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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, 2000
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______
Commission file number 1-7416
VISHAY INTERTECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-1686453
-------- ----------
(State or other (IRS employer
jurisdiction of identification no.)
incorporation or organization)
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 27, 2001, assuming conversion of all its Class B
Common Stock held by non-affiliates into Common Stock of the registrant, was
$2,481,402,000.
As of March 27, 2001, registrant had 122,431,080 shares of its Common
Stock and 15,518,546 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, 2000, 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 passive and 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.
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. In February 2001, the Company communicated
a proposal to the Board of Directors of Siliconix to purchase any and all
outstanding shares of Siliconix not already owned by Vishay. This proposal is
currently being evaluated by a special committee of directors of Siliconix
appointed in March 2001. 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
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 $473.1
million in 2000 and $383.3 million in 1999.
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
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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).
During 2000, Vishay continued to consolidate its operations in the
United States, Europe and Asia into one operational unit. In connection with
this consolidation, which began in 1998, the Company achieved the following:
(i) created a single worldwide organization under one management team;
(ii) created further opportunities for synergies among its divisions;
(iii) positioned the Company for increased growth by strengthening the
Company's position at distributors and OEM's through its strong
sales force and broad product line; and
(iv) strengthened its balance sheet by the repayment of debt to
position the Company to grow through acquisitions.
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,
o aluminum and specialty ceramic capacitors,
o transformers,
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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 active components, such as diodes and transistors, 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.
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.
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
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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,
o NTC chip thermistors, and
o certain diodes and transistor products.
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The Company also provides a number of component packaging styles to facilitate
automated product assembly by its customers.
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.
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, 2000, approximately 44% of the Company's
net sales were 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 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,
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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.
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.
Vishay's largest customers vary from year to year, and no customer has
long-term commitments to purchase products of the Company. For the year ended
December 31, 2000, one customer of the Company, Future Electronics, an
independent distributor, accounted for 14% of the Company's sales. Most of the
sales to Future Electronics were tantalum capacitors and thick film resistor
chips, products in short supply. No other customer accounted for more than 10%
of sales for such year.
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 $37.1 million for 2000,
$35.0 million for 1999 and $28.9 million for 1998, respectively. The major
increase in research and development costs in 1998, as compared to earlier
years, was due to the acquisition of Siliconix. Siliconix's expenditures were
$21.0 million and $17.0 million for the years ended December 31, 2000 and 1999,
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 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. The Company believes that in
the long term, there exist 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, in the short term, there may be shortages of tantalum
powder that could lead to increases in tantalum prices that the Company may not
be able to pass on to its customers. The Company stockpiled tantalum ore in 2000
and early 2001. Prices for tantalum powder are expected to increase
significantly in 2001.
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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 $201
to $970 per troy ounce during the three years ended December 31, 2000. As of
February 27, 2001, the price of palladium had increased to $1,090 per troy
ounce. Palladium is currently found primarily 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 ability
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 $773.1 million, $505.1
million, and $309.3 million, respectively, at December 31, 2000, 1999 and 1998.
The increase in backlog at December 31, 2000 primarily reflects the increase in
demand during 2000 for the Company's products, including both passive and active
components. Due to a recent slowing of growth in the personal computer and cell
phone markets, this increase in demand is not expected to continue in 2001.
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. In the
first quarter of 2001, a significant number of such orders have been either
cancelled or pushed back by nine to twelve months.
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 Semiconductor 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, 2000, approximately 33% of the Company's identifiable
assets were located in the United States, approximately 29% were located in
Europe, approximately 24% were located in Israel, and approximately 14% 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 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 and in Shanghai, China (four).
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 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.
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, 2000, sales of products manufactured in Israel accounted for
approximately 35.9% 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. The Company may incur such expenses in 2001.
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See Note 14 of the Notes to the Consolidated Financial Statements,
"Business Segment and Geographic Area Data," for financial information by
geographic area.
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 all of its facilities, the Company has completed its
undertaking to comply with environmental regulations relating to the elimination
of chlorofluorocarbons ("CFCs") and ozone depleting substances ("ODS") pursuant
to the Clean Air Act amendments of 1990. The Company has completely eliminated
the use of CFCs and ODS in its manufacturing processes, and all facilities are
currently in compliance with the Clean Air Act.
The Company anticipates that it will undertake capital expenditures of
approximately $6,340,000 in fiscal 2001 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 expends minimal amounts
in connection with several of these sites 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. More stringent
environmental regulations may be enacted in the future, and Vishay cannot
determine the modifications, if any, in its operations that any such future
regulations might require, or the cost of compliance with these regulations.
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, 2000, the Company employed approximately 22,418 full
time employees of whom approximately 16,725 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."
During the first quarter of 2001, layoffs of employees are anticipated.
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Item 2. PROPERTIES
As of December 31, 2000, the Company maintains approximately 66
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
Columbus and Norfolk, NE* 298,000
Sanford, ME 225,000
Malvern and Bradford, PA* 222,000
Santa Clara, CA 220,000
Wendell and Statesville, NC* 194,000
Grafton and Oconto, Wisconsin* 165,000
Roanoke, VA 128,000
Monroe, CT 91,000
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* 2 locations
Foreign
Israel (4 locations) 970,000
Germany (12 locations) 806,000
France (5 locations) 392,000
Czech Republic (4 locations) 306,000
Portugal 301,000
Hungary 194,000
Austria 153,000
Vishay owns an additional 238,000 square feet of manufacturing
facilities located in Florida, Maryland, New York, and South Dakota. Vishay also
owns 50,000 square feet in Taiwan and 11,000 square feet in England.
Available leased facilities in the United States include 359,000 square
feet of space located in California, Massachusetts, Maine, Rhode Island and
South Dakota. Foreign leased facilities consist of 104,000 square feet in China,
220,000 square feet in Mexico, 45,000 square feet in England, 141,000 square
feet in Germany, 131,000 square feet in Hungary, 14,000 square feet in the
Philippines, 75,000 square feet in the Czech Republic and 6,000 square feet in
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,
-11-
although the Company would not be required to rehire the employees, the Company
would have to pay damages equal to approximately 10 million French Francs
(approximately U.S. $1,437,000) as of March 28, 2001, to the former employees.
The Company has appealed this decision.
The Company's 80.4% owned subsidiary, Siliconix, is a party to two
environmental proceedings. The first involves 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 has substantially completed its
compliance with the RWQCB's orders.
In February and March 2001, several purported class action complaints
were filed in the Court of Chancery in and for New Castle County, Delaware and
the Superior Court of the State of California against the Company, Siliconix,
and the directors of Siliconix in connection with the Company's announced
proposal to purchase all issued and outstanding shares of Siliconix not already
owned by the Company. The class actions, filed on behalf of all non-Vishay
Siliconix shareholders, allege, among other things, that the Company's proposed
offer is unfair and a breach of fiduciary duty. One of the Delaware class
actions also contains derivative claims against the Company on behalf of
Siliconix alleging self-dealing and waste because the Company purportedly
usurped Siliconix's inventory and patents, appropriated Siliconix's separate
corporate identity, and obtained a below-market loan from Siliconix. The actions
seek injunctive relief, damages and other relief. The Company has not yet
responded to these complaints.
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. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the
executive officers of the Company as of March 27, 2001.
Name Age Positions Held
- ---- --- --------------
Felix Zandman* 72 Chairman of the Board and Chief Executive
Officer
Avi D. Eden* 53 Vice-Chairman of the Board, Executive
Vice President and General Counsel
Gerald Paul* 52 Chief Operating Officer, President
and Director
-12-
Name Age Positions Held
- ---- --- --------------
Richard N. Grubb* 54 Executive Vice President, Treasurer,
Chief Financial Officer and Director
Robert A. Freece* 60 Senior Vice President and Director
William J. Spires 59 Vice President and Secretary
* Member of the Executive Committee of the Board of Directors.
-13-
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 an 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 an 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 an 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 a
Vice President of the Company from 1972 until 1994, and has been a 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.
-14-
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 2000 and 1999 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 agreement. See Note 5 to the Consolidated
Financial Statements. Holders of record of the Company's Common Stock totaled
approximately 2,067 at March 27, 2001.
COMMON STOCK MARKET PRICES
Calendar 2000 Calendar 1999
High Low High Low
---- --- ---- ---
First Quarter $40.88 $18.58 $ 8.27 $ 5.90
Second Quarter $62.63 $35.00 $14.04 $ 7.80
Third Quarter $44.75 $26.00 $17.50 $12.04
Fourth Quarter $31.75 $13.88 $21.33 $14.17
At March 27, 2001, the Company has outstanding 15,518,546 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 except in certain very limited instances 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.
-15-
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial
information of the Company for the fiscal years ended December 31, 2000, 1999,
1998, 1997 and 1996. 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,
----------------------------------------------------------------------------------------
2000 1999 (1) 1998 (2) 1997 (3) 1996 (4)
---- ---- ----- ----- -----
Income Statement Data (in thousands,
except per share amounts):
Net sales $2,465,066 $1,760,091 $1,572,745 $1,125,219 $1,097,979
Interest expense 25,177 53,296 49,038 18,819 17,408
Earnings before income taxes and
minority interest 690,225 134,711 42,646 89,561 70,846
Income taxes 148,186 36,940 30,624 34,167 17,741
Minority interest 24,175 14,534 3,810 2,092 489
Net earnings 517,864 83,237 8,212 53,302 52,616
Basic earnings per share(5) $ 3.83 $ 0.66 $ 0.07 $ 0.42 $ 0.41
Diluted earnings per share(5) $ 3.77 $ 0.65 $ 0.07 $ 0.42 $ 0.41
Weighted average shares
outstanding - basic(5) 135,295 126,678 126,665 126,627 126,632
Weighted average shares
outstanding - diluted(5) 137,463 128,233 126,797 126,904 126,717
Balance Sheet Data (in thousands):
Total assets $2,783,658 $2,323,781 $2,462,744 $1,719,648 $1,558,515
Long-term debt 140,467 656,943 814,838 347,463 229,885
Working capital 1,057,200 604,150 650,483 455,134 434,199
Stockholders' equity 1,833,855 1,013,592 1,002,519 959,648 945,230
- ----------------------------
(1) The sale of Nicolitch, S.A. and a tax rate change in Germany reduced net
earnings by $14,562,000 ($0.11 per share).
(2) Includes the results from March 1, 1998 of TEMIC and special charges
after taxes of $55,335,000 ($0.44 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 ($0.22 per
share).
(4) Includes restructuring expense of $38,030,000 ($0.21 per share).
(5) Adjusted to reflect a three-for-two stock split distributed June 9, 2000,
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.
-16-
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, multi-layer ceramic chip capacitors 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 July 2000, the Company sold its interest in LPSC to the
Lite-On Group, the 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. 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. In February 2001, the Company
communicated a proposal to the Board of Directors of Siliconix to purchase any
and all outstanding shares of Siliconix not already owned by Vishay. This
proposal is currently being evaluated by a special committee of directors of
Siliconix appointed in March 2001.
From the third quarter of 1999 through the third quarter of 2000, the
Company experienced increased demand for its products, including both passive
and active electronic components, as a result of growth in the wireless
telecommunications market, particularly cell phones, and the increased use of
embedded computing devices in a wide range of consumer and commercial products.
The Company expanded capacity in all of its major product lines in order to
satisfy the increased demand, and, in some cases, was able to increase pricing
for its products because of tight supply, reversing the price erosion
experienced in prior years. However, as a result of a recent slowing of growth
in the personal computer and cell phone product markets, the Company has
recently experienced softness in product demand, resulting in order
cancellations and deferrals. This decrease in demand could cause a significant
drop in average sales prices, which could, in turn, cause a reduction in the
Company's gross margins and operating profits.
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. The
Company intends to continue to explore and implement opportunities for cost
efficiencies in its manufacturing operations.
The Company realizes approximately 56% 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 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
of December 31, 2000, the Company and its subsidiaries did not have any
outstanding foreign currency forward exchange contracts.
-17-
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
scaled back or discontinued some of its incentive programs over the past several
years. 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 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 $15,721,000 for the year ended December 31, 2000, as compared to
$14,256,000 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
2000 1999 1998
---- ---- ----
Costs of products sold 59.2% 73.8% 75.6%
Gross profit 40.8 26.2 24.4
Selling, general and
administrative expenses 12.1 14.5 14.9
Operating income 28.3 11.0 6.0
Earnings before income taxes
and minority interest 28.0 7.7 2.7
Effective tax rate 21.5 27.4 71.8
Net earnings 21.0 4.7 0.5
Year ended December 31, 2000 compared to Year ended December 31, 1999
Net Sales
Net sales for the year ended December 31, 2000 increased $704,975,000 or
40.1% from the prior year. Both the passive and active components segments
contributed to these increases. The strengthening of the U.S. dollar against
foreign currencies for the year ended December 31, 2000, in comparison to the
prior year, resulted in decreases in reported sales of $105,615,000. The passive
components business net sales were $1,627,861,000 for the year ended December
31, 2000 as compared to $1,008,266,000 for the prior year period, a 61.5%
increase. The active components business net sales were $837,205,000 for the
year ended December 31, 2000 as compared to $751,825,000 for the prior year
period, an 11.4% increase. Strong demand, particularly in the wireless
communications market, for the Company's products and increased average selling
prices contributed to the sales growth. Although backlog at December 31, 2000
remains strong, the Company is experiencing a slowdown in bookings in 2001 as
the cell phone and computer markets have experienced a slowing of growth.
Costs of Products Sold
Costs of products sold for the year ended December 31, 2000 were 59.2%
of net sales, as compared to 73.8% for the prior year. Gross profit, as a
percentage of net sales, for the year ended December 31, 2000 was 40.8% as
compared to 26.2% for the comparable prior year period. Both the passive and
active components segments contributed to the improved gross margins.
The passive components business gross profit margins were 41.7% for the
year ended December 31, 2000 as compared to 22.4% for the prior year period.
Price and volume increases in the resistor, tantalum capacitor, and multi-layer
ceramic chip capacitor product lines were primarily responsible for this
improvement in gross margins.
-18-
The active components business gross profit margins were 39.0% for the
year ended December 31, 2000 as compared to 31.4% for the prior year. Continued
cost reductions, increased manufacturing efficiencies and an improved product
mix contributed to the improved gross margins. The increase reflects
improvements at the Siliconix operation, where gross profit margins increased to
46.0% of net sales in 2000 compared to 41.0% in 1999 primarily as a result of
economies of scale in manufacturing operations, productivity improvements, and
further advances in technologies.
Israeli government grants, recorded as a reduction of costs of products
sold, were $15,721,000 for the year ended December 31, 2000, as compared to
$14,256,000 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, 2000 relating to Israeli
government grants was $55,162,000 as compared to $50,462,000 at December 31,
1999.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses for the year ended
December 31, 2000 were 12.1% of net sales, as compared to 14.5% for the prior
year. This reduction was a result of higher net sales in 2000 as compared to
1999 and reflects company-wide cost reduction initiatives, particularly the
reduction of headcount in high labor cost countries.
Interest Expense
Interest costs decreased by $28,119,000 for the year ended December 31,
2000 from the prior year. This decrease was a result of lower bank borrowings
during the year 2000 as compared to the prior year. The Company received net
proceeds of $395,449,000 from a Common Stock offering in May 2000, which were
used to pay down long-term debt.
Other Income
Other income was $18,904,000 for the year ended December 31, 2000 as
compared to an expense of $5,737,000 in the prior year. The 2000 amount includes
higher interest income, a gain on sale of subsidiaries, and a gain from
termination of interest rate swap agreements. Proceeds received from the May
2000 Common Stock offering and cash flows from operations were used to pay down
debt outstanding under the Company's long-term revolving credit agreement. In
connection with debt repayments, the Company terminated $200,000,000 notional
amount of interest rate swap agreements and recognized pretax gains of
$8,919,000. These amounts were partially offset by foreign exchange losses of
$7,305,000.
Minority Interest
Minority interest increased by $9,641,000 for the year ended December
31, 2000 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, 2000 was 21.5% as
compared to 27.4% for the prior year. The higher 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 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 $89,745,000 and $12,469,000 for the years ended December 31,
2000 and 1999, 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, 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 related 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
reflected increased demand for product, particularly in telecommunications and
computer applications, and reduced price erosion on its products.
-19-
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 was due to the Siliconix operation, where gross margins 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 saw an increase
in demand and the average selling prices 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.
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 was 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 was a loss of $6,269,000 related to a forward
exchange 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 1998 and a $10,000,000 increase in a valuation
allowance for a deferred tax asset for net operating loss carryforwards 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
-20-
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 $542,319,000 for the year ended December
31, 2000 compared to $239,547,000 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, 2000 as compared to the year ended December 31, 1999.
Net purchases of property and equipment for the year ended December 31, 2000
were $229,781,000 compared to $119,638,000 in the prior year, reflecting the
Company's efforts toward increasing capacity. The Company paid down $506,687,000
on its revolving credit lines during the year 2000. These payments were
partially funded by $395,449,000 of proceeds from the May 2000 Common Stock
offering and $39,873,000 of proceeds from the exercise of stock options. On July
12, 2000 the Company completed the sale of its 65% interest in LPSC to the
Lite-On Group. The net cash proceeds of $33,162,000 were used to further pay
down the Company's long-term debt. 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, 2000 is strong, with a
current ratio of 3.53 to 1. The Company's ratio of long-term debt, less current
portion, to stockholders' equity was .08 to 1 at December 31, 2000 and .65 to 1
at December 31, 1999.
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 and August 31, 2000, the Company amended the credit facilities. The amended
agreement now provides for a $660,000,000 long-term revolving credit and swing
line facility maturing on June 1, 2005, subject to Vishay's right to request
year-to-year renewals. Borrowings under the facility bear interest at variable
rates based, at the option of Vishay, on the prime rate or a eurocurrency rate
and in the case of any swing line advance, the quoted rate. The borrowings under
the loan agreement 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
long-term facility. The credit facility restricts the Company from paying cash
dividends, and requires 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.
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.
-21-
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 the Private Securities Litigation Reform Act of 1995. Such statements
involve a number of risks, uncertainties and contingencies, many of which are
beyond the Company's control, which may cause actual results, performance or
achievements to differ materially from those anticipated. Set forth below are
important factors that could cause the Company's results, performance or
achievements 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. Due to a recent slowing of
growth in the personal computer and cell phone markets, the
Company and others in the electronic and semi-conductor
component industry have recently experienced softness in product
demand, resulting in order cancellations and deferrals. This
slowdown may continue and may become more pronounced. Such a
slowdown in demand, as well as 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. The electronics
components industry has become increasingly concentrated and
globalized in recent years, and the Company's major competitors,
some of which are larger than the Company, have significant
financial resources and technological capabilities.
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 and this
produced a significant decrease in demand for the Company's
products.
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 risks that the Company will be unable to
anticipate the direction of technological change or that the
Company will be unable to timely develop and 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 was substantially debt free at the end of 2000. If
the Company were to undertake a substantial acquisition for
cash, the acquisition would likely need to be financed in part
through bank borrowings or the issuance of public or private
debt. This would decrease the Company's ratio of earnings to
fixed charges and adversely affect other leverage criteria. The
Company cannot ensure that the necessary acquisition financing
would be available to the Company when required on acceptable
terms.
o The Company may have difficulty expanding its manufacturing of
product lines to satisfy future increases in demand for its
products. Factors that could limit such expansion include delays
in procurement of manufacturing equipment, shortages of skilled
personnel and capacity constraints at the Company's facilities.
If the Company is unable to meet its
-22-
customers' requirements and its competitors sufficiently expand
production, the Company could lose customers and/or market
share.
o Any drop in demand or increase in supply of the Company's
products due to the expansion of production capacity by the
Company's competitors could cause a dramatic drop in average
sales prices causing a drop in gross margins.
Foreign Operations and Sales
o Approximately 56.0% of the Company's revenues are derived from
sales to customers outside the United States. As a result,
currency exchange rate fluctuations, regional inflation, changes
in monetary policy and tariffs, potential changes in laws and
regulations affecting the Company's business in foreign
jurisdictions, international 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's strategy is aimed at achieving 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. In this process, 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 The Company has in the past and may in the future respond to
changing economic conditions by restructuring its operations.
Such restructruing, particularly in Europe, may result in labor
unrest or strikes, 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. The Company's inability to
achieve these goals could have an adverse effect on the
Company's results of operations.
Raw Materials
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. Prices for tantalum
powder are expected to increase significantly in the
near future.
The Class B Common Stock
o The holders of common stock are entitled to one vote for each
share held, while the holders of Class B common stock are
entitled to 10 votes for each share held. Currently, the holders
of Class B common stock hold 57% of the voting
-23-
power of the Company. As a result, the holders of Class B common
stock are able to cause the election of their nominees as
directors of the Company. The holders of Class B common stock
may also be able to approve other action as stockholders without
obtaining the votes of other stockholders of the Company.
o The effective control of the Company by holders of Class B
common stock may make the Company less attractive as a target
for a takeover proposal. It may also render more difficult or
discourage a merger proposal or proxy contest for the removal of
the incumbent directors, even if such actions were favored by
all stockholders of the Company other than the holders of the
Class B common stock. Accordingly, this may deprive the holders
of common stock of an opportunity they might otherwise have to
sell their shares at a premium over the prevailing market price
in connection with a merger or acquisition of the Company with
or by another company.
Miscellaneous Factors
o The Company's results may also be affected by a variety of other
factors, including:
1. possible environmental liability and remediation
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. Company 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, 2000, the
outstanding balance under this facility was $140,000,000. 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, 2000 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. As of December 31,
2000, five of these six agreements had been terminated. The remaining agreement,
which expires in 2003, has a notional amount of $100,000,000 and requires the
Company to make payments to the counterparty at variable rates based on
USD-LIBOR-BBA rates. At December 2000 and 1999, the Company paid a weighted
average fixed rate of 7.16% and 5.61%, respectively, and received a weighted
average variable rate of 6.53% and 6.49%, respectively. The fair value of the
interest rate swap agreements, based on current market rates, approximated a net
receivable of $51,000 and $8,714,000 at December 31, 2000 and 1999,
respectively.
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, in most locations, has introduced a
"netting" policy where subsidiaries pay all
-24-
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. As of December 31, 2000, the Company did not have any outstanding
foreign currency forward exchange contracts.
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, 2000 and 1999.
Consolidated Statements of Operations -- for the years ended
December 31, 2000, 1999 and 1998.
Consolidated Statements of Cash Flows -- for the years ended
December 31, 2000, 1999, and 1998.
Consolidated Statements of Stockholders' Equity -- for the years
ended December 31, 2000, 1999 and 1998.
Notes to Consolidated Financial Statements-- December 31, 2000.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-25-
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, 2000, 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, "Executive Officers of the Registrant."
-26-
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, 2000 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, dated as of May 31, 2000, among
Lite-On JV Corporation, Vishay Intertechnology, Inc., and
Lite-On Power Semiconductor Corporation. Incorporated by
reference to Exhibit F to Amendment No. 2 to Schedule 13D filed
on June 29, 2000.
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. Amended and Restated Long Term
Revolving Credit Agreement, dated as of June 1, 1999, by and
among Vishay and the Permitted Borrowers (as defined therein),
the Lenders (as defined therein), and Comerica Bank, as
administrative agent. Incorporated by reference to Exhibit 10.1
to the Company's Registration Statement on Form S-3 (No.
333-52594) filed December 22, 2000.
10.3 First Amendment to Amended and Restated Vishay Intertechnology,
Inc. Long Term Revolving Credit Agreement and Other Loan
Documents, dated as of August 31, 2000, by and among Vishay and
the Permitted Borrowers (as defined therein), Comerica Bank and
the other Lenders signatory thereto, and Comerica Bank, as
administrative agent. Incorporated by reference to Exhibit 10.2
to the Company's Registration Statement on Form S-3 (No.
333-52594) filed December 22, 2000.
10.4 Employment Agreement, dated as of March 15, 1985, between the
Company and Dr. Felix Zandman. Incorporated by reference to
Exhibit 10.12 to the Company's Registration Statement on Form
S-2 (No. 33-13833).
10.5 Vishay Intertechnology 1995 Stock Option Program. Incorporated
by reference to the Company's Definitive Proxy Statement on
Schedule 14ADR filed April 7, 1995.
10.6 Vishay Intertechnology 1997 Stock Option Program. Incorporated
by reference to the Company's Definitive Proxy Statement on
Schedule 14A filed April 16, 1998.
10.7 Vishay Intertechnology 1998 Stock Option Program. Incorporated
by reference to the Company's Definitive Proxy Statement on
Schedule 14A filed April 16, 1998.
10.8 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).
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
-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 27, 2001 /s/ Felix Zandman
------------------------------
Felix Zandman, 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 27, 2001 /s/ Felix Zandman
------------------------------
Felix Zandman, Chairman
of the Board and Chief
Executive Officer
(Principal Executive Officer)
March 27, 2001 /s/ Avi D. Eden
------------------------------
Avi D. Eden, Vice-Chairman of the
Board, Executive Vice President
and General Counsel
March 27, 2001 /s/ Gerald Paul
------------------------------
Gerald Paul, Director, President
and Chief Operating Officer
March 27, 2001 /s/ Richard N. Grubb
------------------------------
Richard N. Grubb, Director,
Executive Vice President, Treasurer
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
March 27, 2001 /s/ Robert A. Freece
------------------------------
Robert A. Freece, Director,
Senior Vice President
March 27, 2001 /s/ Eli Hurvitz
------------------------------
Eli Hurvitz, Director
March 27, 2001 /s/ Edward B. Shils
------------------------------
Edward B. Shils, Director
March 27, 2001 /s/ Luella B. Slaner
------------------------------
Luella B. Slaner, Director
March 27, 2001 /s/ Mark I. Solomon
------------------------------
Mark I. Solomon, Director
March 27, 2001 /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, 2000 and 1999, and the related
consolidated statements of operations, cash flows, and stockholders' equity for
each of the three years in the period ended December 31, 2000. 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, 2000 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 5, 2001, except for Note 17,
as to which the date is March 8, 2001
F-1
Vishay Intertechnology, Inc.
Consolidated Balance Sheets
(In thousands, except per share and share amounts)
December 31
2000 1999
----------------------------
Assets
Current assets:
Cash and cash equivalents $ 337,213 $ 105,193
Accounts receivable, less allowances of
$12,630 and $9,495 452,579 320,978
Inventories:
Finished goods 179,286 144,645
Work in process 130,682 131,951
Raw materials 215,894 121,704
Deferred income taxes 32,051 35,119
Prepaid expenses and other current assets 127,169 67,159
----------------------------
Total current assets 1,474,874 926,749
Property and equipment - at cost:
Land 47,625 51,453
Buildings and improvements 265,311 261,528
Machinery and equipment 1,168,241 1,073,556
Construction in progress 83,768 61,881
----------------------------
1,564,945 1,448,418
Less allowances for depreciation (591,391) (517,873)
----------------------------
973,554 930,545
Goodwill 295,759 399,970
Other assets 39,471 66,517
----------------------------
Total assets $ 2,783,658 $ 2,323,781
============================
F-2
December 31
2000 1999
----------------------------
Liabilities and stockholders' equity
Current liabilities:
Notes payable to banks $ 8,250 $ 26,790
Trade accounts payable 120,070 101,613
Payroll and related expenses 111,132 77,209
Other accrued expenses 146,157 107,724
Income taxes 31,915 4,818
Current portion of long-term debt 150 4,445
----------------------------
Total current liabilities 417,674 322,599
Long-term debt - less current portion 140,467 656,943
Deferred income taxes 79,109 62,712
Deferred income 55,162 50,462
Minority interest 63,480 61,637
Other liabilities 93,157 47,315
Accrued pension costs 100,754 108,521
Stockholders' equity:
Preferred Stock, par value $1.00 per share:
authorized - 1,000,000 shares; none issued
Common Stock, par value $.10 per share:
authorized - 150,000,000 shares; 122,408,402 and 111,468,463
shares outstanding after deducting 225,673 and 25,673 shares in
treasury 12,241 11,147
Class B convertible Common Stock, par value $.10 per share:
authorized - 20,000,000 shares; 15,518,546 and 15,554,898
shares outstanding after deducting 279,453 shares in treasury 1,552 1,556
Capital in excess of par value 1,319,426 985,393
Retained earnings 615,455 97,591
Unearned compensation (1,248) (1,086)
Accumulated other comprehensive loss (113,571) (81,009)
----------------------------
Total stockholders' equity 1,833,855 1,013,592
----------------------------
Total liabilities and stockholders' equity $ 2,783,658 $ 2,323,781
==========================
See accompanying notes.
F-3
Vishay Intertechnology, Inc.
Consolidated Statements of Operations
(In thousands, except per share and share amounts)
Year ended December 31
2000 1999 1998
------------------------------------------------
Net sales $ 2,465,066 $ 1,760,091 $ 1,572,745
Costs of products sold 1,459,784 1,299,705 1,189,107
------------------------------------------------
Gross profit 1,005,282 460,386 383,638
Selling, general, and administrative expenses 297,315 254,282 234,840
Amortization of goodwill 11,469 12,360 12,272
Unusual items -- -- 29,301
Purchased research and development -- -- 13,300
------------------------------------------------
696,498 193,744 93,925
Other income (expense):
Interest expense (25,177) (53,296) (49,038)
Other 18,904 (5,737) (2,241)
------------------------------------------------
(6,273) (59,033) (51,279)
------------------------------------------------
Earnings before income taxes and minority interest 690,225 134,711 42,646
Income taxes 148,186 36,940 30,624
Minority interest 24,175 14,534 3,810
------------------------------------------------
Net earnings $ 517,864 $ 83,237 $ 8,212
================================================
Basic earnings per share $ 3.83 $ 0.66 $ 0.07
================================================
Diluted earnings per share $ 3.77 $ 0.65 $ 0.07
================================================
Weighted average shares outstanding:
Basic 135,295,000 126,678,000 126,665,000
Diluted 137,463,000 128,233,000 126,797,000
See accompanying notes.
F-4
Vishay Intertechnology, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year ended December 31
2000 1999 1998
-------------------------------------
Operating activities
Net earnings $ 517,864 $ 83,237 $ 8,212
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 140,840 139,676 127,947
(Gain) loss on sale of subsidiaries (5,851) 10,073 --
Loss on disposal of property and equipment 2,320 1,146 712
Minority interest in net earnings of consolidated
subsidiaries 24,175 14,534 3,810
Equity in earnings of affiliate 2,577 2,195 1,084
Purchased research and development -- -- 13,300
Asset impairment losses -- -- 23,057
Loss on forward exchange contract -- -- (5,295)
Changes in operating assets and liabilities, net
of effects of businesses acquired or sold:
Accounts receivable (148,414) (72,776) 13,827
Inventories (140,084) 25,998 13,304
Prepaid expenses and other current assets (62,687) 14,451 (23,206)
Accounts payable 28,507 15,838 1,575
Other current liabilities 106,084 24,146 (36,542)
Other 76,988 (18,971) 27,665
-------------------------------------
Net cash provided by operating activities 542,319 239,547 169,450
Investing activities
Purchases of property and equipment (229,781) (119,638) (151,682)
Purchases of businesses (42,384) -- (423,031)
Net cash proceeds from divestitures 33,162 9,118 --
Proceeds from sale of property and equipment 7,267 7,934 11,650
-------------------------------------
Net cash used in investing activities (231,736) (102,586) (563,063)
Financing activities
Net (payments) proceeds on revolving credit lines (506,686) (143,496) 462,214
Proceeds from long-term borrowings -- 197 5,030
Principal payments on long-term debt (385) (4,481) (7,068)
Purchase of treasury stock (5,765) -- --
Proceeds from sale of common stock 395,449 -- --
Proceeds from stock options exercised 39,873 -- --
Net changes in short-term borrowings 39 6,752 (9,768)
-------------------------------------
Net cash (used in) provided by financing activities (77,475) (141,028) 450,408
Effect of exchange rate changes on cash (1,088) (4,469) 1,671
-------------------------------------
Increase (decrease) in cash and cash equivalents 232,020 (8,536) 58,466
Cash and cash equivalents at beginning of year 105,193 113,729 55,263
-------------------------------------
Cash and cash equivalents at end of year $ 337,213 $ 105,193 $ 113,729
====================================
See accompanying notes.
F-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 Value Earnings Compensation Income (Loss) Equity
--------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ 10,587 $ 1,486 $ 914,531 $ 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 (116,664 shares) 12 -- 1,050 -- (1,062) -- --
Stock dividends (5,296,314;
743,007 shares) 530 74 68,841 (69,445) -- -- --
Conversions from Class B to
common (20 shares) -- -- -- -- -- -- --
Tax effects relating to stock
plan -- -- (16) -- -- -- (16)
Amortization of unearned
compensation -- -- -- -- 575 -- 575
------------------------------------------------------------------------------------------------
Balance at December 31, 1998 11,129 1,560 984,406 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 (46,511 shares) 5 -- 503 -- (508) -- --
Stock options exercised (87,819
shares) 9 -- 482 -- -- -- 491
Conversions from Class B to
common (42,206 shares) 4 (4) -- -- -- -- --
Tax effects relating to stock
plan -- -- 2 -- -- -- 2
Amortization of unearned
compensation -- -- -- -- 553 -- 553
------------------------------------------------------------------------------------------------
Balance at December 31, 1999 11,147 1,556 985,393 97,591 (1,086) (81,009) 1,013,592
Net earnings -- -- -- 517,864 -- -- 517,864
Foreign currency translation
adjustment -- -- -- -- -- (32,468) (32,468)
Pension liability adjustment -- -- -- -- -- (94) (94)
-----------
Comprehensive income 485,302
-----------
Stock issued (53,716 shares) 5 -- 1,699 -- (1,704) -- --
Stock options exercised
(2,656,171 shares) 266 -- 39,607 -- -- -- 39,873
Conversions from Class B to
common (36,347 shares) 4 (4) -- -- -- -- --
Common stock repurchase
(200,000 shares) (20) -- (5,745) -- -- -- (5,765)
Sale of common stock
(8,392,500 shares) 839 -- 394,610 -- -- -- 395,449
Termination of Lite-On stock
appreciation rights -- -- (108,495) -- -- -- (108,495)
Tax effects relating to stock
plan -- -- 12,357 -- -- -- 12,357
Amortization of unearned
compensation -- -- -- -- 1,542 -- 1,542
------------------------------------------------------------------------------------------------
Balance at December 31, 2000 $ 12,241 $ 1,552 $1,319,426 $ 615,455 $ (1,248) $ (113,571) $ 1,833,855
=================================================================================================
See accompanying notes.
F-6
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
Vishay Intertechnology, Inc. is an international manufacturer and supplier of
passive and 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 distributors that provide limited rights of return
and protection against price reductions initiated by the Company. The effect of
these programs is estimated based on historical experience and provisions are
recorded at the time of shipment.
Shipping and Handling Costs
Shipping and handling costs are included in costs of products sold.
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.
F-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 $126,285,000,
$125,847,000, and $114,592,000 for the years ended December 31, 2000, 1999, and
1998, respectively.
Construction in Progress
The estimated cost to complete construction in progress at December 31, 2000 was
$64,485,000.
Goodwill
Goodwill (excess of purchase price over net assets acquired) is amortized
principally over periods ranging from 20-40 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 $60,061,000 and $57,071,000 at December 31,
2000 and 1999, respectively.
Cash Equivalents
Cash and cash equivalents includes demand deposits and all highly liquid
investments with maturities of three months or less when purchased.
F-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 $37,103,000,
$35,038,000, and $28,857,000 for the years ended December 31, 2000, 1999, and
1998, 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 $15,721,000, $14,256,000, and $13,116,000 for the years
ended December 31, 2000, 1999, and 1998, respectively. Grants receivable of
$23,792,000 and $10,056,000 are included in other current assets at December 31,
2000 and 1999, respectively. Deferred grant income was $55,162,000 and
$50,462,000 at December 31, 2000 and 1999, 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 9, 2000 and June 22, 1999, the Company effected three-for-two and
five-for-four splits, respectively, of the 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 these stock splits.
F-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 a 5% stock
dividend paid on June 11, 1998.
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.
F-10
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Foreign currency forward exchange contracts are used in certain instances to
manage the effect of exchange rate changes on actual cash flows from 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 Pronouncement 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, as amended, 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. Management
anticipates that the adoption of SFAS 133 will have an immaterial effect on the
Company's financial position and results of operations.
Commitments and Contingencies
Liabilities for loss contingencies, including environmental remediation costs,
arising from claims, assessments, litigation, fines, 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 environmental 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 that 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.
F-11
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions and Divestitures
During 2000, the Company acquired certain assets and assumed certain liabilities
of Spectrol Electronics Corporation and Spectrol Electronics Limited and
acquired 100% of the common stock of Cera-Mite Corporation and of Electro-Films,
Inc. The combined cash purchase price was $42,384,000. The purchase price
allocations have been preliminarily estimated by management based upon currently
available information. The results of operations of Electro-Films, Cera-Mite,
and Spectrol have been included in the Company's results from June 1, 2000,
August 1, 2000, and September 1, 2000, respectively. Excess of cost over fair
value of assets acquired ($19,707,000) is being amortized over 20 years using
the straight-line method. The pro forma effect of these acquisitions was not
material for 2000 or 1999.
On May 31, 2000, the Company entered into a definitive agreement for the sale of
its 65% interest in Lite-On Power Semiconductor Corporation (LPSC) to the
Lite-On Group for $40,736,000 in cash and the transfer to the Company of the
rights under the SARs (see Note 6) issued in July 1997. The fair value of the
SARs was $108,495,000 as of May 31, 2000. A pretax gain of $8,401,000 is
included in other income in connection with the sale of the Company's 65%
interest in LPSC. The transaction was completed on July 12, 2000.
On November 30, 2000, the Company sold V-Tech Latino Americana LTDA, its
Brazilian distribution subsidiary. In connection with the sale, the Company
received cash proceeds of approximately $400,000 and recorded a noncash pretax
loss of $2,550,000, which is included in other income (expense).
On March 26, 1999, the Company sold Nicolitch, S.A., its French manufacturer of
printed circuit boards. In connection with the sale, the Company received
proceeds of approximately $9,118,000 and recorded a noncash pretax loss of
$10,073,000, which is included in other income (expense).
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.
F-12
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions and Divestitures (continued)
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 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 products, 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, 2000, the
restructuring plan was completed.
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 net assets acquired
($154,866,000) is being amortized principally over periods ranging from 30-40
years using the straight-line method.
F-13
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions and Divestitures (continued)
Had the TEMIC acquisition been made at the beginning of 1998, the Company's pro
forma unaudited results for the year ended December 31, 1998 would have been (in
thousands, except per share amounts):
Net sales $1,655,197
Net earnings 6,528
Basic and diluted earnings per share 0.05
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 acquisition occurred at the beginning of
the period 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 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
F-14
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
3. Unusual Items (continued)
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.
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
F-15
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
3. Unusual Items (continued)
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 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.
4. Income Taxes
Earnings before income taxes and minority interest consists of the following
components:
Year ended December 31
2000 1999 1998
---------------------------------
(In thousands)
Domestic $177,852 $ 26,717 $(45,334)
Foreign 512,373 107,994 87,980
---------------------------------
$690,225 $134,711 $ 42,646
=================================
F-16
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
Significant components of income taxes are as follows:
Year ended December 31
2000 1999 1998
------------------------------------
(In thousands)
Current:
U.S. Federal $ 51,965 $ 1,685 $ 1,590
Foreign 11,936 6,810 12,370
State 4,744 728 987
------------------------------------
68,645 9,223 14,947
Deferred:
U.S. Federal 62,156 21,957 (44)
Foreign 17,540 5,333 15,708
State (155) 427 13
------------------------------------
79,541 27,717 15,677
------------------------------------
$ 148,186 $ 36,940 $ 30,624
===================================
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:
December 31
2000 1999
-----------------------
(In thousands)
Deferred tax assets:
Pension and other retiree obligations $ 18,393 $ 26,447
Net operating loss carryforwards 32,406 84,387
Tax credit carryforwards 2,143 8,236
Restructuring reserves 3,412 4,981
Other accruals and reserves 32,595 32,385
-----------------------
Total deferred tax assets 88,949 156,436
Less: Valuation allowance (19,658) (47,648)
-----------------------
Net deferred tax assets 69,291 108,788
Deferred tax liabilities:
Tax over book depreciation 83,489 86,497
Other - net 16,966 14,641
-----------------------
Total deferred tax liabilities 100,455 101,138
-----------------------
Net deferred tax assets (liabilities) $ (31,164) $ 7,650
======================
F-17
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:
Year ended December 31
2000 1999 1998
-------------------------------------
(In thousands)
Tax at statutory rate $ 241,579 $ 47,149 $ 14,926
State income taxes, net of U.S. federal
tax benefit 3,064 606 649
Effect of foreign operations (99,520) (13,717) (1,561)
Increase in valuation allowance for
foreign net operating loss
carryforwards -- -- 10,000
Purchased research and development
expense -- -- 4,655
Other 3,063 2,902 1,955
-------------------------------------
$ 148,186 $ 36,940 $ 30,624
====================================
At December 31, 2000, the Company had the following net operating loss
carryforwards for tax purposes (in thousands):
Expires
-----------------
Germany $85,899 No expiration
France 4,456 Unlimited
Portugal 4,375 2002 - 2005
Approximately $38,472,000 of the carryforward in Germany resulted from the
Company's acquisition of Roederstein, GmbH in 1993. Valuation allowances of
$19,068,000 and $45,698,000 have been recorded at December 31, 2000 and 1999,
respectively, for deferred tax assets related to foreign net operating loss
carryforwards. In 2000 and 1999, respectively, tax benefits recognized through
reductions of the valuation
F-18
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
allowance had the effect of reducing goodwill of acquired companies by
$2,693,000 and $454,000. If additional tax benefits are recognized in the future
through further reduction of the valuation allowance, $7,925,000 of such
benefits will reduce goodwill.
At December 31, 2000, no provision had been made for U.S. federal and state
income taxes on approximately $892,141,000 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 $45,703,000, $5,463,000, and $36,488,000 for the years
ended December 31, 2000, 1999, and 1998, respectively.
5. Long-Term Debt
Long-term debt consists of the following:
December 31
2000 1999
-------------------------
(In thousands)
Multicurrency revolving credit loans $ 140,000 $ 635,215
Other debt and capital lease obligations 617 26,173
-------------------------
140,617 661,388
Less current portion 150 4,445
-------------------------
$ 140,467 $ 656,943
=========================
F-19
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt (continued)
At December 31, 1999, 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 facility and a $100,000,000 364-day multicurrency
revolving credit facility.
On August 31, 2000, the Company amended the credit facilities. The amended
agreement provides for a $660,000,000 long-term revolving credit and swing line
facility which matures on June 1, 2005, subject to the Company's right to
request year-to-year renewals. Interest on the long-term facility is payable at
prime or other variable interest rate options. The Company is required to pay
facility fees on the long-term facility. As of December 31, 2000, the Company
had $140,000,000 outstanding under the long-term revolving credit facility
(interest rate of 7.19%; 6.53% after giving effect to interest rate swaps).
Borrowings under the loan agreement are secured by pledges of stock in certain
significant subsidiaries and certain guaranties by significant subsidiaries. The
credit facility restricts the Company from paying cash dividends and requires
the Company to comply with other covenants, including the maintenance of
specific financial ratios.
Aggregate annual maturities of long-term debt are as follows: 2001 - $150,000;
2002 - $168,000; 2003 - $117,000; 2004 - $116,000; and 2005 - $140,066,000.
At December 31, 2000, the Company had committed and uncommitted short-term
credit lines with various U.S. and foreign banks aggregating $106,197,000, of
which $97,947,000 was unused. The weighted average interest rate on short-term
borrowings outstanding as of December 31, 2000 and 1999 was 6.57% and 7.07%,
respectively.
Interest paid was $29,930,000, $53,605,000, and $48,105,000 for the years ended
December 31, 2000, 1999, and 1998, respectively.
6. Stockholders' Equity
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 into shares of
Common Stock.
F-20
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
6. Stockholders' Equity (continued)
The Company completed a public offering of its Common Stock on May 15, 2000,
selling 8,392,500 shares at a price of $49.00 (adjusted for the June 9, 2000
three-for-two stock split). The total net proceeds to the Company from the
offering, after deducting the underwriting discount and estimated expenses, were
approximately $395,449,000. These proceeds were used to repay a portion of the
debt outstanding under its long-term revolving credit facility.
In connection with the Company's acquisition of 65% of LPSC in July 1997, the
Company issued stock appreciation rights ("SARs") to the Lite-On Group (former
owners of LPSC). The SARs represented the right to receive, in stock, the
increase in value on the equivalent of 3,200,000 shares of the Company's Common
Stock, above $11.68 per share. On January 24, 2000, the Company exercised its
right to call the SARs. Based on the call price of $26.43 per share and the
average closing price of Vishay shares for the thirty days prior to January 24,
2000, the Company would have had to issue 2,294,000 shares of Common Stock to
settle the SARs. In connection with the sale of its 65% interest in LPSC to the
Lite-On Group (see Note 2), the Lite-On Group transferred its rights under the
SARs to Vishay.
On August 10, 2000, the Board of Directors of the Company authorized the
repurchase of up to 5,000,000 shares of its Common Stock from time to time in
the open market. As of December 31, 2000, the Company had repurchased 200,000
shares for a total of $5,765,000.
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, 2000, 305,126 shares were available for issuance under stock plans.
F-21
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
7. Other Income (Expense)
Other income (expense) consists of the following:
Year ended December 31
2000 1999 1998
-----------------------------------------------
(In thousands)
Foreign exchange (losses) gains $ (7,305) $ 86 $ 495
Loss on forward exchange contract -- -- (6,269)
Interest income 9,652 3,968 4,687
Equity in net income of affiliates 2,577 2,195 1,084
Gain on termination of interest rate swap
agreements 8,919 -- --
Gains (losses) on sale of subsidiaries 5,851 (10,073) --
Loss on disposal of property and equipment (2,320) (1,179) (712)
Other 1,530 (734) (1,526)
-----------------------------------------------
$ 18,904 $ (5,737) $ (2,241)
===============================================
In connection with repayments of debt, the Company terminated $200,000,000
notional amount of interest rate swap agreements (see Note 12) and recognized
pretax gains of $8,919,000 in 2000.
During the year ended December 31, 2000, the Company sold its 65% interest in
LPSC and all of the assets of V-Tech Latino American LTDA. The sale of LPSC
resulted in a pretax gain of $8,401,000 and the sale of V-Tech resulted in a
pretax loss of $2,550,000. During the year ended December 31, 1999, the Company
sold Nicolitch S.A. and recorded a pretax loss of $10,073,000 (see Note 2).
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.
F-22
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:
Beginning Before-Tax Tax (Benefit) Net-of-Tax Ending Balance
Balance Amount Expense Amount
----------------------------------------------------------------------------
(In thousands)
December 31, 2000
Pension liability adjustment $ (5,043) $ 1,258 $ 1,352 $ (94) $ (5,137)
Currency translation adjustment (75,966) (32,468) -- (32,468) (108,434)
----------------------------------------------------------------------------
$ (81,009) $ (31,210) $ 1,352 $ (32,562) $ (113,571)
============================================================================
December 31, 1999
Pension liability adjustment $ (8,386) $ 6,177 $ 2,834 $ 3,343 $ (5,043)
Currency translation adjustment 587 (76,553) -- (76,553) (75,966)
----------------------------------------------------------------------------
$ (7,799) $ (70,376) $ 2,834 $ (73,210) $ (81,009)
============================================================================
December 31, 1998
Pension liability adjustment $ (4,312) $ (7,342) $ 3,268 $ (4,074) $ (8,386)
Currency translation adjustment (37,587) 38,174 -- 38,174 587
----------------------------------------------------------------------------
$ (41,899) $ 30,832 $ 3,268 $ 34,100 $ (7,799)
============================================================================
F-23
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:
Pension Benefits Other Benefits
------------------------------------------------------------
2000 1999 2000 1999
------------------------------------------------------------
(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year $ 104,447 $ 110,965 $ 7,331 $ 7,977
Service cost 2,528 3,296 225 264
Interest cost 7,858 6,981 545 496
Employee contributions 2,067 1,959 - -
Actuarial losses (gains) 6,152 (11,690) 104 (849)
Plan amendments - - 314 -
Benefits paid (7,044) (7,064) (555) (557)
------------------------------------------------------------
Benefit obligation at end of year $ 116,008 $ 104,447 $ 7,964 $ 7,331
============================================================
Change in plan assets:
Fair value of plan assets at beginning
of year $ 99,440 $ 95,534
Actual return on plan assets 2,982 6,837
Company contributions 5,473 2,174
Plan participants' contributions 2,067 1,959
Benefits paid (7,044) (7,064)
------------------------------
Fair value of plan assets at end of year $ 102,918 $ 99,440
==============================
Funded status $ (13,090) $ (5,007) $ (7,964) $ (7,331)
Unrecognized net actuarial loss (gain) 15,772 4,455 (187) (308)
Unrecognized transition obligation (asset) (193) (83) 2,322 2,779
Unamortized prior service cost 8 75 732 248
------------------------------------------------------------
Net amount recognized $ 2,497 $ (560) $ (5,097) $ (4,612)
============================================================
Amounts recognized in the consolidated
balance sheets consist of:
Prepaid benefit cost $ 7,018 $ 4,165 $ - $ -
Accrued benefit liability (4,521) (4,725) (5,097) (4,612)
------------------------------------------------------------
Net amount recognized $ 2,497 $ (560) $ (5,097) $ (4,612)
============================================================
F-24
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
9. Pensions and Other Postretirement Benefits (continued)
Pension Benefits Other Benefits
----------------------------------------------------------------
2000 1999 2000 1999
----------------------------------------------------------------
Weighted-average assumptions
as of December 31:
Discount rate 7.25% 7.50% 7.25% 7.50%
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
-----------------------------------------------------------------------------
2000 1999 1998 2000 1999 1998
-----------------------------------------------------------------------------
(In thousands)
Components of net
periodic benefit cost:
Annual service cost $ 4,595 $ 5,255 $ 5,610 $ 225 $ 264 $ 287
Less employee
contribution 2,067 1,959 1,782 -- -- --
-----------------------------------------------------------------------------
Net service cost 2,528 3,296 3,828 225 264 287
Interest cost 7,858 6,981 6,726 545 496 494
Expected return on plan (8,463)
assets (8,703) (8,259) -- -- --
Amortization of prior
service cost 67 98 195 93 31 31
Amortization of
transition obligation 110 110 110 194 214 214
Amortization of (gains)
losses 556 461 -- (17) 6 --
-----------------------------------------------------------------------------
Net periodic benefit cost $ 2,416 $ 2,687 $ 2,396 $ 1,040 $ 1,011 $ 1,026
=============================================================================
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 $21,829,000, $21,355,000, and $15,899,000,
respectively, as of December 31, 2000 and $21,494,000, $21,380,000, and
$15,401,000, respectively, as of December 31, 1999.
F-25
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 $116,008,000, $102,340,000, and $102,918,000,
respectively, as of December 31, 2000 and $21,494,000, $21,380,000, and
$15,401,000, respectively, as of December 31, 1999.
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 $3,161,000,
$3,196,000, and $2,816,000 for the years ended December 31, 2000, 1999, and
1998, respectively.
F-26
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 following table sets forth a
reconciliation of the benefit obligation, plan assets, and accrued benefit cost
related to the German plans:
2000 1999
--------------------------
(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year $ 98,108 $ 111,770
Service cost 440 554
Interest cost 5,755 6,501
Actuarial (gains) losses (915) (837)
Benefits paid (4,871) (5,341)
Foreign currency translation (7,969) (14,539)
--------------------------
Benefit obligation at end of year $ 90,548 $ 98,108
==========================
Change in plan assets:
Fair value of plan assets at beginning of year $ 13,726 $ 15,227
Actual return on plan assets 677 753
Company contributions 2,408 2,467
Benefits paid (2,514) (2,574)
Foreign currency translation (880) (2,147)
--------------------------
Fair value of plan assets at end of year $ 13,417 $ 13,726
==========================
F-27
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
9. Pensions and Other Postretirement Benefits (continued)
2000 1999
-----------------------------------
(In thousands)
Funded status $ (77,131) $ (84,382)
Unrecognized net actuarial losses 4,347 5,650
Unrecognized transition asset (9) (13)
Unamortized prior service cost 58 103
-----------------------------------
Net amount recognized $ (72,735) $ (78,642)
===================================
Amounts recognized in the consolidated balance
sheets consist of:
Accrued benefit liability $ (78,742) $ (85,867)
Accumulated other comprehensive income 6,007 7,225
-----------------------------------
Net amount recognized $ (72,735) $ (78,642)
===================================
Weighted-average assumptions as of December 31:
Discount rate 6.50% 6.50%
Rate of compensation increase 3.00% 3.00%
2000 1999 1998
-----------------------------------------------------
(In thousands)
Components of net periodic benefit cost:
Service cost $ 440 $ 554 $ 510
Interest cost 5,755 6,501 6,025
Expected return on plan assets (440) (488) (476)
Amortization of prior service cost 45 65 86
Amortization of transition asset (4) (6) (2)
Amortization of losses 151 250 62
-----------------------------------------------------
Net periodic benefit cost $ 5,947 $ 6,876 $ 6,205
=====================================================
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 $90,548,000,
$89,064,000, and $13,417,000, respectively, as of December 31, 2000 and
$98,108,000, $96,601,000, and $13,726,000, respectively, as of December 31,
1999.
F-28
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
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 19,
1995, to purchase 2,283,000 shares of the Company's Common Stock. The options
were fully vested on the date of grant and expired March 1, 2000, with one-third
exercisable at $12.21, one-third exercisable at $15.36, and one-third
exercisable at $21.94. As of December 31, 2000, 2,010,000 options have been
exercised under this plan and the remaining options have been canceled.
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
2,687,000 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 $10.89,
one-third exercisable at $12.53, and one-third exercisable at $13.61. As of
December 31, 2000, 528,000 options have been exercised under this plan.
Under the 1998 Stock Option Program, certain executive officers and key
employees were granted options, as summarized in the following table:
Exercise
Date of Grant # of Options Price Vesting Expiration
- -------------------------------------------------------------------------------------------------------------
October 6, 1998 1,598,000 $ 5.60 Evenly over 6 years March 16, 2008
October 8, 1999 1,334,000 15.33 Evenly over 6 years October 8, 2009
August 4, 2000 50,000 30.00 Evenly over 5 years, beginning August 4, 2010
August 4, 2003
October 12, 2000 1,114,000 25.13 Evenly over 6 years October 12, 2010
On May 18, 2000, the stockholders of the Company, approved an increase in the
number of shares available for grant under Vishay's 1998 Stock Option Program.
As a result, the number of shares available for grant under this program
increased from 2,953,500 to 4,453,500. As of December 31, 2000, 206,000 options
have been exercised under this plan.
F-29
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):
2000 1999 1998
----------------------------------------------------------------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Options Price Options Price Options Price
----------------------------------------------------------------------------
Outstanding at beginning of
year 7,493 $12.67 6,295 $11.96 2,283 $16.50
Granted 1,164 25.34 1,334 15.33 4,286 9.83
Exercised (2,656) 15.08 (88) 5.60 -- --
Forfeited -- -- -- -- (273) 16.50
Cancelled (355) 10.41 (48) 6.05 (1) 5.60
------------- ------------- ------------
Outstanding at end of year 5,646 14.29 7,493 12.67 6,295 11.96`
============= ============= ============
Exercisable at end of year 2,651 11.96 4,866 13.83 4,698 14.12
============= ============= ============
Available for future grants 760 69 1,355
============= ============= ============
The following table summarizes information concerning stock options outstanding
and exercisable at December 31, 2000 (options in thousands):
Options Outstanding
---------------------------------------------------
Weighted Options Exercisable
Average -----------------------------------
Remaining Weighted Number Weighted
Range of Number of Contractual Average of Average
Exercise Prices Options Life Exercise Price Options Exercise Price
- -----------------------------------------------------------------------------------------------------------
$5.60 1,161 7.75 $ 5.60 293 $ 5.60
$10.89 - $12.53 1,289 7.39 11.76 1,289 11.76
$13.61 - $15.33 2,044 8.17 14.60 1,069 13.93
$25.13 - $30.00 1,152 9.77 25.34 - -
---------------- -----------------
Total 5,646 8.23 14.29 2,651 11.96
================ =================
F-30
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 would have been reduced to the pro forma amounts indicated below (in
thousands, except per share amounts):
Year ended December 31
2000 1999 1998
-------------------------------------------------
Net earnings $515,296 $82,103 $(1,906)
Basic earnings per share 3.81 0.65 (0.02)
Diluted earnings per share 3.75 0.64 (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 2000 had a weighted average fair value of $11.64 and a
weighted average exercise price of $25.34. All options granted in 1999 had an
exercise price equal to the market value and a weighted average fair value of
$6.21. For options granted in 1998 with an exercise price equal to the market
value, the weighted average fair value was $3.48 and the weighted average
exercise price was $7.74. For options granted in 1998 with an exercise price
greater than the market value, the weighted average fair value was $3.85 and the
weighted average exercise price was $13.80.
2000 1999 1998
---------------- --------------- --------------- -----------------
1998 Stock 1998 Stock 1998 Stock 1997 Stock
Option Program Option Program Option Program Option Program
---------------- --------------- --------------- -----------------
Expected dividend yield - - - -
Risk-free interest rate 5.8% 6.0% 4.2% 5.7%
Expected volatility 58.2% 51.3% 48.3% 48.3%
Expected life (in years) 4.7 4.5 4.5 8.0
F-31
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Leases
Total rental expense under operating leases was $21,431,000, $21,390,000, and
$23,703,000 for the years ended December 31, 2000, 1999, and 1998, respectively.
Future minimum lease payments for operating leases with initial or remaining
noncancelable lease terms in excess of one year are as follows: 2001 -
$15,943,000; 2002 - $13,721,000; 2003 - $11,895,000; 2004 - $10,766,000; 2005 -
$10,391,000; and thereafter - $47,080,000.
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 cash and
cash equivalents and accounts receivable. The Company maintains cash and cash
equivalents with various major financial institutions. Concentrations of credit
risk with respect to receivables are generally limited due to the Company's
large number of customers and their dispersion across many countries and
industries. At December 31, 2000, the Company had one customer that represented
13.7% of accounts receivable. At December 31, 1999, 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,
maturing in 2003, 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 required 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. During fiscal 2000,
the Company terminated $200,000,000 notional amount of interest rate swap
agreements and recognized a pretax gain of $8,919,000. At December 31, 2000, the
Company had outstanding one interest rate swap agreement with a notional amount
of $100,000,000. At December 31, 2000 and 1999, the Company paid a weighted
F-32
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
12. Financial Instruments (continued)
average fixed rate of 5.77% and 5.61%, respectively, and received a weighted
average variable rate of 6.66% and 6.49%, respectively. The fair value of the
interest rate swap agreements, based on current market rates, approximated a net
receivable of $51,000 and $8,714,000 at December 31, 2000 and 1999,
respectively.
Foreign Currency Forward Exchange Contracts
In September 1999, a subsidiary of the Company entered into foreign currency
forward exchange contracts to hedge yen-denominated commitments from customers
in Japan. At December 31, 1999, the notional amount of outstanding foreign
currency forward exchange contracts was $6,438,000. In March 2000, the Company
settled all outstanding foreign currency forward exchange contracts and there
are no such contracts as of December 31, 2000.
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
Customer Concentrations
A material portion of the Company's revenues are derived from the worldwide
communications and computer markets. These markets have historically experienced
wide variations in demand for end products. If demand for these end products
should decrease significantly, the producers thereof could reduce their
purchases of the Company's products, which could have a material adverse effect
on the Company's results of operations and financial position.
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.
F-33
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
13. Current Vulnerability Due to Certain Concentrations (continued)
Tantalum, a metal, is the principal material used in the manufacture of tantalum
capacitor products. 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. The Company believes that in
the long-term, there exist 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, in the short-term, there may be shortages of tantalum
powder that could lead to increases in tantalum prices that the Company may not
be able to pass on to its customers. The Company stockpiled tantalum ore in 2000
and early 2001. Prices for tantalum powder are expected to increase
significantly in 2001.
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 $201
to $970 per troy ounce during the three years ended December 31, 2000, and had
increased to $1,090 per troy ounce as of February 27, 2001. Palladium is
currently found primarily 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 ability 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.
F-34
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
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.
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 include LPSC
from July 1, 1997 through its divestiture in 2000. 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.
During the year 2000, Future Electronics, a North American distributor,
accounted for more than 10% of total net sales. During the years 1999 and 1998,
no individual customer accounted for more than 10% of net sales. Sales to Future
Electronics accounted for 14% of consolidated sales for the year ended December
31, 2000. At December 31, 2000, the Company had accounts receivable of
$62,031,000 with Future Electronics.
F-35
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
14. Business Segment and Geographic Area Data (continued)
2000 1999 1998
-----------------------------------------------------
Business segment information (In thousands)
Net sales:
Passives $ 1,627,860 $ 1,008,266 $ 1,027,902
Actives 837,206 751,825 544,843
-----------------------------------------------------
$ 2,465,066 $ 1,760,091 $ 1,572,745
=====================================================
Operating income:
Passives $ 547,156 $ 104,655 $ 114,747
Actives 204,640 119,510 51,516
Corporate (43,829) (18,061) (17,465)
Unusual items - - (29,301)
Purchased research and development - - (13,300)
Amortization of goodwill (11,469) (12,360) (12,272)
-----------------------------------------------------
$ 696,498 $ 193,744 $ 93,925
=====================================================
Depreciation expense:
Passives $ 73,803 $ 75,798 $ 74,173
Actives 52,250 49,826 40,210
Corporate 232 223 209
-----------------------------------------------------
$ 126,285 $ 125,847 $ 114,592
=====================================================
Total assets:
Passives $ 1,931,610 $ 1,429,177 $ 1,693,554
Actives 809,360 882,296 750,875
Corporate 42,688 12,308 18,315
-----------------------------------------------------
$ 2,783,658 $ 2,323,781 $ 2,462,744
=====================================================
Capital expenditures:
Passives $ 131,318 $ 52,903 $ 87,168
Actives 95,343 61,409 59,969
Corporate 3,120 5,326 4,545
-----------------------------------------------------
$ 229,781 $ 119,638 $ 151,682
=====================================================
F-36
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
14. Business Segment and Geographic Area Data (continued)
The amount of investment in equity method investees included in the Actives
total assets above was $0, $12,495,000, and $10,090,000 for 2000, 1999 and 1998,
respectively.
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:
2000 1999 1998
-----------------------------------------------------
Geographic area information (In thousands)
Net sales:
United States $ 1,034,985 $ 706,049 $ 659,845
Germany 678,398 574,629 519,114
Asia Pacific 279,645 273,921 185,784
France 85,686 88,975 119,992
Israel 296,704 20,290 9,970
Other 89,648 96,227 78,040
-----------------------------------------------------
$ 2,465,066 $ 1,760,091 $ 1,572,745
=====================================================
Property, plant, and equipment - net:
United States $ 355,291 $ 333,594 $ 352,007
Germany 116,910 127,727 153,423
Israel 317,840 268,916 283,691
Asia Pacific 77,337 97,060 67,051
France 24,272 25,758 45,461
Other 81,904 77,490 95,434
-----------------------------------------------------
$ 973,554 $ 930,545 $ 997,067
=====================================================
15. 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 the weighted average number of common shares outstanding adjusted
to include the potentially dilutive effect of stock options granted under the
Company's 1995, 1997, and 1998 stock option plans (see Note 10), stock
appreciation rights issued in connection with the LPSC acquisition (see Note 6),
and other potentially dilutive securities.
F-37
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
15. Earnings per Share (continued)
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share amounts):
Year ended December 31
2000 1999 1998
------------------------------------------------------
Numerator:
Net income $ 517,864 $ 83,237 $ 8,212
Denominator:
Denominator for basic earnings per share -
weighted average shares 135,295 126,678 126,665
Effect of dilutive securities:
Employee stock options 1,831 809 -
Stock appreciation rights 144 567 -
Other 193 179 132
------------------------------------------------------
Dilutive potential common shares 2,168 1,555 132
------------------------------------------------------
Denominator for diluted earnings per share -
adjusted weighted average shares 137,463 128,233 126,797
======================================================
Basic earnings per share $ 3.83 $ 0.66 $ 0.07
======================================================
Diluted earnings per share $ 3.77 $ 0.65 $ 0.07
======================================================
For the years ended December 31, 2000, 1999, and 1998, respectively, options to
purchase 1,114,000 shares of common stock at $25.13 per share, 716,000 shares of
common stock at $21.94 per share, and 5,150,000 shares of common stock at prices
ranging from $10.89 to $21.94 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.
F-38
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, 2000 and 1999
is as follows (in thousands, except per share amounts):
First Quarter Second Quarter Third Quarter
----------------------------------------------------------------------------------
2000 1999 2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------------
Net sales $ 538,894 $ 423,058 $ 612,771 $ 425,323 $ 669,784 $ 443,711
Gross profit 187,716 99,890 254,096 108,681 299,376 119,633
Net earnings 74,271 818(1) 131,853 20,181 171,111 25,736
Basic earnings per share(2) $ 0.57 $ 0.01(1) $ 0.97 $ 0.16 $ 1.24 $ 0.20
Diluted earnings per share(2) $ 0.56 $ 0.01(1) $ 0.96 $ 0.16 $ 1.22 $ 0.20
Fourth Quarter Total Year
---------------------------------------------------
2000 1999 2000 1999
- ------------------------------------------------------------------------------------
Net sales $ 643,617 $ 467,999 $2,465,066 $1,760,091
Gross profit 264,094 132,182 1,005,282 460,386
Net earnings 140,629 36,502 517,864 83,237
Basic earnings per share(2) $ 1.02 $ 0.29 $ 3.83 $ 0.66
Diluted earnings per share(2) $ 1.01 $ 0.28 $ 3.77 $ 0.65
(1) The sale of Nicolitch, S.A. and a tax rate change in Germany reduced net
earnings by $14,562,000 or $0.11 per share in the first quarter of 1999.
(2) Adjusted to give retroactive effect to a three-for-two stock split in June
2000 and a five-for-four stock split in June 1999.
F-39
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
17. Subsequent Events
On February 22, 2001, the Company announced its proposal to purchase any and all
outstanding shares of common stock of Siliconix incorporated not already owned
by Vishay at a price of $28.82 per share in cash. This amount (approximately
$169,000,000) would be financed through borrowings under the Company's revolving
line of credit. The purchase would be made through a tender offer, subject to
customary conditions, in accordance with the rules of the Securities and
Exchange Commission. Vishay also indicated that it might offer to exchange the
Siliconix shares for shares of its common stock. Depending upon whether the
exchange would be tax-free to Siliconix stockholders, Vishay would expect that
the value per share of Siliconix in an exchange offer would be somewhat less
than the cash price.
The Company also stated that, if it holds at least 90% of the outstanding
Siliconix shares following the completion of the offer, it may effect a "short
form" merger of Siliconix with a Vishay subsidiary. If such a merger takes place
promptly after the offer, the consideration given to the stockholders in the
merger would be the same as the consideration received by tendering stockholders
in the offer.
This proposal is currently being evaluated by a special committee of directors
of Siliconix appointed by the Siliconix Board of Directors in March 2001.
Following the announcement of the Company's proposal, several purported
class-action complaints were filed against the Company, Siliconix, and the
Siliconix directors, alleging, among other things, that the proposed transaction
is unfair and a breach of fiduciary duty, and seeking, among other things, to
enjoin the transaction. The Company has not yet responded to the complaints.
F-40
EXHIBIT INDEX
Page Number in
sequentially
Exhibit No. Description Numbered Copy
- ---------- ----------- -------------
2.1 Stock Purchase Agreement, dated as of May 31,
2000, among Lite-On JV Corporation, Vishay
Intertechnology, Inc., and Lite-On Power
Semiconductor Corporation. Incorporated by
reference to Exhibit F to Amendment No. 2 to
Schedule 13D filed on June 29, 2000.
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. Amended and Restated
Long Term Revolving Credit Agreement, dated as of
June 1, 1999, by and among Vishay and the
Permitted Borrowers (as defined therein), the
Lenders (as defined therein), and Comerica Bank,
as administrative agent. Incorporated by
reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-3 (No.
333-52594) filed December 22, 2000.
10.3 First Amendment to Amended and Restated Vishay
Intertechnology, Inc. Long Term Revolving Credit
Agreement and Other Loan Documents, dated as of
August 31, 2000, by and among Vishay and the
Permitted Lenders (as defined therein), Comerica
Bank and the other Lenders signatory thereto, and
Comerica Bank, as administrative agent.
Incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement on Form S-3 (No.
333-52594) filed December 22, 2000.
10.4 Employment Agreement, dated as of March 15, 1985,
between the Company and Dr. Felix Zandman.
Incorporated by reference to Exhibit 10.12 to the
Company's Registration Statement on Form S-2 (No.
33-13833).
10.5 Vishay Intertechnology 1995 Stock Option Program.
Incorporated by reference to the Company's
Definitive Proxy Statement on Schedule 14ADR
filed April 7, 1995.
10.6 Vishay Intertechnology 1997 Stock Option Program.
Incorporated by reference to the Company's
Definitive Proxy Statement on Schedule 14A filed
April 16, 1998.
10.7 Vishay Intertechnology 1998 Stock Option Program.
Incorporated by reference to the Company's
Definitive Proxy Statement on Schedule 14A filed
April 16, 1998.
10.8 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).
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
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