $ 88,242 $ 6,401 1,460 $ 94,643
Utilized (52,118) (1,249) (426) (53,367)
Changes in estimates (7,900) -- (147) (7,900)
----------------------------------------------------------
Balance at December 31, 2002 28,224 5,152 887 33,376
Utilized (4,396) (2,641) (97) (7,037)
----------------------------------------------------------
Balance at September 30, 2003 $ 23,828 $ 2,511 790 $ 26,339
==========================================================
In January 2002, the Company acquired the transducer and strain gage
businesses of Sensortronics, Inc. Sensortronics is a leading manufacturer of
load cells and torque transducers for domestic and international customers in a
wide range of industries with manufacturing facilities in Covina, California,
Costa Rica, and, pursuant to a joint venture arrangement, India. The acquisition
included the wholly-owned subsidiary of Sensortronics, JP Technologies, a
manufacturer of strain gages, located in San Bernardino, California. The
purchase price was $10 million in cash. The purchase price has been allocated,
with resulting goodwill of $3,027,000. The results of operations of
Sensortronics are included in the results of the passives segment from January
31, 2002.
15
In June 2002, the Company acquired Tedea-Huntleigh BV, a subsidiary of
Tedea Technological Development and Automation Ltd. Tedea-Huntleigh is engaged
in the production and sale of load cells used in digital scales by the weighing
industry. The purchase price was approximately $21 million in cash.
Additionally, Vishay is paying Tedea a $1 million consulting fee over a
three-year period and repaid a $9 million loan of Tedea to Tedea-Huntleigh.
Tedea-Huntleigh operates two plants in Israel, in Netanya and Carmiel, where it
employs approximately 350 people, as well as a number of facilities outside
Israel. Tedea-Huntleigh also has load cell operations in the People's Republic
of China. The purchase price has been allocated, with resulting goodwill of
$13,841,000. The results of operations of Tedea-Huntleigh are included in the
results of the passives segment beginning July 1, 2002.
In July 2002, the Company acquired the BLH and Nobel businesses of Thermo
Electron Corporation. BLH and Nobel are engaged in the production and sale of
load cell-based process weighing systems, weighing and batching instruments, web
tension instruments, weighing scales, servo control systems, and components
relating to load cells including strain gages, foil gages, and transducers. The
purchase price was $18.5 million in cash. The purchase price has been allocated,
with resulting goodwill of $11,262,000. The results of operations of BLH and
Nobel are included in the results of the passives segment beginning August 1,
2002.
In October 2002, the Company acquired Celtron Technologies. Celtron is
engaged in the production and sale of load cells used in digital scales for the
weighing industry, with manufacturing facilities and offices in Taiwan, the
People's Republic of China and California. The purchase price of $13.5 million
in cash has been allocated, with resulting goodwill of $4,711,000.
On December 13, 2002, the Company acquired BCcomponents Holdings B.V., a
leading manufacturer of passive components with operations in Europe, India and
the Far East. The product lines of BCcomponents include linear and non-linear
resistors; ceramic, film and aluminum electrolytic capacitors; and switches and
trimming potentiometers.
Vishay acquired the outstanding shares of BCcomponents in exchange for
ten-year warrants to acquire 7,000,000 shares of Vishay Common Stock at an
exercise price of $20.00 per share and ten-year warrants to acquire 1,823,529
shares of Vishay Common Stock at an exercise price of $30.30 per share. The fair
value of the warrants ($39,462,000) was determined using the Black-Scholes
method. Significant assumptions used included an expected dividend yield of 0%,
a risk free interest rate of 3%, an expected volatility of 66%, and an expected
life of five years.
In the transaction, outstanding obligations of BCcomponents, including
indebtedness and transaction fees and expenses, in the amount of approximately
$224 million were paid ($191,000,000) or assumed ($33,000,000). Also, $105
million in principal amount of BCcomponents' mezzanine indebtedness and certain
other securities of BCcomponents were exchanged for $105 million principal
amount of floating rate unsecured loan notes of Vishay due 2102. The Vishay
notes bear interest at LIBOR plus 1.5% through December 31, 2006 and at LIBOR
thereafter. The interest rate may be further reduced to 50% of LIBOR after
December 31, 2010 if the price of Vishay Common Stock trades above a specified
target price, as provided in the notes. The notes are subject to a put and call
agreement under which the holders may at any time put the notes to Vishay in
exchange for 6,176,000 shares of Vishay Common Stock in the aggregate, and
Vishay may call the notes in exchange for cash or for shares of its Common Stock
after 15 years from the
16
date of issuance. The purchase price was as follows:
Cash consideration (including transaction fees
and expenses) $191,000,000
Warrants issued 39,462,000
Acquisition costs 3,000,000
------------
Total purchase price $233,462,000
============
Under purchase accounting, the total purchase price is allocated to assets
acquired and liabilities assumed based on their estimated fair values. The
allocation of the purchase price is based on a preliminary evaluation of the
fair value of BCcomponents' tangible and identifiable intangible assets acquired
and liabilities assumed at the date of the merger based upon currently available
information. There can be no assurance that the estimated amounts will represent
the final purchase allocation. Goodwill increased by approximately $60 million
during the quarter ended September 30, 2003, as a result of the reallocation of
the purchase price based on revisions to asset appraisals. The Company expects
to finalize the purchase allocation by December 13, 2003. The purchase price has
been preliminarily allocated, pending finalization of appraisals for property,
plant, and equipment, debt, intangible assets and warrants, to the acquired
assets and liabilities based on fair values as follows:
Current assets $ 91,859,000
Property, plant, and equipment 68,762,000
Other assets 3,054,000
Trademarks 23,000,000
Completed technology 19,000,000
Current liabilities (118,425,000)
Long-term debt (126,328,000)
Other noncurrent liabilities (29,860,000)
Goodwill 302,400,000
-------------
Total purchase price $ 233,462,000
=============
In connection with the BCcomponents acquisition, the Company recorded
restructuring liabilities of $48,000,000 related to an exit plan that management
began to formulate prior to the acquisition date. Approximately $46,000,000 of
these liabilities relate to employee termination costs covering approximately
780 technical, production, administrative and support employees located in the
United States, Europe and the Pacific Rim. The restructuring liability is
recorded in other accrued expenses and is expected to be paid out by the second
quarter of 2004. The exit plan is not yet finalized. Future adjustments that
increase or decrease the restructuring liabilities would increase or decrease
goodwill. A rollforward of the activity related to these restructuring
liabilities is as follows (in thousands, except number of employees):
Number of
Workforce Employees
Reduction Other Terminated Total
--------------------------------------------------------------
Balance at December 31, 2002 $ 45,855 $ 1,939 780 $ 47,794
Utilized (18,320) (247) (206) (18,567)
Foreign currency effect 3,382 -- -- 3,382
--------------------------------------------------------------
Balance at September 30, 2003 $ 30,917 $ 1,692 574 $ 32,609
==============================================================
17
Had the above acquisitions (other than General Semiconductor) been made as
of January 1, 2002, the Company's pro forma results would have been (in
thousands, except per share amounts):
Three Months Ended Nine Months Ended
September 30, 2002 September 30, 2002
------------------ ------------------
Net sales $ 544,224 $ 1,602,970
Net (loss) earnings $ (1,488) 7,280
Basic (loss) earnings per share $ (0.01) $ 0.05
Diluted (loss) earnings per share $ (0.01) $ 0.05
Note 7: Stock-Based Compensation
SFAS No. 123, Accounting for Stock-Based Compensation, encourages entities
to record compensation expense for stock-based employee compensation plans at
fair value but provides the option of measuring compensation expense using the
intrinsic value method prescribed in APB Opinion No. 25, Accounting for Stock
Issued to Employees. The Company accounts for stock-based compensation in
accordance with APB 25 and related interpretations. The following is provided to
comply with the disclosure requirements of SFAS 123, as amended. If compensation
expense for the Company's stock option programs had been determined using the
fair-value method prescribed by SFAS 123, the Company's results would have been
reduced to the pro forma amounts indicated below (in thousands, except per share
amounts):
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
------- ------- ------- ---------
Net income, as reported $6,775 $13,114 $16,503 $ 31,151
Deduct: Total stock-based employee compensation
expense determined under fair value-based method
for all awards, net of related tax effects
451 676 1,316 1,961
------ ------- ------- ----------
Pro forma net income $6,324 $12,438 $15,187 $ 29,190
====== ======= ======= ==========
Earnings per share:
Basic--as reported $ 0.04 $ 0.08 $ 0.10 $ 0.20
====== ======= ======= ==========
Basic--pro forma $ 0.04 $ 0.08 $ 0.10 $ 0.18
====== ======= ======= ==========
Diluted--as reported $ 0.04 $ 0.08 $ 0.10 $ 0.19
====== ======= ======= ==========
Diluted--pro forma $ 0.04 $ 0.08 $ 0.09 $ 0.18
====== ======= ======= ==========
Pro forma compensation expense determined under the fair-value based
method described in SFAS 123 is recognized ratably over the vesting period. The
fair value of options granted was estimated using the Black-Scholes
option-pricing model. No options have been granted in 2003.
18
The assumptions used in estimating the fair value of options granted in prior
years are disclosed in Note 1 to the consolidated financial statements contained
in the Company's Form 10-K/A for the year ended December 31, 2002.
Note 8: Accounting Pronouncements Pending Adoption
In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities. This interpretation clarifies the application of
Accounting Research Bulletin No. 51, Consolidated Financial Statements, to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 applies immediately to variable interest
entities created after January 31, 2003, and to variable interest entities in
which an enterprise obtains an interest after that date. Provisions of FIN 46,
as amended, are effective for the first interim or annual period ending after
December 15, 2003 for those variable interests held prior to February 1, 2003.
The Company is currently evaluating what impact, if any, adoption of FIN 46 will
have on its consolidated financial position, consolidated results of operations,
or liquidity.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which is effective for contracts
entered into or modified after June 30, 2003, with certain exceptions, and for
hedging relationships designated after June 30. The guidance is to be applied
prospectively. The adoption of this standard did not have a material impact on
the Company's financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity. The
Standard specifies that instruments within its scope embody obligations of the
issuer and that, therefore, the issuer must classify them as liabilities. The
Company has not issued any such financial instruments.
Note 9: Guarantees
The Company's borrowings under its credit facility are secured by pledges
of stock and guarantees by certain significant subsidiaries. The subsidiaries
would be required to perform under the guarantees in the event that the Company
failed to make principal or interest payments under the revolving credit
facility. The Company's borrowings under the credit facility were $0 and
$111,000,000 at September 30, 2003 and December 31, 2002, respectively. If any
subsidiary were to borrow under the credit facility, the Company would provide a
similar guarantee with respect to the subsidiary's borrowings.
19
Note 10: Debt
Long-term debt consists of the following:
September 30, December 31,
2003 2002
---------------------------
(In thousands)
Multicurrency revolving credit loans $ -- $111,000
Convertible subordinated notes, LYONs, due 2021 227,506 317,830
Other debt and capital lease obligations 4,015 21,689
Convertible unsecured notes, BCcomponents, due 2102 105,000 105,000
Convertible subordinated notes, GSI, due 2006 -- 169,347
Convertible subordinated notes, due 2023 500,000 --
---------------------------
836,521 724,866
Less current portion 1,387 18,550
---------------------------
$835,134 $706,316
===========================
On August 6, 2003, the Company sold $450 million aggregate principal
amount of 3-5/8% convertible subordinated notes due 2023 and granted the initial
purchasers an option to purchase, within 30 days of the date of the offering
memorandum relating to the notes, an additional $50 million of the notes. This
option was exercised, and the additional $50 million of notes was issued on
September 3, 2003. The notes will pay interest semi-annually.
Holders may convert the notes into Vishay Common Stock prior to the close
of business on August 1, 2023 if (1) the sale price of Vishay Common Stock
reaches 130% of the conversion price for a specified period; (2) the trading
price of the notes falls below 98% of the average last reported sales price of
Vishay Common Stock multiplied by the conversion rate for a specified period;
(3) the notes have been called for redemption; (4) the credit ratings assigned
to the notes are lowered by two or more rating levels; or (5) specified
corporate transactions occur. None of these conditions had occurred as of
September 30, 2003. The conversion price of $21.28 is equivalent to a conversion
rate of 46.9925 shares per $1,000 principal amount of notes.
The notes are subordinated in right of payment to all of the Company's
existing and future senior indebtedness and are effectively subordinated to all
existing and future liabilities of its subsidiaries. The notes will be
redeemable at the Company's option beginning August 1, 2010 at a redemption
price equal to 100% of the principal amount plus accrued and unpaid interest, if
any. Holders of the notes will have the right to require the Company to
repurchase all or some of their notes at a purchase price equal to 100% of their
principal amount of the notes, plus accrued and unpaid interest, if any, on
August 1, 2008, August 1, 2010, August 1, 2013 and August 1, 2018. In addition,
holders of the notes will have the right to require the Company to repurchase
all or some of their notes upon the occurrence of certain events constituting a
fundamental change. On any required repurchase, the Company may choose to pay
the purchase price in cash or shares of Vishay Common Stock or any combination
of cash and Vishay Common Stock. The proceeds of the offering of the notes were
used to repay other outstanding debt, as well as for general corporate purposes.
20
The early extinguishment of the LYONs and the General Semiconductor
debentures, described below, resulted in a pretax loss of $9,910,000 in the
third quarter of 2003, which included premium on redemption of approximately
$7.3 million and write-off of deferred financing costs of approximately $2.6
million.
The Company used approximately $130 million of the proceeds of the
offering of the convertible subordinated notes to repay amounts outstanding
under its revolving credit facility. The Company agreed with the lenders under
its secured revolving credit facility to an amendment and restatement of the
agreement governing the facility. The maximum availability under the facility,
in light of the Company's anticipated liquidity needs, has been changed from
$500 million to $400 million, and the final maturity of the facility has been
extended from June 2005 to May 2007. The restatement decreases the Company's
minimum tangible net worth requirement to $850 million plus 50% of net income
(without offset for losses) and 75% of net proceeds of equity offerings from
July 1, 2003, eliminates the covenant on minimum earnings before interest and
tax, permits securitization of up to $200 million of non-U.S. accounts
receivable, allows for the release of all collateral (other than subsidiary
stock and pledges by the Company and its subsidiaries of intercompany notes)
under certain circumstances and creates an event of default upon the occurrence
of a fundamental change as defined under the Company's convertible subordinated
notes.
The Company used approximately $97.4 million of the proceeds of the
offering of the convertible subordinated notes to fund the purchase of
approximately $97.0 million accreted principal amount ($165.0 million face
amount) of its Liquid Yield Option(TM) Notes (LYONs). Pursuant to the terms of
the LYONs, in June 2004, the remaining holders of the LYONs will have the right
to "put" these notes to the Company for an aggregate purchase price of $235
million. If these notes are put to the Company, the Company expects to be able
to utilize its revolving credit facility to finance the repurchase.
The Company used approximately $176.6 million of the proceeds of the
offering of the convertible subordinated notes to fund principal and premium in
connection with the redemption of all of the outstanding 5.75% convertible
subordinated notes due 2006 of its General Semiconductor subsidiary. Prior to
redemption, there was $171 million principal amount of the General Semiconductor
notes outstanding. These notes were redeemed at a price of 103.286% of their
principal amount, plus accrued but unpaid interest to the date of redemption of
$2.3 million.
Note 11: Current Vulnerability to Certain Concentrations
The Company is a major consumer of the world's annual production of
tantalum. Tantalum, a metal purchased in powder or wire form, is the principal
material used in the manufacture of tantalum capacitors. There are currently
three major suppliers that process tantalum ore into capacitor grade tantalum
powder. Due to the strong demand for its tantalum capacitors and difficulty in
obtaining sufficient quantities of tantalum powder from its suppliers, the
Company stockpiled tantalum ore in 2000 and early 2001. During 2001, the Company
and its competitors experienced a significant decline in the tantalum capacitor
business. The market prices for tantalum also decreased significantly during
2002. The Company recorded a writedown of $25,700,000 to reduce its tantalum
inventories to current market value in the fourth quarter of 2002. The Company
also recorded a loss on future purchase commitments of $106,000,000 in the
fourth quarter of 2002. In 2003, prices of tantalum continued to decline. As a
result, the Company recorded a writedown of $4,185,000 to reduce its tantalum
inventories to current market value in the third quarter of 2003.
21
The Company also recorded a loss on future purchase commitments of $11,392,000
in the third quarter of 2003. The Company's purchase commitments were entered
into at a time when market demand for tantalum capacitors was high and tantalum
powder was in short supply. If the downward pricing trend were to continue, the
Company could again be required to write down the carrying value of its tantalum
inventory and record additional losses on its long-term purchase commitments.
Note 12: Gain on Insurance Claim
On February 13, 2002, a fire occurred at the Electro-Films, Inc. (EFI)
facility located in Providence, Rhode Island causing a production stoppage of
this product line. The Company received insurance proceeds based on its costs to
replace the assets, which were in excess of the book value of the assets at the
time of the fire. Most significant matters with respect to this insurance claim
have been resolved, and the Company has recognized a gain of $30,361,000 related
to the claim during the third quarter of 2003. Resolution of the remaining
matters is not anticipated to have a material impact on the Company's financial
statements.
22
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Overview
Vishay operates in two segments, passive components and active components.
The Company is the leading manufacturer of passive components in the United
States and Europe. These components include resistors, capacitors, inductors,
strain gages and load cells. The Company is also one of the world's leading
manufacturers of active electronic components, also referred to as discrete
semiconductors. These include transistors, diodes, rectifiers, certain types of
integrated circuits and optoelectronic products. The passive components business
had historically predominated at Vishay until the purchase of General
Semiconductor in November 2001, after which the lead position shifted to the
active business. With the acquisition of BCcomponents in December 2002, the
Company now derives a slight majority of its revenues from the passive business.
Approximately 51% of the Company's revenues for the nine months ended September
30, 2003 were attributable to the Company's passive business and 49% to its
active business. Revenues for the quarter ended September 30, 2003 were
approximately evenly split between the two segments.
Net earnings for the quarter ended September 30, 2003 were $6,775,000 or
$0.04 per share, compared with net earnings for the quarter ended September 30,
2002 of $13,114,000 or $0.08 per share. Earnings for the quarter were impacted
by restructuring expense of $6,313,000, a loss on early extinguishment of debt
of $9,910,000, a loss on long-term purchase commitments of $11,392,000, and a
write-down of inventories on hand to market value of $4,185,000, offset by a
gain on an insurance claim of $30,361,000. These items and their tax related
consequences had a negative $0.02 effect on earnings per share. The charge for
early extinguishment of debt related to refinancing of debt during the third
quarter of 2003. The September 2002 quarter included restructuring expenses of
$2,567,000, resulting in a reduction of $0.01 in net earnings per share.
Net earnings for the nine months ended September 30, 2003 were $16,503,000
or $0.10 per share, compared with net earnings for the nine months ended
September 30, 2002 of $31,151,000 or $0.19 per diluted share. Earnings for the
nine months ended September 30, 2003 were impacted by restructuring expense of
$19,258,000, a loss on early extinguishment of debt of $9,910,000, a loss on
long-term purchase commitments of $11,392,000, and a write-down of inventories
on hand to market value of $4,185,000, offset by a gain on an insurance claim of
$30,361,000. These items and their tax related consequences had a negative $0.08
effect on earnings per share. The nine months ended September 30, 2002 included
restructuring expenses of $7,498,000, resulting in a reduction of $0.04 in net
earnings per share.
Following a difficult 2002 and 2001, in which the electronic components
business generally was depressed both in the United States and much of the
world, the Company is beginning to see some improvement of the overall market
and general economic outlook, particularly in Asia. There appears to be a
substantial rebound in the computer market, a slow upturn in telecom,
particularly networks, an acceleration of demand for mobile phone components in
China and Korea, and continued strength in the European automotive market, with
some recovery in the corresponding U.S. market. Capacity utilization is a
reflection, in part, of these demand trends. The Company was approaching full
capacity in most of its active
23
facilities during the most recent quarter, with some capacity improvement in the
passive segment. In this latter area, capacity for resistors and inductors
ranged from 50 to 70 percent, while in the capacitor lines it averaged around
50%. Despite these positive trends, operating results remained depressed because
of continuing pricing pressures. Average selling prices continued to decline
during the third quarter in both the passive and active segments, though
considerably less on a sequential quarter-to-quarter basis than on a
year-over-year basis. Operating results for the nine months ended September 30,
2003 also suffered from the SARS outbreak, particularly in the active segment
which does a substantial portion of its business in Asia.
The Company's book-to-bill ratio for the third quarter was 1.03,
reflecting a ratio for the active business of 1.09 and a ratio for the passive
business of 0.97. The Company's backlog was $434 million at the end of the third
quarter, a $14 million increase from the previous quarter and a $26 million
increase from December 31, 2002. As in the past, during this phase of the
business cycle, the improvement in the active business is proceeding ahead of
any pick-up in the passive business.
The following table shows the end of period backlog and the book-to-bill
ratio for Vishay's business as a whole during the five quarters beginning with
the third quarter of 2002 through the third quarter of 2003.
3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter
----------- ----------- ----------- ----------- -----------
2002 2002 2003 2003 2003
---- ---- ---- ---- ----
End of Period
Backlog $ 378,500,000 $ 407,600,000(1) $ 438,200,000(1) $ 419,800,000(1) $ 434,000,000(1)
Book-to-Bill
Ratio 0.90 0.93 1.05 0.96 1.03
(1) Includes $49,800,000, $49,500,000, $49,500,000, and $54,100,000 of backlog
attributable to the business of BCcomponents for the fourth quarter of
2002, the first quarter, second quarter, and third quarter of 2003,
respectively. BCcomponents was acquired in December 2002.
24
The following table shows sales and book-to-bill ratios broken out by
segment for the five quarters beginning with the third quarter of 2002 through
the third quarter of 2003:
3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter
----------- ----------- ----------- ----------- -----------
2002 2002 2003 2003 2003
---- ---- ---- ---- ----
Passive
Components
----------
Sales $ 196,702,000 $ 198,542,000 $ 274,874,000(1) $ 280,056,000(1) $ 268,368,000(1)
Book-to-Bill
Ratio 0.96 1.00 1.07 0.96 0.97
Active
Components
----------
Sales $ 274,717,000 $ 260,835,000 $ 257,253,000 $ 258,047,000 $ 264,800,000
Book-to-Bill
Ratio 0.85 0.88 1.03 0.96 1.09
(1) Includes $69,300,000, $63,600,000, and $60,800,000, attributable to
BCcomponents for the first, second, and third quarters of 2003,
respectively.
The Company continued to implement its cost control programs during the
third quarter with an emphasis on the reduction and reallocation of headcount. A
major element of the Company's cost control strategy has been to position its
manufacturing facilities, to the extent practicable, in jurisdictions with low
labor costs. The percentage of headcount in low labor cost countries was 67% as
of September 30, 2003, as compared to 65% as of September 30, 2002 and December
31, 2002, respectively. The Company continues to target improvement in this area
as it proceeds with the integration of the business of BCcomponents.
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,
2003 2002 2003 2002
----- ----- ------ -----
Costs of products sold 78.6% 77.3% 77.8% 77.9%
Gross profit 19.2% 22.7% 21.5% 22.1%
Selling, general and
administrative expenses 17.3% 16.6% 17.7% 16.8%
Operating income 0.8% 5.6% 2.5% 4.8%
Earnings before income
taxes and minority interest 2.6% 4.5% 2.0% 3.6%
Net earnings 1.3% 2.8% 1.0% 2.3%
Effective tax rate 37.4% 25.7% 29.6% 23.3%
25
Net Sales, Gross Profits and Margins
Net sales for the quarter ended September 30, 2003 increased $62 million,
or 13%, as compared to the comparable prior year period. The increase primarily
reflects the acquisitions of BCcomponents in December 2002, Celtron Technologies
in October 2002, BLH and Nobel in July 2002 and Tedea-Huntleigh BV in September
2002. Excluding these acquisitions, net sales decreased $3,260,000, or 0.7%.
Foreign exchange rates during the quarter positively impacted revenues by $15.9
million as compared to the three months ended September 30, 2002. Net sales for
the nine months ended September 30, 2003 increased $240 million, or 18%, as
compared to the comparable prior year period. The increase primarily reflects
the acquisitions of BCcomponents in December 2002, Celtron Technologies in
October 2002, BLH and Nobel in July 2002 and Tedea-Huntleigh BV in September
2002. Excluding these acquisitions, net sales increased $7,996,000, or 0.6%.
Foreign exchange rates during the nine months ended September 30, 2003
positively impacted revenues by $64.3 million as compared to the nine months
ended September 30, 2002.
Costs of products sold as a percentage of net sales for the quarter and
nine months ended September 30, 2003 were 78.6% and 77.8%, respectively, as
compared to 77.3% and 77.9% for the comparable prior year periods. Gross profit
as a percentage of net sales for the quarter and nine months ended September 30,
2003, were 19.2% and 21.5%, respectively, as compared to 22.7% and 22.1% for the
comparable prior year periods. Price declines were offset in substantial part by
volume increases and cost savings programs. Gross profit for the quarter and
nine months ended September 30, 2003 reflects a writedown of raw material
inventory to lower of cost or market of $4,185,000, which is included in cost of
products sold, and an accrual of loss on long-term purchase commitments of
$11,392,000.
The following tables show sales and gross profit margins separately for
our passive and active segments.
Passive Components
------------------
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
------------ ------------ ------------ ------------
Net Sales $268,368,000 $196,702,000 $823,298,000 $568,704,000
Gross Profit
Margin 12.7% 14.3% 17.2% 13.0%
Net sales of passive components for the quarter and nine months ended
September 30, 2003 increased $71,666,000 or 36.4% and $254,594,000 or 44.7%,
respectively, as compared to the comparable prior year periods. Without the
acquisition of BCcomponents, Celtron Technologies, BLH and Nobel, the passive
components business sales would have increased by $6,658,000 or 3.4%, for the
quarter ended September 30, 2003 and by $22,628,000, or 4.0%, for the nine
months ended September 30, 2003 as compared to the comparable prior year
periods. The organic increase in net sales is attributable to the volume
increases in the resistor and inductor product lines, partially offset by price
declines, and the positive impact of foreign currency exchange rates. The
average
26
selling price was stable versus prior quarter, though selling prices are down
versus the prior year.
Gross margins were 12.7% and 17.2%, respectively, for the quarter and nine
months ended September 30, 2003, as compared to 14.3% and 13.0%, respectively,
for the comparable prior year period. Margins were affected negatively by raw
material related writedowns during the third quarter and nine month periods, as
market prices for these materials continued to decline. These writedowns
included a writedown of $4,185,000 to reduce tantalum inventories to current
market value, and a loss on purchase commitments for future delivery of tantalum
of $11,392,000, both of which were recorded in the third quarter. In addition,
the Company recorded a writedown of $1,585,000 of palladium inventory in the
first quarter of 2003, which affected margins during the nine month period. The
raw materials writedowns have the effect of improving gross margins in
subsequent periods by reducing cost of goods sold as inventory is utilized. This
effect cannot be quantified in any specific reporting period, however, because
of the large number of affected products and the impracticality of tracking raw
material inventory usage on a product-by-product basis.
The weakness in demand for tantalum capacitor products has affected not
only the prices for tantalum but also the Company's usage of this material. The
Company has three sources for tantalum-an inventory of tantalum ore, an
inventory of tantalum powder and wire and contractual purchase commitments for
future delivery of tantalum powder and wire with Cabot Corporation. The Company
does not anticipate utilizing its stockpile of tantalum ore at any time in the
foreseeable future. Tantalum inventory as of September 30, 2003 was 339,522
pounds, with estimated usage over the next twelve months for this material of
200,000 pounds. Accordingly, the Company has reclassified 139,522 pounds, or
$31.8 million, into long-term assets. The Company anticipates, based on current
and foreseeable demand for tantalum capacitors, that its minimum purchase
commitments under the contracts with Cabot will substantially exceed its
requirements over the terms of the contracts. Based on usage currently expected
in 2003, the Company's purchase commitments represent approximately 7.5 years of
usage. The Company has little visibility of the demand for its tantalum
capacitor products beyond twelve months. It is almost certain that actual
requirements of tantalum will differ from those projected, and likely that the
difference will be material. Tantalum ore, powder and wire have an indefinite
shelf life, so that the Company believes that it will eventually utilize all of
the material in its inventory or that it is obligated to purchase under its
contractual commitments. The Company's ending inventory balance of tantalum at
September 30, 2003 was approximately $77.3 million.
The Company continues to implement cost reduction programs, particularly
in its passives business, in order to reduce costs and thereby stabilize its
margins in the current period of relatively weak demand. We have initiated
several significant cost reduction programs in all of our products lines,
including facility combinations and shifting production to lower cost regions,
with particular emphasis placed on reducing headcount in high labor cost
countries. Sixty-seven percent of the Company's labor force was in low labor
cost countries as of September 30, 2003. The impact of these cost savings plans
has been partially offset by the underutilization of capacity in the commodity
products.
27
Active Components
-----------------
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
----------- ----------- ------------ -----------
Net Sales $264,800,000 $274,717,000 $780,100,000 $794,732,000
Gross Profit
Margin 25.9% 28.8% 26.0% 28.6%
Net sales of the active components business for the quarter ended
September 30, 2003 decreased by $9,917,000, or 3.6%, from sales of the
comparable prior year period. Net sales of the active components business for
the nine months ended September 30, 2003 decreased by $14,632,000, or 1.8%, from
sales of the comparable prior year period. Pricing pressure continues to
increase in the active components business. The outbreak of SARS in Asia,
particularly at Siliconix, was the significant factor in the decrease of net
sales for the nine months ended September 30, 2003. Siliconix sales into Asia
comprise approximately 70% of its total sales. Siliconix experienced a rebound
in the third quarter, and the Company realized improvements in orders in other
areas of the active business. The business recovery came primarily from Asia,
and was driven by demand for computer components and by distributors restocking
inventories. Gross margins were 25.9% and 26.0%, respectively, for the quarter
and nine months ended September 30, 2003 as compared to 28.8% and 28.6%,
respectively, for the comparable prior year periods. Margins were negatively
impacted by product mix changes at Siliconix where there was a higher share of
commodity products as compared to the comparable prior year periods.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses for the quarter and nine
months ended September 30, 2003 were 17.3% and 17.7% of net sales, respectively,
as compared to 16.6% and 16.8% of net sales, respectively, for the comparable
prior year periods. This increase was mainly due to the costs associated with
the acquisition and integration of BCcomponents. The Company's continuing cost
reduction initiatives referred to above also target selling, general &
administrative costs and offset, in part, the acquisition related increases in
SG&A margins.
Restructuring Expense
The Company's restructuring activities have been designed to cut both
fixed and variable costs, particularly in response to the reduced demand for
products occasioned by the electronics industry downturn beginning in 2001.
These activities include the closing of facilities and the termination of
employees. Beginning January 1, 2003, restructuring costs have been accounted
for under SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. This Statement requires that a liability for a cost associated with
an exit or disposal activity be recognized when the liability is incurred.
Because costs are recorded based upon estimates, actual expenditures for the
restructuring activities may differ from the initially recorded costs. If the
initial estimates were too low or too high, we could be required either to
record additional expenses in future periods
28
or to reverse previously recorded expenses. We anticipate that we will realize
the benefits of our restructuring through lower labor costs and other operating
expenses in future periods, although it is not possible to quantify the expected
savings.
The Company recorded restructuring expense of $6,313,000 for the quarter
ended September 30, 2003. Restructuring of European and Asian operations
included $5,021,000 of employee termination costs covering 134 technical,
production, administrative and support employees located in Germany, France,
Hungary, Portugal, the United Kingdom, Austria and the Far East. The remaining
restructuring expense relates to termination costs of $281,000 for 47 technical,
production, administrative and support employees located in the United States,
and $1,011,000 for asset impairment charges. The restructuring expense was
incurred as part of the cost reduction programs currently being implemented by
the Company.
The Company recorded restructuring expense of $2,567,000 for the quarter
ended September 30, 2002. Restructuring of European and Israeli operations
included $1,739,000 of employee termination costs covering approximately 90
technical, production, administrative and support employees located in Czech
Republic, France, Hungary, Israel, Portugal, and Austria. The remaining $828,000
of restructuring expense related to termination costs for approximately 110
technical, production, administrative and support employees located in the
United States. The restructuring expense was incurred as part of the cost
reduction programs currently being implemented by the Company.
Restructuring expense is separate from plant closure, employee termination
and similar integration costs we incur in connection with our acquisition
activities. These amounts are included in the costs of our acquisitions and do
not affect earnings or losses on our statement of operations.
Interest Expense
Interest expense for the quarter and nine months ended September 30, 2003
increased by $2,561,000 and $8,035,000, respectively, as compared to the
comparable prior year periods. This increase was primarily a result of the
various acquisitions made in 2002 and the issuance in August 2003 of the
Company's $500 million principal amount 3 5/8% convertible subordinated notes
due 2023, net of debt repaid with the proceeds of these notes in the amount of
$398 million. Acquisition related debt included in particular borrowings of $116
million on its revolving credit facility and the issuance of $105 million
principal amount of unsecured loan notes, currently bearing interest at LIBOR
plus 1.5%, in connection with the BCcomponents acquisition in December 2002.
These increases in interest expense were partially offset by the impact of
repayment of approximately $171 million principal amount of General
Semiconductor's 5.75% convertible notes, approximately $97 million principal
amount of Liquid Yield OptionTM Notes (LYONs) and $130 million in borrowings
under the Company's bank credit facility with the proceeds of the issuance of
the Company's 3 5/8% notes.
29
Other Income (Expense)
The Company recorded a loss of $9.9 million for extinguishment of debt in
the third quarter of 2003 on the redemption of $171 principal amount of the
General Semiconductor notes and the repurchase of $97.0 million in accreted
amount of the Company's LYONs. Also during the 2003 third quarter, the Company
recorded a gain of $30.4 million on the receipt of insurance proceeds in excess
of book value on account of the destruction of the thin film resistor facility
of the Company's Electro-Films, Inc. subsidiary in Providence, Rhode Island.
That facility has now been completely rebuilt into a state-of-the-art production
center. No comparable losses or gains were recorded in the corresponding three
and nine month 2002 periods.
Other expense was $951,000 for the quarter ended September 30, 2003, as
compared to income of $2,126,000 for the comparable prior year quarter. Other
expense was $14,000 for the nine months ended September 30, 2003 as compared to
income of $4,755,000 for the comparable prior year period. This decrease was
primarily due to higher foreign exchange losses. Foreign exchange losses of
$3,862,000 were reported for the nine months ended September 30, 2003 as
compared to foreign exchange losses of $1,939,000 for the comparable prior year
period. Interest income decreased by $1,230,000 for the nine months ended
September 30, 2003 compared to the same period in the prior year, primarily due
to lower interest rates. Additionally, the nine months ended September 30, 2002
included other income of approximately $1,400,000 received from the Chinese
government as an incentive for being a foreign partner in China.
Minority Interest
Minority interest for the nine months ended September 30, 2003 decreased
$758,000 as compared to the comparable prior year period. This decrease was
primarily due to a decrease in the net earnings of Siliconix.
Income Taxes
The effective tax rate for the first nine months of 2003 was 29.6% as
compared to 23.3% for the comparable prior year period. The higher effective tax
rate in 2003 is due primarily to the fact that the Company did not recognize the
tax benefit of losses incurred in certain high tax jurisdictions. Vishay is not
recognizing deferred tax assets for loss carryforwards in jurisdictions where
there is a recent history of cumulative losses, where there is no taxable income
in the carryback period, where there is insufficient evidence of future earnings
to overcome the loss history and where there is no other positive evidence such
as the availability of temporary differences turning around to offset the loss
carryforwards. In addition, Vishay is not considering the use of any tax
planning strategies to support the recognition of the deferred tax asset without
the associated valuation allowance. While the losses described above are
available to offset future taxable income, accounting rules do not allow for
Vishay to recognize the benefit currently. Additionally, unusual losses recorded
by the Company during the quarter, described in Other Income (Expense) above,
did not include significant tax benefit.
The Company enjoys favorable tax rates on its income in Israel from
specific approved projects. The low rates, which generally are available for a
period of ten or fifteen years, ordinarily result in greater earnings than what
they would be if the Israeli income was subject to statutory
30
United States tax rates. However, due to losses reported in Israel, the low
rates did not materially impact net earnings for the nine months ended September
30, 2003 and 2002, respectively.
Financial Condition and Liquidity
Cash flows from operations were $176,517,000 for the nine months ended
September 30, 2003 as compared to $297,937,000 for the nine months ended
September 30, 2002. For the nine months ended September 30, 2002, there were
significant organic reductions in accounts receivable and inventory in response
to the business slowdown. The increase in accounts receivable at September 30,
2003 versus December 31, 2002 was primarily due to the net sales of
BCcomponents, which was acquired in December 2002. Net purchases of property and
equipment for the nine months ended September 30, 2003 were $71,592,000 as
compared to $54,198,000 for the comparable prior year period. This increase was
mainly due to spending in connection with the active components business.
Purchase of businesses, net of cash acquired, of $25,602,000, for the nine
months ended September 30, 2003 represents payments made related to liabilities
assumed from previous acquisitions.
Cash and cash equivalents were $529 million at September 30, 2003, of
which $263 million belonged to Siliconix. Of the remaining amount of $266
million, approximately $156 million is held by the Company's non-U.S.
subsidiaries.
The Company's financial condition at September 30, 2003 was strong, with a
current ratio of 2.91 to 1. The Company's ratio of long-term debt, less current
portion, to stockholders' equity was 0.34 to 1 at September 30, 2003 as compared
to 0.20 to 1 at September 30, 2002 and 0.30 to 1 at December 31, 2002. The
increase in long-term debt ratio from September 30, 2002 to September 30, 2003
reflects the debt issued in the third quarter of 2003, net of debt repaid, as
well as debt incurred in connection with the BCcomponents acquisition.
In connection with the acquisition of BCcomponents in December 2002, the
Company issued $105,000,000 principal amount of floating rate unsecured loan
notes due 2102. The notes bear interest at LIBOR plus 1.5% through December 31,
2006 and at LIBOR thereafter. The interest payable on the notes may be further
reduced to 50% of LIBOR after December 31, 2010 if the price of Vishay Common
Stock trades above a specified target price, as provided in the notes. The notes
are subject to a put and call agreement under which the holders may at any time
put the notes to the Company in exchange for 6,176,471 shares of Vishay Common
Stock in the aggregate, and the Company may call the notes in exchange for cash
or for shares of Vishay Common Stock after 15 years from the date of issuance.
On August 6, 2003, the Company sold $450 million aggregate principal
amount of 3-5/8% convertible subordinated notes due 2023 and granted the initial
purchasers an option to purchase, within 30 days of the date of the offering
memorandum relating to the notes, an additional $50 million of the notes. This
option was exercised, and the additional $50 million of notes was issued on
September 3, 2003. The notes will pay interest semi-annually. Holders may
convert their notes into shares of Vishay Common Stock, subsequent to the
occurrence of certain conditions that had not occurred as of September 30, 2003,
at a conversion price of $21.28 per share. This conversion price is the
equivalent to a conversion rate of 46.9925 shares per $1,000 principal amount of
notes. The notes are subordinated in right of payment to all of the Company's
existing and future senior
31
indebtedness and are effectively subordinated to all existing and future
liabilities of its subsidiaries. The notes will be redeemable at the Company's
option beginning August 1, 2010 at a redemption price equal to 100% of the
principal amount plus accrued and unpaid interest, if any. Holders of the notes
will have the right to require the Company to repurchase all or some of their
notes at a purchase price equal to 100% of their principal amount of the notes,
plus accrued and unpaid interest, if any, on August 1, 2008, August 1, 2010,
August 1, 2013 and August 1, 2018. In addition, holders of the notes will have
the right to require the Company to repurchase all or some of their notes upon
the occurrence of certain events constituting a fundamental change. On any
required repurchase, the Company may choose to pay the purchase price in cash or
shares of Vishay Common Stock or any combination of cash and Vishay Common
Stock. The proceeds of the offering of these convertible subordinated notes were
used to repay other outstanding debt, as well as general corporate purposes. The
early extinguishment of the LYONs and the General Semiconductor notes, described
below, resulted in a pretax loss of $9.9 million in the third quarter of 2003.
It is anticipated that the early extinguishment will reduce interest expense by
$3.5 million per year going forward.
The Company used approximately $130 million of the proceeds of the
offering of the convertible subordinated notes to repay amounts outstanding
under its revolving credit facility. The Company has agreed with the lenders
under its secured revolving credit facility to an amendment and restatement of
the agreement governing the facility. The maximum availability under the
facility, in light of the Company's anticipated liquidity needs, has been
changed from $500 million to $400 million, and the final maturity of the
facility has been extended from June 2005 to May 2007. The restatement decreases
the Company's minimum tangible net worth requirement to $850 million plus 50% of
net income (without offset for losses) and 75% of net proceeds of equity
offerings from July 1, 2003, eliminates the covenant on minimum earnings before
interest and tax, permits securitization of up to $200 million of non-U.S.
accounts receivable, allows for the release of all collateral (other than
subsidiary stock and pledges by the Company and its subsidiaries of intercompany
notes) under certain circumstances and creates an event of default upon the
occurrence of a fundamental change as defined under the Company's convertible
subordinated notes. At September 30, 2003 and as of the date of this report,
there were no borrowings outstanding under this credit facility. The Company's
tangible net worth at the end of the quarter stood at $875 million, which is $22
million more than the minimum required under the related credit facility
covenant.
The Company used approximately $97.4 million of the proceeds of the
offering of the convertible subordinated notes to fund the purchase of
approximately $97.0 million accreted principal amount ($165.0 million face
amount) of its Liquid Yield Option(TM) Notes (LYONs). Pursuant to the terms of
the LYONs, in June 2004, the remaining holders of the LYONs will have the right
to "put" these notes to the Company for an aggregate purchase price of $235
million. If these notes are put to the Company, the Company expects to be able
to utilize its revolving credit facility to finance the repurchase.
32
The Company used approximately $176.6 million of the proceeds of the
offering of the convertible subordinated notes to fund principal and premium in
connection with the redemption of all of the outstanding 5.75% convertible
subordinated notes due 2006 of its General Semiconductor subsidiary. Prior to
redemption, there was $171 million principal amount of the General Semiconductor
notes outstanding. These notes were redeemed at a price of 103.286% of their
principal amount, plus accrued but unpaid interest to the date of redemption of
$2.3 million.
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
Statements in this report that are not clearly historical are
"forward-looking statements" within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995. These include, but are not limited to,
anticipated results for the remainder of 2003 and expectations with respect to
recoveries in the economic and business climate in general and the Company's
businesses in particular. All forward-looking statements made by or on behalf of
the Company involve risks, uncertainties and contingencies, whether they are
contained in this report or other reports and documents filed with the
Securities and Exchange Commission, in press releases or in communications and
discussions with investors and analysts through meetings, webcasts, phone calls
or conference calls. Many of these risks, uncertainties and contingencies are
beyond the Company's control, and they may cause actual results, performance or
achievements to differ materially from those anticipated. Please refer to the
Company's 2002 Annual Report on Form 10-K/A for important factors that could
cause the Company's actual results, performance or achievements to differ
materially from those in any forward-looking statements made by or on behalf of
the Company.
33
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's cash flows and earnings are subject to fluctuations
resulting from changes in foreign currency exchange rates and interest rates.
The Company manages its exposure to these market risks through internally
established policies and procedures and, when deemed appropriate, through the
use of derivative financial instruments. The Company's policies do not allow
speculation in derivative instruments for profit or execution of derivative
instrument contracts for which there are no underlying exposures. The Company
does not use financial instruments for trading purposes and is not a party to
any leveraged derivatives. The Company monitors its underlying market risk
exposures on an ongoing basis and believes that it can modify or adapt its
hedging strategies as needed.
The Company is exposed to changes in U.S. dollar LIBOR interest rates on
borrowings under its floating rate revolving credit facility. On a selective
basis, the Company from time to time enters into interest rate swap or cap
agreements to reduce the potential negative impact that increases in interest
rates could have on its outstanding variable rate debt. The impact of interest
rate derivative instruments on the Company's results of operations for the nine
months ended September 30, 2003 was not significant.
Item 4. Controls and Procedures
An evaluation was performed as of September 30, 2003, under the
supervision and with the participation of the Company's management, including
the CEO and CFO, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on that evaluation, the CEO
and CFO have concluded that the Company's disclosure controls and procedures are
effective in ensuring that all material information required to be filed in this
quarterly report has been reported, recorded, processed and summarized in a
timely fashion. There have been no changes in the Company's internal control
over financial reporting during the quarter ended September 30, 2003 that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
34
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:
Exhibit 31.1 - Certification pursuant to Rules 13a-14(a) or
15d-14(a) under the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 - Dr. Felix Zandman, Chief Executive Officer
Exhibit 31.2 - Certification pursuant to Rules 13a-14(a) or
15d-14(a)under the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 -
Richard N. Grubb, Chief Financial Officer
Exhibit 32.1 - Certification Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 - Dr. Felix Zandman, Chief Executive Officer
Exhibit 32.2 - Certification Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 - Richard N. Grubb, Chief Financial Officer
35
(b) Reports on Form 8-K:
On July 30, 2003, the Company filed a current report under
Item 12 of Form 8-K, reporting the financial results of the
Company for the quarter and six months ended June 30, 2003.
On July 31, 2003, the Company filed a current report dated
July 30, 2003 under Item 9 of Form 8-K, announcing discussions
to amend and restate its revolving credit facility and
announcing a proposed issuance of debt securities.
On August 1, 2003, the Company filed a current report dated
July 31, 2003 under Item 5 of Form 8-K, announcing an
agreement to sell debt securities.
On August 8, 2003, the Company filed a current report under
Item 7 of Form 8-K, furnishing the Certificate of Amendment to
the Certificate of Incorporation of Vishay Intertechnology,
Inc. (as filed with the Secretary of State of the State of
Delaware on July 31, 2003) and the Amended and Restated Bylaws
of Vishay Intertechnology, Inc. dated as of May 22, 2003.
36
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 14, 2003
37
Exhibit 31.1
CERTIFICATION
I, Dr. Felix Zandman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Vishay Intertechnology,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors:
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: November 14, 2003
/s/ Dr. Felix Zandman
---------------------------
Dr. Felix Zandman
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Richard N. Grubb, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Vishay Intertechnology,
Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b. Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors:
a. All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: November 14, 2003
/s/ Richard N. Grubb
---------------------------
Richard N. Grubb
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Vishay Intertechnology, Inc. (the
"Company") on Form 10-Q for the quarterly period ending September 30, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Dr. Felix Zandman, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Dr. Felix Zandman
- ------------------------
Dr. Felix Zandman
Chief Executive Officer
November 14, 2003
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Vishay Intertechnology, Inc. (the
"Company") on Form 10-Q for the quarterly period ending September 30, 2003 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Richard N. Grubb, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Richard N. Grubb
- --------------------------
Richard N. Grubb
Chief Financial Officer
November 14, 2003