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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from to
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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 (IRS employer
incorporation or organization) identification no.)
63 Lincoln Highway
Malvern, Pennsylvania 19355-2120
(Address of principal executive offices)
(610) 644-1300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.10 par value
(Title of Class)
New York Stock Exchange
(Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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 check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock held by non-affiliates
of the registrant as of March 28, 2000, assuming conversion of all its Class B
Common Stock held by non-affiliates into Common Stock of the registrant, was
$4,148,782,000.
As of March 28, 2000, registrant had 75,700,828 shares of its Common
Stock and 10,369,932 shares of its Class B Common Stock outstanding.
Portions of the registrant's definitive proxy statement, which will be
filed within 120 days of December 31, 1999, are incorporated by reference into
Part III.
PART I
Item 1. DESCRIPTION OF BUSINESS
General
Vishay Intertechnology, Inc. (together with its consolidated subsidiaries,
"Vishay" or the "Company") is a leading international manufacturer and supplier
of discrete passive electronic components and discrete active electronic
components, particularly resistors, capacitors, inductors, diodes and
transistors. The Company offers its customers "one-stop" access to one of the
most comprehensive electronic component lines of any manufacturer in the United
States or Europe. Passive electronic components, discrete active electronic
components and integrated circuits are the primary elements of every electronic
circuit. The Company manufactures one of the broadest lines of surface mount
devices, a format for electronic components that has evolved into the standard
required by most customers. In addition, the Company continues to produce
components in the traditional leaded form. Components manufactured by the
Company are used in virtually all types of electronic products, including those
in the computer, telecommunications, military/aerospace, instrument, automotive,
medical and consumer electronics industries.
Since 1985, Vishay has pursued a business strategy that principally
consists of the following elements:
1. expansion within the electronic components industry, primarily through
the acquisition of other manufacturers with established positions in major
markets, reputations for product quality and reliability and product lines with
which the Company has substantial marketing and technical expertise;
2. reduction of selling, general and administrative expenses through the
integration or elimination of redundant sales offices and administrative
functions at acquired companies;
3. achievement of significant production cost savings through the transfer
and expansion of manufacturing operations to regions, such as Israel, Mexico,
Portugal, the Czech Republic, Taiwan 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; and
4. maintenance of significant production facilities in those regions where
the Company markets the bulk of its products in order to enhance customer
service and responsiveness.
As a result of this strategy, Vishay has grown during the past fifteen
years from a small manufacturer of precision resistors and strain gages to one
of the world's largest manufacturers and suppliers of a broad line of electronic
components.
In 1997, Vishay purchased a 65% interest in Lite-On Power Semiconductor
Corporation ("LPSC"), a Taiwan-based company that is a major supplier of
discrete active electronic components in Asia. LPSC's product line includes
small-signal transistors, zeners, transient voltage suppressors, small-signal
diodes, shottkys, rectifiers and bridges. In March 2000, the Company agreed to
sell its interest in LPSC to Lite-On JV Corporation (the "Lite-On Group"), the
current owner of the remaining 35% interest in LPSC, for consideration
consisting of cash and the assignment or transfer to Vishay of the Lite-On
Group's rights under stock appreciation rights. The closing is expected to
occur before September 30, 2000.
On March 2, 1998, the Company purchased 80.4% of Siliconix Incorporated
(NASDAQ; SILI) ("Siliconix") and 100% of TEMIC Semiconductor GmbH (collectively
with Siliconix, "TEMIC") for a total of $549,889,000 in cash. On March 4, 1998,
the Company sold the Integrated Circuits Division of TEMIC to Atmel Incorporated
for a total of $105,755,000 in cash. Siliconix is a publicly traded chip maker
based in Santa Clara, California which designs, markets and manufactures power
and analog semiconductor products for computers, cell phones, fixed
communications networks, automobiles and other electronic systems. Siliconix has
manufacturing
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facilities in Santa Clara, California. Siliconix also maintains assembly and
testing facilities, which include a company-owned facility in Taiwan, is party
to a joint venture in Shanghai, China and has subcontractors in the Philippines,
China and the United States. Siliconix reported worldwide sales of $ 383.3
million in 1999 and $282.3 million in 1998.
The TEMIC acquisition continued Vishay's expansion efforts in the area of
discrete active electronic components through the addition of TEMIC's product
line, which includes diodes, RF transistors, MOSFET switches, bipolar power
switches, opto-electronic semiconductors, IRDC (Infrared Data Transceivers),
POWER MOSFET, POWER IC (Integrated Circuits), Signal Processing Switches and
JFETs (junction field-effect transistors).
In 1998, Vishay consolidated its Vishay Electronic Components operations
in the United States, Europe and Asia into one operational unit. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." In connection with this consolidation, the Company achieved the
following:
(i) created a single worldwide organization under one management team;
(ii) created further opportunities for synergies among its divisions; and
(iii) positioned the Company for stronger growth by streamlining the
Company's ability to penetrate and create new markets.
Vishay was incorporated in Delaware in 1962 and maintains its principal
executive offices at 63 Lincoln Highway, Malvern, Pennsylvania 19355-2120. Its
telephone number is (610) 644-1300.
Products
Vishay designs, manufactures and markets electronic components that cover
a wide range of products and technologies. The products primarily consist of:
o fixed resistors,
o tantalum capacitors,
o multi-layer ceramic chip capacitors ("MLCC"),
o film capacitors,
o power MOSFETs,
o power integrated circuits,
o signal processing switches,
o diodes and
o transistors;
and, to a lesser extent:
o inductors,
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o aluminum and specialty ceramic capacitors,
o transformers,
o potentiometers,
o plasma displays,
o thermistors and
o Infrared Data Transceivers (IRDC)
The Company offers most of its product types both in surface mount format and in
the traditional leaded device format. The Company believes it produces one of
the broadest lines of electronic components available from any single
manufacturer.
Unlike integrated circuits (ICs), which combine the functions of many
electronic components in one chip, discrete components perform one specific
function per device. Discrete components can be passive devices or active
(semiconductor) devices. Passive components, such as resistors, capacitors and
inductors, adjust and regulate current or store energy and filter frequencies.
Discrete semiconductor components such as diodes and transistors, convert AC
currents to DC, amplify currents or switch electronic signals.
Resistors are basic components used in all forms of electronic circuitry
to adjust and regulate levels of voltage and current. They vary widely in
precision and cost, and are manufactured in numerous materials and forms.
Resistive components may be either fixed or variable, the distinction being
whether the resistance is adjustable (variable) or not (fixed). Resistors can
also be used as measuring devices, such as Vishay's resistive sensors. Resistive
sensors or strain gages are used in experimental stress analysis systems as well
as in transducers for electronic measurement loads (scales), acceleration and
fluid pressure.
Vishay manufactures virtually all types of fixed resistors, both in
discrete and network forms. These resistors are produced for virtually every
segment of the resistive product market, from resistors used in the highest
quality precision instruments for which the performance of the resistors is the
most important requirement, to resistors for which price is the most important
factor.
Capacitors perform energy storage, frequency control, timing and filtering
functions in most types of electronic equipment. The more important applications
for capacitors are:
o electronic filtering for linear and switching power supplies;
o decoupling and bypass of electronic signals or integrated circuits
and circuit boards; and
o frequency control, timing and conditioning of electronic signals for
a broad range of applications.
The Company's capacitor products primarily consist of solid tantalum surface
mount chip capacitors, solid tantalum leaded capacitors, wet/foil tantalum
capacitors, MLCC capacitors, and film capacitors. Each capacitor product has
unique physical and electrical performance characteristics that make each type
of capacitor useful for specific applications. Tantalum and MLCC capacitors are
generally used in conjunction with integrated circuits in applications requiring
low to medium capacitance values, "capacitance" being the measure of the
capacitor's ability to store energy. The tantalum capacitor is the smallest and
most stable type of capacitor for its range of capacitance and is best suited
for applications requiring medium capacitance values. MLCC capacitors, on the
other hand, are more cost-effective for applications requiring lower capacitance
values. The Company's MLCC capacitors are known for their particularly high
reliability.
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Discrete active devices are components that generate, control, regulate,
amplify, or switch electronic signals or energy and must be interconnected with
passive components. Integrated circuits consist of a number of active and
passive components, interconnected on a single chip, that are intended to
perform multiple functions.
Diodes are used to convert electrical currents from AC to DC and are
applied in a broad range of electronic equipment that requires such conversion.
Discrete power MOSFETs are used to switch and manage power in a wide range of
electronic systems, including cell phones, portable and desktop computers,
automobiles, instrumentation and industrial applications. Power conversion ICs
are used in applications where an input voltage from a battery or other supply
source must be switched or converted to a level that is compatible with logic
signals used by microprocessors and other digital components in a specific
system. Motor control ICs control the starting, speed, or position of electric
motors, such as the head positioning and spindle motors in hard disk drives.
Vishay has taken advantage of the growth of the surface mount component
market and is an industry leader in designing and marketing surface mount
devices. Surface mount devices adhere to the surface of a circuit board rather
than being secured by leads that pass through holes to the back side of the
board. Surface mounting provides distinct advantages over through-hole mounting.
For example, surface mounting allows the placement of more components on a
circuit board, which is particularly desirable for a growing number of
manufacturers who require greater miniaturization in products such as hand held
computers and cellular telephones. Surface mounting also facilitates automation,
resulting in lower production costs for equipment manufacturers than those
associated with leaded devices. The Company believes it is a market leader in
the development and production of a wide range of surface mount devices,
including:
o thick film chip resistors,
o thick film resistor networks and arrays,
o metal film leadless resistors (MELFs),
o molded tantalum chip capacitors,
o coated tantalum chip capacitors,
o film capacitors,
o multi-layer ceramic chip capacitors,
o thin film chip resistors,
o thin film networks,
o wirewound chip resistors,
o power strip resistors,
o bulk metal foil chip resistors,
o current sensing chips,
o chip inductors,
o chip transformers,
o chip trimmers,
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o NTC chip thermistors, and
o certain diodes and transistor products.
The Company also provides a number of component packaging styles to facilitate
automated product assembly by its customers.
Markets
Vishay's products are sold primarily to original equipment manufacturers
("OEMs"), OEM subcontractors that assemble printed circuit boards and
independent distributors that maintain large inventories of electronic
components for resale to OEMs. Its products are used in virtually every type of
product containing electronic circuitry, including:
o computer-related products,
o telecommunications equipment,
o measuring instruments,
o industrial equipment,
o automotive applications,
o process control systems,
o military and aerospace applications,
o consumer electronics,
o medical instruments, and
o scales.
For the year ended December 31, 1999, approximately 29.1% of the Company's
net sales was attributable to customers in the United States, while the
remainder was attributable to sales primarily in Europe and Asia.
In the United States, products are marketed through independent
manufacturers' representatives, who are compensated solely on a commission
basis, by the Company's own sales personnel and by independent distributors. The
Company has regional sales personnel in several North American locations that
make sales directly to OEMs and provide technical and sales support for
independent manufacturers' representatives throughout the United States, Mexico
and Canada. In addition, the Company uses independent distributors to resell its
products. Outside North America, products are sold to customers in Germany, the
United Kingdom, France, Israel, Japan, Singapore, Taiwan, South Korea, Brazil
and other European and Pacific Rim countries through Company sales offices,
independent manufacturers' representatives and distributors. In order to better
serve its customers, the Company maintains production facilities in those
regions where it markets the bulk of its products, such as the U.S., Germany,
France and the U.K. In addition, to maximize production efficiencies, the
Company seeks, whenever practicable, to establish manufacturing facilities in
those regions, such as Israel, Mexico, Portugal, the Czech Republic, Taiwan and
the People's Republic of China, where it can take advantage of lower labor costs
and available tax and other government-sponsored incentives.
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The Company undertakes to have its products incorporated into the design
of electronic equipment at the research and prototype stages. Vishay employs its
own staff of application and field engineers who work with its customers,
independent manufacturers' representatives and distributors to solve technical
problems and develop products to meet specific needs.
The Company has qualified certain products under various military
specifications, approved and monitored by the United States Defense Electronic
Supply Center ("DESC"), and under certain European military specifications.
Classification levels have been established by DESC based upon the rate of
failure of products to meet specifications. In order to maintain the
classification level of a product, tests must be continuously performed, and the
results of these tests must be reported to DESC. If the product fails to meet
the requirements for the applicable classification level, the product's
classification may be reduced to a less stringent level. Various United States
manufacturing facilities from time to time experience a product classification
level modification. During the time that such level is reduced for any specific
product, net sales and earnings derived from such product may be adversely
affected.
The Company is aggressively undertaking to have the quality systems at
most of its major manufacturing facilities approved under the ISO 9001
international quality control standard. ISO 9001 is a comprehensive set of
quality program standards developed by the International Standards Organization.
A majority of the Company's manufacturing operations has already received ISO
9001 approval and others are actively pursuing such approval.
Vishay's largest customers vary from year to year, and no customer has
long-term commitments to purchase products of the Company. No customer accounted
for more than 10% of the Company's sales for the year ended December 31, 1999.
Research and Development
Many of the Company's products and manufacturing processes have been
invented, designed and developed by Company engineers and scientists. The
Company maintains strategically located design centers where proximity to
customers enables it to more easily satisfy the needs of local markets. These
design centers are located in the United States (California, Connecticut, Maine,
Nebraska, North Carolina, Pennsylvania), Germany (Selb, Heilbronn, Landshut,
Pfafenberg, Backnang), France (Nice) and Israel (Dimona, Migdal Ha-emek). The
Company also maintains separate research and development staffs and promotes
separate programs at a number of its production facilities to develop new
products and new applications of existing products, and to improve manufacturing
techniques. This decentralized system encourages individual product development
at individual manufacturing facilities that occasionally have applications at
other facilities. Company research and development costs (exclusive of purchased
in-process research and development) were approximately $35.0 million for 1999,
$28.9 million for 1998 and $7.0 million for 1997, respectively. The major
increase in research and development costs was due to the acquisition of
Siliconix. Siliconix's expenditures were $17.0 million and $17.1 million for the
years ended December 31, 1999 and 1998, respectively. Significant effort has
been expended on new power products and power IC's. These amounts do not include
substantial expenditures for the development and manufacturing of machinery and
equipment for new processes and for cost reduction measures. See "Competition".
Sources of Supplies
Although most materials incorporated in the Company's products are
available from a number of sources, certain materials, particularly ceramic
substrates, tantalum, and palladium, are available only from a relatively
limited number of suppliers.
Tantalum, a metal, is the principal material used in the manufacture of
tantalum capacitors. It is purchased in powder and wire form primarily under
annual contracts with domestic and foreign suppliers at prices that are subject
to periodic adjustment. The Company is a major consumer of the world's annual
tantalum production. There are currently three major suppliers that process
tantalum ore into capacitor grade tantalum powder. In light of escalating demand
for tantalum capacitors, there exists a possibility in the short term there may
be shortages of
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tantalum ore and powder until suppliers are able to increase production. The
Company believes that in the long term, there exists sufficient tantalum ore
reserves and a sufficient number of tantalum processors relative to demand. The
tantalum required by the Company has generally been available in sufficient
quantities to meet its requirements. However, the limited number of tantalum
powder suppliers could lead to increases in tantalum prices that the Company may
not be able to pass on to its customers.
Palladium is primarily purchased on the spot and forward markets,
depending on market conditions. Palladium is used to produce multi-layer ceramic
capacitors. Palladium is considered a commodity and is subject to price
volatility. The price of palladium fluctuated in the range of approximately $127
to $444 per troy ounce during the three years ended December 31, 1999. As of
February 28, 2000, the price of palladium had increased to $670 per troy ounce.
Palladium is currently found in South Africa and Russia. Due to various factors,
the Company believes there may be a short-term shortage of palladium which may
affect both the cost of palladium and the Company's plans to expand MLCC
production to meet increased demand. An inability on the part of the Company to
pass on increases in palladium costs to its customers could have an adverse
effect on the margins of those products using the metal.
Inventory and Backlog
Although Vishay manufactures standardized products, substantial portions
of its products are produced to meet customer specifications. The Company does,
however, maintain an inventory of resistors and other components. Backlog of
outstanding orders for the Company's products was $505.1 million, $309.3
million, and $269.8 million, respectively, at December 31, 1999, 1998 and 1997.
The increase in backlog at December 31, 1999 primarily reflects the increase in
demand for its products, including both passive and active components.
Many of the orders in the Company's backlog may be cancelled by its
customers, in whole or in part, although sometimes subject to penalty. To date,
however, cancellations have not been significant.
Competition
The Company faces strong competition in its various product lines from
both domestic and foreign manufacturers that produce products using technologies
similar to those of the Company. The Company's main competitors for tantalum
capacitors are KEMET Corporation, AVX Corporation and NEC Electronics Inc. For
MLCC capacitors, its principal competitors are KEMET, AVX, Murata and TDK Corp.
For thick film chip resistors, competitors are Rohm Corp., Koa Speer Electronics
Inc. and Yageo Corporation. For wirewound and metal film resistors, the
principal competitors are I.R.C. Inc., Rohm Corp. and Ohmite Manufacturing
Company. For discrete active components, competitors are International
Rectifier, Philips, N.V., Rohm Corp., Motorola, Inc., Fairchild Semiconductor
Corp., Maxim, General Semi and Samsung Electro-Mechanics Co., Ltd.
The Company's competitive position depends on its product quality,
know-how, proprietary data, marketing and service capabilities and business
reputation, as well as on price. With respect to certain products, the Company
competes on the basis of its marketing and distribution network, which provides
a high level of customer service. For example, the Company works closely with
its customers to have its components incorporated into their electronic
equipment at the early stages of design and production and maintains redundant
production sites for most of its products to ensure an uninterrupted supply of
products. Further, the Company has established a National Accounts Management
Program, which provides the Company's largest customers with one national
account executive who can cut across Vishay business unit lines for sales,
marketing and contract coordination. In addition, the breadth of the Company's
product offerings enables the Company to strengthen its market position by
providing its customers with "one-stop" access to one of the broadest selections
of passive electronic components available directly from a manufacturing source.
Although the Company has numerous United States and foreign patents
covering certain of its products and manufacturing processes, no particular
patent is considered material to the business of the Company.
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Manufacturing Operations
The Company strives to balance the location of its manufacturing
facilities. In order to better serve its customers, the Company maintains
production facilities in those regions where it markets the bulk of its
products, such as the United States, Germany, France, Asia and the United
Kingdom. To maximize production efficiencies, the Company seeks whenever
practicable to establish manufacturing facilities in countries, such as Israel,
Mexico, Portugal, the Czech Republic, Taiwan and the People's Republic of China,
where it can take advantage of lower labor and tax costs and, in the case of
Israel, to take advantage of various government incentives, including grants and
tax relief.
At December 31, 1999, approximately 32% of the Company's identifiable
assets were located in the United States, approximately 32% were located in
Europe, approximately 16% were located in Israel, and approximately 20% were
located in Asia. In the United States, the Company's main manufacturing
facilities are located in Nebraska, South Dakota, North Carolina, Pennsylvania,
Maine, Connecticut, Virginia, New Hampshire, Florida and California. In Europe,
the Company's main manufacturing facilities are located in Selb, Landshut,
Backnang, and Heilbronn, Germany and Nice, France. In Israel, manufacturing
facilities are located in Holon, Dimona, Beersheva and Migdal Ha-emek. In Asia,
the Company's main manufacturing facilities are located in Taiwan (two) and in
Shanghai, China (five). The Company also maintains major manufacturing
facilities in Juarez, Mexico and the Czech Republic. Over the past several
years, the Company has invested substantial resources to increase capacity and
to maximize automation in its plants, which it believes will further reduce
production costs.
The Company has expanded, and plans to continue to expand, its
manufacturing operations in Israel, where it benefits from the government's
employment and tax incentive programs designed to increase employment, lower
wage rates and attract a highly-skilled labor force, all of which have
contributed substantially to the growth and profitability of the Company.
Under the terms of the Israeli government's incentive programs, once a
project is approved, the recipient is eligible to receive the benefits of the
related grants for the life of the project, so long as the recipient continues
to meet preset eligibility standards. None of the Company's approved projects
has ever been cancelled or modified, and the Company has already received
approval for a majority of the projects contemplated by its capital expenditure
program. However, over the past few years, the government has scaled back or
discontinued some of its incentive programs. Accordingly, there can be no
assurance that in the future the Israeli government will continue to offer new
incentive programs applicable to the Company or that, if it does, such programs
will provide the same level of benefits the Company has historically received or
that the Company will continue to be eligible to take advantage of them. The
Company might be materially adversely affected if these incentive programs were
no longer available to the Company for new projects. However, because a majority
of the Company's projects in Israel currently benefit from government incentive
programs, the Company does not anticipate that any cutbacks in the incentive
programs would have an adverse impact on its earnings and operations for at
least several years. In addition, the Company might be materially adversely
affected if events were to occur in the Middle East that interfere with the
Company's operations in Israel. The Company, however, has never experienced any
material interruption in its Israeli operations in its 30 years of operations
there, in spite of several Middle East crises, including wars. For the year
ended December 31, 1999, sales of products manufactured in Israel accounted for
approximately 23.0% of the Company's net sales.
In 1998, the Company accelerated the implementation of its strategy to
shift manufacturing emphasis to higher automation in higher labor cost regions
and to relocate a fair amount of production to regions with lower labor costs.
As a result, the Company incurred significant restructuring costs in the year
ended December 31, 1998 associated with the downsizing and closing of
manufacturing facilities in Europe. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
See Note 14, "Business Segment and Geographic Area Data," of the Notes to
the Consolidated Financial Statements for financial information by geographic
area.
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Environment, Health and Safety
The Company has adopted an Environmental Health and Safety Corporate
Policy that commits it to achieve and maintain compliance with applicable
environmental laws, to promote proper management of hazardous materials for the
safety of its employees and the protection of the environment, and to minimize
the hazardous materials generated in the course of its operations. This policy
is implemented with accountability directly to the Chairman of the Board of
Directors. In addition, the Company's manufacturing operations are subject to
various federal, state and local laws restricting discharge of materials into
the environment.
The Company is not involved in any pending or threatened proceedings that
would require curtailment of its operations. The Company continually expends
funds to ensure that its facilities comply with applicable environmental
regulations. In regard to its U.S. and European facilities, the Company is
nearing completion of its undertaking to comply with new environmental
regulations relating to the elimination of chlorofluorocarbons (CFCs) and ozone
depleting substances (ODS) and other anticipated compliances with the Clean Air
Act amendments of 1990. In regard to all other facilities, including those
recently acquired, the Company has begun to take steps to implement its
compliance with these regulations.
The Company anticipates that it will undertake capital expenditures of
approximately $5,800,000 in fiscal 2000 for general environmental compliance and
enhancement programs, including those to be applied at the TEMIC facilities. The
Company has been named a Potentially Responsible Party (PRP) at nine Superfund
sites, including two Siliconix facilities. The Company has settled three of
these for minimal amounts and does not expect costs associated with the others
to be material. While the Company believes that it is in material compliance
with applicable environmental laws, it cannot accurately predict future
developments and does not necessarily have knowledge of past occurrences on
sites currently occupied by the Company. Moreover, the risk of environmental
liability and remediation costs is inherent in the nature of the Company's
business and, therefore, there can be no assurance that material environmental
costs, including remediation costs, will not arise in the future.
With each acquisition, the Company undertakes to identify potential
environmental concerns and to minimize, or obtain indemnification for, the
environmental matters it may be required to address. In addition, the Company
establishes reserves for specifically identified potential environmental
liabilities. The Company believes that the reserves it has established are
adequate. Nevertheless, the Company often unavoidably inherits certain
pre-existing environmental liabilities, generally based on successor liability
doctrines. Although the Company has never been involved in any environmental
matter that has had a material adverse impact on its overall operations, there
can be no assurance that in connection with any past or future acquisition the
Company will not be obligated to address environmental matters that could have a
material adverse impact on its operations.
Employees
As of December 31, 1999, the Company employed approximately 21,124 full
time employees of whom approximately 15,861 were located outside the United
States. Some of the Company's employees outside the U.S. are members of trade
unions. The Company's relationship with its employees is good. However, no
assurance can be given that, if the Company continues to restructure its
operations in response to changing economic conditions, labor unrest or strikes,
especially at European facilities, will not occur. See "Legal Proceedings".
Year 2000 Compliance
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 compliant. Each of the Company's divisions implemented a
Year 2000 program designed to address the Year 2000 issue, of which all programs
are now complete. The Company's total cost for these Year 2000 programs
approximated $1,400,000. As a result of these efforts, the Company has
experienced no significant disruptions in mission-critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. In addition, the Company
has not experienced any adverse effects with any of its third party vendors,
suppliers or customers. While the Company is not aware of, and does not expect
that it will experience, any material problems related to this issue, it will
continue to monitor its mission-critical computer applications and those of its
suppliers, vendors and customers throughout the year 2000 to ensure that any
latent Year 2000 matters that may arise are addressed promptly.
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Item 2. PROPERTIES
As of December 31, 1999, the Company maintains approximately 64
manufacturing facilities. The principal locations of such facilities, along with
available space including administrative offices, are:
Approx. Available
Owned Locations Space (Square Feet)
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United States
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Columbus and Norfolk, NE* 298,000
Santa Clara, CA 235,000
Sanford, ME 225,000
Malvern and Bradford, PA* 223,000
Wendell and Statesville, NC* 200,000
Roanoke, VA 128,000
Concord, NH 108,000
Monroe, CT 91,000
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* 2 locations
Foreign
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Israel (4 locations) 970,000
Germany (12 locations) 889,000
France (4 locations) 357,000
Czech Republic (4 locations) 306,000
Portugal 301,000
Taiwan (2 locations) 170,000
Austria 153,000
Hungary 94,000
Vishay owns an additional 277,000 square feet of manufacturing facilities
located in Colorado, Maryland, New York, South Dakota and Florida.
Available leased facilities in the United States include 115,000 square
feet of space located in California, South Dakota and Missouri. Foreign leased
facilities consist of 235,000 square feet in China, 220,000 square feet in
Mexico, 110,000 square feet in England, 75,000 square feet in Germany, 66,000
square feet in Hungary, 35,000 square feet in France, 15,000 square feet in the
Philippines and 10,000 square feet in both the Czech Republic and Japan.
In the opinion of management, the Company's properties and equipment
generally are in good operating condition and are adequate for its present
needs. The Company does not anticipate difficulty in renewing existing leases as
they expire or in finding alternative facilities.
Item 3. LEGAL PROCEEDINGS
The Company from time to time is involved in routine litigation incidental
to its business. Management believes that such matters, either individually or
in the aggregate, should not have a material adverse effect on the Company's
business or financial condition.
As part of Vishay's 1996 restructuring program, the Company's subsidiary,
Sprague France S.A., laid off certain workers at the company's facility in
Tours, France. The trade union representing the workers claimed that the layoffs
were not economically motivated, and were therefore prohibited under French law.
A court ruled that, although the Company would not be required to rehire the
employees, the Company would have to pay damages
-11-
equal to approximately 10 million French Francs (approximately U.S. $1,475,000)
as of March 28, 2000, to the former employees. The Company has appealed this
decision.
In 1996, the Company's 80.4% owned subsidiary, Siliconix, was a party to
two environmental proceedings. The first involved property that Siliconix
vacated in 1972. In July 1989, the California Regional Water Quality Control
Board ("RWQCB") issued Cleanup and Abatement Order No. 89-115 both to Siliconix
and the current owner of the property. The Order alleged that Siliconix
contaminated both the soil and the groundwater on the property by the improper
disposal of certain chemical solvents. The RWQCB considered both parties to be
liable for the contamination and sought to have them decontaminate the site to
acceptable levels. Siliconix subsequently reached a settlement of this matter
with the current owner of the property. The settlement provided that the current
owner will indemnify Siliconix and its employees, officers, and directors
against any liability that may arise out of any governmental agency actions
brought for environmental cleanup of the subject site, including liability
arising out of RWQCB Order No. 89-115, to which Siliconix remains nominally
subject.
The second proceeding involves Siliconix's Santa Clara, California
facility, which the company has owned and occupied since 1969. In February 1989,
the RWQCB issued Cleanup and Abatement Order No. 89-27 to Siliconix. The Order
is based on the discovery of contamination of both the soil and the groundwater
on the property by certain chemical solvents. The Order calls for Siliconix to
specify and implement interim remedial actions and to evaluate final remedial
alternatives. The RWQCB issued a subsequent order requiring Siliconix to
complete the decontamination. Siliconix is complying with the RWQCB's orders.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this report, no
matter was submitted to a vote of the security holders of the Company.
Item 4A. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the executive
officers of the Company as of March 28, 2000.
Name Age Positions Held
Felix Zandman* 71 Chairman of the Board, Chief Executive
Officer and Director
Avi D. Eden* 52 Vice-Chairman of the Board, Executive
Vice President, General Counsel
and Director
Gerald Paul* 51 Chief Operating Officer, President
and Director
Richard N. Grubb* 53 Executive Vice President, Treasurer,
Chief Financial Officer and Director
Robert A. Freece* 59 Senior Vice President and Director
William J. Spires 58 Vice President and Secretary
* Member of the Executive Committee of the Board of Directors.
-12-
Dr. Felix Zandman, a founder of the Company, has been the Chief Executive
Officer and a Director of the Company since its inception. Dr. Zandman had been
President of the Company from its inception until March 16, 1998, when Dr.
Gerald Paul was appointed President of the Company. Dr. Zandman has been
Chairman of the Board since March 1989.
Avi D. Eden has been a Director and General Counsel of the Company since
June 1988, and has been Vice Chairman of the Board and Executive Vice President
of the Company since August 1996.
Dr. Gerald Paul has served as a Director of the Company since May 1993 and
has been Chief Operating Officer and Executive Vice President of the Company
since August 1996. On March 16, 1998, Dr. Paul was appointed President of the
Company. He was President of Vishay Electronic Components, Europe from January
1994 to August 1996. Dr. Paul has been Managing Director of Draloric Electronic
GmbH, an affiliate of the Company, since January 1991. Dr. Paul has been
employed by Draloric since February 1978.
Richard N. Grubb has been a Director, Vice President, Treasurer and Chief
Financial Officer of the Company since May 1994, and has been Executive Vice
President of the Company since August 1996. Mr. Grubb has been associated with
the Company in various capacities since 1972.
Robert A. Freece has been a Director of the Company since 1972. He was
Vice President of the Company from 1972 until 1994, and has been Senior Vice
President since May 1994.
William J. Spires has been a Vice President and Secretary of the Company
since 1981. Mr. Spires has been Vice President - Industrial Relations since 1980
and has been employed by the Company since 1970.
-13-
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol VSH. The following table sets forth the high and low sales prices for
the Company's Common Stock as reported on the New York Stock Exchange Composite
Tape for the quarterly periods within the 1999 and 1998 calendar years
indicated. Stock prices have been restated to reflect stock dividends and stock
splits. The Company does not currently pay cash dividends on its capital stock.
Its policy is to retain earnings to support the growth of the Company's business
and the Company does not intend to change this policy at the present time. In
addition, the Company is restricted from paying cash dividends under the terms
of the Company's revolving credit agreements. See Note 5 to the Consolidated
Financial Statements. Holders of record of the Company's Common Stock totaled
approximately 1,867 at March 28, 2000.
COMMON STOCK MARKET PRICES
Calendar Calendar
1999 1998
High Low High Low
---- --- ---- ---
First Quarter $12.40 $ 8.90 $18.34 $15.00
Second Quarter $21.06 $11.70 $18.76 $13.81
Third Quarter $26.25 $18.06 $14.70 $ 8.00
Fourth Quarter $32.00 $21.25 $13.75 $ 7.35
At March 28, 2000, the Company had outstanding 10,369,932 shares of Class
B Common Stock, par value $.10 per share (the "Class B Stock"), each of which
entitles the holder to ten votes. The Class B Stock generally is not
transferable and there is no market for those shares. The Class B Stock is
convertible, at the option of the holder, into Common Stock on a share for share
basis. Substantially all of such Class B Stock is owned by Dr. Felix Zandman,
Mrs. Luella B. Slaner and trusts for the benefit of Mrs. Slaner's grandchildren,
either directly or beneficially. Dr. Felix Zandman is an executive officer and
director of the Company. Mrs. Luella B. Slaner is a director of the Company.
-14-
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information
of the Company for the fiscal years ended December 31, 1999, 1998, 1997, 1996
and 1995. This table should be read in conjunction with the Consolidated
Financial Statements of the Company and the related notes thereto included
elsewhere in this Form 10-K.
As of and for the Year Ended December 31,
----------------------------------------------------------------------
1999 (1) 1998 (2) 1997 (3) 1996 (4) 1995
---- ----- ----- ----- ----
Income Statement Data (in thousands,
except per share amounts):
Net sales $1,760,091 $1,572,745 $1,125,219 $1,097,979 $1,224,416
Interest expense 53,296 49,038 18,819 17,408 29,433
Earnings before income taxes
and minority interest 134,711 42,646 89,561 70,846 123,255
Income taxes 36,940 30,624 34,167 17,741 30,307
Minority interest 14,534 3,810 2,092 489 281
Net earnings 83,237 8,212 53,302 52,616 92,667
Basic earnings per share(5) $ 0.99 $ 0.10 $ 0.63 $ 0.62 $ 1.18
Diluted earnings per share(5) $ 0.97 $ 0.10 $ 0.63 $ 0.62 $ 1.18
Weighted average shares
outstanding - basic(5) 84,452 84,443 84,418 84,421 78,571
Weighted average shares
outstanding - diluted(5) 85,488 84,531 84,603 84,478 78,615
Balance Sheet Data (in thousands):
Total assets $2,323,781 $2,462,744 $1,719,648 $1,558,515 $1,543,331
Long-term debt 656,943 814,838 347,463 229,885 228,610
Working capital 581,550 639,783 455,134 434,199 411,286
Stockholders' equity 1,013,592 1,002,519 959,648 945,230 907,853
- ------------------------------------------------------------------------------------------------------
(1) The sale of Nicolitch, S.A. and a tax rate change in Germany reduced net
earnings by $14,562,000 ($0.17 per share).
(2) Includes the results from March 1, 1998 of TEMIC and special charges after
taxes of $55,335,000 ($0.66 per share).
(3) Includes the results from July 1, 1997 of Lite-On Power Semiconductor
Corporation and special charges after taxes of $27,692,000 ($0.33 per
share).
(4) Includes restructuring expense of $38,030,000 ($0.31 per share).
(5) Adjusted to reflect a five-for-four stock split distributed June 22,
1999 and 5% stock dividends paid on June 11, 1998, June 9, 1997 and June
7, 1996.
-15-
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction and Background
The Company's sales and net earnings increased significantly through 1995
primarily as a result of its acquisitions. Following each acquisition, the
Company implemented programs to take advantage of distribution and operating
synergies among its businesses. This implementation was reflected in increases
in the Company's sales and in the decline in selling, general, and
administrative expenses as a percentage of the Company's sales.
However, beginning with the last quarter of 1995 and through 1998 the
Company experienced a decline in demand for its commodity-related products
(fixed resistors, MLCC and tantalum capacitors) which accounted for
approximately 50% of the Company's revenues during that time. Such decline in
demand resulted in a decrease in revenues, earnings and backlogs of these
products.
In order to address the slowdown in demand and price erosion resulting
from an oversupply of tantalum and multi-layer ceramic chip capacitors, the
Company implemented a restructuring program beginning in 1996 that included the
downsizing and closing of manufacturing facilities in North America and Europe.
In connection with the restructuring, the Company incurred $38,030,000 of pretax
charges for the year ended December 31, 1996 relating to employee termination
and facility closure costs. In 1997 the Company incurred $12,605,000 of
restructuring expenses relating to employee termination and facility closure
costs in Europe. In 1998 the Company incurred $6,244,000 of restructuring
expenses.
In the late 1990's, the Company began to enter into the active components
business. In July 1997, the Company purchased a 65% interest in LPSC, a Taiwan
based company that is a major supplier of discrete active electronic components
in Asia. In 1998, the Company acquired the Semiconductor Business Group of
TEMIC, which included Telefunken and 80.4% of Siliconix, producers of
transistors, diodes, optoelectronics, and power and analog switching integrated
circuits.
Since the third quarter of 1999, the Company has experienced increasing
demand for its products, including both passive and active electronic
components. The Company is expanding capacity in all of its major product lines
in order to satisfy this demand. In some cases, the Company has been able to
increase pricing for its products because of tight supply, reversing the price
erosion experienced in prior years. The Company attributes the increased demand
for its products to the continuing growth in the wireless telecommunication
market, particularly cell phones, and to the increasing use of embedded
computing devices in a wide range of consumer and commercial products.
The Company's strategy contemplates transferring some of its
manufacturing operations from countries with high labor costs and tax rates,
such as the United States, France and Germany, to Israel, Mexico, Portugal, the
Czech Republic, Taiwan and the People's Republic of China in order to benefit
from lower labor costs and, in the case of Israel, to take advantage of various
government incentives, including government grants and tax incentives.
Notwithstanding the current favorable market conditions, the Company intends to
continue to explore and implement opportunities for cost efficiencies in its
manufacturing operations.
The Company realizes approximately 70.9% of its revenues from customers
outside the United States. As a result, fluctuations in currency exchange rates
can significantly affect the Company's reported sales and, to a lesser extent,
earnings. Currency fluctuations impact the Company's net sales and other income
statement amounts, as denominated in U.S. dollars, including other income as it
relates to foreign exchange gains or losses. Generally, in order to minimize the
effect of currency fluctuations on profits, the Company endeavors to:
1. borrow money in the local currencies and markets where it conducts
business; and
2. minimize the time for settling intercompany transactions.
In connection with its day-to-day operations, the Company generally does not
purchase foreign currency exchange contracts or other derivative instruments to
hedge foreign currency exposures. In September 1999, a subsidiary of the Company
entered into foreign currency forward exchange contracts to manage exchange
rate exposure on certain foreign currency denominated transactions.
As a result of the increased production by the Company's operations in
Israel over the past several years, the low tax rates in Israel (as compared to
the statutory rate in the United States) have had the effect of increasing the
Company's net earnings. The more favorable Israeli tax rates are applied to
specific approved projects and are normally available for a period of ten years
or, if the investment in the project is over $20 million, for a period of 15
years, which has been the case for most of the Company's projects in Israel
since 1994. New projects are continually being introduced. In addition, the
Israeli government offers certain incentive programs in the form of grants
designed to increase employment in Israel. However, the Israeli government has
recently scaled back or discontinued some of its incentive programs.
Accordingly, there can be no assurance that in the future the Israeli government
will continue to offer new incentive programs applicable to the Company or that,
if it does, such programs will provide the same level of benefits the Company
has historically received or that the Company will continue to be eligible to
take advantage of them. The Company might be materially adversely affected if
these incentive programs were no longer available to the Company for new
projects. However, because a majority of the Company's projects in
-16-
Israel already benefit from government incentive programs, the Company does not
anticipate that any cutbacks in the incentive programs would have an adverse
impact on its earnings and operations for at least several years.
Israeli government grants, recorded as a reduction of costs of products
sold, were $14,256,000 for the year ended December 31, 1999, as compared to
$13,116,000 for the prior year. If the Israeli government continues its grant
and incentive programs, future benefits offered to the Company by the Israeli
government will likely depend on the Company's continuing to increase capital
investment and the number of Company employees in Israel.
Results of Operations
Income statement captions as a percentage of sales and the effective tax
rates were as follows:
Year Ended December 31,
1999 1998 1997
---- ---- ----
Costs of products sold 73.8% 75.6% 76.3%
Gross profit 26.2 24.4 23.7
Selling, general and
administrative expenses 14.5 14.9 12.2
Operating income 11.0 6.0 9.7
Earnings before income taxes and
minority interest 7.7 2.7 8.0
Effective tax rate 27.4 71.8 38.1
Net earnings 4.7 0.5 4.7
Year ended December 31, 1999 compared to Year ended December 31, 1998
Net Sales
Net sales for the year ended December 31, 1999 increased $187,346,000 or
11.9% from the prior year. The increase in net sales relates primarily to the
results of TEMIC, which was acquired March 2, 1998. Net sales of TEMIC for the
year ended December 31, 1999 were $673,300,000 as compared to $474,188,000
included in the Company's reported sales for the ten months ended December 31,
1998. Exclusive of TEMIC, net sales would have decreased by $11,776,000 or 1.0%.
The strengthening of the U.S. dollar against foreign currencies for the year
ended December 31, 1999, in comparison to the prior year, resulted in decreases
in reported sales of $15,882,000. The passive components business net sales were
$1,008,266,000 for the year ended December 31, 1999 as compared to
$1,027,902,000 for the prior year period. The active components business net
sales were $751,825,000 for the year ended December 31, 1999 as compared to
$544,843,000 for the prior year period. The 1999 sales of the active business
reflect increased demand for product, particularly in telecommunication and
computer applications and reduced price erosion on its products.
Costs of Products Sold
Costs of products sold for the year ended December 31, 1999 were 73.8% of
net sales, as compared to 75.6% for the prior year. Gross profit, as a
percentage of net sales, for the year ended December 31, 1999 increased from the
comparable prior year period mainly due to the results of TEMIC. TEMIC reported
gross profit margins of 33.3% for the year ended December 31, 1999 as compared
to 30.1% for the ten months ended December 31, 1998, mainly due to higher
business volume and manufacturing efficiencies gained from the full utilization
of existing manufacturing capacity.
The active components business gross margins were 31.4% for the year ended
December 31, 1999 as compared to 27.9% for the prior year period. The increase
is due to the Siliconix operation, where gross margins have increased
substantially as a result of increased product demand, stronger capacity
utilization, an improved product mix and increased fab efficiencies.
The passive components business gross profit margins were 22.4% for the
year ended December 31, 1999 as compared to 22.5% for the prior year period.
Profitability for the passive components business was negatively affected by
price erosion, which began in the second quarter of 1998. However, beginning in
the third quarter of 1999, most of the Company's product lines have seen an
increase in demand and the average selling prices have stopped declining, with
prices actually increasing in some instances.
Israeli government grants, recorded as a reduction of costs of products
sold, were $14,256,000 for the year ended December 31, 1999, as compared to
$13,116,000 for the prior year. Future grants and other incentive programs
offered to the Company by the Israeli government will likely depend on the
Company's continuing to increase capital investment and the number of Company
employees in Israel. Deferred income at December 31, 1999 relating to Israeli
government grants was $50,462,000 as compared to $59,264,000 at December 31,
1998.
-17-
Selling, General and Administrative Expenses
Selling, general, and administrative expenses for the year ended December
31, 1999 were 14.5% of net sales, as compared to 14.9% for the prior year. The
decrease in selling, general and administrative expenses was primarily due to
the cost reduction initiatives of TEMIC, for which selling, general and
administrative expenses were 16.1% for the year ended December 31, 1999 as
compared to 19.6% for the ten months ended December 31, 1998.
Interest Expense
Interest costs increased by $4,258,000 for the year ended December 31,
1999 from the prior year. Bank borrowings related to the TEMIC acquisition were
outstanding for twelve months during 1999 compared to ten months during 1998.
Also during 1999, interest rates increased as compared to the prior year.
Other Income
Other income decreased by $3,496,000 for the year ended December 31, 1999
as compared to the prior year. Included in the results for the year ended
December 31, 1999 is a non-cash loss of $10,073,000 in connection with the sale
of Nicolitch, S.A., a subsidiary of the Company. Included in the results for the
year ended December 31, 1998 is a loss of $6,269,000 related to a forward
exhange contract entered into to set the purchase price in connection with the
TEMIC acquisition.
Minority Interest
Minority interest increased by $10,724,000 for the year ended December 31,
1999 as compared to the prior year primarily due to the increase in net earnings
of Siliconix, of which Vishay owns 80.4%.
Income Taxes
The effective tax rate for the year ended December 31, 1999 was 27.4% as
compared to 71.8% for the prior year. The tax rate for the year ended December
31, 1999 reflects the non-tax deductibility of the loss on the sale of
Nicolitch, S.A. Tax expense on the sale of Nicolitch, S.A. was $1,416,000. Also,
a tax rate change in Germany resulted in a decrease in German deferred tax
assets, which increased tax expense by $1,939,000. Exclusive of the effect of
the sale of Nicolitch, S.A. and the tax rate change in Germany, the effective
tax rate on earnings before minority interest for the year ended December 31,
1999 would have been 23.2%. The higher tax rate for the year ended December 31,
1998 was primarily due to the non-tax deductibility of the in-process research
and development expense in the fourth quarter 1998 and a $10,000,000 increase in
a valuation allowance for a deferred tax asset for net operating loss carry
forwards in Germany. Exclusive of the effect of special charges, the tax rate on
earnings before minority interest for the year ended December 31, 1998 would
have been 27.8%. The continuing effect of low tax rates in Israel, as compared
to the statutory rate in the United States, resulted in increases in net
earnings of $12,469,000 and $15,166,000 for the years ended December 31, 1999
and 1998, respectively. The more favorable Israeli tax rates are applied to
specific approved projects and are normally available for a period of ten or
fifteen years. See "Description of Business -- Manufacturing Operations."
Year ended December 31, 1998 compared to Year ended December 31, 1997
Net Sales
Net sales for the year ended December 31, 1998 increased $447,526,000 or
39.8% from the prior year. The increase in net sales related primarily to the
acquisition of TEMIC, which became effective March 1, 1998. Net sales of TEMIC
for the ten months ended December 31, 1998 included in the Company's reported
sales were $474,188,000. LPSC was acquired by Vishay effective July 1, 1997.
LPSC's sales for the year ended December 31, 1998 were $70,655,000 compared to
$38,290,000 for the six months ended December 31, 1997. Exclusive of TEMIC and
LPSC, net sales would have decreased by $97,317,000 or 8.6%. The strengthening
of the U.S. dollar against foreign currencies for the year ended December 31,
1998 in comparison to the prior year resulted in decreases in reported sales of
$16,131,000. Moreover, the Company's net sales of passive components and
semiconductor components
-18-
were negatively affected by substantial price erosion resulting from oversupply
of tantalum and multi-layer chip capacitors and the economic downturn in Asia.
Costs of Products Sold
Costs of products sold for the year ended December 31, 1998 were 75.6% of
net sales, as compared to 76.3% for the prior year. Gross profit, as a
percentage of net sales, for the year ended December 31, 1998 increased from the
comparable prior year period mainly due to the acquisition of TEMIC. TEMIC
reported gross profit margins of 30.1% for the ten months ended December 31,
1998. The passive components business gross profit margins were 22.5% for the
year ended December 31, 1998 as compared to 24.0% for the prior year, reflecting
a weakness in the passive components business. Profitability for the passive
components business was negatively affected by price erosion from an oversupply
of tantalum and multi-layer chip capacitors and the depressed Asian market. The
results for semiconductor components were also negatively affected by a decrease
in demand for products in the semiconductor industry, adjustments of high
inventory levels at distributors, the depressed Asian market, and substantial
price erosion.
Israeli government grants, recorded as a reduction of costs of products
sold, were $13,116,000 for the year ended December 31, 1998, as compared to
$11,352,000 for the prior year. Deferred income at December 31, 1998 relating to
Israeli government grants was $59,264,000 as compared to $59,300,000 at December
31, 1997.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses for the year ended December
31, 1998 were 14.9% of net sales, as compared to 12.2% for the prior year. The
increased selling, general and administrative expenses were primarily due to the
acquisition of TEMIC, for which selling, general and administrative expenses
were 19.6% for the ten months ended December 31, 1998.
Unusual Items
The Company incurred unusual items of $29,301,000 for the year ended
December 31, 1998. Approximately $23,057,000 of these items related to
impairment losses in connection with certain joint ventures in China and Japan.
The remaining $6,244,000 of unusual items related to the Company's restructuring
of European operations ($5,944,000) and closing of two U.S. sales offices
($300,000). See Note 3 to Consolidated Financial Statements for additional
information on the Company's impairment losses and restructuring programs.
Purchased In-Process Technology
In connection with the acquisition of TEMIC, the Company expensed $13.3
million representing purchased in-process technology that had not yet reached
technological feasibility and had no alternative future use (see Note 2 to
Consolidated Financial Statements).
The in-process technology acquired in the TEMIC acquisition was segmented
into two categories, process technology and product technology. Process
technology is the process by which multiple products can be manufactured. Three
separate process technologies were identified, (i) Bondwireless, (ii) 178M Cell,
and (iii) PIC .8 micron 15V. Product technology is the technology behind the
development of products. TEMIC has three primary product categories, (i) Power
MOS, (ii) Power IC, and (iii) Standard Products. Introduction of the new process
technologies, if successful, was expected to improve the efficiency and
effectiveness of TEMIC's MOSFET products and introduce new IC technology which
would reduce die size by approximately 66%. This would lower production costs
per unit and increase margins. Introduction of the product technologies, if
successful, was expected to optimize the performance of certain MOSFETs, diodes
and power ICs and introduce new applications for certain of TEMIC's products.
These research and development projects were expected to reach completion and
begin generating revenues during periods ranging from 1999 to 2003. At the
acquisition date, TEMIC's research and development projects ranged in completion
from approximately 1% to 86%, with total continuing research and development
commitments to complete the projects of approximately $7.4 million.
The value assigned to purchased in-process research and development was
determined by estimating the costs to develop TEMIC's purchased in-process
technology into commercially viable products, estimating the resulting net cash
flows from such projects, and discounting the net cash flows back to their
present values. The revenue estimates used to value the in-process research and
development were based on estimates of the relevant market sizes and growth
factors, expected trends in technology and the nature and expected timing of new
product introductions by the Company and its competitors. The estimates for
costs of products sold, research and development, selling, general and
administrative expenses and income taxes were calculated as a percentage of
revenue and were based on historical amounts and were adjusted to reflect
competition and advancing technology in the industry.
The rates utilized to discount the net cash flows to their present value
were based on weighted average cost of capital and venture capital rates of
return. Given the nature of the risks associated with the estimated growth,
profitability and development projects, a discount rate of 20% was deemed
appropriate for TEMIC's in-process projects. This discount rate was intended to
be commensurate with the specific risks of achieving technological feasibility
and the uncertainties in the economic estimates described above. The estimates
used by the Company in valuing in-process research and development were based on
assumptions the Company believed to be reasonable but which were inherently
uncertain and unpredictable.
Interest Expense
Interest costs increased by $30,219,000 for the year ended December 31,
1998 from the prior year due to the increase in bank borrowings necessary to
fund the TEMIC and LPSC acquisitions. The Company had net borrowings of
$444,000,000 and $130,000,000, respectively, from a group of banks to finance
the acquisitions of TEMIC and LPSC.
-19-
Other Income
Other income decreased by $2,019,000 for the year ended December 31, 1998
as compared to the prior year primarily due to reduced foreign exchange gains.
Foreign exchange gains for the year ended December 31, 1998 were $495,000
compared to $3,657,000 for the year ended December 31, 1997. The Company also
incurred losses of $6,269,000 and $5,295,000 in 1998 and 1997, respectively,
relating to a forward exchange contract which was entered into to set the
purchase price in connection with the TEMIC acquisition, since the purchase
price was denominated in German Marks and payable in U.S. Dollars.
Income Taxes
The effective tax rate for the year ended December 31, 1998 was 71.8% as
compared to 38.1% for the prior year. The higher tax rate for the year ended
December 31, 1998 was primarily due to the non-tax deductibility of the
in-process research and development expense and a $10,000,000 increase in a
valuation allowance for a deferred tax asset for net operating loss carry
forwards in Germany. Exclusive of the effect of special charges, the tax rate on
earnings before minority interest for the year ended December 31, 1998 would
have been 27.8%. The continuing effect of low tax rates in Israel, as compared
to the statutory rate in the United States, resulted in increases in net
earnings of $15,166,000 and $10,685,000 for the years ended December 31, 1998
and 1997, respectively. The more favorable Israeli tax rates are applied to
specific approved projects and are normally available for a period of ten or
fifteen years. See "Description of Business -- Manufacturing Operations".
Financial Condition and Liquidity
Cash flows from operations were $239,809,000 for the year ended December
31, 1999 compared to $169,450,000 for the prior year. The increase in cash flows
from operations is primarily attributable to an increase in net earnings for the
year ended December 31, 1999 as compared to the year ended December 31, 1998.
Net purchases of property and equipment for the year ended December 31, 1999
were $119,638,000 compared to $151,682,000 in the prior year. The Company made
$141,028,000 net payments on borrowings during 1999. Net cash provided by
financing activities of $450,408,000 for the year ended December 31, 1998
reflects borrowings used to finance the acquisition of TEMIC. See Notes 2 and 3
to the Consolidated Financial Statements for discussion of restructuring costs
paid during 1999.
The Company's financial condition at December 31, 1999 is strong, with a
current ratio of 2.68 to 1. The Company's ratio of long-term debt, less current
portion, to stockholders' equity was .65 to 1 at December 31, 1999 and .81 to 1
at December 31, 1998.
On March 2, 1998, the Company and certain of its subsidiaries entered into
a $1.1 billion multicurrency revolving credit agreement with a group of banks
that included an $825 million long term revolving credit and swing line facility
and a $275 million short term revolving credit facility. On June, 1, 1999, the
Company amended the two facilities. The $825 million long-term facility matures
on March 2, 2003, subject to Vishay's right to request year-to-year renewals.
The short-term facility now provides for a $100 million 364-day facility, which
is available until May 30, 2000. Borrowings under the two facilities bear
interest at variable rates based, at the option of Vishay, on the prime rate or
a
-20-
eurocurrency rate and in the case of any swing line advance, the quoted rate.
The borrowings under the two facilities are secured by pledges of stock in
certain significant subsidiaries and indirect subsidiaries of Vishay and
guaranties by certain significant subsidiaries. The Company is required to pay
facility fees on the two facilities. The credit facilities restrict the Company
from paying cash dividends, and require the Company to comply with certain
financial covenants. See Note 5 to the Consolidated Financial Statements for
additional information.
Management believes that available sources of credit, together with cash
expected to be generated from operations, will be sufficient to satisfy the
Company's anticipated financing needs for working capital and capital
expenditures during the next twelve months.
Year 2000 Compliance
In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 compliant. Each of the Company's divisions implemented a
Year 2000 program designed to address the Year 2000 issue, of which all programs
are now complete. The Company's total cost for these Year 2000 programs
approximated $1,400,000. As a result of these efforts, the Company has
experienced no significant disruptions in mission-critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. In addition, the Company
has not experienced any adverse effects with any of its third party vendors,
suppliers or customers. While the Company is not aware of, and does not expect
that it will experience, any material problems related to this issue, it will
continue to monitor its mission-critical computer applications and those of its
suppliers, vendors and customers throughout the year 2000 to ensure that any
latent Year 2000 matters that may arise are addressed promptly.
Euro Conversion
On January 1, 1999, 11 of the 15 member countries of the European Union
adopted the euro as their common legal currency and established fixed conversion
rates between their existing sovereign currencies and the euro. The Company is
currently evaluating issues raised by the introduction and initial
implementation of the euro on January 1, 2002. The Company does not expect costs
of system modifications to be material, nor does it expect the introduction and
use of the euro to materially and adversely affect its financial condition or
results of operations. The Company will continue to evaluate the impact of the
euro introduction.
Inflation
Normally, inflation does not have a significant impact on the Company's
operations. The Company's products are not generally sold on long-term
contracts. Consequently, selling prices, to the extent permitted by competition,
can be adjusted to reflect cost increases caused by inflation.
Safe Harbor Statement
From time to time, information provided by the Company, including but not
limited to statements in this report, or other statements made by or on behalf
of the Company, may contain "forward-looking" information within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such statements involve a number of risks and
uncertainties. The Company's actual results could differ materially from those
discussed in the forward-looking statements. The cautionary statements set forth
below identify important factors that could cause actual results to differ
materially from those in any forward-looking statements made by or on behalf of
the Company.
Changes in Product Demand, Competition, Backlog
o The Company offers a broad variety of products and services to its
customers. Changes in demand for, or in the mix of, products and
services comprising revenues could cause actual operating results
to vary from those expected.
o A slowdown in demand for passive electronic components or
recessionary trends in the global economy in general or in
specific countries or regions where the Company sells the bulk of
its products, such as the U.S., Germany, France or the Pacific
Rim, could adversely impact the Company's results of operations.
o The Company operates in a highly competitive environment, which
includes significant competitive pricing pressures and intense
competition for entry into new markets.
o Many of the orders in the Company's backlog may be canceled by its
customers without penalty. Customers may on occasion double and
triple order components from multiple sources to ensure timely
delivery when backlog is particularly long. The Company's results
of operations may be adversely impacted if customers were to
cancel a material portion of such orders.
-21-
Product Development, Business Expansion
o The Company's future operating results are dependent, in part, on
its ability to develop, produce and market new and innovative
products, to convert existing products to surface mount devices
and to customize certain products to meet customer requirements.
There are numerous risks inherent in this complex process,
including the need for the Company to timely bring to market new
products and applications to meet customers' changing needs.
o The Company's historic growth in revenues and net earnings has
resulted in large part from its strategy to expand through
acquisitions. However, there is no assurance that the Company will
find or consummate transactions with suitable acquisition
candidates in the future. From time to time, when the Company is
in the process of pursuing a strategic acquisition, the Company or
the acquisition target may feel compelled for securities and other
legal reasons to announce the potential acquisition or the
Company's desire to enter into a certain market prior to entering
into formal agreements. As a result, there can be no assurance
that the Company will consummate any such acquisition.
o The Company may have difficulty expanding its product lines to
satisfy the current unusually strong demand for its products.
Factors, which could limit such expansion, include delays in
procurement of manufacturing equipment, shortages of skilled
personnel and capacity constraints at the Company's facilities.
o The Company is currently benefiting from an acute atypical
shortage of the Company's products. This shortage has enabled the
Company to increase prices for certain products and thus increase
gross margins. Any drop in demand or increase in supply due to
competitors expansion could cause a dramatic drop in average sales
prices causing a drop in gross margins.
Foreign Operations and Sales
o Approximately 71% of the Company's revenues are derived from
sales to customers outside the United States. As a result,
currency exchange rate fluctuations, inflation, changes in
monetary policy and tariffs, potential changes in laws and
regulations affecting the Company's business in foreign
jurisdictions, trade restrictions or prohibitions,
intergovernmental disputes, increased labor costs and reduction or
cancellation of government grants, tax benefits or other
incentives could impact the Company's results of operations.
o Specifically, as a result of the increased production by the
Company's operations in Israel over the past several years, the
low tax rates in Israel, as compared to the statutory rates in the
U.S., have had the effect of increasing the Company's net
earnings. In addition, the Company takes advantage of certain
incentive programs in Israel in the form of grants designed to
increase employment in Israel. Any significant increase in the
Israeli tax rates or reduction or elimination of any of the
Israeli grant programs, such as described in "Description of
Business--Manufacturing Operations" could have an adverse impact
on the Company's results of operations.
Restructuring and Cost Reduction Activities
o The Company may experience underutilization of certain plants and
factories in high labor cost regions and capacity constraints in
plants and factories located in low labor cost regions, resulting
initially in production inefficiencies and higher costs. Such
costs include those associated with work force reductions and
plant closings in the higher labor cost regions, as described in
"Introduction and Background" of this Item, and start-up expenses,
manufacturing and construction delays, and increased depreciation
costs in connection with the start of production in new plants and
expansions in lower labor cost regions. Moreover, capacity
constraints may limit the Company's ability to continue to meet
demand for any of the Company's products. For example, during
1998, restructuring costs were particularly high as a result of
the Company's accelerated effort to streamline operations in
response to the continued weakness in the international electronic
components market at the time.
o When the Company restructures its operations in response to
changing economic conditions, particularly in Europe, labor unrest
or strikes may occur, which could have an adverse effect on the
Company.
o The Company's strategy also focuses on the reduction of selling,
general and administrative expenses through the integration or
elimination of redundant sales offices and administrative
functions at acquired companies and achievement of significant
production cost savings through the transfer and expansion of
manufacturing operations to lower cost regions such as Israel,
Mexico, Portugal, the Czech Republic, Taiwan and the People's
Republic of China. The Company's inability to achieve any of these
goals could have an adverse effect on the Company's results of
operations.
-22-
Raw Material Costs
o The Company's results of operations may be adversely impacted by:
1. difficulties in obtaining raw materials, supplies, power,
natural resources and any other items needed for the
production of the Company's products;
2. the effects of quality deviations in raw materials,
particularly tantalum powder, palladium and ceramic
dielectric materials; and
3. the effects of significant price increases for tantalum or
palladium, or an inability to obtain adequate supplies of
tantalum or palladium from the limited number of suppliers.
Miscellaneous Factors
o The Company's results may also be affected by a variety of other
factors, including:
1. possible environmental liability and redemption costs;
2. legal proceedings and investigations;
3. possible challenges to the Company's intellectual property
rights;
4. increases in the Company's debt levels or its cost of
borrowings;
5. changes in generally accepted accounting policies and
practices;
6. disruptions to the Company's manufacturing operations that
may result from casualty losses, military hostilities
particularly in the Middle East, or acts of God; and
7. changes in executive personnel.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Disclosure
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 policy does 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
its floating rate revolving credit facility. At December 31, 1999, the
outstanding balance under this facility was $635,215,000. On a selective basis,
the Company from time to time enters into interest rate swap or cap agreements
to reduce the potential negative impact increases in interest rates could have
on its outstanding variable rate debt. The impact of interest rate instruments
on the Company's results of operations in each of the three years ended December
31, 1999 was not significant. See Notes 5 and 12 to Consolidated Financial
Statements for components of the Company's long-term debt and interest rate swap
arrangements.
In August 1998, the Company entered into six interest rate swap agreements
with a total notional amount of $300,000,000 to manage interest rate risk
related to its multicurrency revolving line of credit. These interest rate swap
agreements require the Company to make payments to the counterparties at
variable rates. These interest rate swap agreements mature in August 2003. The
variable rates are based on USD-LIBOR-BBA rates. In November 1999, the Company
entered into two three month interest rate swap agreements with a total notional
amount of $300,000,000. These interest rate swap agreements require the company
to make payments to the counterparties on February 29, 2000 at the three month
USD-LIBOR-BBA rate as of November 29, 1999 less 0.16% and receive monthly
payments from the counterparties at the monthly USD-LIBOR-BBA rate. At December
1999 and 1998, the Company paid a weighted average fixed rate of 5.61% and
5.77%, respectively and received a weighted average variable rate of 6.49% and
5.25%, respectively. The fair value of the interest rate swap agreements, based
on current market rates, approximated a net receivable of $8,714,000 and a net
payable of $7,572,000 at December 31, 1999 and 1998, respectively.
-23-
Foreign Exchange Risk
The Company is exposed to foreign currency exchange rate risks. The
Company's significant foreign subsidiaries are located in Germany, France,
Israel and the Far East. The Company continues to reduce its exposure to foreign
currencies by borrowing funds in local currency to balance its foreign assets
and liabilities. The Company, in most locations, has introduced a "netting"
policy where subsidiaries pay all intercompany balances within thirty days.
In September 1999, a subsidiary of the Company entered into foreign
currency forward exchange contracts to manage the effect of exchange rate
changes on certain foreign currency denominated transactions. At December 31,
1999, the notional amount of outstanding foreign currency forward exchange
contracts was $6,438,000. All of the total outstanding contracts at December 31,
1999 were to hedge yen denominated commitments from customers in Japan.
In the normal course of business, the financial position of the Company is
routinely subjected to a variety of risks, including market risks associated
with interest rate movements, currency rate movements on non-U.S. dollar
denominated assets and liabilities and collectibility of accounts receivable.
The Company does not anticipate material losses in these areas.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements of the Company and its
subsidiaries, together with the report of independent auditors thereon, are
presented under Item 14 of this report:
Report of Independent Auditors
Consolidated Balance Sheets -- December 31, 1999 and 1998.
Consolidated Statements of Operations -- for the years ended
December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows -- for the years ended
December 31, 1999, 1998 and 1997.
Consolidated Statements of Stockholders' Equity -- for the years
ended December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements-- December 31, 1999.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-24-
PART III
Information with respect to Items 10, 11, 12 and 13 on Form 10-K is set
forth in the Company's definitive proxy statement, which will be filed within
120 days of December 31, 1999, the Company's most recent fiscal year. Such
information is incorporated herein by reference, except that information with
respect to Executive Officers of Registrant is set forth in Part I, Item 4A
hereof under the caption, "Directors and Executive Officers of the Registrant."
-25-
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) All Consolidated Financial Statements of the Company
and its subsidiaries for the year ended December 31, 1999
are filed herewith. See Item 8 of this Report for a list of
such financial statements.
(2) All financial statement schedules for which
provision is made in the applicable accounting
regulation of the Securities and Exchange Commission
are not required under the related instructions or
are inapplicable and therefore have been omitted.
(3) Exhibits-- See response to paragraph (c) below.
(b) None.
(c) Exhibits:
2.1 Stock Purchase Agreement Among Lite-On Semiconductor Corporation,
Silitek Corporation, Lite-On Technology Corporation, Dyna
Investment Co., Ltd., Lite-On Inc. and Other Shareholders as
Sellers and Vishay Intertechnology, Inc. as Purchaser, dated as of
April 25, 1997. Incorporated by reference to Exhibit A to Schedule
13D filed on July 28, 1997.
2.1A Memorandum of Understanding, dated as of March 15, 2000, between
Lite-On JV Corporation and Vishay Intertechnology, Inc. Incorporated
by reference to Exhibit D to Amendment No. 1 to Schedule 13D filed
on March 28, 2000.
2.2 Amendment No. 1 to Joint Venture Agreement. Incorporated by
reference to Exhibit C to Schedule 13D filed on July 28, 1997.
2.3 Stock Purchase Agreement, dated December 16, 1997, among TEMIC
TELEFUNKEN microelectronic GmbH, Delengate Limited, Daimler-Benz
Aerospace Aktiengesellschaft, Daimler-Benz Technology Corporation,
Vishay TEMIC Semiconductor Acquisition Holdings Corp., "PAMELA"
Verwaltungsgesellschaft GmbH and Vishay Intertechnology.
Incorporated by reference to Exhibit A to Schedule 13D filed
December 24, 1997.
2.4 Share Sale and Transfer Agreement, between "PAMELA"
Verwaltungsgesellschaft GmbH, Vishay Intertechnology, Inc., ATMEL
Corporation and Atmel Holding GmbH i.G. Incorporated by reference to
Exhibit 2.2 to Form 8-K filed on March 17, 1998.
3.1 Composite Amended and Restated Certificate of Incorporation of the
Company dated August 3, 1995. Incorporated by reference to Exhibit
3.1 to Form 10-Q for the quarter ended June 30, 1995 (the "1995 Form
10-Q"). Certificate of Amendment of Composite Amended and Restated
Certificate of Incorporation of the Company. Incorporated by
reference to Exhibit 3.1 to Form 10-Q for the quarter ended June 30,
1997 (the "1997 Form 10-Q").
3.2 Amended and Restated Bylaws of Registrant. Incorporated by reference
to Exhibit 3.2 to Registration Statement No. 33-13833 of Registrant
on Form S-2 under the Securities Act of 1933 (the "Form S-2") and
Amendment No. 1 to Amended and Restated Bylaws of Registrant
Incorporated by reference to Exhibit 3.2 to Form 10-K file number
1-7416 for fiscal year ended December 31, 1993 (the "1993 Form
10-K").
10.1 Performance-Based Compensation Plan for Chief Executive Officer of
Registrant. Incorporated by reference to Exhibit 10.1 to the 1993
Form 10-K.
10.2 Vishay Intertechnology, Inc. $825,000,000 Long Term Revolving Credit
Agreement, dated as of March 2, 1998, by and among Vishay, Comerica
Bank, Nationsbanc Montgomery Securities LLC and the other banks
signatory thereto, and Comerica Bank, as administrative agent.
Incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K filed on March 17, 1998.
10.3 Vishay Intertechnology, Inc. $275,000,000 Short Term Revolving
Credit Agreement, dated as of March 2, 1998, by and among Vishay,
Comerica Bank, Nationsbanc Montgomery Securities LLC and the other
banks signatory thereto, and Comerica Bank, as administrative agent.
Incorporated by reference to Exhibit 10.2 to the Current Report on
Form 8-K filed on March 17, 1998.
-26-
10.4 Company Guaranty (Long Term), dated March 2, 1998, by Vishay
Intertechnology, Inc. to Comerica Bank, as administrative agent.
Incorporated by reference to Exhibit 10.3 to the Current Report on
Form 8-K filed on March 17, 1998.
10.5 Domestic Guaranty (Long Term), dated March 2, 1998, by the
Guarantors signatory thereto to Comerica Bank, as administrative
agent. Incorporated by reference to Exhibit 10.4 to the Current
Report on Form 8-K filed on March 17, 1998.
10.6 Foreign Guaranty (Long Term), dated March 2, 1998, by the Guarantors
signatory thereto to Comerica Bank, as administrative agent.
Incorporated by reference to Exhibit 10.5 to the Current Report on
Form 8-K filed on March 17, 1998.
10.7 Company Guaranty (Short Term), dated March 2, 1998, by Vishay
Intertechnology, Inc. to Comerica Bank, as administrative agent.
Incorporated by reference to Exhibit 10.6 to the Current Report on
Form 8-K filed on March 17, 1998.
10.8 Domestic Guaranty (Short Term), dated March 2, 1998, by the
Guarantors signatory thereto to Comerica Bank, as administrative
agent. Incorporated by reference to Exhibit 10.7 to the Current
Report on Form 8-K filed on March 17, 1998.
10.9 Employment Agreement, dated as of March 15, 1985, between the
Company and Dr. Felix Zandman. Incorporated by reference to Exhibit
(10.12) to the Form S-2.
10.10 Vishay Intertechnology 1995 Stock Option Program. Incorporated by
reference to the Company's Registration Statement on Form S-8 (No.
33-59609).
10.11 1986 Employee Stock Plan of the Company. Incorporated by reference
to Exhibit 4 to the Company's Registration Statement on Form S-8
(No. 33-7850).
10.12 1986 Employee Stock Plan of Dale Electronics, Inc. Incorporated by
reference to Exhibit 4 to the Company's Registration Statement on
Form S-8 (No. 33-7851).
10.13 Money Purchase Plan Agreement of Measurements Group, Inc.
Incorporated by reference to Exhibit 10(a)(6) to Amendment No. 1
to the Company's Registration Statement on Form S-7 (No. 2-69970).
10.14 Joint Venture Agreement, dated April 25, 1997, by and between
Vishay Intertechnology, Inc. and Lite-On. Incorporated by
reference to Exhibit B to Schedule 13D filed on July 28, 1997.
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
27. Financial Data Schedule.
-27-
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) 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.
March 28, 2000 /s/Felix Zandman
--------------------
Felix Zandman, Director, Chairman
of the Board, and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated below.
March 28, 2000 /s/Felix Zandman
----------------------
Felix Zandman, Director, Chairman
of the Board, and Chief
Executive Officer
(Principal Executive Officer)
March 28, 2000 /s/Avi D. Eden
---------------------
Avi D. Eden, Director,Vice-Chairman
of the Board, Executive Vice President
and General Counsel
March 28, 2000 /s/Gerald Paul
----------------------
Gerald Paul, Director, President
and Chief Operating Officer
March 28, 2000 /s/Richard N. Grubb
----------------------
Richard N. Grubb, Director,
Executive Vice President, Treasurer and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
March 28, 2000 /s/Robert A. Freece
---------------------
Robert A. Freece, Director,
Senior Vice President
March 28, 2000 /s/Eli Hurvitz
---------------------
Eli Hurvitz, Director
March 28, 2000 /s/Edward B. Shils
---------------------
Edward B. Shils, Director
March 28, 2000 /s/Luella B. Slaner
---------------------
Luella B. Slaner, Director
March 28, 2000 /s/Mark I. Solomon
---------------------
Mark I. Solomon, Director
March 28, 2000 /s/Jean-Claude Tine
---------------------
Jean-Claude Tine, Director
-28-
Report of Independent Auditors
Board of Directors and Stockholders
Vishay Intertechnology, Inc.
We have audited the accompanying consolidated balance sheets of Vishay
Intertechnology, Inc. as of December 31, 1999 and 1998, and the related
consolidated statements of operations, cash flows, and stockholders' equity for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Vishay
Intertechnology, Inc. at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
Philadelphia, Pennsylvania
February 2, 2000, except for
Note 17, as to which the date
is March 21, 2000
1
Vishay Intertechnology, Inc.
Consolidated Balance Sheets
(In thousands, except per share and share amounts)
December 31
1999 1998
-----------------------------
Assets
Current assets:
Cash and cash equivalents $ 105,193 $ 113,729
Accounts receivable, less allowances
of $9,495 and $9,758 320,978 276,270
Inventories:
Finished goods 144,645 196,551
Work in process 131,951 136,393
Raw materials 121,704 113,194
Deferred income taxes 35,119 53,389
Prepaid expenses and other current
assets 67,159 67,045
-----------------------------
Total current assets 926,749 956,571
Property and equipment-at cost:
Land 51,453 59,146
Buildings and improvements 261,528 270,095
Machinery and equipment 1,073,556 1,039,050
Construction in progress 61,881 69,534
-----------------------------
1,448,418 1,437,825
Less allowances for depreciation (517,873) (440,758)
-----------------------------
930,545 997,067
Goodwill 399,970 432,558
Other assets 66,517 76,548
-----------------------------
$ 2,323,781 $ 2,462,744
=============================
2
December 31
1999 1998
-----------------------------
Liabilities and stockholders' equity
Current liabilities:
Notes payable to banks $ 26,790 $ 20,253
Trade accounts payable 101,613 92,656
Payroll and related expenses 77,209 70,490
Other accrued expenses 107,724 111,420
Income taxes 27,418 17,425
Current portion of long-term debt 4,445 4,544
-----------------------------
Total current liabilities 345,199 316,788
Long-term debt-less current portion 656,943 814,838
Deferred income taxes 62,712 68,933
Deferred income 50,462 59,264
Minority interest 61,637 51,858
Other liabilities 24,715 25,174
Accrued pension costs 108,521 123,370
Stockholders' equity:
Preferred Stock, par value $1.00 a share:
Authorized - 1,000,000 shares;
none issued
Common Stock, par value $.10 a share:
Authorized-150,000,000 and 75,000,000
shares; 74,312,309 and 74,184,370 shares
outstanding after deducting 17,116 and
21,489 shares in treasury 7,431 7,419
Class B convertible Common Stock, par value
$.10 a share: Authorized-20,000,000 and
15,000,000 shares; 10,369,932 and
10,402,068 shares outstanding after deducting
186,302 and 187,096 shares in treasury 1,038 1,041
Capital in excess of par value 989,627 988,635
Retained earnings 97,591 14,354
Unearned compensation (1,086) (1,131)
Accumulated other comprehensive loss (81,009) (7,799)
-----------------------------
1,013,592 1,002,519
-----------------------------
$ 2,323,781 $ 2,462,744
=============================
See accompanying notes.
3
Vishay Intertechnology, Inc.
Consolidated Statements of Operations
(In thousands, except per share and share amounts)
Year ended December 31
1999 1998 1997
--------------------------------------------
Net sales $ 1,760,091 $ 1,572,745 $ 1,125,219
Costs of products sold 1,299,705 1,189,107 858,020
--------------------------------------------
Gross profit 460,386 383,638 267,199
Selling, general, and
administrative expenses 254,282 234,840 136,876
Amortization of goodwill 12,360 12,272 7,218
Unusual items -- 29,301 14,503
Purchased research and development -- 13,300 --
--------------------------------------------
193,744 93,925 108,602
Other income (expense):
Interest expense (53,296) (49,038) (18,819)
Other (5,737) (2,241) (222)
--------------------------------------------
(59,033) (51,279) (19,041)
--------------------------------------------
Earnings before income taxes and
minority interest 134,711 42,646 89,561
Income taxes 36,940 30,624 34,167
Minority interest 14,534 3,810 2,092
--------------------------------------------
Net earnings $ 83,237 $ 8,212 $ 53,302
============================================
Basic earnings per share $ 0.99 $ 0.10 $ 0.63
============================================
Diluted earnings per share $ 0.97 $ 0.10 $ 0.63
============================================
Weighted average shares
outstanding--basic 84,452,000 84,443,000 84,418,000
Weighted average shares
outstanding--diluted 85,488,000 84,531,000 84,603,000
See accompanying notes.
4
Vishay Intertechnology, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year ended December 31
1999 1998 1997
------------------------------------
Operating activities
Net earnings $ 83,237 $ 8,212 $ 53,302
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 139,676 127,947 81,874
Loss on sale of subsidiary 10,073 -- --
Loss on disposal of property and equipment 1,146 712 1,245
Minority interest in net earnings of
consolidated subsidiaries 14,534 3,810 2,092
Purchased research and development -- 13,300 --
Asset impairment losses -- 23,057 --
Loss on forward exchange contract -- (5,295) 5,295
Changes in operating assets and liabilities, net
of effects of businesses acquired or sold:
Accounts receivable (73,678) 13,827 (23,339)
Inventories 24,988 13,304 19,501
Prepaid expenses and other current assets 14,317 (23,206) 20,496
Accounts payable 15,997 1,575 6,882
Other current liabilities 24,414 (25,842) 5,897
Other (14,895) 18,049 3,913
------------------------------------
Net cash provided by operating activities 239,809 169,450 177,158
Investing activities
Purchases of property and equipment (119,638) (151,682) (78,074)
Purchases of businesses, net of cash acquired -- (423,031) (122,468)
Proceeds from sale of subsidiary 9,118 -- --
Proceeds from sale of property and equipment 7,934 11,650 959
------------------------------------
Net cash used in investing activities (102,586) (563,063) (199,583)
Financing activities
Proceeds from long-term borrowings 197 5,030 4,100
Principal payments on long-term debt (4,481) (7,068) (82,076)
Net (payments) proceeds on revolving credit lines (143,496) 462,214 155,729
Net changes in short-term borrowings 6,752 (9,768) (17,152)
------------------------------------
Net cash (used in) provided by financing activities (141,028) 450,408 60,601
Effect of exchange rate changes on cash (4,731) 1,671 (3,858)
------------------------------------
(Decrease) increase in cash and cash equivalents (8,536) 58,466 34,318
Cash and cash equivalents at beginning of year 113,729 55,263 20,945
------------------------------------
Cash and cash equivalents at end of year $ 105,193 $ 113,729 $ 55,263
====================================
See accompanying notes.
5
Vishay Intertechnology, Inc.
Consolidated Statements of Stockholders' Equity
(In thousands, except share amounts)
Class B Accumulated
Convertible Capital in Other Total
Common Common Excess of Retained Unearned Comprehensive Stockholders'
Stock Stock Par Earnings Compensation Income (Loss) Equity
------------------------------------------------------------------------------------------------
Balance at December 31, 1996 $ 6,717 $ 945 $ 824,416 $ 107,762 $ (370) $ 5,760 $ 945,230
Net earnings -- -- -- 53,302 -- -- 53,302
Foreign currency translation
adjustment -- -- -- -- -- (46,693) (46,693)
Pension liability adjustment -- -- -- -- -- (966) (966)
-----------
Comprehensive income 5,643
-----------
Stock issued (35,608 shares) 4 -- 777 -- (566) -- 215
Stock dividends (3,359,615;
472,734 shares) 336 47 85,094 (85,477) -- -- --
Conversions from Class B to
common (20,641 shares) 1 (1) -- -- -- -- --
Stock appreciation rights -- -- 8,200 -- -- -- 8,200
Tax effects relating to stock plan -- -- 68 -- -- -- 68
Amortization of unearned
compensation -- -- -- -- 292 -- 292
------------------------------------------------------------------------------------------------
Balance at December 31, 1997 7,058 991 918,555 75,587 (644) (41,899) 959,648
Net earnings -- -- -- 8,212 -- -- 8,212
Foreign currency translation
adjustment -- -- -- -- -- 38,174 38,174
Pension liability adjustment -- -- -- -- -- (4,074) (4,074)
-----------
Comprehensive income 42,312
-----------
Stock issued (77,776 shares) 8 -- 1,054 -- (1,062) -- --
Stock dividends (3,350,876;
495,338 shares) 353 50 69,042 (69,445) -- -- --
Conversions from Class B to
common (13 shares) -- -- -- -- -- -- --
Tax effects relating to stock plan -- -- (16) -- -- -- (16)
Amortization of unearned
compensation -- -- -- -- 575 -- 575
------------------------------------------------------------------------------------------------
Balance at December 31, 1998 7,419 1,041 988,635 14,354 (1,131) (7,799) 1,002,519
Net earnings -- -- -- 83,237 -- -- 83,237
Foreign currency translation
adjustment -- -- -- -- -- (76,553) (76,553)
Pension liability adjustment -- -- -- -- -- 3,343 3,343
-----------
Comprehensive income 10,027
-----------
Stock issued (31,007 shares) 3 -- 505 -- (508) -- --
Stock options exercised (58,546
shares) 6 -- 485 -- -- -- 491
Conversions from Class B to
common (28,137 shares) 3 (3) -- -- -- -- --
Tax effects relating to
stock plan -- -- 2 -- -- -- 2
Amortization of unearned
compensation -- -- -- -- 553 -- 553
------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $ 7,431 $ 1,038 $ 989,627 $ 97,591 $ (1,086) $ (81,009) $ 1,013,592
================================================================================================
See accompanying notes.
6
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements
December 31, 1999
Vishay Intertechnology, Inc. is an international manufacturer and supplier of
passive electronic components and discrete active electronic components,
particularly resistors, capacitors, power MOSFETS, power conversion and motor
control integrated circuits, transistors and diodes. Electronic components
manufactured by the Company are used in virtually all types of electronic
products, including those in the computer, telecommunications,
military/aerospace, instrument, automotive, medical, and consumer electronics
industries.
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Vishay
Intertechnology, Inc. and its majority-owned subsidiaries, after elimination of
all significant intercompany transactions, accounts, and profits. The Company's
investments in 20% to 50%-owned companies are accounted for on the equity
method. Investments in other companies are carried at cost.
Revenue Recognition
The Company recognizes revenue when products are shipped to customers. The
Company has agreements with distributor customers which, under specified
conditions, provide protection against price reductions initiated by the Company
and allow for returns of overstocked inventories. The effect of these programs
is estimated based on historical experience and provisions are recorded.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ significantly from those
estimates.
Inventories
Inventories are stated at the lower of cost, determined by the first-in,
first-out method, or market.
7
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Depreciation
Depreciation is computed principally by the straight-line method based upon the
estimated useful lives of the assets. Depreciation of capital lease assets is
included in total depreciation expense. Depreciation expense was $125,847,000,
$114,592,000, and $73,329,000 for the years ended December 31, 1999, 1998, and
1997, respectively.
Construction in Progress
The estimated cost to complete construction in progress at December 31, 1999 was
$28,208,000.
Goodwill
Goodwill (excess of purchase price over net assets acquired) is amortized
principally over periods ranging from 30-40 years using the straight-line
method. The recoverability of goodwill is evaluated at the operating unit level
by an analysis of operating results and consideration of other significant
events or changes in the business environment. If an operating unit has current
operating losses and based upon projections there is a likelihood that such
operating losses will continue, the Company will determine whether impairment
exists on the basis of undiscounted expected future cash flows from operations
before interest for the remaining amortization period. If impairment exists,
goodwill will be reduced by the estimated shortfall of discounted cash flows.
Accumulated amortization amounted to $57,071,000 and $48,407,000 at December 31,
1999 and 1998, respectively.
Cash Equivalents
For purposes of the Statement of Cash Flows, cash equivalents include demand
deposits and all highly liquid investments with maturities of three months or
less when purchased.
8
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Research and Development Expenses
The amount charged to expense for research and development (exclusive of
purchased in-process research and development) aggregated $35,038,000,
$28,857,000, and $7,023,000 for the years ended December 31, 1999, 1998, and
1997, respectively. The Company spends additional amounts for the development of
machinery and equipment for new processes and for cost reduction measures.
Grants
Grants received by certain foreign subsidiaries from foreign governments,
primarily in Israel, are recognized as income in accordance with the purpose of
the specific contract and in the period in which the related expense is
incurred. Grants from the Israeli government recognized as a reduction of costs
of products sold were $14,256,000, $13,116,000, and $11,352,000 for the years
ended December 31, 1999, 1998, and 1997, respectively. Grants receivable of
$10,056,000 and $12,828,000 are included in other current assets at December 31,
1999 and 1998, respectively. Deferred grant income was $50,462,000 and
$59,264,000 at December 31, 1999 and 1998, respectively. The grants are subject
to certain conditions, including maintaining specified levels of employment for
periods up to ten years. Noncompliance with such conditions could result in the
repayment of grants. However, management expects that the Company will comply
with all terms and conditions of the grants.
Minority Interest
Minority interest represents the ownership interests of third parties in the net
assets and results of operations of certain consolidated subsidiaries.
Share and Per Share Amounts
On June 22, 1999, the Company effected a five-for-four split of the outstanding
shares of Common Stock and Class B Common Stock. Accordingly, all share and per
share amounts shown in the accompanying consolidated financial statements and
notes have been retroactively adjusted to reflect the stock split.
9
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Earnings per share amounts for all periods presented also reflect 5% stock
dividends paid on June 11, 1998 and June 9, 1997.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"), 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 Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees ("APB 25"). The Company accounts for stock-based
compensation in accordance with APB 25. Note 10 presents pro forma results of
operations as if SFAS 123 had been used to account for stock-based compensation
plans.
Derivative Financial Instruments
The Company uses interest rate swap agreements for purposes other than trading
and treats such agreements as off-balance-sheet items. Interest rate swap
agreements are used by the Company to modify variable rate obligations to fixed
rate obligations, thereby reducing the exposure to market rate fluctuations. The
interest rate swap agreements are designated as hedges, and effectiveness is
determined by matching the principal balances and terms with each specific
obligation. Such an agreement involves the exchange of amounts based on fixed
interest rates for amounts based on variable interest rates over the life of the
agreement without an exchange of the notional amount upon which payments are
based. The differential to be paid or received as interest rates change is
accounted for on the accrual method of accounting. The related amount payable to
or receivable from counterparties is included as an adjustment to interest
expense and to accrued interest in other accrued expenses. Gains and losses upon
terminations of interest rate swap agreements are deferred as an adjustment to
interest expense related to the obligations over the term of the original
contract lives of the terminated swap agreements. In the event of early
extinguishment of an obligation, any realized or unrealized gain or loss from
the swap is recognized in income at the time of extinguishment.
10
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Foreign currency forward exchange contracts are used to manage the effect of
exchange rate changes on actual cash flows from certain foreign currency
denominated transactions. Foreign currency forward exchange contracts designated
as effective hedges of firm commitments are treated as hedges for accounting
purposes. Gains and losses are deferred and recognized in income when the hedged
transaction occurs.
Accounting Pronouncements Pending Adoption
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. It
requires entities to record all derivative instruments on the balance sheet at
fair value. Changes in the fair value of derivatives are recorded in each period
in current earnings or other comprehensive income, based on whether a derivative
is designated as part of a hedge transaction and the type of hedge transaction.
The ineffective portion of all hedges is recognized in earnings. The Company is
required to adopt SFAS 133, as amended, effective January 1, 2001. Based on
current derivative usage and hedging activities, the Company does not expect the
adoption of SFAS 133 to have a material impact on its future earnings or
financial position.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101, Revenue Recognition (SAB 101), which provides
guidance on the recognition, presentation and disclosure of revenue in financial
statements filed with the SEC. SAB 101 outlines the basic criteria that must be
met to recognize revenue and provides guidance for disclosures related to
revenue recognition policies. Management believes that the Company's revenue
recognition policy is in compliance with the provisions of SAB 101 and that SAB
101 will have no material effect on the financial position or results of
operations of the Company.
11
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Commitments and Contingencies
Liabilities for loss contingencies, including environmental remediation costs,
arising from claims, assessments, litigation, fines and penalties, and other
sources are recorded when it is probable that a liability has been incurred and
the amount of the assessment and/or remediation can be reasonably estimated. The
costs for a specific cleanup site are discounted if the aggregate amount of the
obligation and the amount and timing of the cash payments for that site are
fixed or reliably determinable generally based upon information derived from the
remediation plan for that site. Recoveries from third parties which are probable
of realization and can be reasonably estimated are separately recorded, and are
not offset against the related environmental liability.
Reclassifications
Certain prior-year amounts have been reclassified to conform to the current
financial statement presentation.
2. Acquisitions
On March 2, 1998, the Company purchased 80.4% of Siliconix Incorporated
(NASDAQ:SILI) and 100% of TEMIC Semiconductor GmbH (collectively, "TEMIC") for a
total of $549,889,000 in cash. TEMIC is a producer of discrete active electronic
components with manufacturing facilities in the United States, the Far East,
Germany and Austria. On March 4, 1998, the Company sold the Integrated Circuits
division of TEMIC to Atmel Incorporated for a total of $105,755,000 in cash.
The purchase of TEMIC was funded from the Company's $1.1 billion revolving
credit facilities made available to Vishay on March 2, 1998.
The TEMIC acquisition was accounted for under the purchase method of accounting.
Under purchase accounting, the assets and liabilities of TEMIC were required to
be adjusted from historical amounts to their estimated fair values.
Management estimated that $13,300,000 of the TEMIC purchase price represented
purchased in-process technology that had not reached technological feasibility
and had no alternative future use. Accordingly, this amount was expensed with no
tax benefit upon consummation of the acquisition. The value assigned to
purchased in-process technology was determined by identifying research projects
in areas for which technological
12
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
feasibility had not been established. The value was determined by estimating the
costs to develop the purchased in-process technology into commercially viable
products, estimating the resulting net cash flows from such projects, and
discounting the net cash flows back to their present value. The discount rate
included a factor that took into account the uncertainty surrounding the
successful development of the purchased in-process technology.
In connection with the TEMIC acquisition, the Company recorded restructuring
liabilities of $30,471,000 in connection with an exit plan that management began
to formulate prior to the acquisition date. Approximately $25,197,000 of these
liabilities related to employee termination costs covering 498 technical,
production, administrative and support employees located in the United States,
Europe, and the Pacific Rim. The remaining $5,274,000 related to provisions for
contract cancellations and other costs. As of December 31, 1999, 364 employees
had been terminated and $20,203,000 of the termination costs were paid.
Additionally, $3,302,000 of contract cancellation charges and other costs were
paid.
The results of operations of TEMIC have been included in the Company's results
from March 1, 1998. Excess of cost over the fair value of assets acquired
($154,866,000) is being amortized principally over periods ranging from 30-40
years using the straight-line method.
In July 1997, the Company purchased 65% of the common stock of Lite-On Power
Semiconductor Corporation ("LPSC"), a Taiwan company, for $130,000,000 in cash
and stock appreciation rights with a fair value at the time of issuance of
$8,200,000. LPSC is a producer of discrete active electronic components with
manufacturing facilities in Taiwan, China and the United States. LPSC owns 40.2%
of Diodes, Inc. (AMEX:DIO). The Company utilized existing credit facilities to
finance the cash portion of the purchase price. The acquisition was accounted
for under the purchase method of accounting.
The results of operations of LPSC have been included in the Company's results
from July 1, 1997. Excess of cost over the fair value of net assets acquired
($110,978,000) is being amortized on a straight-line method over an estimated
useful life of forty years.
13
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
Had the TEMIC and LPSC acquisitions been made at the beginning of 1998 and 1997,
the Company's pro forma unaudited results would have been (in thousands, except
per share amounts):
Year ended December 31
1998 1997
------------------------------
Net sales $1,655,197 $1,723,818
Net earnings 6,528 41,394
Basic and diluted earnings per share 0.08 0.49
The pro forma results include adjustments for interest expense that would have
been incurred to finance the acquisitions, additional depreciation based on the
fair value of property, plant, and equipment acquired, writeoff of purchased
in-process research and development, amortization of goodwill, and related tax
effects.
The unaudited pro forma results are not necessarily indicative of the results
that would have been attained had the acquisitions occurred at the beginning of
the periods presented.
3. Unusual Items
Unusual items in 1998 consisted of the following components (in thousands):
Impairment losses:
China $19,556
Nikkohm 3,501
Restructuring of European operations 5,944
Closing of two U.S. sales offices 300
=======
$29,301
=======
In May 1996, the Company signed letters of intent with the China National
Non-Ferrous Metals Industry Corporation Nanchang Branch (the "CNNC") and United
Development, Inc. to enter into joint ventures to mine, process and refine
tantalum at a site in China and
14
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
3. Unusual items (continued)
to build a plant in China to manufacture dipped radial and chip tantalum
capacitors. Management viewed this as a strategic investment as it would provide
the Company with a presence in the Far East, another source of low-cost labor,
and a stable, low-cost supply of tantalum. Through March 31, 1998, the Company
continued to negotiate the terms of the joint ventures with the CNNC and to
conduct feasibility tests on the mine. As of March 31, 1998, the Company had
removed from existing production lines and packaged for shipment to China $18.9
million of equipment to be used in the manufacture of dipped radial and chip
tantalum capacitors at the proposed plant. In addition, the Company had deferred
$1.7 million in consulting costs incurred in evaluating the potential joint
venture. During fiscal 1998, several events occurred which led to the eventual
abandonment of the projects in China. First, the CNNC was disbanded by the
Chinese government and replaced by a smaller organization with much less control
over the various potential Chinese partners in the joint ventures. The
individual Chinese partners, no longer under the central control of the CNNC,
began demanding renegotiations of the joint venture agreements in ways that were
unacceptable to the Company. Second, the Asian economy experienced a significant
downturn and demand for the Company's tantalum capacitors dropped significantly.
The reduction in demand for the Company's tantalum capacitors made the building
of a large factory financially impractical. Instead, the Company downsized its
plans and opened a small finishing plant for tantalum capacitors in one of the
Company's existing Shanghai facilities that it had acquired in 1997. Third,
suppliers of tantalum outside of China were forced to lower prices due to a
significant increase in supply primarily due to competition from Chinese
suppliers. Fourth, in 1997 and 1998, Vishay acquired two companies that had
established facilities in China with approximately 2,000 employees in five
factories. These factories served to establish Vishay as a major components
manufacturer in China without additional investment by the Company. During the
fourth quarter of fiscal 1998, management evaluated the proposed joint ventures
and concluded that, due to the factors described above, the Company would
discontinue negotiations and abandon the proposed joint ventures. Management
concluded that the $18.9 million of equipment had a net realizable value of $1
million and that the $1.7 million of deferred costs were not recoverable and in
accordance with the Company's accounting policy, recorded an impairment loss of
$19.6 million.
15
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
3. Unusual items (continued)
In March 1995, the Company acquired a 49% interest in Nikkohm, a Japanese
manufacturer and distributor of passive electronic components. The Company's
investment in Nikkohm totaled $4 million. Like the proposed Chinese joint
ventures, management considered its investment in Nikkohm strategic because it
provided the Company with an entry into certain Far East markets. Following the
acquisition of its interest, Vishay worked with the management of Nikkohm to
build Nikkohm's business and improve its profitability. Through December 31,
1997, the Company recognized a cumulative loss on its investment in Nikkohm of
$499,800 (1995-$304,000; 1996-$141,800; 1997-$54,000). Management had been
encouraged by Nikkohm's trend in earnings and had proposed certain marketing
programs intended to further improve operating results. However, Nikkohm's
results of operations began to deteriorate in fiscal 1998 due to a decrease in
demand for the Company's products, particularly thin film resistors, and a
downturn in the Asian economy. In addition, a significant member of Nikkohm's
management resigned due to health concerns. Also, the Company's acquisitions in
1997 and 1998 had established Vishay as a major electronics components
manufacturer in the Far East. During the fourth quarter of fiscal 1998,
management evaluated these recent developments and concluded that the carrying
amount of the investment in Nikkohm was not recoverable and in accordance with
the Company's accounting policy, recorded an impairment loss of $3.5 million.
Restructuring of European operations includes $5,694,000 of employee termination
costs covering approximately 182 technical, production, administrative and
support employees located in Germany and the United Kingdom. The remaining
$250,000 relates to lease buyout expense associated with the closing of a
facility in the United Kingdom. At December 31, 1998, approximately 15 employees
had been terminated and $471,000 of termination costs were paid. During the year
ended December 31, 1999, the Company terminated the remainder of the employees
and paid related termination costs of $4,899,000. At December 31, 1999, the 1998
European operations restructuring plan was completed.
The remaining $300,000 of restructuring expense consists of employee termination
costs of $130,000 and lease buyout and other expenses of $170,000 relating to
the closing of two U.S. sales offices. During the year ended December 31, 1999,
these sales offices were closed and the restructuring costs were paid.
16
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
3. Unusual Items (continued)
Unusual items expense of $14,503,000 in 1997 consisted of restructuring expense
of $12,605,000 and a settlement with the United States Government in the amount
of $1,898,000 representing reimbursements for overcharges relating to military
products produced prior to 1993 at one of the Company's U.S. subsidiaries.
Restructuring expense of $12,605,000 in 1997 resulted from a downsizing of the
Company's European operations. Approximately $10,357,000 of this expense related
to employee termination costs covering 324 technical, production,
administrative, and support employees located in Germany and France.
Approximately $623,000 of the restructuring expense related to facility closure
costs in France. The remaining $1,625,000 related to additional payments to
certain employees laid off in the last half of fiscal 1996 in connection with
Vishay's fiscal 1996 restructuring program. The payments were a result of a
judgment rendered by a French court against a subsidiary of the Company. The
court ruled that these employees were due additional payments under France's
mandated social plan. At December 31, 1998, approximately 173 employees had been
terminated and $6,158,000 of termination costs were paid. During the year ended
December 31, 1999, the Company terminated an additional 143 employees and paid
related termination costs of $4,097,000. At December 31, 1999, the 1997 European
operations restructuring plan was completed.
4. Income Taxes
Earnings before income taxes and minority interest consists of the following
components (in thousands):
Year ended December 31
1999 1998 1997
---------------------------------------------
Domestic $ 26,717 $ (45,334) $ 45,832
Foreign 107,994 87,980 43,729
---------------------------------------------
$ 134,711 $ 42,646 $ 89,561
=============================================
17
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
Significant components of income taxes are as follows (in thousands):
Year ended December 31
1999 1998 1997
-----------------------------------------
Current:
U.S. Federal $ 1,685 $ 1,590 $ 20,296
Foreign 6,810 12,370 6,494
State 728 987 2,103
-----------------------------------------
9,223 14,947 28,893
Deferred:
U.S. Federal 21,957 (44) 1,476
Foreign 5,333 15,708 3,547
State 427 13 251
-----------------------------------------
27,717 15,677 5,274
-----------------------------------------
$ 36,940 $ 30,624 $ 34,167
=========================================
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as follows (in thousands):
December 31
1999 1998
----------------------------
Deferred tax assets:
Pension and other retiree obligations $ 26,447 $ 27,839
Net operating loss carryforwards 84,387 109,545
Tax credit carryforwards 8,236 8,535
Restructuring reserves 4,981 7,937
Other accruals and reserves 32,385 40,643
----------------------------
Total deferred tax assets 156,436 194,499
Less: Valuation allowance (47,648) (59,329)
----------------------------
Net deferred tax assets 108,788 135,170
Deferred tax liabilities:
Tax over book depreciation 86,497 99,890
Other--net 14,641 11,645
----------------------------
Total deferred tax liabilities 101,138 111,535
----------------------------
Net deferred tax assets $ 7,650 $ 23,635
===========================
18
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
A reconciliation of income tax expense at the U.S. federal statutory income tax
rate to actual income tax expense is as follows (in thousands):
Year ended December 31
1999 1998 1997
--------------------------------
Tax at statutory rate $ 47,149 $ 14,926 $ 31,346
State income taxes, net of U.S. federal
tax benefit 606 649 1,619
Effect of foreign operations (13,717) (1,561) (11,059)
Benefit of net operating loss carryforwards -- -- (207)
Provision for estimated tax uncertainties -- -- 10,000
Increase in valuation allowance for foreign
net operating loss carryforwards -- 10,000 --
Purchased research and development expense
-- 4,655 --
Other 2,902 1,955 2,468
--------------------------------
$ 36,940 $ 30,624 $ 34,167
================================
At December 31, 1999, the Company had the following net operating loss
carryforwards for tax purposes (in thousands):
Expires
--------------------
U.S. Federal $ 36,794 2018-2019
Germany 131,218 No expiration
France 6,957 2004 to unlimited
Portugal 6,439 2001-2004
Approximately $59,480,000 of the carryforward in Germany resulted from the
Company's acquisition of Roederstein, GmbH in 1993. Valuation allowances of
$45,698,000 and $57,054,000 have been recorded at December 31, 1999 and 1998,
respectively, for deferred tax assets related to foreign net operating loss
carryforwards. In 1999 and 1998, respectively, tax benefits recognized through
reductions of the valuation allowance had the effect of reducing goodwill of
acquired companies by $454,000 and $446,000. If additional tax benefits are
recognized in the future through further reduction of the valuation allowance,
$21,360,000 of such benefits will reduce goodwill.
19
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
At December 31, 1999, no provision had been made for U.S. federal and state
income taxes on approximately $423,748,000 of foreign earnings which are
expected to be reinvested indefinitely. Upon distribution of those earnings in
the form of dividends or otherwise, the Company would be subject to U.S. income
taxes (subject to an adjustment for foreign tax credits), state income taxes,
and withholding taxes payable to the various foreign countries. Determination of
the amount of unrecognized deferred U.S. income tax liability is not practicable
because of the complexities associated with its hypothetical calculation.
Income taxes paid were $5,463,000, $36,488,000 and $24,879,000 for the years
ended December 31, 1999, 1998, and 1997, respectively.
5. Long-Term Debt
Long-term debt consisted of the following (in thousands):
December 31
1999 1998
-------------------------
Multicurrency Revolving Credit Loans $635,215 $777,400
Other Debt and Capital Lease Obligations 26,173 41,982
-------------------------
661,388 819,382
Less current portion 4,445 4,544
-------------------------
$656,943 $814,838
=========================
At December 31, 1998, two facilities were available under the Company's amended
and restated loan agreements with a group of banks: an $825,000,000 five-year
multicurrency revolving credit and swing line facility (interest 5.87% at
December 31, 1998); and a $275,000,000 364-day multicurrency revolving credit
facility.
20
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt (continued)
On June 1, 1999, the Company amended the two credit facilities. The $825,000,000
long-term facility matures on March 2, 2003, subject to Vishay's right to
request year-to-year renewals. The short-term facility now provides for a
$100,000,000 364-day facility, which is available on a revolving basis until May
30, 2000. Interest on the two facilities is payable at prime or other interest
rate options. The Company is required to pay facility fees on the two
facilities. As of December 31, 1999, the Company had $635,215,000 outstanding
under the long-term revolving credit facility (interest 7.52%, 7.10% after
giving effect to interest rate swaps).
Borrowings under the loan agreements are secured by pledges of stock in certain
significant subsidiaries and indirect subsidiaries of Vishay and certain
guaranties by the significant subsidiaries. The credit facilities restrict the
Company from paying cash dividends and require the Company to comply with other
covenants, including the maintenance of specific financial ratios.
Other debt and capital lease obligations include borrowings under short-term
credit lines of $3,410,000 and $10,470,000 at December 31, 1999 and 1998,
respectively, which are classified as long-term based on the Company's intention
and ability to refinance the obligations on a long-term basis.
Aggregate annual maturities of long-term debt, are as follows: 2000--$4,445,000;
2001--$15,627,000; 2002--$1,518,000; 2003--$635,811,000; 2004--$569,000;
thereafter--$3,418,000.
At December 31, 1999, the Company had committed and uncommitted short-term
credit lines with various U.S. and foreign banks aggregating $134,767,000, of
which $104,567,000 was unused. The weighted average interest rate on short-term
borrowings outstanding as of December 31, 1999 and 1998 was 7.07% and 6.11%,
respectively.
Interest paid was $53,605,000, $48,105,000, and $18,699,000 for the years ended
December 31, 1999, 1998, and 1997, respectively.
21
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
6. Stockholders' Equity
On May 20, 1999, the Company's shareholders approved an increase in the
authorized number of shares of Common Stock, $.10 par value, from 75,000,000
shares to 150,000,000 shares and an increase in the authorized number of shares
of Class B Common Stock, $.10 par value, from 15,000,000 shares to 20,000,000
shares.
The Company's Class B Common Stock carries ten votes per share while the Common
Stock carries one vote per share. Class B shares are transferable only to
certain permitted transferees while the Common Stock is freely transferable.
Class B shares are convertible on a one-for-one basis at any time to shares of
Common Stock.
In connection with the acquisition of LPSC (see Notes 2 and 17), the Company
issued stock appreciation rights (SARs) to the former owners of LPSC. The SARs
represent the right to receive in stock the increase in value on the equivalent
of 2,133,000 shares of the Company's stock above $17.52 per share. The SARs may
be exercised at any time prior to July 17, 2007 at the option of the former
owners of LPSC. The Company may force redemption of the SARs if the Company's
stock trades above the "Strike Price" ($39.64 per share effective July 17,
1999). The Strike Price increases by 10% each year. The fair value of the SARs
as of July 17, 1997 was determined to be $8,200,000 using the binomial option
pricing model.
Unearned compensation relating to Common Stock issued under employee stock plans
is being amortized over periods ranging from three to five years. At December
31, 1999, 203,418 shares were available for issuance under stock plans.
22
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
7. Other Income (Expense)
Other income (expense) consists of the following (in thousands):
Year ended December 31
1999 1998 1997
-----------------------------------
Foreign exchange gains $ 86 $ 495 $ 3,657
Loss on forward exchange contract -- (6,269) (5,295)
Investment income 3,968 4,687 2,353
Equity in net income of affiliates 2,195 1,084 1,090
Loss on sale of fixed assets (1,179) (712) (1,245)
Loss on sale of subsidiary (10,073) -- --
Other (734) (1,526) (782)
-----------------------------------
$ (5,737) $ (2,241) $ (222)
==================================
On March 26, 1999, the Company sold Nicolitch, S.A., its French manufacturer of
printed circuit boards, to Leonische Drahtwerke AG. In connection with the sale,
the Company received proceeds of approximately $9,118,000 and recorded a noncash
pretax loss of $10,073,000.
In connection with the Company's acquisition of TEMIC, the Company entered into
a forward exchange contract in December 1997. This contract was intended to
protect against the impact of fluctuations in the exchange rate between the U.S.
Dollar and the Deutsche Mark, since the purchase price was denominated in
Deutsche Marks and payable in U.S. Dollars. At December 31, 1997, the Company
had an unrealized loss on this contract of $5,295,000, which resulted from
marking the contract to market value. On March 2, 1998, the forward exchange
contract was settled and the Company recognized an additional loss of
$6,269,000.
23
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
8. Other Comprehensive Income
The income tax effects allocated to and the cumulative balance of each component
of other comprehensive income (loss) are as follows (in thousands):
Beginning Before-Tax Tax (Benefit) Net-of-Tax Ending
Balance Amount Expense Amount Balance
-------------------------------------------------------------------------
December 31, 1999
Pension liability adjustment $ (8,386) $ 6,173 $ 2,830 $ 3,343 $ (5,043)
Currency translation adjustment 587 (76,553) - (76,553) (75,966)
-------------------------------------------------------------------------
$ (7,799) $ (70,380) $ 2,830 $ (73,210) $ (81,009)
=========================================================================
December 31, 1998
Pension liability adjustment $ (4,312) $ (7,338) $ (3,264) $ (4,074) $ (8,386)
Currency translation adjustment (37,587) 38,174 - 38,174 587
-------------------------------------------------------------------------
$ (41,899) $ 30,836 $ (3,264) $ 34,100 $ (7,799)
=========================================================================
December 31, 1997
Pension liability adjustment $ (3,346) $ (2,714) $ (1,748) $ (966) $ (4,312)
Currency translation adjustment 9,106 (46,693) - (46,693) (37,587)
---------------------------------------------------------------------
$ 5,760 $ (49,407) $ (1,748) $ (47,659) $ (41,899)
=========================================================================
24
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
9. Pensions and Other Postretirement Benefits
The Company maintains several defined benefit pension and nonpension
postretirement plans which cover substantially all full-time U.S. employees. The
following table sets forth a reconciliation of the benefit obligation, plan
assets, and accrued benefit cost related to these plans (in thousands):
Pension Benefits Other Benefits
-------------------------------------------------------------
1999 1998 1999 1998
-------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year $ 110,965 $ 98,991 $ 7,977 $ 7,796
Service cost 3,296 3,828 264 287
Interest cost 6,981 6,726 496 494
Employee contributions 1,959 1,782 - -
Actuarial losses (gains) (11,690) 7,057 (849) (94)
Benefits paid (7,064) (7,419) (557) (506)
-------------------------------------------------------------
Benefit obligation at end of year $ 104,447 $ 110,965 $ 7,331 $ 7,977
=============================================================
Change in plan assets:
Fair value of plan assets at
beginning of year $ 95,534 $ 98,388
Actual return on plan assets 6,837 706
Company contributions 2,174 2,077
Plan participants' contributions 1,959 1,782
Benefits paid (7,064) (7,419)
-------------------------------
Fair value of plan assets at end of year $ 99,440 $ 95,534
===============================
Funded status $ (5,007) $ (15,431) $ (7,331) $ (7,977)
Unrecognized net actuarial loss (gain) 4,455 15,184 (308) 547
Unrecognized transition obligation (asset) (83) 27 2,779 2,993
Unamortized prior service cost 75 173 248 279
-------------------------------------------------------------
Net amount recognized $ (560) $ (47) $ (4,612) $ (4,158)
=============================================================
Amounts recognized in the consolidated balance sheets consist of:
Prepaid benefit cost $ 4,165 $ 4,452 $ - $ -
Accrued benefit liability (4,725) (7,817) (4,612) (4,158)
Accumulated other comprehensive income - 3,318 - -
-------------------------------------------------------------
Net amount recognized $ (560) $ (47) $ (4,612) $ (4,158)
=============================================================
25
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
9. Pensions and Other Postretirement Benefits (continued)
Pension Benefits Other Benefits
--------------------------------------------------------------------
1999 1998 1999 1998
--------------------------------------------------------------------
Weighted-average assumptions
as of December 31:
Discount rate 7.50% 6.50% 7.50% 6.50%
Expected return on plan assets 8.50% - 9.50% 8.50% - 9.50%
Rate of compensation increase 4.50% 4.50%
Pension Benefits Other Benefits
---------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
---------------------------------------------------------------------------
Components of net periodic benefit cost:
Annual service cost $ 5,255 $ 5,610 $ 4,968 $ 264 $ 287 $ 252
Less employee contribution 1,959 1,782 1,969 - - -
---------------------------------------------------------------------------
Net service cost 3,296 3,828 2,999 264 287 252
Interest cost 6,981 6,726 6,266 496 494 499
Expected return on plan
assets (8,259) (8,463) (7,511) - - -
Amortization of prior
service cost 98 195 233 31 31 31
Amortization of
transition obligation 110 110 110 214 214 214
Amortization of losses 461 - - 6 - 5
---------------------------------------------------------------------------
Net periodic benefit cost $ 2,687 $ 2,396 $ 2,097 $ 1,011 $ 1,026 $ 1,001
===========================================================================
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets were $21,494,000, $21,380,000, and $15,401,000,
respectively, as of December 31, 1999 and $98,043,000, $91,596,000, and
$83,739,000, respectively, as of December 31, 1998.
26
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
9. Pensions and Other Postretirement Benefits (continued)
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plans with projected benefit obligations in
excess of plan assets were $21,494,000, $21,380,000, and $15,401,000,
respectively, as of December 31, 1999 and $110,965,000, $101,414,000, and
$95,535,000, respectively, as of December 31, 1998.
The Company's nonpension postretirement plan is funded as costs are incurred.
The plan is contributory, with employee contributions adjusted for general
inflation or inflation in costs under the plan. The plan was amended in 1993 to
cap employer contributions at 1993 levels. The impact of a one-percentage-point
change in assumed health care cost trend rates on the net periodic benefit cost
and postretirement benefit obligation is immaterial.
Many of the Company's U.S. employees are eligible to participate in 401(k)
savings plans, some of which provide for Company matching under various
formulas. The Company's matching expense for the plans was $3,196,000,
$2,816,000, and $2,l26,000 for the years ended December 31, 1999, 1998, and
1997, respectively.
27
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
9. Pensions and Other Postretirement Benefits (continued)
The Company provides pension and similar benefits to employees of certain
foreign subsidiaries consistent with local practices. German subsidiaries of the
Company have defined benefit pension plans. The Company acquired 100% of TEMIC
Semiconductor GmbH on March 2, 1998, including its pension plan. The following
table sets forth a reconciliation of the benefit obligation, plan assets, and
accrued benefit cost related to the German plans (in thousands):
-----------------------
1999 1998
-----------------------
Change in benefit obligation:
Benefit obligation at beginning of year $ 111,770 $ 64,758
Service cost 554 510
Interest cost 6,501 6,025
Actuarial (gains) losses (837) 3,383
Acquisition -- 34,536
Benefits paid (5,341) (5,036)
Foreign currency translation (14,794) 7,594
-----------------------
Benefit obligation at end of year $ 97,853 $ 111,770
=======================
Change in plan assets:
Fair value of plan assets at beginning of year $ 15,227 $ 13,735
Actual return on plan assets 753 624
Company contributions 2,467 2,754
Benefits paid (2,574) (2,872)
Foreign currency translation (2,147) 986
-----------------------
Fair value of plan assets at end of year $ 13,726 $ 15,227
=======================
28
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
9. Pensions and Other Postretirement Benefits (continued)
-------------------------------------------
1999 1998
-------------------------------------------
Funded status $ (84,127) $ (96,543)
Unrecognized net actuarial losses 5,650 7,002
Unrecognized transition obligation (asset) (13) (19)
Unamortized prior service cost 103 168
-------------------------------------------
Net amount recognized $ (78,387) $ (89,392)
===========================================
Amounts recognized in the consolidated balance sheets consist of:
Accrued benefit liability $ (85,612) $ (99,476)
Accumulated other comprehensive income 7,225 10,084
-------------------------------------------
Net amount recognized $ (78,387) $ (89,392)
===========================================
Weighted-average assumptions as of December 31:
Discount rate 6.50% 6.50%
Rate of compensation increase 3.00% 3.00%
-----------------------------------------------------
1999 1998 1997
-----------------------------------------------------
Components of net periodic benefit cost:
Service cost $ 554 $ 510 $ 107
Interest cost 6,501 6,025 4,261
Expected return on plan assets (488) (476) (1,179)
Amortization of prior service cost 65 86 106
Amortization of transition asset (6) (2) (4)
Amortization of losses 250 62 -
-----------------------------------------------------
Net periodic benefit cost $ 6,876 $ 6,205 $ 3,291
=====================================================
29
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
9. Pensions and Other Postretirement Benefits (continued)
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the German pension plans with accumulated benefit obligations
and projected benefit obligations in excess of plan assets were $97,853,000,
$96,601,000, and $13,726,000, respectively, as of December 31, 1999 and
$111,770,000, $110,871,000, and $15,227,000, respectively, as of December 31,
1998.
10. Stock Options
The Company has three stock option programs. Under the 1995 Stock Option
Program, certain key executives of the Company were granted options on March 3,
1995, to purchase 1,522,000 shares of the Company's Common Stock. The options
were fully vested on the date of grant and expire March 1, 2000, with one-third
exercisable at $18.31, one-third exercisable at $23.04, and one-third
exercisable at $32.91.
Under the 1997 Stock Option Program, certain executive officers, key employees,
and consultants of the Company were granted options on May 21, 1998, to purchase
1,791,000 shares of the Company's Common Stock. The options were fully vested on
the date of grant and expire June 1, 2008, with one-third exercisable at $16.33,
one-third at $18.79, and one-third at $20.42.
Under the 1998 Stock Option Program, certain executive officers and key
employees were granted options on October 6, 1998 to purchase 1,065,000 shares
of the Company's Common Stock. The options, which are exercisable at $8.40, vest
evenly over a six-year period, and expire March 16, 2008. On October 8, 1999, an
additional 852,000 options were granted. These options are exercisable at
$23.00, vest evenly over a six-year period, and expire October 8, 2009.
30
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
10. Stock Options (continued)
The following table summarizes the Company's stock option activity (options in
thousands):
1999 1998 1997
--------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Options Price Options Price Options Price
--------------------------------------------------------------------------------
Outstanding at beginning of year 4,196 $17.94 1,522 $24.75 1,522 $24.75
Granted 852 23.00 2,856 14.74 - -
Exercised (59) 8.40 - - - -
Forfeited - - (182) 24.75 - -
Cancelled (35) 8.40 - - - -
-------------- -------------- ---------------
Outstanding at end of year 4,954 18.99 4,196 17.94 1,522 24.75
============== ============== ==============
Exercisable at end of year 3,244 20.74 3,132 21.18 1,522 24.75
============== ============== ==============
Available for future grants 87 904 -
The following table summarizes information concerning stock options outstanding
and exercisable at December 31, 1999 (options in thousands):
Options Outstanding Options Exercisable
------------------- -------------------
Weighted Average Weighted Weighted
Remaining Average Average
Range of Exercise Number of Contractual Exercise Number of Exercise
Prices Options Life Price Options Price
------ ------- ---- ----- ------- -----
$8.40 971 8.76 $8.40 113 $8.40
$16.33 - $20.42 2,238 6.75 18.47 2,238 18.47
$23.00 852 9.77 23.00 - -
$23.04 - $32.19 893 0.16 27.98 893 27.98
--------------------- --------------
Total 4,954 6.47 18.99 3,244 20.74
===================== ==============
31
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
10. Stock Options (continued)
The following is provided to comply with the disclosure requirements of SFAS
123. If compensation cost for the Company's stock option programs had been
determined using the fair-value method prescribed by SFAS 123, the Company's
results for the year ended December 31, 1999 and 1998 would have been reduced to
the pro forma amounts indicated below (in thousands, except per share amounts):
1999 1998
-------------------------------
Net earnings (loss) $ 82,103 $ (1,906)
Basic earnings (loss) per share 0.97 (0.02)
Diluted earnings (loss) per share 0.96 (0.02)
The weighted average fair value of the options granted was estimated using the
Black-Scholes option pricing model, with the assumptions presented below. All
options granted in 1999 had an exercise price equal to the market value and a
weighted average fair value of $9.31. For options granted in 1998 with an
exercise price equal to the market value, the weighted average fair value was
$5.22 and the weighted average exercise price was $11.61. For options granted in
1998 with an average exercise price greater than the market value, the weighted
average fair value was $5.78 and the weighted average exercise price was $20.70.
1999 1998
------------------ -----------------------------------
1998 Stock 1998 Stock 1997 Stock Option
Option Program Option Program Program
------------------ -----------------------------------
Expected dividend yield - - -
Risk-free interest rate 6.0% 4.2% 5.7%
Expected volatility 51.3% 48.3% 48.3%
Expected life (in years) 4.5 4.5 8
32
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Leases
Total rental expense under operating leases was $21,390,000, $23,703,000, and
$9,413,000 for the years ended December 31, 1999, 1998, and 1997, respectively.
Future minimum lease payments for operating leases with initial or remaining
noncancelable lease terms in excess of one year are as follows:
2000--$15,213,000; 2001--$12,237,000; 2002--$11,435,000; 2003--$10,507,000;
2004--$11,797,000; thereafter--$54,318,000.
12. Financial Instruments
The Company uses financial instruments in the normal course of its business,
including derivative financial instruments, for purposes other than trading.
These financial instruments include debt and interest rate swap agreements. The
notional or contractual amounts of these commitments and other financial
instruments are discussed below.
Concentration of Credit Risk
Financial instruments with potential credit risk consist principally of accounts
receivable. Concentrations of credit risk with respect to receivables are
limited due to the Company's large number of customers and their dispersion
across many countries and industries. At December 31, 1999 and 1998, the Company
had no significant concentrations of credit risk.
Interest Rate Swap Agreements
In August 1998, the Company entered into six interest rate swap agreements with
a total notional amount of $300,000,000 to manage interest rate risk related to
its multicurrency revolving line of credit. These interest rate swap agreements
require the Company to make payments to the counterparties at the fixed rate
stated in the agreements, and in return to receive payments from the
counterparties at variable rates. These interest rate swap agreements mature in
August 2003. The variable rates are based on USD-LIBOR-BBA rates. In November
1999, the Company entered into two three-month interest rate swap agreements
with a total notional amount of $300,000,000. These interest rate swap
33
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
12. Financial Instruments (continued)
agreements require the Company to make payments to the counterparties on
February 29, 2000 at the three-month USD-LIBOR-BBA rate as of November 29, 1999
less 0.16% and to receive monthly payments from the counterparties at the
monthly USD-LIBOR-BBA rate. At December 31, 1999 and 1998, the Company paid a
weighted average fixed rate of 5.61% and 5.77%, respectively, and received a
weighted average variable rate of 6.49% and 5.25%, respectively. The fair value
of the interest rate swap agreements, based on current market rates,
approximated a net receivable of $8,714,000 and a net payable of $7,572,000 at
December 31, 1999 and 1998, respectively.
Foreign Currency Forward Exchange Contracts
In September 1999, a subsidiary of the Company entered into foreign currency
forward exchange contracts to manage exposure related to certain foreign
currency commitments and balance sheet positions. At December 31, 1999, the
notional amount of outstanding foreign currency forward exchange contracts was
$6,438,000. All of the total outstanding contracts at December 31, 1999 were to
hedge yen denominated commitments from customers in Japan.
Cash and Cash Equivalents, Notes Payable, and Long-Term Debt
The carrying amounts reported in the consolidated balance sheets approximate
fair value.
13. Current Vulnerability Due to Certain Concentrations
Sources of Supply
Although most materials incorporated in the Company's products are available
from a number of sources, certain materials (particularly tantalum and
palladium) are available only from a relatively limited number of suppliers.
Tantalum, a metal, is the principal material used in the manufacture of tantalum
capacitor products. It is purchased in powder form primarily under annual
contracts with domestic and foreign suppliers at prices that are subject to
periodic adjustment. The Company is a major consumer of the world's annual
tantalum production. There are currently three major suppliers that process
tantalum ore into capacitor grade tantalum powder. The Company believes that
34
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
13. Current Vulnerability Due to Certain Concentrations (continued)
there is currently a surplus of tantalum ore reserves and a sufficient number of
tantalum processors relative to foreseeable demand. The tantalum required by the
Company has generally been available in sufficient quantities to meet its
requirements. However, the limited number of tantalum powder suppliers could
lead to increases in tantalum prices that the Company may not be able to pass on
to its customers. Palladium is used to produce multi-layer ceramic capacitors.
Palladium is primarily purchased on the spot and forward markets, depending on
market conditions. Palladium is considered a commodity and is subject to price
volatility. The price of palladium fluctuated in the range of approximately $127
to $444 per troy ounce during the three years ended December 31, 1999, and had
increased to $670 per troy ounce as of February 28, 2000. Palladium is currently
found in South Africa and Russia. Due to various factors, the Company believes
there may be a short-term shortage of palladium which may afffect both the cost
of palladium and the Company's plan to expand multi-layer ceramic chip capacitor
production to meet increased demand. An inability on the part of the Company to
pass on increases in palladium costs to its customers could have an adverse
effect on the margins of those products using the metal.
Geographic Concentration
To address the increasing demand for its products and to lower its costs, the
Company has expanded, and plans to continue to expand, its manufacturing
operations in Israel in order to take advantage of that country's lower wage
rates, highly skilled labor force, government-sponsored grants, and various tax
abatement programs. Israeli incentive programs have contributed substantially to
the growth and profitability of the Company. The Company might be materially and
adversely affected if these incentive programs were no longer available to the
Company or if events were to occur in the Middle East that materially interfered
with the Company's operations in Israel.
14. Business Segment and Geographic Area Data
Vishay 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) consisting principally of
fixed resistors, solid tantalum surface mount chip capacitors, solid tantalum
leaded capacitors, wet/foil tantalum capacitors, multi-layer ceramic chip
capacitors, film capacitors and inductors and Active Electronic Components
(Actives) consisting principally of diodes, transistors, power MOSFETS, power
conversion and motor control integrated circuits.
35
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
14. Business Segment and Geographic Area Data (continued)
The Company evaluates performance and allocates resources based on several
factors, of which the primary financial measure is business segment operating
income excluding amortization of intangibles and special charges. The accounting
policies of the business segments are the same as those described in the summary
of significant accounting policies (see Note 1). The operating results of
Actives reflect the acquisition of TEMIC as of March 2, 1998 and the acquisition
of LPSC as of July 1, 1997. Business segment assets are the owned or allocated
assets used by each business.
The corporate component of operating income represents corporate selling,
general, and administrative expenses. Corporate assets include corporate cash,
property, plant, and equipment, and certain other assets.
1999 1998 1997
----------------------------------------
(In Thousands)
Business Segment Information
Net Sales:
Passives $ 1,008,266 $ 1,027,902 $ 1,086,929
Actives 751,825 544,843 38,290
----------------------------------------
$ 1,760,091 $ 1,572,745 $ 1,125,219
=========================================
Operating Income:
Passives $ 104,655 $ 114,747 $ 138,185
Actives 119,510 51,516 2,959
Corporate (18,061) (17,465) (10,821)
Unusual items -- (29,301) (14,503)
Purchased research and development -- (13,300) --
Amortization of goodwill (12,360) (12,272) (7,218)
----------------------------------------
$ 193,744 $ 93,925 $ 108,602
=========================================
36
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
14. Business Segment and Geographic Area Data (continued)
1999 1998 1997
-----------------------------------------------------
(In Thousands)
Business Segment Information
Depreciation Expense:
Passives $ 75,798 $ 74,173 $ 69,716
Actives 49,826 40,210 3,409
Corporate 223 209 204
-----------------------------------------------------
$ 125,847 $ 114,592 $ 73,329
=====================================================
Total Assets:
Passives $ 1,429,177 $ 1,693,554 $ 1,506,191
Actives 882,296 750,875 211,684
Corporate 12,308 18,315 1,773
-----------------------------------------------------
$ 2,323,781 $ 2,462,744 $ 1,719,648
=====================================================
Capital Expenditures:
Passives $ 52,903 $ 87,168 $ 69,617
Actives 61,409 59,969 8,285
Corporate 5,326 4,545 172
-----------------------------------------------------
$ 119,638 $ 151,682 $ 78,074
=====================================================
The amount of investment in equity method investees included in the Actives
total assets above was $12,495,000, $10,090,000, and $8,854,000 for 1999, 1998
and 1997, respectively.
37
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
14. Business Segment and Geographic Area Data (continued)
The following geographic area data include net sales based on revenues generated
by subsidiaries located within that geographic area and property, plant, and
equipment based on physical location:
1999 1998 1997
----------------------------------------------------
(In Thousands)
Geographic Area Information
Net Sales:
United States $ 706,049 $ 659,845 $ 624,377
Germany 574,629 519,114 249,298
Asia Pacific 273,921 185,784 44,647
France 88,975 119,992 114,704
Other 116,517 88,010 92,193
----------------------------------------------------
$ 1,760,091 $ 1,572,745 $ 1,125,219
====================================================
Property, Plant, and Equipment (Net):
United States $ 333,594 $ 352,007 $ 205,784
Germany 127,727 153,423 110,827
Israel 268,916 283,691 271,180
Asia Pacific 97,060 67,051 42,522
France 25,758 45,461 43,071
Other 77,490 95,434 35,758
----------------------------------------------------
$ 930,545 $ 997,067 $ 709,142
====================================================
38
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
15. Earnings per Share
Statement of Financial Accounting Standards No. 128, Earnings Per Share,
requires net earnings per share to be presented under two calculations, basic
earnings per share and diluted earnings per share. Basic earnings per share is
computed using the weighted average number of common shares outstanding during
the periods presented. Diluted earnings per share is computed using common and
dilutive potential common shares outstanding during the periods presented. The
Company's potential common shares consist primarily of stock options granted
under the Company's 1995, 1997, and 1998 stock option plans (see Note 10) and
stock appreciation rights issued in connection with the LPSC acquisition (see
Notes 2, 6, and 17).
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share amounts):
Year ended December 31
1999 1998 1997
-----------------------------------------------------
Numerator:
Net Income $ 83,237 $ 8,212 $ 53,302
Denominator:
Denominator for basic earnings per
share - weighted average shares 84,452 84,443 84,418
Effect of dilutive securities:
Employee stock options 539 - -
Stock appreciation rights 378 - -
Other 119 88 185
-----------------------------------------------------
Dilutive potential common shares 1,036 88 185
-----------------------------------------------------
Denominator for diluted earnings per share -
adjusted weighted average shares 85,488 84,531 84,603
=====================================================
Basic earnings per share $ 0.99 $ 0.10 $ 0.63
=====================================================
Diluted earnings per share $ 0.97 $ 0.10 $ 0.63
=====================================================
39
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
15. Earnings per Share (continued)
For the year ended December 31, 1999, options to purchase 477,000 shares of
Common Stock at $32.91 per share were not included in the computation of diluted
earnings per share because the options' exercise prices were greater than the
average market price of the common shares. Options to purchase 3,433,000 shares
of Common Stock at prices ranging from $16.33 to $32.91 per share outstanding
during 1998, and options to purchase 1,523,000 shares at prices ranging from
$18.31 to $32.91 per share outstanding during 1997, were not included in the
computation of diluted earnings per share because the options' exercise prices
were greater than the average market price of the common shares.
40
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
16. Summary of Quarterly Financial Information (Unaudited)
Quarterly financial information for the years ended December 31, 1999 and 1998
is as follows (in thousands, except per share amounts):
First Quarter Second Quarter Third Quarter
1999 1998 1999 1998 1999 1998
Net sales $423,058 $348,744 $425,323 $412,844 $443,711 $399,499
Gross profit 99,890 85,204 108,681 102,392 119,633 97,595
Net earnings (loss) 818(1) 16,536(2) 20,181 16,766 25,736 12,121
Basic earnings (loss) per share (4): $ .01(1) $ .20(2) $ .24 $ .20 $ .30 $ .14
Diluted earnings (loss) per share (4) $ .01(1) $ .20(2) $ .24 $ .20 $ .30 $ .14
Fourth Quarter Total Year
1999 1998 1999 1998
Net sales $ 467,999 $ 411,658 $1,760,091 $1,572,745
Gross profit 132,182 98,447 460,386 383,638
Net earnings (loss) 36,502 (37,211)(3) 83,237 8,212
Basic earnings (loss) per share (4): $ .43 $ (.44)(3) $ .99 $ .10
Diluted earnings (loss) per share (4) $ .42 $ (.44)(3) $ .97 $ .10
(1) The sale of Nicolitch, S.A. and a tax rate change in Germany reduced net
earnings by $14,562,000 or $0.17 per share in the first quarter of 1999.
(2) A forward exchange contract loss ($6,269,000) reduced net earnings by
$3,924,000 or $0.05 per share in the first quarter of 1998.
(3) Charges for restructuring ($6,244,000), impairment losses ($23,057,000),
purchased research and development ($13,300,000), reduction of a deferred
tax asset ($10,000,000), and other noncash charges ($1,815,000) reduced net
earnings by $51,411,000 or $.61 per share in the fourth quarter of 1998.
(4) Adjusted to give retroactive effect to a five-for-four stock split in June
1999 and a 5% stock dividend paid in June 1998.
41
17. Subsequent Events
On January 24, 2000, the Company exercised its right to call the stock
appreciation rights ("SARs") issued in connection with its acquisition of LPSC
(see Notes 2 and 6). Based on the call price of $39.64 per share and the average
closing price of Vishay shares for the thirty days prior to January 24, 2000,
the Company would have to issue 1,529,000 shares Vishay Common Stock to settle
the SARs.
On March 15, 2000, the Company and Lite-On JV Corporation ("Lite-On Group")
entered into a Memorandum of Understanding for the sale of Vishay's 65% interest
in LPSC to the Lite-On Group for consideration consisting of cash and the
assignment or transfer to Vishay of the Lite-On Group's rights under the SARs.
The Lite-On Group currently owns the remaining 35% interest in LPSC. Based on
the March 21, 2000 closing price of Vishay stock of $59, the accounting for the
disposition of Vishay's interest in LPSC would have a minor downward effect on
Vishay's earnings. The actual effect on earnings from the disposition of LPSC
will depend on the value of Vishay stock at the time the parties execute final
documentation. The closing is expected to occur before September 30, 2000.
During the time prior to the closing, the parties will prepare additional
documentation relating to the transaction, and the Lite-On Group will arrange
its financing for the cash portion of the purchase price. The Company and the
Lite-On Group have agreed to defer the actual redemption of the SARs pending the
execution of certain documentation relating to the sale of Vishay's interest in
LPSC to the Lite-On Group. No effects of these transactions are reflected in the
Company's financial statements for the year ended December 31, 1999.
EXHIBIT INDEX
Exhibit Description Page Number in
No. sequentially
Numbered Copy
2.1 Lite-on Stock Purchase Agreement, dated as of April 25,
1997, among Lite-On Semiconductor Corporation, Silitek
Corporation, Lite-On Technology Corporation, Dyna
Investment Co., Ltd., Lite-On Inc. and other
shareholders as Sellers and Vishay Intertechnology, Inc.
as Purchaser. Incorporated by reference to Exhibit A to
Schedule 13D filed on July 28, 1997.
2.1A Memorandum of Understanding, dated as of March 15, 2000,
between Lite-On JV Corporation and Vishay
Intertechnology, Inc. Incorporated by reference to
Exhibit D to Amendment No. 1 to Schedule 13D filed on
March 28, 2000.
2.2 Amendment No. 1 to Joint Venture Agreement. Incorporated
by reference to Exhibit C to Schedule 13D filed on July
28, 1997.
2.3 Stock Purchase Agreement, dated December 16, 1997, among
TEMIC TELEFUNKEN microelectronic GmbH, Delengate
Limited, Daimler-Benz Aerospace Aktiengesellschaft,
Daimler-Benz Technology Corporation, Vishay TEMIC
Semiconductor Acquisition Holdings Corp., "PAMELA"
Verwaltungsgesellschaft GmbH and Vishay Intertechnology.
Incorporated by reference to Exhibit A to Schedule 13D
filed December 24, 1997.
2.4 Share Sale and Transfer Agreement, between "PAMELA"
Verwaltungsgesellschaft GmbH, Vishay Intertechnology,
Inc., ATMEL Corporation and Atmel Holding GmbH i.G.
Incorporated by reference to Exhibit 2.2 to Form 8-K
filed on March 17, 1998.
3.1 Composite Amended and Restated Certificate of
Incorporation of the Company dated August 3, 1995.
Incorporated by reference to Exhibit 3.1 to Form 10-Q
for the quarter ended June 30, 1995 (the "1995 Form
10-Q"). Certificate of Amendment of Composite Amended
and Restated Certificate of Incorporation of the
Company. Incorporated by reference to Exhibit 3.1 to
Form 10-Q for the quarter ended June 30, 1997 (the "1997
Form 10-Q").
3.2 Amended and Restated Bylaws of Registrant. Incorporated
by reference to Exhibit 3.2 to Registration Statement
No. 33-13833 of Registrant on Form S-2 under the
Securities Act of 1933 (the "Form S-2") and Amendment
No. 1 to Amended and Restated Bylaws of Registrant
Incorporated by reference to Exhibit 3.2 to Form 10-K
file number 1-7416 for fiscal year ended December 31,
1993 (the "1993 Form 10-K").
10.1 Performance-Based Compensation Plan for Chief Executive
Officer of Registrant. Incorporated by reference to
Exhibit 10.1 to the 1993 Form 10-K.
10.2 Vishay Intertechnology, Inc. $825,000,000 Long Term
Revolving Credit Agreement, dated as of March 2, 1998,
by and among Vishay, Comerica Bank, NationsBanc
Montgomery Securities LLC and the other banks signatory
thereto, and Comerica Bank, as administrative agent.
Incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K dated March 17, 1998.
10.3 Vishay Intertechnology, Inc. $275,000,000 Short Term
Revolving Credit Agreement, dated as of March 2, 1998,
by and among Vishay, Comerica Bank, NationsBanc
Montgomery Securities LLC and the other banks signatory
thereto, and Comerica Bank, as administrative agent.
Incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K dated March 17, 1998.
10.4 Company Guaranty (Long Term), dated March 2, 1998, by
Vishay Intertechnology, Inc. to Comerica Bank, as
administrative agent. Incorporated by reference to
Exhibit 10.3 to the Current Report on Form 8-K dated
March 17, 1998.
10.5 Domestic Guaranty (Long Term), dated March 2, 1998, by
the Guarantors signatory thereto to Comerica Bank, as
administrative agent. Incorporated by reference to
Exhibit 10.4 to the Current Report on Form 8-K filed on
March 17, 1998.
10.6 Foreign Guaranty (Long Term), dated March 2, 1998, by
the Guarantors signatory thereto to Comerica Bank, as
administrative agent. Incorporated by reference to
Exhibit 10.5 to the Current Report on Form 8-K filed on
March 17, 1998.
10.7 Company Guaranty (Short Term), dated March 2, 1998, by
Vishay Intertechnology, Inc. to Comerica Bank, as
administrative agent. Incorporated by reference to
Exhibit 10.6 to the Current Report on Form 8-K filed on
March 17, 1998.
10.8 Domestic Guaranty (Short Term), dated March 2, 1998, by
the Guarantors signatory thereto to Comerica Bank, as
administrative agent. Incorporated by reference to
Exhibit 10.7 to the Current Report on Form 8-K filed on
March 17, 1998.
10.9 Employment Agreement, dated as of March 15, 1985,
between the Company and Dr. Felix Zandman. Incorporated
by reference to Exhibit (10.12) to the Form S-2.
10.10 Vishay Intertechnology 1995 Stock Option Program.
Incorporated by reference to the Company's Registration
Statement on Form S-8 (No. 33-59609).
10.11 1986 Employee Stock Plan of the Company. Incorporated by
reference to Exhibit 4 to the Company's Registration
Statement on Form S-8 (No. 33-7850).
10.12 1986 Employee Stock Plan of Dale Electronics, Inc.
Incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form S-8 (No. 33-7851).
10.13 Money Purchase Plan Agreement of Measurements Group,
Inc. Incorporated by reference to Exhibit 10(a)(6) to
Amendment No. 1 to the Company's Registration Statement
on Form S-7 (No. 2-69970).
10.14 Joint Venture Agreement, dated April 25, 1997, by and
between Vishay Intertechnology, Inc. and Lite On [JV
Co.]. Incorporated by reference to Exhibit B to Schedule
13D filed on July 28, 1997.
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
27. Financial Data Schedule.