V I S H A Y I N T E R T E C H N O L O G Y , I N C .
A n n u a l
R e p o r t
See the inside front cover
for an explanation of
this photograph
www.vishay.com
Vishay Intertechnology
Manufacturer of the World’s Broadest Line of
Discrete Electronic(cid:27)Components
Vishay Intertechnology, Inc. (NYSE: VSH), a
Fortune 1,000 Company with annual sales of $1.8
billion, is the largest U.S. and European manufacturer
of passive electronic components (resistors, capacitors,
and inductors) and a major producer of discrete
semiconductors (diodes, optoelectronics, transistors),
infrared data communication devices (IrDCs), and
power and analog switching integrated circuits.
The Company’s components are vital to electronic
circuits and can be found in products manufactured in
a very broad range of industries worldwide. Products
that include Vishay components include telephones,
computers, automobiles, video and audio equipment,
household appliances, instrumentation, medical
equipment, satellites, and military and aerospace
equipment.
With headquarters in Malvern, Pennsylvania,
Vishay employs over 20,000 people in 64 plants in the
U.S., Mexico, Germany, Austria, the United Kingdom,
France, Portugal, the Czech Republic, Hungary, Israel,
Taiwan, China, and the Philippines. Vishay can be
found on the Internet at www.vishay.com.
About the Cover
The front cover photo illustrates
Vishay’s expansion into the
semiconductor market and the
growing importance of cell phones,
laptop computers, and other portable
electronic products. The photo
includes a silicon wafer, an
assortment of Vishay components,
and three views of a Vishay Siliconix
integrated circuit: the packaged
device, a magnified view of the silicon
chip inside the product package, and
microscopic detail of the chip’s
Table of Contents
1 Financial Highlights
2 A Message from the
Chairman
4 Overview: Strong Demand,
High Growth
6 Vishay’s History: From
Innovative Start-up to
Industry Leader
8 Telecommunications: Market
Trends
10 Computers: Market Trends
12 Automotive Electronics:
Market Trends
14 Military and Aerospace
Equipment: Market Trends
15 Instrumentation and Medical
Electronics: Market Trends
16 Major Vishay Products and
Brands
17 Consolidated Statements of
Operations
18 Consolidated Balance Sheets
20 Consolidated Statements of
Cash Flows
21 Consolidated Statements of
Stockholders’ Equity
22 Notes to Consolidated
Financial Statements
33 Report of Independent
Auditors
34 Management’s Discussion
and Analysis of Financial
Condition and Results of
Operations
40 Financial Summary
42 Corporate Directory
Financial Highlights
As Of and For the Year Ended December 31
1999
1998
1997
(In thousands, except per share amounts)
Net sales .......................................................................... $ 1,760,091
$ 1,572,745
$ 1,125,219
Operating profit ..............................................................
193,744
Net earnings ....................................................................
83,237*
93,925
8,212*
Depreciation and amortization ........................................
139,676
127,947
Basic earnings per share .................................................. $
Diluted earnings per share .............................................. $
0.99*
0.97*
$
$
0.10*
0.10*
$
$
Weighted average shares outstanding – basic .................
Weighted average shares outstanding – diluted ..............
84,452
85,488
84,443
84,531
108,602
53,302*
81,874
0.63*
0.63*
84,418
84,603
Cash flows from operations ............................................. $
239,809
$
169,450
$
177,158
Working capital ...............................................................
581,550
Property and equipment – net ........................................
930,545
Long-term debt ...............................................................
656,943
639,783
997,067
814,838
Stockholders’ equity ........................................................
1,013,592
1,002,519
455,134
709,142
347,463
959,648
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† Includes $0.02 for cumulative effect of
accounting change for income taxes.
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† Includes $1.4 million for cumulative effect of
accounting change for income taxes.
'97
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*
Includes charges for the sale of a subsidiary and a German tax rate change of $14,562,000 ($0.17 per share) for the year ended December 31, 1999, and restructuring
expenses and unusual charges of $55,335,000 ($0.66 per share), $27,692,000 ($0.33 per share), and $38,030,000 ($0.31 per share) for the years ended December 31,
1998, 1997, and 1996 respectively.
** Orange color in graphs excludes charges for the sale of a subsidiary and a German tax rate change of $14,562,000 ($0.17 per share) for the year ended December 31,
1999, and restructuring expenses and unusual charges of $55,335,000 ($0.66 per share), $27,692,000 ($0.33 per share), and $38,030,000 ($0.31 per share) in 1998,
1997, and 1996 respectively.
A Message from the Chairman
To Our Shareholders, Employees, Customers, and Vendors:
2
We are entering the new millennium with optimism for Vishay! Increasing demand for Vishay’s products is being
driven by the very large increase of the cell phone market and other wireless communication devices, as well as
renewed strength in the computer and automotive markets. These end markets combined account for approximately
70% of the sales of our products, with wireless communications representing approximately 35% of our sales. Annual
global shipments of cell phones have increased from 110 million units in 1997 to 283 million units in 1999. The
forecast for year 2000 is 420 million units. At the same time, the number of passive components per phone increased
dramatically.
As a result of this strong demand, our bookings (orders) were $2.0 billion in 1999, a 30% increase over 1998
bookings. As a consequence, we increased capacity in all our major product lines to meet this continuing demand for
our products.
Our Siliconix operation (80.4% owned by Vishay) reported record results for 1999 with net earnings of $66 million
as compared to $738 thousand in 1998. Net sales were a record $383 million in 1999, a 36% increase over $282
million in 1998.
The demand for Siliconix’s products continues to be strong, especially in the wireless communications markets. This
strength for Siliconix products, as well as the diodes and transistors of our Telefunken operation, resulted in 43% of
our 1999 sales in semiconductor products as compared to 35% of our sales in 1998. We are quite pleased with the
success of our Siliconix-Telefunken acquisition and we believe that as a result, we are now more strongly positioned
as a leader in discrete semiconductor technology and the market.
Our passive component business has also started to show much improved orders, first in capacitors, then followed by
resistors and inductors. We have shown a significant increase in profitability, which can be attributed to production
efficiencies, cost reduction programs, including movement of labor to low-cost countries, price stabilization, and, in
some products, price increases. Most of the price increases are still in the backlog and will begin to be reflected in the
first quarter of year 2000 and thereafter. In fact, on March 29, 2000, we announced that earnings per share for the
first quarter ending March 31, 2000 should exceed analysts’ estimates of $0.54 per share by at least 25%. This was an
additional increase in our results from an announcement made on March 2, 2000 when we announced that we
would exceed analysts’ estimates at that time of $0.44 by at least 20% and now represents a 54% increase over these
estimates.
Vishay had 21,124 employees as of December 31, 1999; 15,861 of them are outside the United States, often in low
labor cost countries.
As a Company, we have worked hard during the past year. Successes have included the release of 150 new products,
cost cutting in manufacturing and other areas, and a substantial increase in Asian sales to over $500 million in 1999.
Our cash generation is also very strong. During 1999, we reduced long-term debt by $157,895,000. With the current
strong demand for our products, our continuing cost reduction programs, and aggressive new product introductions,
the outlook for the year 2000 looks much better.
On March 27, 2000, we announced that we had agreed to sell our 65% interest in Lite-On Power Semiconductor
Corporation (“LPSC”) to Lite-On JV Corporation (“Lite-On Group”), the current owner of the remaining 35% interest
in LPSC, for consideration consisting of cash and the assignment or transfer of stock appreciation rights in Vishay
common stock held by the Lite-On Group or the proceeds thereof. The disposition of our interest in LPSC will allow
Vishay to focus its active components strategy on its Siliconix and Telefunken businesses, over which it has full
control and which have been performing very well. We didn’t achieve the results we expected from LPSC and have
decided to sell it back to the party we bought it from. Depending on the value of the stock appreciation rights at the
time of execution of the documents, there could be a one-time gain or loss as a result of this transaction, which is
expected to close before September 30, 2000. The sale of LPSC should have a positive annual impact on Vishay’s
earnings going forward by approximately $0.08 to $0.10 per share.
Financial Highlights
For the year ended December 31, 1999, sales were $1,760,091,000 compared with $1,572,745,000 in the previous
year. Net earnings, before special charges, for the year ended December 31, 1999 were $97,799,000 or $1.14 per
share. After special charges of $14,562,000 or $0.17 per share, net earnings for the year ended December 31, 1999
were $83,237,000 or $0.97 per share. The 1999 special charges were primarily a
result of the sale of Nicolitch, S.A., a French manufacturer of printed circuit boards, a
non-core business of Vishay, which was completed on March 26, 1999. Net earnings
before special charges for the year ended December 31, 1998 were $63,547,000 or
$0.76 per share. After special charges of $55,335,000 or $0.66 per share, net earnings
for the year ended December 31, 1998 were $8,212,000 or $0.10 per share. With the
strong rebound in earnings per share in the third and fourth quarters of 1999, we are
confident of a strong year 2000.
Earnings per share amounts for all periods reflect a 5-for-4 stock split paid June 22,
1999.
Sales of the passive components business were $1,008,266,000 for the year ended December 31, 1999 as compared
to sales of $1,027,902,000 for 1998 and operating income was $104,655,000 as compared to operating income of
$114,747,000 for 1998. Sales of the active components business were $751,825,000 for the year ended December
31, 1999, as compared to sales of $544,843,000 for 1998 resulting in operating income of $119,510,000 as com-
pared to operating income of $51,516,000 for 1998, an increase of 132%.
Gross profits for the year ended December 31, 1999 were 26.2% of sales as compared to 24.4% in the prior year. The
active components business reported gross margins of 31.4% for the year ended December 31, 1999, as compared to
27.9% for the prior year. 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.
Selling, general, and administrative expenses for the year ended December 31, 1999 were 14.5% of sales as com-
pared to 14.9% in the prior year.
The Company is generating substantial cash and its financial condition is strong with a current ratio of 2.7 to 1.0. For
the year ended December 31, 1999, the Company’s cash flow from operations was $239,809,000. Purchases of
property and equipment for the year ended December 31, 1999 were $119,638,000 as compared to $151,682,000
in the prior year. Long-term debt was reduced by $157,895,000 from $814,838,000 at December 31, 1998 to
$656,943,000 at December 31, 1999.
3
Looking Ahead
During the second half of 1999, Vishay began to show the results of our strength in the passive components business
as well as our semiconductor business. In the year 2000 and beyond, we will continue to build on that strength and
our historical position as a leader in the U.S., European, and Asian electronics markets. We are focused on being a
total solution provider — a manufacturer of passive electronic components and a major producer of discrete semi-
conductors and selected integrated circuits. Vishay components are vital to the operation of electronic products found
in virtually all electronic applications.
The Company is committed, through our state-of-the-art technology, our increasing research and development, and
through an acquisition strategy targeting companies with advanced technology resources, to continually strive to
introduce the most advanced components in the industry to satisfy the ever-changing customer demands in today’s
dynamic marketplace.
We are extremely grateful to our employees worldwide for their loyalty, skill, and energy, which have contributed
significantly to our growth. We value highly the relationship we have with our customers and suppliers. To our fellow
shareholders, we thank you for your continued confidence in Vishay. We look forward to the year 2000 being the
best year ever.
Sincerely,
Dr. Felix Zandman
Chairman of the Board and Chief Executive Officer
April 2000
Overview: Strong Demand, High Growth
Throughout the world, electronic circuits that handle data, audio, and video depend on Vishay components.
Vishay is a high-growth company: Increasing demand for its products is driven by the explosive growth of cell
phones and other wireless communications devices, as well as growing reliance on electronics in the computer,
automotive, consumer, industrial, medical, and military markets.
High Growth
Vishay Percent of Sales
by Region
Cell phones with Internet access and other new features. Laptop
computers with faster speeds and longer battery life. Cars with sophisti-
cated entertainment, communication, safety, and security systems. In
almost all major markets, products are becoming smaller, faster, and
“smarter” — and increasingly reliant on semiconductors, resistors,
capacitors, inductors, and other electronic components produced by
Vishay. Increased cell phone production and an increase in the
number of electronic components per cell phone — as well as rising
global demand for electronic components in computers, cars, and
other products — is fueling Vishay’s growth.
29%
Asia
38%
U.S.
33%
Europe
Strong Momentum and Innovative Products
4
Vishay’s entry into the fast-paced semiconductor market expanded the Company’s
product line, significantly increased earnings, and provided new market opportunities. The result has been
accelerated Company growth. The momentum generated by rising demand for Vishay semiconductors and
other Vishay components is compounded by economic recovery in Asia and Europe.
Vishay’s investment in research and development yields a steady stream of new products — 150 in 1999 alone.
These pave the way for more advanced cell phones, lighter and more powerful laptop computers, more reliable
and versatile automobile electronic systems, and product improvements in many other industries. Vishay’s
Siliconix division, based in Silicon Valley, is known for its innovations in product performance, product packag-
ing, and silicon technology. New and improved components from other Vishay divisions continue to set new
standards for precision and reliability.
Skilled Management
Vishay’s dramatic growth — from sales of $59 million in 1986 to $1.8 billion today — has been guided by a
skilled and experienced management team. An aggressive acquisition strategy and a continuing commitment to
product innovation have enabled Vishay to become a global industry leader. Vishay’s semiconductor expansion
has been a major success. In just two years, Vishay’s earnings have increased so that Vishay’s semiconductor
business now represents approximately 50 percent of Company earnings. Vishay’s focus on cost reduction has
enabled the Company to maintain a competitive edge during industry downturns, maximize the benefits of
market upswings, and plan successfully for long-term growth.
Total Solutions
With its diverse product line, Vishay can provide a complete package of components to meet the specifications
of a customer’s product. This enables Vishay to benefit from the trend towards vendor reduction. Companies
that are streamlining their component vendor base and focusing on a limited number of highly efficient suppli-
ers can turn to Vishay for total discrete component solutions. Customers enjoy the advantages of one-stop
shopping, while Vishay increases opportunities to become involved in the early stage of customers’ product
development and design.
Some Major OEM and EMS*
Customers
Acer
Alcatel
Apple
Bosch
Celestica
Cisco Systems
Compaq
Dell Computer
Delphi
Ericsson
Hewlett-Packard
Honeywell
IBM
Intel
Lockheed Martin
Lucent Technologies
Matsushita
Motorola
Nokia
Nortel Networks
Philips
Qualcomm
Raytheon
Rockwell
Samsung
SCI
Seagate
Siemens
Solectron
Sony
Sun Microsystems
VDO
Visteon
Western Digital
* Original equipment manufacturers and electronics
manufacturing services.
All major distributors distribute Vishay components.
Vishay Percent of Sales
by Product Type
43%
Semiconductors
32%
Capacitors
25%
Resistors
Customer Service
5
Electronic components such as transistors and integrated circuits are made from thin
silicon wafers of semiconductor material.
Vishay’s wide range of products and locations enables customers to do business with a single global manufac-
turer for essentially all of their discrete electronic component needs. Vishay’s commitment to superior customer
service is a key part of its corporate mission. Vishay serves customers through a worldwide network of manufac-
turing facilities, sales and technical support offices, independent distributorships, and manufacturers’ represen-
tatives. Vishay has customer service centers and inventories strategically located where customers need them —
in the Americas, Europe, and Asia. To ensure uninterrupted supplies to customers, Vishay maintains dual or
triple internal sourcing for most of its products.
Vishay’s History:
From Innovative Start-up to Industry Leader
Vishay’s Beginnings
In the 1950s, as the electronics industry began its accelerated growth, Dr. Felix Zandman, a physicist, and
current Chairman and CEO of Vishay, was issued patents for his PhotoStress® coatings and instruments. These
devices are used to reveal and measure the distribution of stresses in structures under live load conditions. Dr.
Zandman’s research in this area led him to develop Bulk Metal® foil resistors — ultra-precise, ultra-stable
resistors that provide performance far beyond any other resistor available.
In 1962, Dr. Zandman, with the financial help of the late Alfred P. Slaner, founded Vishay to develop and
manufacture Bulk Metal foil resistors. Concurrently, J.E. Starr, a colleague of Dr. Zandman, developed foil
resistance strain gages, which also became a part of Vishay. The Company was named after Dr. Zandman’s and
Mr. Slaner’s ancestral village in Lithuania, in memory of family members who perished in the Holocaust.
Throughout the ’60s and ’70s, Vishay established itself as a technical and market leader in PhotoStress products,
strain gages, and foil resistors.
Company Acquisitions Power Dramatic Growth
By the early ’80s, Vishay was positioned to grow significantly. Because the markets for resistance strain gages
and ultra-precise resistors were relatively small, the Company moved to expand into high-volume resistors.
Such resistors are used by the billions every year, in every sector of the electronics industry.
Vishay’s strategy was to enter the market through the acquisition of respected, well-positioned manufacturers.
The Company set strict acquisition criteria for technological strength, brand recognition, manufacturing
capabilities, markets served, and management depth.
6
Beginning in the mid ’80s, Dale Electronics, Draloric Electronics, and Sfernice
were acquired. These new operations helped produce dramatic
sales growth — from $59 million in 1986 to more than $400
million in 1989. Vishay quickly achieved a position as
the largest fixed resistor manufacturer in the United
States and Europe.
Vishay’s Major Strategic Acquisitions
• 1985: Dale Electronics
• 1987: Draloric Electronics
• 1988:
• 1992:
Sfernice
Sprague Electric
• 1993: Roederstein
• 1994: Vitramon
• 1998: Telefunken; Siliconix
(formerly TEMIC of Daimler-Benz)
In the PhotoStress® process, special plastic coatings bonded to
structures and viewed through a polariscope reveal colorful
patterns that provide information on stress distribution.
You are likely to find Vishay components in electronic products manufactured by all U.S. and
European manufacturers, as well as many Asian manufacturers. Vishay is the only producer of
such a broad line of passive and active (semiconductor) electronic components.
New Passive Components and New Markets
These acquisitions also brought other passive electronic components into Vishay, such as inductors, specialty
capacitors, plasma displays, specialty connectors, transformers, thermistors, and oscillators — complementing
Vishay’s strength in resistors. In fact, this diversification underscores the strategy that Vishay continues to
pursue today — to be the manufacturer of the broadest line of discrete electronic components in the industry.
In the early ’90s, Vishay applied its acquisition strategy to the high-volume capacitor market, extending its
range of products and increasing penetration in passive components. Major acquisitions included Sprague
Electric, the inventor and manufacturer of tantalum capacitors; Roederstein, a manufacturer of film, aluminum,
and ceramic disk capacitors and thick film chip resistors; and Vitramon, a high-quality manufacturer of multi-
layer ceramic chip capacitors. By 1994, annual sales had reached $988 million.
Adding Active Components to the Mix
In 1998, Vishay acquired the Semiconductor Business Group of TEMIC — which included Telefunken and
80.4% of Siliconix, producers of transistors, diodes, optoelectronics, transceivers, and power and analog
switching integrated circuits — thus becoming a major factor in semiconductors.
7
The Company and the industry have grown,
driven by the emergence of new technolo-
gies, industry consolidation, a commit-
ment to solve customer and applica-
tion problems, and an ongoing
effort to make products better,
more cost-efficient, and
defect-free.
Semiconductor wafers are cut into
small chips. Vishay’s semiconductor
business represents approximately
50% of Company earnings.
Telecommunications: Market Trends
Exponential growth in telecommunications has been fueled by the convenience of cellular
phones, pagers, and other handheld devices.
Global Cell Phone Shipments
600
In Millions
550
s
e
n
o
h
P
r
a
u
l
l
l
e
C
f
o
r
e
b
m
u
N
500
400
300
200
100
0
420
283
110
50
'95
'97
'99
Year
'00†
'02†
† Estimate
Source: Paumanok Publications, March 2000
8
Global Consumption of Passive
Components (Capacitors, Resistors,
Magnetics) in Cell Phones
200,000
In Millions
187,000
s
t
n
e
n
o
p
m
o
C
e
v
s
s
a
P
i
f
o
r
e
b
m
u
N
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
117,600
70,750
19,250
8,000
'95
'97
'99
Year
'00†
'02†
† Estimate
Source: Paumanok Publications, March 2000
Cell phones also include substantial amounts of
semiconductors, many of which are produced by Vishay.
Annual global shipments of cell phones are expected to
grow from 283 million units in 1999 to 420 million in the
year 2000.* At the same time, unflagging demand for
increased functionality — devices that are both more
complex and more user-friendly — will result in a dramatic
rise in the number of electronic components required for
each cell phone.
The telecommunications industry continues to be driven by
constantly improving services and falling prices, which in
turn are increasing consumer demand. New product designs
require passive components, discrete semiconductors, and
power ICs that save space, promote efficient use of battery
power, and provide new features.
Key product trends include the transition to digital technol-
ogy and the addition of new features, including short
messaging services, smart card compatibility, voice mail alert
and callback, caller identification, and voice-activated
dialing. Product size reductions and new applications, such
as child locators and hand-held global positioning systems
(GPS) are increasing the demand for smaller, more efficient
electronic components.
Vishay passive electronic components (such as resistors,
capacitors, and inductors) and semiconductor devices (such
as diodes, power MOSFETs, ICs, and transceivers) address
the needs of the telecommunications market. These include
miniaturization, higher efficiency, extended run time, and
wireless interconnection.
Supporting the growth in cell phones, pagers, handsets, and
other wireless devices is a growing investment in telecom-
munications infrastructure. This increases demand for
electronic components for voice and data switches, PBX
equipment, power supplies, and related equipment. Vishay
supplies most of these components.
* Paumanok Publications, March 2000
Component Content In a Cellular Telephone
The photos on this page show both sides of a printed circuit board from a cell phone,
with highlights of individual components.
Irdc Transceiver
Highlighted on this page are
types of electronic components
manufactured by Vishay that
are found in cell phones.
Power IC
Chip Resistor
Multilayer Ceramic
Chip Capacitor
Diode
Low Power
MOSFET
9
Power MOSFET
Coated Tantalum
Chip Capacitor
Molded Tantalum
Chip Capacitor
Chip Inductor
Back
Total Discrete Component
Content is 477
(excluding battery charger)
Source: Paumanok Publications, March 2000
Vishay Intertechnology, March 2000
Front
Approximate Dollar Content per
Dualband Phone
Components
$ Content
Resistors and Inductors
Capacitors
Vishay Siliconix and
Vishay Telefunken Products
Total
3.24
4.16
5.73
$13.13
Source: Vishay Intertechnology, March 2000
Computers: Market Trends
Worldwide personal computer (PC) shipments reached nearly 105 million units in 1998 and
are expected to reach more than 191 million by 2002.*
Computer processing speeds increase all the time, while
computer and peripheral manufacturers continue to offer
more features and options. This results in increased need for
passive components and semiconductors.
An integrated circuit (IC) located on a computer’s
motherboard serves as the microprocessor that does all the
calculations and coordinates all the computer’s activities.
The microprocessor and other electronic circuits make up
the central processing unit, or CPU. Each new generation of
PCs features faster microprocessing speeds. In 1995, a speed
of 200 megahertz (200 million cycles per second) was
considered fast. The year 2000 saw the arrival of the 1-
gigahertz (one billion cycles per second) PC.
The number of passive components needed for integrated
circuit support in PCs is growing more rapidly than PC
manufacturing itself. Intel’s 486 microprocessor, which
required 124 supporting passive components, was suc-
ceeded by Intel’s Pentium® processor, which required 252
passive components, and the Pentium II, which requires
345 passive components. The even more powerful Pentium
III requires 440 supporting passive components.**
Vishay components can be found in nearly every computer
subsystem, including the motherboard, monitor, keyboard,
mouse, disk drive, PCMCIA card, and modem — as well as
in printers, fax machines, and copy machines.
Typical Passive Component
Requirements for Integrated Circuit
440
345
252
s
t
n
e
n
o
p
m
o
C
e
v
s
s
a
P
i
f
o
r
e
b
m
u
N
450
400
350
300
250
200
150
100
50
0
124
486
Pentium Pentium II Pentium III
Intel Motherboards
Source: Vishay Intertechnology, January 2000
Estimates will vary depending upon end-product applications
10
Computers also include substantial amounts of
semiconductors, many of which are produced by Vishay.
Passive Component Usage in Computers
180,000
Millions of Units
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
'95
'96
'97
'98
'99
'00†
'01†
Year
'02†
† Estimate
Source: Paumanok Publications, January 2000
Computers also include substantial amounts of
semiconductors, many of which are produced by Vishay.
* Paumanok Publications, April 2000
** Vishay Intertechnology, January 2000
Vishay Produces Components Used in
Computers and Peripherals
The photo on this page is a portion of a personal computer (PC) motherboard.
Listed below are Vishay
products found in computer
applications.
Analog Switches
Diodes
IrDC Transceivers
Multilayer and Wirewound
Inductors
Multilayer Ceramic
Capacitors
Optical Switches
Optocouplers
Power ICs
Power Metal Strip®
Resistors
Power MOSFETs
RFI Suppression Capacitors
Tantalum Capacitors
Thick Film Chip Resistors
Thin Film Resistors
11
Automotive Electronics: Market Trends
The market for automotive electronics is expected to reach $89 billion by 2002.* This growth will
be fueled by enhancements to power train and safety systems such as antilock brakes (ABS),
airbags, and engine control, as well as new comfort, security, and communications features.
Passive Components Per Vehicle
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Average
Annual Growth
16%
'92
'93
'94
'95
'96
'97
Year
'98
'99
'00† '01† '02†
† Estimate
Source: Paumanok Publications, January 2000
12
Automobiles also include substantial amounts of
semiconductors, many of which are produced by Vishay.
Volume of Passive Components Consumed
in the Global Automotive Market
300,000
Millions of Units
250,000
200,000
150,000
100,000
50,000
0
Average
Annual Growth
17%
'92
'93
'94
'95
'96
'97
Year
'98
'99
'00† '01† '02†
† Estimate
Each new generation of antilock brakes, airbags, high-
intensity lighting, and traction control makes cars progres-
sively safer, while electronic ignition and engine control
systems promise to significantly reduce vehicle emissions
and increase reliability. Automotive entertainment systems
are growing as sophisticated as those found in homes, while
on-board computers will become an increasingly common
link to navigation and traffic information, as well as e-mail
and Web access.
Many of these advances originated in technologies devel-
oped for the computer and communications markets, but
their adaptation for cars and trucks involves a number of
distinct challenges. In the automotive market, environmental
ranges and climate conditions are extreme, product life
cycles are relatively long, the cost of component repair is
high, and component failures can be catastrophic. As a
result, the reliability of components is crucial.
Increasingly, mechanical parts for braking, transmission,
throttle control, and other automotive operations are being
replaced by sophisticated electronic circuits. Vishay ad-
dresses this “drive by wire” trend by providing electronic
transmission interfaces, electronic fuel-level sensors, fuel
injection position sensors, and other innovative products.
For drivers, fewer moving parts means greater reliability. For
Vishay, global growth in automotive electronic component
sales means increased market opportunities.
Source: Paumanok Publications, January 2000
Automobiles also include substantial amounts of
semiconductors, many of which are produced by Vishay.
* Paumanok Publications, April 2000
Vishay Produces Components Used In
Automobile Subsystems
GPS
Entertainment Center
Comfort Accessories
Steering
Airbags
Security System
Lighting
Engine
Brakes
Suspension
Transmission
13
Vishay products are found in the automotive
applications highlighted on this page.
Military and Aerospace Equipment: Market Trends
The worldwide market for military and aerospace equipment is expected to
grow $11.5 billion from 1997 to 2002.* This will result in increased demand
for electronics for these new systems.
It is estimated that several hundred platforms will
be launched into space over the next five years,
with many of these providing commercial tele-
phone, satellite TV, and data services. Meanwhile,
substantial growth in the global commercial
aviation market is being driven by the need to
replace older fleets. Although the needs of the
military and aerospace market are evolving, the
essential criteria for the electronic components that
serve it — reliability and performance — remain
unchanged.
Vishay is one of the largest suppliers of military
components, and Vishay products for the estab-
lished-reliability market reflect a long-term
commitment to military and aerospace customers.
Vishay components used in military and aerospace
equipment are designed to function reliably when
subjected to extremely hot and cold temperatures,
intense vibration, and other environmental stresses.
In addition, Vishay has the ability to custom-design
and produce components to meet the high expecta-
tions of quality and reliability demanded by
military and aerospace customers. Vishay produces
custom components for applications as diverse as
missile systems and ground-based communication
systems. Every component Vishay provides to the
military and aerospace market is backed by
comprehensive testing and failure analysis facilities,
and by an experienced technical staff.
14
* Dataquest, January 1999
Sophisticated electronic systems in U.S. spacecraft
and jet planes rely on Vishay components.
Instrumentation and Medical Electronics: Market Trends
The market for instrumentation and medical electronics, like the computer and
telecommunications markets, is characterized by trends toward portability,
miniaturization, and shortened design cycles.
Vishay components are used in a wide
range of instruments, manufacturing
systems, and medical products, including
pacemakers (righthand photo) and
oscilloscopes (bottom photo).
Handheld oscilloscopes and digital multimeters are
giving test and measurement professionals on-site
capabilities that were once confined to engineering
labs.
In the medical electronics area, miniaturization is
being driven by the trend towards minimally
invasive therapies such as laparoscopic surgery and
by the growing importance of home care, where
mobile equipment allows health care providers to
monitor the vital functions of their patients over
wireless data networks.
In 1999, the worldwide semiconductor market for
instruments, medical equipment, and manufactur-
ing systems was approximately $10 billion. By
2002, it is expected to grow to more than $13
billion.* As product development cycles become
shorter, the ability of component suppliers to work
with manufacturers during the design phase, and
to solve subsystem problems such as power
management and cordless connectivity, is
becoming ever more critical.
Vishay components are found in many
different types of test, measurement,
instrumentation, and medical systems.
They are used in pacemakers and other
implantable medical devices, where reliable,
long-term performance is literally a matter of
life and death. Vishay is a long-time supplier of
ceramic capacitors to the leading manufacturer of
pacemakers.
15
* Dataquest, January 1999
Major Vishay Products and Brands
Passive Components
RESISTORS
Bulk Metal® Foil Resistors
Metal Film Resistors and Networks
Thick Film Resistors and Networks
Thick Film R/C Networks
Thin Film Resistors and Networks
Current Sensing Resistors
Wirewound Resistors
Power Metal Strip® Resistors
Panel Controls
Thermistors
Varistors
Fuse Resistors
Trimming Potentiometers
Panel Potentiometers
CAPACITORS
Tantalum (Solid) Capacitors
Tantalum (Wet) Capacitors
Ceramic Capacitors
Film Capacitors
Aluminum Capacitors
16
MAGNETICS
Custom Magnetics
Inductors
Transformers
Discrete Semiconductors
DIODES
Diodes
Rectifiers
TVS
TRANSISTORS
RF Transistors
Bipolar Power Transistors
Power MOSFETs
JFETs
OPTOELECTRONIC COMPONENTS
Photo Detectors
Infrared Emitters
Optocouplers
Optosensors
Photo Modules
LEDs
Displays
INTEGRATED CIRCUITS
Power ICs
Analog Switches
Multiplexers
IrDC Infrared Data Transceivers
Passive electronic components (resistors,
capacitors, and magnetics) reduce electrical
currents, store electric energy, or filter
frequencies. They are referred to as passive
because they do not amplify DC current or
voltage. In contrast, active electronic
components (semiconductors) amplify electrical
currents, convert currents, or switch electronic
and optical signals. Vishay can provide a
complete package of passive and active
electronic components to meet customer needs.
For Position Only
Major Vishay Brands
Vishay Dale
Vishay Draloric
Vishay Foil Resistors
Vishay Measurements Group
Vishay Roederstein
Vishay Sfernice
Vishay Siliconix
Vishay Sprague
Vishay Telefunken
Vishay Thin Film
Vishay Vitramon
Consolidated Statements of Operations
Vishay Intertechnology, Inc.
(In thousands, except per share and share amounts)
1999
1998
1997
Year ended December 31
Net sales .................................................................................
$ 1,760,091
$ 1,572,745
$ 1,125,219
Costs of products sold ...........................................................
1,299,705
1,189,107
858,020
GROSS PROFIT ................................................................
460,386
383,638
267,199
Selling, general, and administrative expenses ....................
Amortization of goodwill .........................................................
Unusual items .........................................................................
Purchased research and development .................................
254,282
12,360
—
—
234,840
12,272
29,301
13,300
136,876
7,218
14,503
—
Other income (expense):
Interest expense .................................................................
Other ...................................................................................
(53,296)
(5,737)
(49,038)
(2,241)
(18,819)
(222)
193,744
93,925
108,602
(59,033)
(51,279)
(19,041)
Earnings before income taxes and minority interest ...........
Income taxes ...........................................................................
Minority interest ......................................................................
134,711
36,940
14,534
42,646
30,624
3,810
89,561
34,167
2,092
NET EARNINGS ................................................................
$ 83,237
$ 8,212
$ 53,302
Basic earnings per share .......................................................
$ 0.99
$ 0.10
Diluted earnings per share ....................................................
$ 0.97
$ 0.10
$ 0.63
$ 0.63
17
Weighted average shares outstanding — basic ..................
Weighted average shares outstanding — diluted ................
84,452,000
85,488,000
84,443,000
84,531,000
84,418,000
84,603,000
See accompanying notes.
Consolidated Balance Sheets
(In thousands, except per share and share amounts)
December 31
1999
1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents .................................................................
$ 105,193
$ 113,729
Accounts receivable, less allowances of
$9,495 and $9,758 ...........................................................................
320,978
276,270
Inventories:
Finished goods ................................................................................
Work in process ...............................................................................
Raw materials ..................................................................................
Deferred income taxes ........................................................................
Prepaid expenses and other current assets ......................................
144,645
131,951
121,704
35,119
67,159
196,551
136,393
113,194
53,389
67,045
TOTAL CURRENT ASSETS ...............................................................
926,749
956,571
PROPERTY AND EQUIPMENT — at cost
Land ......................................................................................................
Buildings and improvements ...............................................................
51,453
261,528
59,146
270,095
Machinery and equipment ...................................................................
1,073,556
1,039,050
Construction in progress .....................................................................
61,881
69,534
18
Less allowances for depreciation .......................................................
1,448,418
(517,873)
1,437,825
(440,758)
930,545
997,067
GOODWILL ...............................................................................................
399,970
432,558
OTHER ASSETS ......................................................................................
66,517
76,548
$ 2,323,781
$ 2,462,744
Vishay Intertechnology, Inc.
December 31
1999
1998
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Notes payable to banks .......................................................................
$ 26,790
$ 20,253
Trade accounts payable ......................................................................
Payroll and related expenses ..............................................................
Other accrued expenses .....................................................................
Income taxes ........................................................................................
Current portion of long-term debt .......................................................
101,613
77,209
107,724
27,418
4,445
92,656
70,490
111,420
17,425
4,544
TOTAL CURRENT LIABILITIES .........................................................
345,199
316,788
LONG-TERM DEBT — less current portion ...........................................
656,943
814,838
DEFERRED INCOME TAXES .................................................................
DEFERRED INCOME ...............................................................................
MINORITY INTEREST .............................................................................
OTHER LIABILITIES ................................................................................
62,712
50,462
61,637
24,715
68,933
59,264
51,858
25,174
ACCRUED PENSION COSTS .................................................................
108,521
123,370
STOCKHOLDERS’ EQUITY
Preferred Stock, par value $1.00 a share:
Authorized -- 1,000,000 shares; none issued
Common Stock, par value $.10 a share:
Authorized -- 150,000,000 and 75,000,000 shares;
74,312,309 and 74,184,370 shares outstanding after
deducting 17,116 and 21,489 shares in treasury ..........................
7,431
7,419
19
Class B convertible Common Stock, par value $.10 a share:
Authorized -- 20,000,000 and 15,000,000 shares;
10,369,932 and 10,402,068 shares outstanding after
deducting 186,302 and 187,096 shares in treasury .....................
Capital in excess of par value .............................................................
Retained earnings ................................................................................
Unearned compensation .....................................................................
Accumulated other comprehensive loss ............................................
1,038
989,627
97,591
(1,086)
(81,009)
1,041
988,635
14,354
(1,131)
(7,799)
1,013,592
1,002,519
$ 2,323,781
$ 2,462,744
See accompanying notes.
Consolidated Statements of Cash Flows
(In thousands)
OPERATING ACTIVITIES
Vishay Intertechnology, Inc.
Year ended December 31
1999
1998
1997
Net earnings ..............................................................................................
$ 83,237
$ 8,212
$ 53,302
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization ........................................................
139,676
127,947
Loss on sale of subsidiary ..............................................................
Loss on disposal of property and equipment ................................
Minority interest in net earnings of consolidated subsidiaries .....
Purchased research and development ..........................................
Asset impairment losses .................................................................
Loss on forward exchange contract ...............................................
Changes in operating assets and liabilities,
net of effects of businesses acquired or sold:
10,073
1,146
14,534
—
—
—
Accounts receivable .................................................................
(73,678)
Inventories .................................................................................
Prepaid expenses and other current assets ...........................
Accounts payable ......................................................................
Other current liabilities .............................................................
24,988
14,317
15,997
24,414
Other .................................................................................................
(14,895)
—
712
3,810
13,300
23,057
(5,295)
13,827
13,304
(23,206)
1,575
(25,842)
18,049
81,874
—
1,245
2,092
—
—
5,295
(23,339)
19,501
20,496
6,882
5,897
3,913
NET CASH PROVIDED BY OPERATING ACTIVITIES .........................
239,809
169,450
177,158
20
INVESTING ACTIVITIES
Purchases of property and equipment ....................................................
(119,638)
Purchases of businesses, net of cash acquired ....................................
Proceeds from sale of subsidiary ............................................................
Proceeds from sale of property and equipment .....................................
—
9,118
7,934
(151,682)
(423,031)
—
11,650
(78,074)
(122,468)
—
959
NET CASH USED IN INVESTING ACTIVITIES .....................................
(102,586)
(563,063)
(199,583)
FINANCING ACTIVITIES
Proceeds from long-term borrowings ......................................................
Principal payments on long-term debt ....................................................
197
(4,481)
Net (payments) proceeds on revolving credit lines ................................
(143,496)
Net changes in short-term borrowings ....................................................
6,752
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES .......
(141,028)
Effect of exchange rate changes on cash ..............................................
(4,731)
5,030
(7,068)
462,214
(9,768)
450,408
1,671
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ........
Cash and cash equivalents at beginning of year ...................................
(8,536)
113,729
58,466
55,263
4,100
(82,076)
155,729
(17,152)
60,601
(3,858)
34,318
20,945
CASH AND CASH EQUIVALENTS AT END OF YEAR .........................
$ 105,193
$ 113,729
$ 55,263
See accompanying notes.
Consolidated Statements of Stockholders’ Equity
Vishay Intertechnology, Inc.
(In thousands, except share amounts)
Class B
Convertible
Common
Stock
Capital in
Excess of Par
Value
Common
Stock
Retained
Earnings
Unearned
Compensation
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stock-
holders’
Equity
Balance at December 31, 1996
$ 6,717
$ 945
$ 824,416
$ 107,762
$ (370)
$ 5,760
$ 945,230
—
—
—
53,302
—
—
—
—
—
—
(46,693)
(966)
53,302
(46,693)
(966)
Net earnings
Foreign currency translation adjustment
Pension liability adjustment
Comprehensive income
Stock issued (35,608 shares)
Stock dividends (3,359,615; 472,734 shares)
Conversions from Class B to common
(20,641 shares)
Stock appreciation rights
Tax effects relating to stock plan
Amortization of unearned compensation
—
—
—
4
336
1
—
—
—
—
—
—
—
47
(1)
—
—
—
777
85,094
—
8,200
68
—
Balance at December 31, 1997
7,058
991
918,555
Net earnings
Foreign currency translation adjustment
Pension liability adjustment
Comprehensive income
Stock issued (77,776 shares)
Stock dividends (3,350,876; 495,338 shares)
Conversions from Class B to common
(13 shares)
Tax effects relating to stock plan
Amortization of unearned compensation
—
—
—
8
353
—
—
—
—
—
—
—
50
—
—
—
—
—
—
1,054
69,042
—
(16)
—
Balance at December 31, 1998
7,419
1,041
988,635
Net earnings
Foreign currency translation adjustment
Pension liability adjustment
Comprehensive income
Stock issued (31,007 shares)
Stock options exercised (58,546 shares)
Conversions from Class B to common
(28,137 shares)
Tax effects relating to stock plan
Amortization of unearned compensation
—
—
—
3
6
3
—
—
—
—
—
—
—
(3)
—
—
—
—
—
505
485
—
2
—
(644)
(41,899)
959,648
—
—
—
—
38,174
(4,074)
5,643
215
—
—
8,200
68
292
—
—
—
—
—
—
21
8,212
38,174
(4,074)
42,312
—
—
—
(16)
575
—
—
—
—
—
(1,131)
(7,799)
1,002,519
—
—
—
(508)
—
—
—
553
—
(76,553)
3,343
—
—
—
—
—
83,237
(76,553)
3,343
10,027
—
491
—
2
553
—
(566)
—
(1,062)
—
—
—
—
292
—
—
—
575
(85,477)
—
—
—
—
75,587
8,212
—
—
(69,445)
—
—
—
14,354
83,237
—
—
—
—
—
—
—
Balance at December 31, 1999
$ 7,431
$ 1,038
$ 989,627
$ 97,591
$ (1,086)
$ (81,009)
$ 1,013,592
See accompanying notes.
Notes to Consolidated Financial Statements — December 31, 1999
Vishay Intertechnology, Inc.
Vishay Intertechnology, Inc. is an international manufacturer and
supplier of passive electronic components and discrete active electronic
components, particularly resistors, capacitors, power MOSFETS,
power conversion and motor control integrated circuits, transistors and
diodes. Electronic components manufactured by the Company are used
in virtually all types of electronic products, including those in the
computer, telecommunications, military/aerospace, instrument, auto-
motive, medical, and consumer electronics industries.
will be reduced by the estimated shortfall of discounted cash flows.
Accumulated amortization amounted to $57,071,000 and $48,407,000
at December 31, 1999 and 1998, respectively.
Cash Equivalents
For purposes of the Statement of Cash Flows, cash equivalents
include demand deposits and all highly liquid investments with maturi-
ties of three months or less when purchased.
1. Summary of Significant Accounting Policies
Research and Development Expenses
Principles of Consolidation
The consolidated financial statements include the accounts of
Vishay Intertechnology, Inc. and its majority-owned subsidiaries, after
elimination of all significant intercompany transactions, accounts, and
profits. The Company’s investments in 20% to 50%-owned companies
are accounted for on the equity method. Investments in other companies
are carried at cost.
Revenue Recognition
The Company recognizes revenue when products are shipped to
customers. The Company has agreements with distributor customers
which, under specified conditions, provide protection against price
reductions initiated by the Company and allow for returns of overstocked
inventories. The effect of these programs is estimated based on histori-
cal experience and provisions are recorded.
Use of Estimates
22
The preparation of financial statements in conformity with ac-
counting 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.
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. Deprecia-
tion expense was $125,847,000, $114,592,000, and $73,329,000 for
the years ended December31, 1999, 1998, and 1997, respectively.
Construction in Progress
The estimated cost to complete construction in progress at
December31, 1999 was $28,208,000.
Goodwill
Goodwill (excess of purchase price over net assets acquired) is
amortized principally over periods ranging from 30-40 years using the
straight-line method. The recoverability of goodwill is evaluated at the
operating unit level by an analysis of operating results and consideration
of other significant events or changes in the business environment. If an
operating unit has current operating losses and based upon projections
there is a likelihood that such operating losses will continue, the
Company will determine whether impairment exists on the basis of
undiscounted expected future cash flows from operations before inter-
est for the remaining amortization period. If impairment exists, goodwill
The amount charged to expense for research and development
(exclusive of purchased in-process research and development) aggre-
gated $35,038,000, $28,857,000, and $7,023,000 for the years ended
December 31, 1999, 1998, and 1997, respectively. The Company
spends additional amounts for the development of machinery and
equipment for new processes and for cost reduction measures.
Grants
Grants received by certain foreign subsidiaries from foreign
governments, primarily in Israel, are recognized as income in accor-
dance with the purpose of the specific contract and in the period in which
the related expense is incurred. Grants from the Israeli government
recognized as a reduction of costs of products sold were $14,256,000,
$13,116,000, and $11,352,000 for the years ended December31, 1999,
1998, and 1997, respectively. Grants receivable of $10,056,000 and
$12,828,000 are included in other current assets at December31, 1999
and 1998, respectively. Deferred grant income was $50,462,000 and
$59,264,000 at December31, 1999 and 1998, respectively. The grants
are subject to certain conditions, including maintaining specified levels
of employment for periods up to ten years. Noncompliance with such
conditions could result in repayment of grants. However, management
expects that the Company will comply with all terms and conditions of
the grants.
Minority Interest
Minority interest represents the ownership interests of third
parties in the net assets and results of operations of certain consolidated
subsidiaries.
Share and Per Share Amounts
On June 22, 1999, the Company effected a five-for-four split of
the outstanding shares of Common Stock and Class B Common Stock.
Accordingly, all share and per share amounts shown in the accompany-
ing consolidated financial statements and notes have been retroactively
adjusted to reflect the stock split.
Earnings per share amounts for all periods presented also reflect
5% stock dividends paid on June 11, 1998 and June 9, 1997.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, Account-
ing for Stock-Based Compensation (“SFAS 123”), encourages entities
to record compensation expense for stock-based employee compensa-
tion plans at fair value but provides the option of measuring compensa-
tion expense using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Em-
ployees (“APB 25”). The Company accounts for stock-based compensa-
tion in accordance with APB25. Note 10 presents pro forma results of
operations as if SFAS 123 had been used to account for stock-based
compensation plans.
Notes to Consolidated Financial Statements — December 31, 1999 (continued)
Vishay Intertechnology, Inc.
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 reduc-
ing 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 obliga-
tion. 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 account-
ing. 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 extin-
guishment of an obligation, any realized or unrealized gain or loss from
the swap is recognized in income at the time of extinguishment.
Foreign currency forward exchange contracts are used to man-
age the effect of exchange rate changes on actual cash flows from
certain foreign currency denominated transactions. Foreign currency
forward exchange contracts designated as effective hedges of firm
commitments are treated as hedges for accounting purposes. Gains and
losses are deferred and recognized in income when the hedged trans-
action occurs.
Accounting Pronouncements Pending Adoption
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (“SFAS133”). SFAS133
establishes accounting and reporting standards for derivative instru-
ments 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 SFAS133, as amended, effective January 1, 2001.
Based on current derivative usage and hedging activities, the Company
does not expect the adoption of SFAS133 to have a material impact on
its future earnings or financial position.
In December 1999, the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin No. 101, Revenue Recognition
(“SAB 101”), which provides guidance on the recognition, presentation
and disclosure of revenue in financial statements filed with the SEC.
SAB 101 outlines the basic criteria that must be met to recognize
revenue and provides guidance for disclosures related to revenue
recognition policies. Management believes that the Company’s revenue
recognition policy is in compliance with the provisions of SAB 101 and
that SAB 101 will have no material effect on the financial position or
results of operations of the Company.
Commitments and Contingencies
for
Liabilities
loss contingencies,
including environmental
remediation costs, arising from claims, assessments, litigation, fines
and penalties, and other sources are recorded when it is probable that
a liability has been incurred and the amount of the assessment and/or
remediation can be reasonably estimated. The costs for a specific
clean-up site are discounted if the aggregate amount of the obligation
and the amount and timing of the cash payments for that site are fixed
or reliably determinable generally based upon information derived from
the remediation plan for that site. Recoveries from third parties which
are probable of realization and can be reasonably estimated are sepa-
rately recorded, and are not offset against the related environmental
liability.
Reclassifications
Certain prior-year amounts have been reclassified to conform to
the current financial statement presentation.
2. Acquisitions
On March 2, 1998, the Company purchased 80.4% of Siliconix
Incorporated (NASDAQ:SILI) and 100% of TEMIC Semiconductor
GmbH (collectively, “TEMIC”) for a total of $549,889,000 in cash. TEMIC
is a producer of discrete active electronic components with manufactur-
ing facilities in the United States, the Far East, Germany, and Austria.
On March 4, 1998, the Company sold the Integrated Circuits division of
TEMIC to Atmel Incorporated for a total of $105,755,000 in cash.
The purchase of TEMIC was funded from the Company’s $1.1 billion
revolving credit facilities made available to Vishay on March2,1998.
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 con-
summation 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 projects, and discounting the net cash
flows back to their present value. The discount rate included a factor that
took into account the uncertainty surrounding the successful develop-
ment 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 December31, 1999, 364 employ-
ees had been terminated and $20,203,000 of the termination costs were
paid. Additionally, $3,302,000 of contract cancellation charges and
other costs were paid.
The results of operations of TEMIC have been included in the
Company’s results from March 1, 1998. Excess of cost over the fair
value of assets acquired ($154,866,000) is being amortized principally
over periods ranging from 30-40 years using the straight-line method.
In July 1997, the Company purchased 65% of the common stock
of Lite-On Power Semiconductor Corporation (“LPSC”), a Taiwan com-
pany, for $130,000,000 in cash and stock appreciation rights with a fair
value at the time of issuance of $8,200,000. LPSC is a producer of
discrete active electronic components with manufacturing facilities in
23
Notes to Consolidated Financial Statements — December 31, 1999 (continued)
Vishay Intertechnology, Inc.
Taiwan, China and the United States. LPSC owns 40.2% of Diodes, Inc.
(AMEX:DIO). The Company utilized existing credit facilities to finance
the cash portion of the purchase price. The acquisition was accounted
for under the purchase method of accounting.
The results of operations of LPSC have been included in the
Company’s results from July1, 1997. Excess of cost over the fair value
of net assets acquired ($110,978,000) is being amortized on a straight-
line method over an estimated useful life of forty years.
Had the TEMIC and LPSC acquisitions been made at the begin-
ning of 1998 and 1997, the Company’s pro forma unaudited results
would have been (in thousands, except per share amounts):
Year ended December 31
1998
1997
Net sales .................................................
Net earnings ............................................
Basic and diluted earnings per share ...
$ 1,655,197
6,528
0.08
$ 1,723,818
41,394
0.49
The pro forma results include adjustments for interest expense
that would have been incurred to finance the acquisitions, additional
depreciation based on the fair value of property, plant, and equipment
acquired, writeoff of purchased in-process research and development,
amortization of goodwill, and related tax effects.
The unaudited pro forma results are not necessarily indicative of
the results that would have been attained had the acquisitions occurred
at the beginning of the periods presented.
3. Unusual Items
Unusual items in 1998 consisted of the following components (in
thousands):
24
Impairment losses:
China ..................................................
Nikkohm .............................................
Restructuring of European operations ..
Closing of two U.S. sales offices ...........
$ 19,556
3,501
5,944
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 March31,
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 March31, 1998, the Company had removed from existing production
lines and packaged for shipment to China $18.9 million of equipment to
be used in the manufacture of dipped radial and chip tantalum capaci-
tors 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 which had 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 unac-
ceptable to the Company. Second, the Asian economy experienced a
significant downturn and demand for the Company’s tantalum capaci-
tors 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 em-
ployees in five factories. These factories served to establish Vishay as
a major components manufacturer in China without additional invest-
ment by the Company. During the fourth quarter of fiscal 1998, manage-
ment evaluated the proposed joint ventures and concluded that, due to
the factors described above, the Company would discontinue negotia-
tions 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 compo-
nents. The Company’s investment in Nikkohm totaled $4 million. Like
the proposed Chinese joint ventures, management considered its in-
vestment 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 Decem-
ber31,1997, the Company recognized a cumulative loss on its invest-
ment in Nikkohm of $499,800 (1995–$304,000; 1996–$141,800; 1997–
$54,000). Management had been encouraged by Nikkohm’s trend in
earnings and had proposed certain marketing programs intended to
further improve operating results. However, Nikkohm’s results of opera-
tions began to deteriorate in fiscal 1998 due to a decrease in demand for
the Company’s products, particularly thin film resistors, and a downturn
in the Asian economy. In addition, a significant member of Nikkohm’s
management resigned due to health concerns. Also, the Company’s
acquisitions in 1997 and 1998 had established Vishay as a major
electronics components manufacturer in the Far East. During the fourth
quarter of fiscal 1998, management evaluated these recent develop-
ments 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 consists of $5,694,000 of
employee termination costs covering approximately 182 technical, pro-
duction, 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 December31,1998, approximately 15 employees had been termi-
nated and $471,000 of termination costs were paid. During the year
ended December31, 1999, the Company terminated the remainder of
the employees and paid related termination costs of $4,899,000. At
December31,1999, 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.
Notes to Consolidated Financial Statements — December 31, 1999 (continued)
Vishay Intertechnology, Inc.
Unusual items expense of $14,503,000 in 1997 consists of
restructuring expense of $12,605,000 and a settlement with the United
States Government in the amount of $1,898,000 representing reim-
bursements for overcharges relating to military products produced prior
to 1993 at one of the Company’s U.S. subsidiaries.
Restructuring expense of $12,605,000 in 1997 resulted from a
downsizing of the Company’s European operations. Approximately
$10,357,000 of this expense related to employee termination costs
covering 324 technical, production, administrative, and support employ-
ees located in Germany and France. Approximately $623,000 of the
restructuring expense related to facility closure costs in France. The
remaining $1,625,000 related to additional payments to certain employ-
ees laid off in the last half of fiscal 1996 in connection with Vishay’s fiscal
1996 restructuring program. The payments were a result of a judgment
rendered by a French court against a subsidiary of the Company. The
court ruled that these employees were due additional payments under
France’s mandated social plan. At December31,1998, approximately
173 employees had been terminated and $6,158,000 of termination
costs were paid. During the year ended December31,1999, the Com-
pany terminated an additional 143 employees and paid related termina-
tion costs of $4,097,000. At December31,1999, the 1997 European
operations restructuring plan was completed.
4. Income Taxes
Earnings before income taxes and minority interest consists of
the following components (in thousands):
December 31
1999
1998
Deferred tax assets:
Pension and other retiree obligations ......
Net operating loss carryforwards ..............
Tax credit carryforwards ............................
Restructuring reserves ..............................
Other accruals and reserves .....................
$ 26,447 $ 27,839
109,545
8,535
7,937
40,643
84,387
8,236
4,981
32,385
Total deferred tax assets ................................
156,436
194,499
Less: Valuation allowance .........................
(47,648)
(59,329)
Net deferred tax assets ...................................
108,788
135,170
Deferred tax liabilities:
Tax over book depreciation .......................
Other—net ..................................................
86,497
14,641
99,890
11,645
Total deferred tax liabilities .............................
101,138
111,535
Net deferred tax assets ...................................
$ 7,650 $ 23,635
A reconciliation of income tax expense at the U.S. federal
statutory income tax rate to actual income tax expense is as follows (in
thousands):
Year ended December 31
1999
1998
1997
Year ended December 31
1999
1998
1997
Domestic ....................................
Foreign .......................................
$ 26,717 $ (45,334) $ 45,832
43,729
107,994
87,980
$ 134,711
$ 42,646
$ 89,561
Significant components of income taxes are as follows (in thou-
sands):
Tax at statutory rate ..................
State income taxes, net of
U.S. federal tax benefit ........
Effect of foreign operations ......
Benefit of net operating loss
carryforwards ........................
Provision for estimated tax
uncertainties .........................
Year ended December 31
1999
1998
1997
Increase in valuation
Current:
U.S. Federal .........................
Foreign ..................................
State ......................................
$ 1,685
6,810
728
$ 1,590
12,370
987
$ 20,296
6,494
2,103
Deferred:
9,223
14,947
28,893
allowance for foreign
net operating loss
carryforwards ........................
Purchased research and
development expense ..........
Other ...........................................
$ 47,149
$ 14,926 $ 31,346
606
(13,717)
649
(1,561)
1,619
(11,059)
25
–
–
–
–
–
(207)
10,000
10,000
–
–
2,902
4,655
1,955
–
2,468
$ 36,940
$ 30,624 $ 34,167
U.S. Federal .........................
Foreign ..................................
State ......................................
21,957
5,333
427
(44)
15,708
13
1,476
3,547
251
At December 31, 1999, the Company had the following net
operating loss carryforwards for tax purposes (in thousands):
Expires
27,717
15,677
5,274
$ 36,940
$ 30,624
$ 34,167
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts for income tax purposes.
Significant components of the Company’s deferred tax assets and
liabilities are as follows (in thousands):
U.S. Federal .................
Germany .......................
France ..........................
Portugal ........................
$ 36,794
131,218
6,957
6,439
2018-2019
No expiration
2004 to unlimited
2001-2004
Approximately $59,480,000 of the carryforward in Germany re-
sulted from the Company’s acquisition of Roederstein, GmbH in 1993.
Valuation allowances of $45,698,000 and $57,054,000 have been
recorded at December31, 1999 and 1998, respectively, for deferred tax
assets related to foreign net operating loss carryforwards. In 1999 and
Notes to Consolidated Financial Statements — December 31, 1999 (continued)
Vishay Intertechnology, Inc.
1998, respectively, tax benefits recognized through reductions of the
valuation allowance had the effect of reducing goodwill of acquired
companies by $454,000 and $446,000. If additional tax benefits are
recognized in the future through further reduction of the valuation
allowance, $21,360,000 of such benefits will reduce goodwill.
At December31, 1999, no provision had been made for U.S.
federal and state income taxes on approximately $423,748,000 of
foreign earnings which are expected to be reinvested indefinitely. Upon
distribution of those earnings in the form of dividends or otherwise, the
Company would be subject to U.S. income taxes (subject to an adjust-
ment 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 be-
cause of the complexities associated with its hypothetical calculation.
Income
taxes paid were $5,463,000, $36,488,000 and
$24,879,000, for the years ended December31, 1999, 1998, and 1997,
respectively.
5. Long-Term Debt
Long-term debt consisted of the following (in thousands):
December 31
1999
1998
Multicurrency Revolving Credit Loans ...........
Other Debt and Capital Lease Obligations ....
$ 635,215 $ 777,400
41,982
26,173
Less current portion ........................................
4,445
4,544
661,388
819,382
26
$ 656,943 $ 814,838
At December 31, 1998, two facilities were available under the
Company’s amended and restated loan agreements with a group of
banks: an $825,000,000 five-year multicurrency revolving credit and
swing line facility (interest 5.87% at December 31, 1998); and a
$275,000,000 364-day multicurrency revolving credit facility.
On June 1, 1999, the Company amended the two credit facilities.
The $825,000,000 long-term facility matures on March2, 2003, subject
to Vishay’s right to request year-to-year renewals. The short-term
facility now provides for a $100,000,000 364-day facility, which is
available on a revolving basis until May 30, 2000. Interest on the two
facilities is payable at prime or other interest rate options. The Company
is required to pay facility fees on the two facilities. As of December 31,
1999, the Company had $635,215,000 outstanding under the long-term
revolving credit facility (interest 7.52%, 7.10% after giving effect to
interest rate swaps).
Borrowings under the loan agreements are secured by pledges
of stock in certain significant subsidiaries and indirect subsidiaries of
Vishay and certain guaranties by the significant subsidiaries. The credit
facilities restrict the Company from paying cash dividends and require
the Company to comply with other covenants, including the mainte-
nance of specific financial ratios.
Other debt and capital lease obligations include borrowings
under short-term credit lines of $3,410,000 and $10,470,000 at Decem-
ber31, 1999 and 1998, respectively, which are classified as long-term
based on the Company’s intention and ability to refinance the obliga-
tions on a long-term basis.
Aggregate annual maturities of long-term debt, are as follows:
2000—$4,445,000; 2001—$15,627,000; 2002—$1,518,000; 2003—
$635,811,000; 2004—$569,000; thereafter—$3,418,000.
At December31, 1999, the Company had committed and uncom-
mitted short-term credit lines with various U.S. and foreign banks
aggregating $134,767,000, of which $104,567,000 was unused. The
weighted average interest rate on short-term borrowings outstanding as
of December31, 1999 and 1998 was 7.07% and 6.11%, respectively.
Interest paid was $53,605,000, $48,105,000, and $18,699,000
for the years ended December31, 1999, 1998, and 1997, respectively.
6. Stockholders’ Equity
On May 20, 1999, the Company’s shareholders approved an
increase in the authorized number of shares of Common Stock, $.10 par
value from 75,000,000 shares to 150,000,000 shares, and an increase
in the authorized number of shares of Class B Common Stock, $.10 par
value, from 15,000,000 shares to 20,000,000 shares.
The Company’s Class B Common Stock carries ten votes per
share while the Common Stock carries one vote per share. Class B
shares are transferable only to certain permitted transferees while the
Common Stock is freely transferable. Class B shares are convertible on
a one-for-one basis at any time to shares of Common Stock.
In connection with the acquisition of LPSC (see Notes 2 and 17),
the Company issued stock appreciation rights (SARs) to the former
owners of LPSC. The SARs represent the right to receive in stock the
increase in value on the equivalent of 2,133,000 shares of the
Company’s stock above $17.52 per share. The SARs may be exercised
at any time prior to July 17, 2007 at the option of the former owners of
LPSC. The Company may force redemption of the SARs if the
Company’s stock trades above the “Strike Price” ($39.64 per share
effective July 17, 1999). The Strike Price increases by 10% each year.
The fair value of the SARs as of July 17, 1997 was determined to be
$8,200,000 using the binomial option pricing model.
Unearned compensation relating to Common Stock issued under
employee stock plans is being amortized over periods ranging from
three to five years. At December31, 1999, 203,418 shares were avail-
able for issuance under stock plans.
7. Other Income (Expense)
Other income (expense) consists of the following (in thousands):
Year ended December 31
1999
1998
1997
Foreign exchange gains ............
Loss on forward exchange
contract .................................
Investment income ....................
Equity in net income
of affiliates ............................
Loss on sale of fixed assets .....
Loss on sale of subsidiary ........
Other ...........................................
$ 86
$ 495
$ 3,657
-
3,968
(6,269)
4,687
(5,295)
2,353
2,195
(1,179)
(10,073)
(734)
1,084
(712)
–
(1,526)
1,090
(1,245)
–
(782)
$ (5,737)
$ (2,241) $ (222)
On March 26, 1999, the Company sold Nicolitch, S.A., its French
manufacturer of printed circuit boards, to Leonische Drahtwerke AG. In
connection with the sale, the Company received proceeds of approxi-
mately $9,118,000 and recorded a noncash pretax loss of $10,073,000.
Notes to Consolidated Financial Statements — December 31, 1999 (continued)
Vishay Intertechnology, Inc.
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.
8. Other Comprehensive Income
The income tax effects allocated to and the cumulative balance of each component of other comprehensive income (loss) are as follows:
(In thousands)
Beginning
Balance
Before-Tax
Amount
Tax (Benefit)
Expense
Net-of-Tax
Amount
Ending
Balance
December 31, 1999
Pension liability adjustment ........................
Currency translation adjustment ................
December 31, 1998
Pension liability adjustment ........................
Currency translation adjustment ................
December 31, 1997
Pension liability adjustment ........................
Currency translation adjustment ................
$ (8,386)
587
$
6,173
(76,553)
$ 2,830
—
$
3,343
(76,553)
$ (5,043)
(75,966)
$ (7,799)
$ (70,380)
$ 2,830
$ (73,210)
$ (81,009)
$ (4,312)
(37,587)
$ (7,338)
38,174
$ (3,264)
—
$ (4,074)
38,174
$ (8,386)
587
$ (41,899)
$ 30,836
$ (3,264)
$ 34,100
$ (7,799)
$ (3,346)
9,106
$ (2,714)
(46,693)
$ (1,748)
—
$
(966)
(46,693)
$ (4,312)
(37,587)
$ 5,760
$ (49,407)
$ (1,748)
$ (47,659)
$ (41,899)
27
Notes to Consolidated Financial Statements — December 31, 1999 (continued)
Vishay Intertechnology, Inc.
9. Pensions and Other Postretirement Benefits
The Company maintains several defined benefit pension and nonpension postretirement plans which cover substantially all full-time U.S.
employees. The following table sets forth a reconciliation of the benefit obligation, plan assets, and accrued benefit cost related to these plans (in
thousands):
Pension Benefits
1999
1998
Other Benefits
1999
1998
Change in benefit obligation:
Benefit obligation at beginning of year .
Service cost ............................................
Interest cost ............................................
Employee contributions .........................
Actuarial losses (gains) .........................
Benefits paid ...........................................
$ 110,965
3,296
6,981
1,959
(11,690)
(7,064)
$ 98,991
3,828
6,726
1,782
7,057
(7,419)
$ 7,977
264
496
—
(849)
(557)
$ 7,796
287
494
—
(94)
(506)
Benefit obligation at end of year ................
$ 104,447
$ 110,965
$ 7,331
$ 7,977
Change in plan assets:
Fair value of plan assets
at beginning of year ..........................
Actual return on plan assets .................
Company contributions ..........................
Plan participants’ contributions .............
Benefits paid ...........................................
$ 95,534
6,837
2,174
1,959
(7,064)
$ 98,388
706
2,077
1,782
(7,419)
Fair value of plan assets at end of year ....
$ 99,440
$ 95,534
Funded status ..............................................
Unrecognized net actuarial loss (gain) ......
Unrecognized transition obligation (asset).
Unamortized prior service cost ...................
$ (5,007)
4,455
(83)
75
$ (15,431)
15,184
27
173
$ (7,331)
(308)
2,779
248
$ (7,977)
547
2,993
279
Net amount recognized ...............................
$ (560)
$ (47)
$ (4,612)
$ (4,158)
28
Amounts recognized in the consolidated
balance sheets consist of:
Prepaid benefit cost ..........................
Accrued benefit liability ....................
Accumulated other
comprehensive income .................
$
4,165
(4,725)
$
4,452
(7,817)
$
—
(4,612)
$
—
(4,158)
—
3,318
—
—
Net amount recognized ...............................
$
(560)
$
(47)
$ (4,612)
$ (4,158)
Weighted-average assumptions as of
December 31:
6.50%
Discount rate .....................................
Expected return on plan assets ....... 8.50% - 9.50% 8.50% - 9.50%
4.50%
Rate of compensation increase .......
7.50%
4.50%
7.50%
6.50%
1999
Pension Benefits
1998
1997
1999
Other Benefits
1998
1997
Components of net periodic benefit cost:
Annual service cost ...............................
Less employee contribution ..................
$ 5,255
1,959
$ 5,610
1,782
$ 4,968
1,969
$ 264
—
$ 287
—
$ 252
—
Net service cost .....................................
Interest cost ...........................................
Expected return on plan assets ............
Amortization of prior service cost .........
Amortization of transition obligation .....
Amortization of losses ...........................
3,296
6,981
(8,259)
98
110
461
3,828
6,726
(8,463)
195
110
—
2,999
6,266
(7,511)
233
110
—
264
496
—
31
214
6
287
494
—
31
214
—
252
499
—
31
214
5
Net periodic benefit cost
$ 2,687
$ 2,396
$ 2,097
$ 1,011
$ 1,026
$ 1,001
Notes to Consolidated Financial Statements — December 31, 1999 (continued)
Vishay Intertechnology, Inc.
The projected benefit obligation, accumulated benefit obligation,
and fair value of plan assets for the pension plans with accumulated
benefit obligations in excess of plan assets were $21,494,000,
$21,380,000, and $15,401,000, respectively, as of December 31, 1999
and $98,043,000, $91,596,000, and $83,739,000, respectively, as of
December 31, 1998.
The projected benefit obligation, accumulated benefit obligation,
and fair value of plan assets for the pension plans with projected benefit
obligations in excess of plan assets were $21,494,000, $21,380,000,
and $15,401,000, respectively, as of December 31, 1999 and
$110,965,000, $101,414,000, and $95,535,000, respectively, as of
December31, 1998.
The Company’s nonpension postretirement plan is funded as
costs are incurred. The plan is contributory, with employee contributions
adjusted for general inflation or inflation in costs under the plan. The
plan was amended in 1993 to cap employer contributions at 1993 levels.
The impact of a one-percentage-point change in assumed health care
cost trend rates on the net periodic benefit cost and postretirement
benefit obligation is immaterial.
Many of the Company’s U.S. employees are eligible to participate
in 401(k) savings plans, some of which provide for Company matching
under various formulas. The Company’s matching expense for the plans
was $3,196,000, $2,816,000 and $2,126,000 for the years ended
December 31, 1999, 1998, and 1997, respectively.
The Company provides pension and similar benefits to employ-
ees of certain foreign subsidiaries consistent with local practices.
German subsidiaries of the Company have defined benefit pension
plans. The Company acquired 100% of TEMIC Semiconductor GmbH
on March 2, 1998, including its pension plan. The following table sets
forth a reconciliation of the benefit obligation, plan assets, and accrued
benefit cost related to the German plans (in thousands):
1999
1998
Change in benefit obligation:
Benefit obligation at beginning of year .....
Service cost ................................................
Interest cost ................................................
Actuarial (gains) losses .............................
Acquisition ..................................................
Benefits paid ...............................................
Foreign currency translation .....................
$ 111,770 $ 64,758
510
6,025
3,383
34,536
(5,036)
7,594
554
6,501
(837)
—
(5,341)
(14,794)
Benefit obligation at end of year ....................
$ 97,853 $ 111,770
Change in plan assets:
Fair value of plan assets at beginning
of year ....................................................
Actual return on plan assets .....................
Company contributions ..............................
Benefits paid ...............................................
Foreign currency translation .....................
$ 15,227 $ 13,735
624
2,754
(2,872)
986
753
2,467
(2,574)
(2,147)
Fair value of plan assets at end of year ........
$ 13,726 $ 15,227
Funded status ..................................................
Unrecognized net actuarial losses .................
Unrecognized transition obligation (asset) ....
Unamortized prior service cost .......................
$ (84,127) $ (96,543)
7,002
(19)
168
5,650
(13)
103
Net amount recognized ...................................
$ (78,387) $ (89,392)
1999
1998
Amounts recognized in the consolidated
balance sheets consist of:
Accrued benefit liability ........................
Accumulated other comprehensive
$ (85,612) $ (99,476)
income ................................................
7,225
10,084
Net amount recognized ...................................
$ (78,387) $ (89,392)
Weighted-average assumptions
as of December 31:
Discount rate .........................................
Rate of compensation increase ...........
6.50%
3.00%
6.50%
3.00%
1999
1998
1997
Components of net periodic
benefit cost:
Service cost .....................
Interest cost ....................
Expected return on plan
assets ...........................
Amortization of prior
service cost ..................
Amortization of
transition asset ............
Amortization of losses ....
$ 554
6,501
$ 510
6,025
$ 107
4,261
(488)
(476)
(1,179)
65
(6)
250
86
(2)
62
106
(4)
—
Net periodic benefit cost ...........
$ 6,876
$ 6,205
$ 3,291
29
The projected benefit obligation, accumulated benefit obligation,
and fair value of plan assets for the German pension plans with
accumulated benefit obligations and projected benefit obligations in
excess of plan assets were $97,853,000, $96,601,000, and
$13,726,000,
as
$111,770,000, $110,871,000, and $15,227,000, respectively, as of
December 31, 1998.
of December31,1999
respectively,
and
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 March3, 1995, to purchase 1,522,000 shares of the
Company’s Common Stock. The options were fully vested on the date
of grant and expire March1,2000, with one-third exercisable at $18.31,
one-third exercisable at $23.04, and one-third exercisable at $32.91.
Under the 1997 Stock Option Program, certain executive officers,
key employees, and consultants of the Company were granted options
on May21, 1998, to purchase 1,791,000 shares of the Company’s
Common Stock. The options were fully vested on the date of grant and
expire June1,2008, with one-third exercisable at $16.33, one-third at
$18.79, and one-third at $20.42.
Under the 1998 Stock Option Program, certain executive officers
and key employees were granted options on October6, 1998 to pur-
chase 1,065,000 shares of the Company’s Common Stock. The options,
which are exercisable at $8.40, vest evenly over a six-year period and
expire March16,2008. On October 8, 1999, an additional 852,000
options were granted. These options are exercisable at $23.00, vest
evenly over a six-year period and expire October 8, 2009.
Notes to Consolidated Financial Statements — December 31, 1999 (continued)
Vishay Intertechnology, Inc.
10. Stock Options (continued)
The following table summarizes the Company’s stock option activity (options in thousands):
1999
1998
1997
Weighted
Average
Exercise
Price
$ 17.94
23.00
8.40
—
8.40
18.99
20.74
Number of
Options
4,196
852
(59)
—
(35)
4,954
3,244
87
Number of
Options
1,522
2,856
—
(182)
—
4,196
3,132
904
Weighted
Average
Exercise
Price
$ 24.75
14.74
—
24.75
—
17.94
21.18
Number of
Options
1,522
—
—
—
—
1,522
1,522
—
Weighted
Average
Exercise
Price
$ 24.75
—
—
—
—
24.75
24.75
Outstanding at beginning of year ...............
Granted ........................................................
Exercised .....................................................
Forfeited .......................................................
Cancelled .....................................................
Outstanding at end of year .........................
Exercisable at end of year ..........................
Available for future grants ...........................
The following table summarizes information concerning stock options outstanding and exercisable at December 31, 1999 (options in thousands):
Options Outstanding
Options Exercisable
Range of Exercise Prices
Options Contractual Life
Weighted
Average
Remaining
Number of
$8.40
$16.33 - $20.42
$23.00
$23.04 - $32.19
Total
30
971
2,238
852
893
4,954
8.76
6.75
9.77
0.16
6.47
Weighted
Average
Exercise
Price
$ 8.40
18.47
23.00
27.98
18.99
Weighted
Average
Exercise
Price
$ 8.40
18.47
–
27.98
20.74
Number of
Options
113
2,238
–
893
3,244
The following is provided to comply with the disclosure requirements of SFAS 123. If compensation cost for the Company’s stock option
programs had been determined using the fair-value method prescribed by SFAS 123, the Company’s results for the year ended December31, 1999
and 1998 would have been reduced to the proforma amounts indicated below (in thousands, except per share amounts):
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
1999
$ 82,103
0.97
0.96
1998
$ (1,906)
(0.02)
(0.02)
The weighted average fair value of the options granted was estimated using the Black-Scholes option pricing model, with the assumptions
presented below. All options granted in 1999 had an exercise price equal to the market value and a weighted average fair value of $9.31. For options
granted in 1998 with an exercise price equal to the market value, the weighted average fair value was $5.22 and the weighted average exercise price
was $11.61. For options granted in 1998 with an average exercise price greater than the market value, the weighted average fair value was $5.78
and the weighted average exercise price was $20.70.
1999
1998
1998 Stock
Option Progam
1998 Stock
Option Program
1997 Stock
Option Program
Expected dividend yield
Risk-free interest rate
Expected volatility
Expected life (in years)
–
6.0%
51.3%
4.5
–
4.2%
48.3%
4.5
–
5.7%
48.3%
8
Notes to Consolidated Financial Statements — December 31, 1999 (continued)
Vishay Intertechnology, Inc.
11. Leases
13. Current Vulnerability Due to Certain
Total rental expense under operating leases was $21,390,000,
$23,703,000, and $9,413,000 for the years ended December 31, 1999,
1998, and 1997, respectively.
Future minimum lease payments for operating leases with initial
or remaining noncancelable lease terms in excess of one year are as
follows: 2000—$15,213,000; 2001—$12,237,000; 2002—$11,435,000;
2003—$10,507,000; 2004—$11,797,000; thereafter—$54,318,000.
12. Financial Instruments
The Company uses financial instruments in the normal course of
its business, including derivative financial instruments, for purposes
other than trading. These financial instruments include debt and interest
rate swap agreements. The notional or contractual amounts of these
commitments and other financial instruments are discussed below.
Concentration of Credit Risk
Financial instruments with potential credit risk consist principally
of accounts receivable. Concentrations of credit risk with respect to
receivables are limited due to the Company’s large number of custom-
ers and their dispersion across many countries and industries. At
December31, 1999 and 1998, the Company had no significant concen-
trations of credit risk.
Interest Rate Swap Agreements
In August 1998, the Company entered into six interest rate swap
agreements with a total notional amount of $300,000,000 to manage
interest rate risk related to its multicurrency revolving line of credit.
These interest rate swap agreements require the Company to make
payments to the counterparties at the fixed rate stated in the agree-
ments, and in return to receive payments from the counterparties at
variable rates. These interest rate swap agreements mature in August
2003. The variable rates are based on USD-LIBOR-BBA rates. In
November 1999, the Company entered into two three-month interest
rate swap agreements with a total notional amount of $300,000,000.
These interest rate swap agreements require the Company to make
payments to the counterparties on February 29, 2000 at the three-month
USD-LIBOR-BBA rate as of November 29, 1999 less 0.16% and to
receive monthly payments from the counterparties at the monthly USD-
LIBOR-BBA rate. At December 31, 1999 and 1998, the Company paid
a weighted average fixed rate of 5.61% and 5.77%, respectively, and
received a weighted average variable rate of 6.49% and 5.25%, respec-
tively. The fair value of the interest rate swap agreements, based on
current market rates, approximated a net receivable of $8,714,000 and
a net payable of $7,572,000 at December 31, 1999 and 1998, respec-
tively.
Foreign Currency Forward Exchange Contracts
In September 1999, a subsidiary of the Company entered into
foreign currency forward exchange contracts to manage exposure
related to certain foreign currency commitments and balance sheet
positions. At December 31, 1999, the notional amount of outstanding
foreign currency forward exchange contracts was $6,438,000. All of the
total outstanding contracts at December 31, 1999 were to hedge yen
denominated commitments from customers in Japan.
Cash and Cash Equivalents, Notes Payable, and Long-Term Debt
The carrying amounts reported in the consolidated balance
sheets approximate fair value.
Concentrations
Sources of Supply
Although most materials incorporated in the Company’s products
are available from a number of sources, certain materials (particularly
tantalum and palladium) are available only from a relatively limited
number of suppliers. Tantalum, a metal, is the principal material used in
the manufacture of tantalum capacitor products. It is purchased in
powder form primarily under annual contracts with domestic and foreign
suppliers at prices that are subject to periodic adjustment. The Com-
pany 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 there is
currently a surplus of tantalum ore reserves and a sufficient number of
tantalum processors relative to foreseeable demand. The tantalum
required by the Company has generally been available in sufficient
quantities to meet its requirements. However, the limited number of
tantalum powder suppliers could lead to increases in tantalum prices
that the Company may not be able to pass on to its customers. Palladium
is used to produce multi-layer ceramic capacitors. Palladium is primarily
purchased on the spot and forward markets, depending on market
conditions. Palladium is considered a commodity and is subject to price
volatility. The price of palladium fluctuated in the range of approximately
$127 to $444 per troy ounce during the three years ended Decem-
ber31,1999, and had increased to $670 per troy ounce as of Febru-
ary28, 2000. Palladium is currently found in South Africa and Russia.
Due to various factors, the Company believes there may be a short-term
shortage of palladium which may affect both the cost of palladium and
the Company’s plans 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 incen-
tive programs have contributed substantially to the growth and profit-
ability of the Company. The Company might be materially and adversely
affected if these incentive programs were no longer available to the
Company or if events were to occur in the Middle East that materially
interfered with the Company’s operations in Israel.
14. Business Segment and Geographic Area Data
Vishay designs, manufactures, and markets electronic compo-
nents that cover a wide range of products and technologies. The
Company has two reportable segments: Passive Electronic Compo-
nents (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 ca-
pacitors 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 intan-
gibles and special charges. The accounting policies of the business
segments are the same as those described in the summary of significant
31
Notes to Consolidated Financial Statements — December 31, 1999 (continued)
Vishay Intertechnology, Inc.
accounting policies (see Note 1). The operating results of Actives reflect
the acquisition of TEMIC as of March 2, 1998 and the acquisition of
LPSC as of July 1, 1997. Business segment assets are the owned or
allocated assets used by each business.
The corporate component of operating income represents corpo-
rate selling, general, and administrative expenses. Corporate assets
include corporate cash, property, plant, and equipment, and certain
other assets.
Business Segment Information (In thousands)
1999
1998
1997
Net Sales:
Passives ....................... $ 1,008,266
751,825
Actives .........................
$ 1,027,902 $ 1,086,929
38,290
544,843
$ 1,760,091
$ 1,572,745 $ 1,125,219
Operating Income:
Passives ....................... $ 104,655
119,510
Actives .........................
(18,061)
Corporate .....................
—
Unusual items ..............
Purchased research
$ 114,747 $ 138,185
2,959
(10,821)
(14,503)
51,516
(17,465)
(29,301)
and development ...
—
(13,300)
—
Amortization of
goodwill ...................
(12,360)
(12,272)
(7,218)
$ 193,744
$ 93,925 $ 108,602
Depreciation Expense:
32
Passives ....................... $ 75,798
49,826
Actives .........................
223
Corporate .....................
$ 74,173 $ 69,716
3,409
204
40,210
209
$ 125,847
$ 114,592 $ 73,329
Total Assets:
Passives ....................... $ 1,429,177
882,296
Actives .........................
12,308
Corporate .....................
$ 1,693,554 $ 1,506,191
211,684
1,773
750,875
18,315
Geographic Area Information (In thousands)
1999
1998
1997
Net Sales:
United States ............... $ 706,049
574,629
Germany ......................
273,921
Asia Pacific ..................
88,975
France ..........................
116,517
Other ............................
$ 659,845 $ 624,377
249,298
44,647
114,704
92,193
519,114
185,784
119,992
88,010
$ 1,760,091
$ 1,572,745 $ 1,125,219
Property, Plant, and
Equipment (Net):
United States ............... $ 333,594
127,727
Germany ......................
268,916
Israel ............................
97,060
Asia Pacific ..................
25,758
France ..........................
77,490
Other ............................
$ 352,007 $ 205,784
110,827
271,180
42,522
43,071
35,758
153,423
283,691
67,051
45,461
95,434
$ 930,545
$ 997,067 $ 709,142
15. Earnings Per Share
Statement of Financial Accounting Standards No.128, Earnings
Per Share, requires net earnings per share to be presented under two
calculations, basic earnings per share and diluted earnings per share.
Basic earnings per share is computed using the weighted average
number of common shares outstanding during the periods presented.
Diluted earnings per share is computed using common and dilutive
potential common shares outstanding during the periods presented.
The Company’s potential common shares consist primarily of stock
options granted under the Company’s 1995, 1997 and 1998 stock option
plans (see Note 10) and stock appreciation rights issued in connection
with the LPSC acquisition (see Notes 2, 6 and 17).
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share amounts):
Year ended December 31
1999
1998
1997
$ 2,323,781
$ 2,462,744 $ 1,719,648
Numerator:
Net Income ...............................
$ 83,237
$ 8,212 $ 53,302
Capital Expenditures:
Passives ....................... $ 52,903
61,409
Actives .........................
5,326
Corporate .....................
$ 87,168 $ 69,617
8,285
172
59,969
4,545
$ 119,638
$ 151,682 $ 78,074
The amount of investment in equity method investees included in
the Actives total assets above was $12,495,000, $10,090,000 and
$8,854,000 for 1999, 1998 and 1997, respectively.
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:
Denominator:
Denominator for basic
earnings per share—
weighted average shares ...
Effect of dilutive securities:
Employee stock options .....
Stock appreciation rights ....
Other ....................................
84,452
84,443
84,418
539
378
119
–
–
88
88
–
–
185
185
Dilutive potential common
shares ..................................
1,036
Denominator for diluted
earnings per share—
adjusted weighted
average shares ...................
85,488
84,531
84,603
Basic earnings per share ...........
$ 0.99
$ 0.10
$ 0.63
Diluted earnings per share ........
$ 0.97
$ 0.10
$ 0.63
Notes to Consolidated Financial Statements — December 31, 1999 (continued)
Vishay Intertechnology, Inc.
For the year ended December 31, 1999, options to purchase 477,000 shares of Common Stock at $32.91 per share were not included in the computation of
diluted earnings per share because the options’ exercise prices were greater than the average market price of the common shares. Options to purchase 3,433,000
shares of Common Stock at prices ranging from $ 16.33 to $ 32.91 per share were outstanding during 1998, and options to purchase 1,523,000 shares at prices ranging
from $18.31 to $32.91 per share outstanding during 1997, were not included in the computation of diluted earnings per share because the options’ exercise prices were
greater than the average market price of the common shares.
16. Summary of Quarterly Financial Information (Unaudited)
Quarterly financial information for the years ended December31, 1999 and 1998 is as follows (in thousands, except per share amounts):
First Quarter
1999
1998
Second Quarter
1998
1999
Third Quarter
1999
1998
Fourth Quarter
1998
1999
Total Year
1999
1998
Net sales ........................... $ 423,058
Gross profit .......................
99,890
Net earnings (loss) ...........
Basic earnings (loss)
818(1)
$ 348,744
85,204
16,536(2)
$ 425,323 $ 412,844
102,392
16,766
108,681
20,181
$ 443,711
119,633
25,736
$ 399,499
97,595
12,121
$ 467,999 $ 411,658
98,447
(37,211)(3)
132,182
36,502
$ 1,760,091 $ 1,572,745
383,638
8,212
460,386
83,237
per share(4)
................................. $ .01(1) $ .20(2)
$ .24
$ .20
$ .30
$ .14
$ .43 $ (.44)(3) $ .99 $ .10
Diluted earnings (loss)
per share(4)
................................. $ .01(1) $ .20(2)
$ .24
$ .20
$ .30
$ .14
$ .42 $ (.44)(3) $ .97 $ .10
(1) The sale of Nicolitch, S.A. and a tax rate change in Germany reduced net earnings by $14,562,000 or $0.17 per share in the first quarter of 1999.
(2) A forward exchange contract loss ($6,269,000) reduced net earnings by $3,924,000 or $0.05 per share in the first quarter of 1998.
(3) Charges for restructuring ($6,244,000), impairment losses ($23,057,000), purchased research and development ($13,300,000), reduction of a deferred tax
asset ($10,000,000), and other noncash charges ($1,815,000) reduced net earnings by $51,411,000 or $.61 per share in the fourth quarter of 1998.
(4) Adjusted to give retroactive effect to a five-for-four stock split in June 1999 and a 5% stock dividend paid in June 1998.
17. Subsequent Events
On January 24, 2000, the Company exercised its right to call the stock appreciation rights (“SARs”) issued in connection with its acquisition of LPSC (see
Notes 2 and 6). Based on the call price of $39.64 per share and the average closing price of Vishay shares for thirty days prior to January 24, 2000, the Company
would have to issue 1,529,000 shares of Vishay Common Stock to settle the SARs.
33
On March 15, 2000, the Company and Lite-On JV Corporation (“Lite-On Group”) entered into a Memorandum of Understanding for the sale of Vishay’s
65% interest in LPSC to the Lite-On Group for consideration consisting of cash and the assignment or transfer to Vishay of the Lite-On Group’s rights under
the SARs. The Lite-On Group currently owns the remaining 35% interest in LPSC. Based on the March 21, 2000 closing price of Vishay stock of $59, the
accounting for the disposition of Vishay’s interest in LPSC would have a minor downward effect on Vishay’s earnings. The actual effect on earnings from the
disposition of LPSC will depend on the value of Vishay stock at the time the parties execute final documentation. The closing is expected to occur before
September 30, 2000. During the time prior to the closing, the parties will prepare additional documentation relating to the transaction, and the Lite-On Group
will arrange its financing for the cash portion of the purchase price. The Company and the Lite-On Group have agreed to defer the actual redemption of the SARs
pending the execution of certain documentation relating to the sale of Vishay’s interest in LPSC to the LIte-On Group. No effects of these transactions are
reflected in the Company’s financial statements for the year ended December 31, 1999.
Report of Independent Auditors
Board of Directors and Stockholders
Vishay Intertechnology, Inc.
We have audited the accompanying consolidated balance sheets of Vishay Intertechnology, Inc. as of December 31, 1999 and 1998, and the related
consolidated statements of operations, cash flows, and stockholders’ equity for each of the three years in the period ended December31, 1999. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Vishay
Intertechnology, Inc. at December31, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally accepted in the United States.
Philadelphia, Pennsylvania
February 2, 2000, except for Note 17,
as to which the date is March 21, 2000
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Vishay Intertechnology, Inc.
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 imple-
mentation was reflected in increases in the Company’s sales and in the
decline in selling, general, and administrative expenses as a percent-
age of the Company’s sales.
However, beginning with the last quarter of 1995 and through
1998, the Company experienced a decline in demand for its commodity-
related products (fixed resistors, MLCC and tantalum capacitors) which
accounted for approximately 50% of the Company’s revenues during
that time. Such decline in demand resulted in a decrease in revenues,
earnings and backlogs of these products.
In order to address the slowdown in demand and price erosion
resulting from an oversupply of tantalum and multi-layer ceramic chip
capacitors, the Company implemented a restructuring program begin-
ning in 1996 that included the downsizing and closing of manufacturing
facilities in North America and Europe. In connection with the restruc-
turing, 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 1990s, the Company began to enter into the active
components business. In July 1997, the Company purchased a 65%
interest in LPSC, a Taiwan-based company that is a major supplier of
discrete active electronic components in Asia. In 1998, the Company
acquired the Semiconductor Business Group of TEMIC, which included
Telefunken and 80.4% of Siliconix, producers of transistors, diodes,
optoelectronics, and power and analog switching integrated circuits.
Since the third quarter of 1999, the Company has experienced
increasing demand for its products, including both passive and active
electronic components. The Company is expanding capacity in all of its
major product lines in order to satisfy this demand. In some cases, the
Company has been able to increase pricing for its products because of
tight supply, reversing the price erosion experienced in prior years. The
Company attributes the increased demand for its products to the
continuing growth in the wireless telecommunication market, particu-
larly cell phones, and to the increasing use of embedded computing
devices in a wide range of consumer and commercial products.
The Company’s strategy contemplates transferring some of its
manufacturing operations from countries with high labor costs and tax
rates, such as the United States, France and Germany, to Israel,
Mexico, Portugal, the Czech Republic, Taiwan and the People’s Repub-
lic of China in order to benefit from lower labor costs and, in the case of
Israel, to take advantage of various government incentives, including
government grants and tax incentives. Notwithstanding the current
favorable market conditions, the Company intends to continue to ex-
plore and implement opportunities for cost efficiencies in its manufac-
turing operations.
The Company realizes approximately 70.9% of its revenues from
customers outside the United States. As a result, fluctuations in cur-
rency 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 denomi-
nated in U.S. Dollars, including other income as it relates to foreign
exchange gains or losses. Generally, in order to minimize the effect of
currency fluctuations on profits, the Company endeavors to:
1. borrow money in the local currencies and markets where it
conducts business; and
2. minimize the time for settling intercompany transactions.
In connection with its day-to-day operations, the Company gen-
erally does not purchase foreign currency exchange contracts or other
derivative instruments to hedge foreign currency exposures. In Septem-
ber 1999, a subsidiary of the Company entered into foreign currency
forward exchange contracts to manage exchange rate exposure on
certain foreign currency denominated transactions.
As a result of the increased production by the Company’s opera-
tions in Israel over the past several years, the low tax rates in Israel (as
compared to the statutory rate in the United States) have had the effect
of increasing the Company’s net earnings. The more favorable Israeli
tax rates are applied to specific approved projects and are normally
available for a period of ten years or, if the investment in the project is
over $20 million, for a period of 15 years, which has been the case for
most of the Company’s projects in Israel since 1994. New projects are
continually being introduced. In addition, the Israeli government offers
certain incentive programs in the form of grants designed to increase
employment in Israel. However, the Israeli government has recently
scaled back or discontinued some of its incentive programs. Accord-
ingly, 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
the year ended Decem-
products sold, were $14,256,000
ber31,1999, as compared to $13,116,000 for the prior year. If the
Israeli government continues its grant and incentive programs, future
benefits offered to the Company by the Israeli government will likely
depend on the Company’s continuing to increase capital investment and
the number of Company employees in Israel.
for
Results of Operations
Income statement captions as a percentage of sales and the
effective tax rates were as follows:
Year ended December 31
1999
1998
1997
Costs of products sold ..............
Gross profit ................................
Selling, general, and
administrative expenses ......
Operating income ......................
Earnings before income taxes
and minority interest ............
Effective tax rate ........................
Net earnings ...............................
73.8%
26.2
75.6% 76.3%
23.7
24.4
14.5
11.0
7.7
27.4
4.7
14.9
6.0
2.7
71.8
0.5
12.2
9.7
8.0
38.1
4.7
34
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Vishay Intertechnology, Inc.
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% fromthe prior year. The increase in net sales
relates primarily to the results of TEMIC, which was acquired
March2,1998. Net sales of TEMIC for the year ended Decem-
ber31,1999 were $673,300,000 as compared to $474,188,000 in-
cluded in the Company’s reported sales for the ten months ended
December 31, 1998. Exclusive of TEMIC, net sales would have de-
creased 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 busi-
ness net sales were $751,825,000 for the year ended December 31,
1999 as compared to $544,843,000 for the prior-year period. The 1999
sales of the active business reflect increased demand for product,
particularly in telecommunication and computer applications and re-
duced price erosion on its products.
Costs of Products Sold
Costs of products sold for the year ended December 31, 1999
were 73.8% of net sales,as compared to 75.6% for the prior year.
Gross profit, as a percentage of net sales, for the year ended Decem-
ber31, 1999 increased from the comparable prior-year period mainly
due to the results of TEMIC. TEMIC reported gross profit margins of
33.3% for the year ended December 31, 1999 as compared to 30.1% for
the ten months ended December 31, 1998, mainly due to higher
business volume and manufacturing efficiencies gained from the full
utilization of existing manufacturing capacity.
The active components business gross margins were 31.4% for
the year ended December 31, 1999 as compared to 27.9% for the prior-
year period. The increase is due to the Siliconix operation, where gross
margins have increased substantially as a result of increased product
demand, stronger capacity utilization, an improved product mix and
increased fab efficiencies.
The passive components business gross profit margins were
22.4% for the year ended December 31, 1999 as compared to 22.5% for
the prior year period. Profitability for the passive components business
was negatively affected by price erosion, which began in the second
quarter of 1998. However, beginning in the third quarter of 1999, most
of the Company’s product lines have seen an increase in demand and
the average selling prices have stopped declining, with prices actually
increasing in some instances.
for
Israeli government grants, recorded as a reduction of costs of
products sold, were $14,256,000
the year ended Decem-
ber31,1999, 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 December31, 1999 relating to Israeli gov-
ernment grants was $50,462,000 as compared to $59,264,000 at De-
cember 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 De-
cember 31, 1999 from the prior year. Bank borrowings related to the
TEMIC acquisition were outstanding for twelve months during 1999
compared to ten months during 1998. Also during 1999, interest rates
increased as compared to the prior year.
Other Income
Other income decreased by $3,496,000 for the year ended
December 31, 1999 as compared to the prior year. Included in the
results for the year ended December 31, 1999 is a noncash 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 Decem-
ber31,1998 is 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
was27.4% 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 Decem-
ber31,1999 would have been 23.2%. The higher tax rate for the year
ended December 31, 1998 was primarily due to the non-tax deductibility
of the in-process research and development expense in the fourth
quarter 1998 and a $10,000,000 increase in a valuation allowance for a
deferred tax asset for net operating loss 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 innet
earnings of $12,469,000 and $15,166,000 for the yearsended Decem-
ber 31, 1999 and 1998, respectively. The more favorable Israeli tax
rates are applied to specific approved projects and are normally avail-
able for a period of ten or fifteen years.
Year ended December 31, 1998 compared to
Year ended December 31, 1997
Net Sales
Net sales for the year ended December 31, 1998 increased
$447,526,000 or 39.8% fromthe prior year. The increase in net sales
related primarily to the acquisition of TEMIC, which became effective
March 1, 1998. Net sales of TEMIC for the ten months ended December
31, 1998 included in the Company’s reported sales were $474,188,000.
LPSC was acquired by Vishay effective July 1, 1997. LPSC’s sales for
the year ended December 31,1998 were $70,655,000 compared to
35
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Vishay Intertechnology, Inc.
$38,290,000 for the six months ended December 31, 1997. Exclusive of
TEMIC and LPSC, net sales would have decreased by $97,317,000 or
8.6%. The strengthening of the U.S. Dollar against foreign currencies for
the year ended December 31, 1998 in comparison to the prior year
resulted in decreases in reported sales of $16,131,000. Moreover, the
Company’s net sales of passive components and semiconductor com-
ponents were negatively affected by substantial price erosion resulting
from oversupply of tantalum and multi-layer chip capacitors and the
economic downturn in Asia.
Costs of Products Sold
Costs of products sold for the year ended December 31, 1998
were 75.6% of net sales,as compared to 76.3% for the prior year.
Gross profit, as a percentage of net sales, for the year ended December
31, 1998 increased from the comparable prior-year period mainly due to
the acquisition of TEMIC. TEMIC reported gross profit margins of 30.1%
for the ten months ended December 31, 1998. The passive components
business gross profit margins were 22.5% for the year ended December
31, 1998 as compared to 24.0% for the prior year, reflecting a weakness
in the passive components business. Profitability for the passive com-
ponents business was negatively affected by price erosion from an
oversupply of tantalum and multi-layer chip capacitors and the de-
pressed Asian market. The results for semiconductor components were
also negatively affected by a decrease in demand for products in the
semiconductor industry, adjustments of high inventory levels at distribu-
tors, the depressed Asian market, andsubstantial price erosion.
Israeli government grants, recorded as a reduction of costs of
products sold, were $13,116,000 for the year ended December 31,
1998, as compared to $11,352,000 for the prior year. Deferred income
at December31, 1998 relating to Israeli government grants was
$59,264,000 as compared to $59,300,000 at December 31, 1997.
36
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses for the year ended
December 31, 1998 were 14.9% of net sales,as compared to 12.2% for
the prior year. The increased selling, general, and administrative ex-
penses were primarily due to the acquisition of TEMIC, for which selling,
general, and administrative expenses were 19.6% for the ten months
ended December 31, 1998.
Unusual Items
Product technology is the technology behind the development of prod-
ucts. TEMIC has three primary product categories, (i)Power MOS,
(ii)Power IC, and (iii)Standard Products. Introduction of the new pro-
cess technologies, if successful, was expected to improve the efficiency
and effectiveness of TEMIC’s MOSFET products and introduce new IC
technology which would reduce die size by approximately 66%. This
would lower production costs per unit and increase margins. Introduc-
tion of the product technologies, if successful, was expected to optimize
the performance of certain MOSFETs, diodes and power ICs and
introduce new applications for certain of TEMIC’s products. These
research and development projects were expected to reach completion
and begin generating revenues during periods ranging from 1999 to
2003. At the acquisition date, TEMIC’s research and development
projects ranged in completion from approximately 1% to 86%, with total
continuing research and development commitments to complete the
projects of approximately $7.4 million.
The value assigned to purchased in-process research and devel-
opment was determined by estimating the costs to develop TEMIC’s
purchased in-process technology into commercially viable products,
estimating the resulting net cash flows from such projects, and discount-
ing the net cash flows back to their present values. The revenue
estimates used to value the in-process research and development were
based on estimates of the relevant market sizes and growth factors,
expected trends in technology and the nature and expected timing of
new product introductions by the Company and its competitors. The
estimates for costs of products sold, research and development, selling,
general, and administrative expenses and income taxes were calcu-
lated as a percentage of revenue and were based on historical amounts
and were adjusted to reflect competition and advancing technology in
the industry.
The rates utilized to discount the net cash flows to their present
value were based on weighted average cost of capital and venture
capital rates of return. Given the nature of the risks associated with the
estimated growth, profitability and development projects, a discount
rate of 20% was deemed appropriate for TEMIC’s in-process projects.
This discount rate was intended to be commensurate with the specific
risks of achieving technological feasibility and the uncertainties in the
economic estimates described above. The estimates used by the
Company in valuing in-process research and development were based
on assumptions the Company believes to be reasonable but which are
inherently uncertain and unpredictable.
The Company incurred unusual items of $29,301,000 for the year
ended December 31, 1998. Approximately $23,057,000 of these items
related to impairment losses in connection with certain joint ventures in
China and Japan. The remaining $6,244,000 of unusual items related to
the Company’s restructuring of European operations ($5,944,000) and
closing of two U.S. sales offices ($300,000). See Note 3 to the Consoli-
dated Financial Statements for additional information on the Company’s
impairment losses and restructuring programs.
Interest Expense
Interest costs increased by $30,219,000 for the year ended
December 31, 1998 from the prior year due to the increase in bank
borrowings necessary to fund the TEMIC and LPSC acquisitions. The
Company had net borrowings of $444,000,000 and $130,000,000,
respectively,from a group of banks to finance the acquisitions of
TEMIC and LPSC.
Purchased In-Process Technology
Other Income
In connection with the acquisition of TEMIC, the Company ex-
pensed $13.3 million representing purchased in-process technology
that had not yet reached technological feasibility and had no alternative
future use (see Note2 to the Consolidated Financial Statements).
The in-process technology acquired in the TEMIC acquisition
was segmented into two categories, process technology and product
technology. Process technology is the process by which multiple prod-
ucts can be manufactured. Three separate process technologies were
identified, (i)Bondwireless, (ii)178M Cell, and (iii)PIC.8 micron 15V.
Other income decreased by $2,019,000 for the year ended
December 31, 1998 as compared to the prior year primarily due to
reduced foreign exchange gains. Foreign exchange gains for the year
ended December 31, 1998 were $495,000 compared to $3,657,000 for
the year ended December 31, 1997. The Company also incurred losses
of $6,269,000 and $5,295,000 in 1998 and 1997, respectively, relating
to a forward exchange contract which was entered into to set the
purchase price in connection with the TEMIC acquisition, since the
purchase price was denominated in German Marks and payable in U.S.
Dollars.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Vishay Intertechnology, Inc.
Income Taxes
The effective tax rate for the year ended December 31, 1998
was71.8% as compared to 38.1%for the prior year. The higher tax
rate for the year ended December 31, 1998 was primarily due to the
non-tax deductibility of the in-process research and development ex-
pense 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 innet
earnings of $15,166,000 and $10,685,000 for the yearsended Decem-
ber 31, 1998 and 1997, respectively. The more favorable Israeli tax
rates are applied to specific approved projects and are normally avail-
able for a period of ten or fifteen years.
Financial Condition and Liquidity
Cash flows from operations were $239,809,000 for the year
ended December 31, 1999 compared to $169,450,000 for the prior year.
The increase in cash flows from operations is primarily attributable to an
increase in net earnings for the year ended December 31, 1999 as
compared to the year ended December 31, 1998. Net purchases of
property and equipment for the year ended December 31, 1999 were
$119,638,000 compared to $151,682,000 in the prior year. The Com-
pany made $141,028,000 net payments on borrowings during 1999. Net
cash provided by financing activities of $450,408,000 for the year ended
December 31, 1998 reflects borrowings used to finance the acquisition
of TEMIC. See Notes 2 and 3 to the Consolidated Financial Statements
for discussion of restructuring costs paid during 1999.
The Company’s financial condition at December 31, 1999 is
strong, with a current ratio of 2.68 to 1. The Company’s ratio of long-term
debt, less current portion, to stockholders’ equity was .65 to 1 at
December 31, 1999 and .81 to 1 at December 31, 1998.
On March 2, 1998, the Company and certain of its subsidiaries
entered into a $1.1 billion multicurrency revolving credit agreement with
a group of banks that included an $825 million long-term revolving credit
and swing line facility and a $275 million short-term revolving credit
facility. On June, 1, 1999, the Company amended the two facilities. The
$825 million long-term facility matures on March 2, 2003, subject to
Vishay’s right to request year-to-year renewals. The short-term facility
now provides for a $100 million 364-day facility, which is available until
May 30, 2000. Borrowings under the two facilities bear interest at
variable rates based, at the option of Vishay, on the prime rate or a
eurocurrency rate and in the case of any swing line advance, the quoted
rate. The borrowings under the two facilities are secured by pledges of
stock in certain significant subsidiaries and indirect subsidiaries of
Vishay and guaranties by certain significant subsidiaries. The Company
is required to pay facility fees on the two facilities. The credit facilities
restrict the Company from paying cash dividends, and require the
Company to comply with certain financial covenants. See Note 5 to the
Consolidated Financial Statements for additional information.
Management believes that available sources of credit, together
with cash expected to be generated from operations, will be sufficient to
satisfy the Company’s anticipated financing needs for working capital
and capital expenditures during the next twelve months.
Year 2000 Compliance
In prior years, the Company discussed the nature and
progress of its plans to become Year 2000 compliant. Each of the
Company’s divisions implemented a Year 2000 program designed to
address the Year 2000 issue, of which all programs are now complete.
The Company’s total cost for these Year 2000 programs approximated
$1,400,000. As a result of these efforts, the Company has experienced
no significant disruptions in mission-critical information technology and
non-information technology systems and believes those systems suc-
cessfully responded to the Year 2000 date change. In addition, the
Company has not experienced any adverse effects with any of its third-
party vendors, suppliers or customers. While the Company is not aware
of, and does not expect that it will experience, any material problems
related to this issue, it will continue to monitor its mission-critical
computer applications and those of its suppliers, vendors and custom-
ers throughout the year 2000 to ensure that any latent Year 2000
matters that may arise are addressed promptly.
Euro Conversion
On January 1, 1999, 11 of the 15 member countries of the
European Union adopted the euro as their common legal currency and
established fixed conversion rates between their existing sovereign
currencies and the euro. The Company is currently evaluating issues
raised by the introduction and initial implementation of the euro on
January 1, 2002. The Company does not expect costs of system
modifications to be material, nor does it expect the introduction and use
of theeuro 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.
37
Market Risk Disclosure
The Company’s cash flows and earnings are subject to fluctua-
tions 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 instru-
ments. The Company’s policy does not allow speculation in derivative
instruments for profit or execution of derivative instrument contracts for
which there are no underlying exposures. The Company does not use
financial instruments for trading purposes and is not a party to any
leveraged derivatives. The Company monitors its underlying market risk
exposures on an ongoing basis and believes that it can modify or adapt
its hedging strategies as needed.
this
the outstanding balance under
The Company is exposed to changes in U.S. Dollar LIBOR
interest rates on its floating rate revolving credit facility. At Decem-
ber31, 1999,
facility was
$635,215,000. On a selective basis, the Company from time to time
enters into interest rate swap or cap agreements to reduce the potential
negative impact increases in interest rates could have on its outstanding
variable rate debt. The impact of interest rate instruments on the
Company’s results of operations in each of the three years ended
December 31, 1999 was not significant. See Notes 5 and 12 to the
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Vishay Intertechnology, Inc.
These interest rate swap agreements require the Company to make
payments to the counterparties at variable rates. These interest rate
swap agreements mature in August 2003. The variable rates are based
on USD-LIBOR-BBA rates. In November 1999, the Company entered
into two three-month interest rate swap agreements with a total notional
amount of $300,000,000. These interest rate swap agreements require
the Company to make payments to the counterparties on February 29,
2000 at the three-month USD-LIBOR-BBA rate as of November 29,
1999 less 0.16% and receive monthly payments from the counterparties
at the monthly USD-LIBOR-BBA rate. At December 1999 and 1998, the
Company paid a weighted average fixed rate of 5.61% and 5.77%,
respectively, and received a weighted average variable rate of 6.49%
and 5.25%, respectively. The fair value of the interest rate swap
agreements, based on current market rates, approximated a net receiv-
able of $8,714,000 and a net payable of $7,572,000 at Decem-
ber31,1999 and 1998, 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 continues to
reduce its exposure to foreign currencies by borrowing funds in local
currency to balance its foreign assets and liabilities. The Company, in
most locations, has introduced a “netting” policy where subsidiaries pay
all intercompany balances within thirty days.
In September 1999, a subsidiary of the Company entered into
foreign currency forward exchange contracts to manage the effect of
exchange rate changes on certain foreign currency denominated trans-
actions. At December 31, 1999, the notional amount of outstanding
foreign currency forward exchange contracts was $6,438,000. All of the
total outstanding contracts at December 31, 1999 were to hedge yen
denominated commitments from customers in Japan.
In the normal course of business, the financial position of the
Company is routinely subjected to a variety of risks, including market
risks associated with interest rate movements, currency rate move-
ments on non-U.S. Dollar denominated assets and liabilities and
collectibility of accounts receivable. The Company does not anticipate
material losses in these areas.
Safe Harbor Statement
38
From time to time, information provided by the Company, includ-
ing but not limited to statements in this report, or other statements made
by or on behalf of the Company, may contain “forward-looking” informa-
tion within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such statements
involve a number of risks and uncertainties. The Company’s actual
results could differ materially
the
forward-looking statements. The cautionary statements set forth below
identify important factors that could cause actual results to differ mate-
rially from those in any forward-looking statements made by or on behalf
of the Company.
those discussed
from
in
Changes in Product Demand, Competition, Backlog
• 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.
• A slowdown in demand for passive electronic components or
recessionary trends in the global economy in general or in
specific countries or regions where the Company sells the bulk
of its products, such as the United States, Germany, France or
the Pacific Rim, could adversely impact the Company’s results
of operations.
• The Company operates in a highly competitive environment,
which includes significant competitive pricing pressures and
intense competition for entry into new markets.
• 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.
Product Development, Business Expansion
• The Company’s future operating results are dependent, in part,
on its ability to develop, produce and market new and innova-
tive 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 com-
plex process, including the need for the Company to timely
bring to market new products and applications to meet custom-
ers’ changing needs.
• The Company’s historic growth in revenues and net earnings has
resulted in large part from its strategy to expand through acquisi-
tions. 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.
• The Company may have difficulty expanding its product lines to
satisfy the current unusually strong demand for its products.
Factors, which could limit such expansion, include delays in
procurement of manufacturing equipment, shortages of skilled
personnel and capacity constraints at the Company’s facilities.
• The Company is currently benefiting from an acute atypical
shortage of the Company’s products. This shortage has en-
abled the Company to increase prices for certain products and
thus increase gross margins. Any drop in demand or increase
in supply due to competitors’ expansion could cause a dramatic
drop in average sales prices causing a drop in gross margins.
Foreign Operations and Sales
• Approximately 71% of the Company’s revenues are derived
from sales to customers outside the United States. As a result,
currency exchange rate fluctuations, inflation, changes in mon-
etary policy and tariffs, potential changes in laws and regula-
tions affecting the Company’s business in foreign jurisdictions,
trade restrictions or prohibitions, intergovernmental disputes,
increased labor costs and reduction or cancellation of govern-
ment grants, tax benefits or other incentives could impact the
Company’s results of operations.
• Specifically, as a result of the increased production by the
Company’s operations in Israel over the past several years, the
low tax rates in Israel, as compared to the statutory rates in the
United States, 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
Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
Vishay Intertechnology, Inc.
4.
5.
increases in the Company’s debt levels or its cost of
borrowings;
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.
Common Stock Market Prices
Calendar 1999
Low
High
Calendar 1998
Low
High
First Quarter ......................
Second Quarter ................
Third Quarter ....................
Fourth Quarter ..................
$ 12.40
$ 21.06
$ 26.25
$ 32.00
$ 8.90
$ 11.70
$ 18.06
$ 21.25
$ 18.34
$ 18.76
$ 14.70
$ 13.75
$ 15.00
$ 13.81
$ 8.00
$ 7.35
The Company’s Common Stock is listed on the New York Stock
Exchange under the symbol VSH. The following table sets forth the high
and low sales prices for the Company’s Common Stock as reported on
the New York Stock Exchange Composite Tape for the quarterly periods
within the 1999 and 1998 calendar years indicated. Stock prices have
been restated to reflect stock dividends and stock splits. The Company
does not currently pay cash dividends on its capital stock. Its policy is to
retain earnings to support the growth of the Company’s business and the
Company does not intend to change this policy at the present time. In
addition, the Company is restricted from paying cash dividends under
the terms of the Company’s revolving credit agreements. See Note 5 to
the Consolidated Financial Statements. Holders of record of the
Company’s Common Stock
totaled approximately 1,867 at
March28,2000.
At March 28, 2000, the Company had outstanding 10,369,932
shares of Class B Common Stock, par value $.10 per share (the “Class
B Stock”), each of which entitles the holder to ten votes. The Class B
Stock generally is not transferable and there is no market for those
shares. The Class B Stock is convertible, at the option of the holder, into
Common Stock on a share-for-share basis. Substantially all of such
Class B Stock is owned by Dr. Felix Zandman, Mrs. Luella B. Slaner and
trusts for the benefit of Mrs. Slaner’s grandchildren, either directly or
beneficially. Dr. Felix Zandman is an executive officer and director of the
Company. Mrs. Luella B. Slaner is a director of the Company.
39
designed to increase employment in Israel. Any significant
increase in the Israeli tax rates or reduction or elimination of
any of the Israeli grant programs could have an adverse impact
on the Company’s results of operations.
Restructuring and Cost Reduction Activities
• 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,” 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
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 compo-
nents market at the time.
limit
• When the Company restructures its operations in response to
changing economic conditions, particularly in Europe, labor
unrest or strikes may occur, which could have an adverse effect
on the Company.
• The Company’s strategy also focuses on the reduction of
selling, general, and administrative expenses through the inte-
gration or elimination of redundant sales offices and adminis-
trative functions at acquired companies and achievement of
significant production cost savings through the transfer and
expansion of manufacturing operations to lower cost regions
such as Israel, Mexico, Portugal, the Czech Republic,
Taiwanand the People’s Republic of China. The Company’s
inability to achieve any of these goals could have an adverse
effect on the Company’s results of operations.
Raw Material Costs
• 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.
3.
the effects of quality deviations in raw materials, particu-
larly tantalum powder, palladium and ceramic dielectric
materials; and
the effects of significant price increases for tantalum or
palladium, or an inability to obtain adequate supplies of
tantalum or palladium from the limited number of suppliers.
Miscellaneous Factors
• The Company’s results may also be affected by a variety of
other factors, including:
1. possible environmental liability and redemption costs;
2.
legal proceedings and investigations;
3. possible challenges to the Company’s intellectual property
rights;
Financial Summary
Summary of Operations (in thousands, except per share amounts)
1999
1998
1997
1996
As of and for the Year ended December 31
Net sales ...................................................................................................
Costs of products sold .............................................................................
$ 1,760,091
1,299,705
$ 1,572,745
1,189,107
Gross profit ...........................................................................................
Selling, general, and administrative expenses ......................................
Amortization of goodwill ...........................................................................
Unusual items ...........................................................................................
Operating income .....................................................................................
Other income (expense):
Interest expense ...................................................................................
Other .....................................................................................................
Total other income (expense) ....................................................
Earnings before income taxes, minority interest, and cumulative
effect of accounting change ................................................................
Income taxes .............................................................................................
Minority interest ........................................................................................
Earnings before cumulative effect of accounting change .....................
Cumulative effect of accounting change .................................................
460,386
254,282
12,360
—
193,744
(53,296)
(5,737)
(59,033)
134,711
36,940
14,534
83,237
—
383,638
234,840
12,272
42,601
93,925
(49,038)
(2,241)
(51,279)
42,646
30,624
3,810
8,212
—
$ 1,125,219
$ 1,097,979
858,020
267,199
136,876
7,218
14,503
108,602
(18,819)
(222)
(19,041)
89,561
34,167
2,092
53,302
—
825,866
272,113
141,765
6,494
38,030
85,824
(17,408)
2,430
(14,978)
70,846
17,741
489
52,616
—
Net earnings .........................................................................................
$ 83,237
$ 8,212
$ 53,302
$ 52,616
Earnings per share:
Basic .....................................................................................................
Diluted ...................................................................................................
$ 0.99
$ 0.97
$ 0.10
$ 0.10
$ 0.63
$ 0.63
$ 0.62
$ 0.62
Shares used in computing earnings per share:
40
Basic .....................................................................................................
Diluted ...................................................................................................
84,452
85,488
84,443
84,531
84,418
84,603
84,421
84,478
Financial Data (in thousands, except ratios)
Cash and cash equivalents ......................................................................
$ 105,193
$ 113,729
$ 55,263
$ 20,945
Working capital .........................................................................................
Current ratio ..............................................................................................
Property and equipment — net ...............................................................
Capital expenditures ................................................................................
Depreciation and amortization .................................................................
Total assets ...............................................................................................
Long-term debt .........................................................................................
Stockholders’ equity .................................................................................
581,550
2.68
930,545
119,638
139,676
2,323,781
656,943
1,013,592
639,783
3.02
997,067
151,682
127,947
2,462,744
814,838
1,002,519
455,134
3.38
709,142
78,074
81,874
1,719,648
347,463
959,648
434,199
3.27
710,662
136,276
77,247
1,558,515
229,885
945,230
Note: This table should be read in conjunction with the related consolidated financial statements and accompanying notes and management’s discussion
and analysis of financial condition and results of operations. Includes the results of TEMIC from March 1, 1998, the results of Lite-On Power Semiconductor
Corporation from July 1, 1997, the results of Vitramon from July 1, 1994, the results of Roederstein from January 1, 1993 and the results of the businesses
acquired from Sprague Technologies, Inc. from January 1, 1992. Earnings per share amounts and weighted average shares outstanding have been retroactively
restated for stock dividends and stock splits. Basic and diluted earnings per share for 1993 includes $0.02 for the cumulative effect of an accounting change
for income taxes.
Vishay Intertechnology, Inc.
1995
1994
1993
1992
1991
1990
1989
As of and for the Year ended December 31
$ 1,224,416
$ 987,837
$ 856,272
$ 664,226
$ 442,283
$ 445,596
$ 415,619
902,518
321,898
158,821
6,461
4,200
152,416
(29,433)
272
(29,161)
123,255
30,307
281
92,667
—
748,135
239,702
137,124
4,609
—
97,969
(24,769)
916
(23,853)
74,116
15,169
—
58,947
—
663,239
193,033
118,906
3,294
(562)
71,395
(20,624)
123
(20,501)
50,894
8,246
—
42,648
1,427
508,018
156,208
101,327
2,380
—
52,501
(19,110)
4,533
(14,577)
37,924
7,511
—
30,413
—
318,166
124,117
75,973
1,695
3,700
42,749
(15,207)
(289)
(15,496)
27,253
6,363
—
20,890
—
312,925
132,671
77,740
1,552
2,441
50,938
(19,426)
2,344
(17,082)
33,856
10,655
—
23,201
—
290,801
124,818
75,423
1,502
1,846
46,047
(21,068)
1,439
(19,629)
26,418
8,651
—
17,767
—
$ 92,667
$ 58,947
$ 44,075
$ 30,413
$ 20,890
$ 23,201
$ 17,767
$ 1.18
$ 1.18
$ 0.83
$ 0.83
$ 0.65
$ 0.65
$ 0.55
$ 0.54
$ 0.39
$ 0.39
$ 0.47
$ 0.46
$ 0.38
$ 0.38
78,571
78,615
71,048
71,048
67,729
67,729
55,101
61,791
53,124
53,124
48,815
57,308
45,800
45,800
41
$ 19,584
$ 26,876
411,286
2.80
669,228
165,699
69,547
1,543,331
228,610
907,853
328,322
2.41
543,402
91,571
57,742
1,345,070
402,337
565,088
$ 10,949
205,806
2.09
422,668
79,377
48,578
950,670
266,999
376,503
$ 15,994
145,327
2.02
271,619
49,801
36,062
661,643
139,540
346,625
$ 14,438
128,733
2.65
171,951
26,660
27,056
448,771
127,632
201,366
$ 16,306
120,384
2.42
166,346
28,999
26,157
440,656
140,212
177,839
$ 27,779
115,945
2.35
150,912
21,605
22,288
419,958
186,182
117,984
Corporate Directory
Board of Directors
Corporate Officers
Shareholders’ Information
Independent Auditors
Ernst & Young LLP
Philadelphia, PA
Transfer Agent and Registrar
American Stock Transfer & Trust
Company
40 Wall St., 46th Floor
New York, NY 10055
Phone: 800-937-5449
Stock Exchange Listings
New York Stock Exchange
Symbol: VSH
Midwest Stock Exchange
Chicago Board of Options Exchange
Investor Relations Contact
Robert A. Freece
Senior Vice President
Vishay Intertechnology, Inc.
Phone: 610-644-1300
SEC Form 10-K
A copy of the Company’s Form 10-K
Annual Report for the year ended
December 31, 1999, filed with the
Securities and Exchange Commission,
may be obtained by shareholders
without charge by writing to the
Investor Relations Department,
Vishay Intertechnology, Inc., 63
Lincoln Highway, Malvern, PA
19355-2120 or through Vishay’s
website at www.vishay.com.
Dr. Felix Zandman
Chairman of the Board
Chief Executive Officer
Vishay Intertechnology, Inc.
Avi D. Eden
Vice Chairman of the Board
Executive Vice President,
General Counsel
Vishay Intertechnology, Inc.
Robert A. Freece
Senior Vice President
Vishay Intertechnology, Inc.
Richard N. Grubb
Executive Vice President,
Treasurer, Chief Financial Officer
Vishay Intertechnology, Inc.
Eliyahu Hurvitz
President and Chief Executive Officer
Teva Pharmaceutical Industries, Ltd.
42
Dr. Gerald Paul
President
Chief Operating Officer
Vishay Intertechnology, Inc.
Luella B. Slaner
Investor
Dr. Felix Zandman
Chairman of the Board
Chief Executive Officer
Avi D. Eden
Vice Chairman of the Board
Executive Vice President,
General Counsel
Dr. Gerald Paul
President
Chief Operating Officer
Richard N. Grubb
Executive Vice President,
Treasurer, Chief Financial Officer
Robert A. Freece
Senior Vice President
William J. Spires
Vice President, Secretary
Annual Meeting
May 18, 2000 at 10:30 a.m.
Four Seasons Hotel
South Ballroom
Lobby Level
One Logan Square
Philadelphia, PA 19103
Dr. Edward B. Shils
George W. Taylor Professor Emeritus
of Entrepreneurial Studies
The Wharton School
University of Pennsylvania
Mark I. Solomon
Founder and Chairman
CMS Companies
Jean-Claude Tiné
Investor and
Former Chairman of the Board
Sfernice, S.A.
Honorary Chairman of the Board
Alfred P. Slaner
(Deceased March 14, 1996)
Quarterly Report Mailings
Shareholders owning Vishay stock
indirectly (through a bank, broker, or
nominee who is a registered holder)
can receive our reports directly and
promptly from the Company at the
same time we mail to shareholders of
record. To be placed on Vishay’s
mailing list, call 610-644-1300,
extension 7483. Shareholders with
access to the Internet can find quarterly
reports, press releases, SEC filings,
and all other financial documents at
www.vishay.com.
Vishay Intertechnology, Inc.
World Headquarters
63 Lincoln Highway, Malvern, PA 19355-2120 USA
Phone: 610-644-1300 • Fax: 610-296-0657
www.vishay.com
Major Vishay Units
Vishay Electronic GmbH
Geheimrat-Rosenthal-Straße
100
95100 Selb
Germany
Phone: 49-9287-71-2244
Fax: 49-9287-8188
Vishay Dale
1122 23rd Street
Columbus, NE 68601-3647
USA
Phone 402-564-3131
Fax 402-563-6418
Vishay Draloric
Geheimrat-Rosenthal-Straße
100
95100 Selb
Germany
Phone: 49-9287-71-2244
Fax: 49-9287-8188
Vishay Foil Resistors
63 Lincoln Highway
Malvern, PA 19355-2120
USA
Phone 610-644-1300
Fax 610-296-0657
Vishay Intertechnology Asia
Pte Ltd.
25 Tampines Street 92
Keppel Building #02-00
Singapore 528877
Phone: 65-788-6668
Fax: 65-788-3383
Vishay Israel, Ltd.
2 Ha’Ofan Street
Holon 58814
Israel
Phone 972-3-557-0888
Fax 972-3-556-8116
Vishay Measurements
Group
951 Wendell Boulevard
Wendell, NC 27591
USA
Phone 919-365-3800
Fax 919-365-3945
Vishay Roederstein
2100 W. Front Street
Statesville, NC 28677
USA
Phone: 704-872-8101
Fax: 704-872-8023
Vishay S.A., Division
Sfernice
199, Blvd. de la Madeleine
B.P. 159
F06003 Nice Cedex 1
France
Phone 33-493-37-27-27
Fax 33-493-37-27-26
Vishay Siliconix
2201 Laurelwood Road
Santa Clara, CA 95056
USA
Phone 408-988-8000
Fax 408-567-8950
Vishay Sprague
678 Main Street
Sanford, ME 04073
USA
Phone 207-324-4140
Fax 207-324-7223
Vishay Telefunken
Theresienstrasse 2,
D-74072 Heilbronn
Germany
Phone 49-713-1670
Fax 49-713-167-3040
Vishay Thin Film
63 Lincoln Highway
Malvern, PA 19355-2120
USA
Phone 610-644-1300
Fax 610-296-0657
Vishay Vitramon
10 Main Street
Monroe, CT 06468
USA
Phone 203-268-6261
Fax 203-261-4446
V I S H A Y I N T E R T E C H N O L O G Y , I N C .
World Headquarters
63 Lincoln Highway, Malvern, PA 19355-2120, USA
Phone: (610) 644-1300 • Fax: (610) 296-0657
W W W . V I S H A Y . C O M
© Copyright 2000 Vishay Intertechnology, Inc.
® Registered trademarks of Vishay Intertechnology, Inc.
All rights reserved.