VISHAY INTERTECHNOLOGY, INC.
ANNUAL REPORT 2002
ONE OF THE WORLD’S
LARGEST MANUFACTURERS of discrete semiconductors
and passive components
VISHAY INTERTECHNOLOGY, INC.
is one of the world’s largest manufacturers of discrete semiconductors
and passive electronic components. These components are used in
virtually all types of electronic devices and equipment.Vishay participates
in multiple markets, including automotive, communications, consumer,
computer, industrial, medical, military, and aerospace.Vishay works closely
with strategic partners worldwide and has a strong presence in Asia.
Sales to customers in Asia represent over one-third of Vishay revenues.
Vishay’s diverse product portfolio — one of the broadest in the industry
— helps provide relative stability during business cycles.Vishay’s world-
wide sales rank as number-one or number-two in many different product
categories, and Vishay has many product patents and trademarks.Vishay’s
strategy of providing one-stop shopping to customers, innovations in
technology, superior product quality, successful acquisition strategy, and
focus on cost reduction have made it a global industry leader.
www.vishay.com
TABLE OF CONTENTS
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A Message from the Chairman . . . . . . . . . . . . . . . . . . . . . . . . 2
Essential Building Blocks of Electronics . . . . . . . . . . . . . . . . . . 4
Innovative Products, Experienced Management . . . . . . . . . . . . 6
Market Strength . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Company Background and History . . . . . . . . . . . . . . . . . . . . . 8
Vishay Measurements Group . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Communications Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Consumer Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Computer Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Industrial Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Automotive Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Medical Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Military and Aerospace Markets. . . . . . . . . . . . . . . . . . . . . . . 19
Financial Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
List of Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Financial Report
Corporate Information . . . . . . . . . . . . . . . . . . inside back cover
FINANCIAL HIGHLIGHTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31As of and For the Year
(In thousands, except per share amounts)
2002
2001
2000
Net sales ...................................................................................................................
$1,822,813
$ 1,655,346
$ 2,465,066
Operating (loss) profit............................................................................................
(79,948 ) ****
14,250 ***
Net (loss) earnings ..................................................................................................
(92,614 ) *
Depreciation and amortization .............................................................................
180,748
Basic (loss) earnings per share..............................................................................
Diluted (loss) earnings per share .........................................................................
Weighted average shares outstanding – basic ....................................................
Weighted average shares outstanding – diluted ................................................
$
$
(0.58 ) *
(0.58 ) *
159,413
159,413
513 *
163,387
$
$
0.00 *
0.00 *
141,171
142,514
696,498
517,864
140,840
3.83
3.77
135,295
137,463
$
$
Cash flows from operations ..................................................................................
$ 366,871
$ 161,418
$ 542,319
Working capital ........................................................................................................
897,456
Property and equipment – net..............................................................................
1,274,850
Long-term debt ........................................................................................................
706,316
1,096,034
1,167,533
605,031
1,057,200
973,554
140,467
Stockholders’ equity ...............................................................................................
$2,358,787
$ 2,366,545
$ 1,833,855
NET SALES
$ in millions
NET EARNINGS (LOSS)
$ in millions
DILUTED EARNINGS (LOSS)
PER SHARE ($)
$2,500 –
$2,000 –
$1,500 –
$1,000 –
$500 –
$0 –
$700 –
$600 –
$500 –
$400 –
$300 –
$200 –
$100 –
$0 –
$(100) –
$5.00 –
$4.00 –
$3.00 –
$2.00 –
$1.00 –
$0.00 –
98
00
$1,572.7 $1,760.1 $2,465.1 $1,655.3 $1,822.8
01
99
02
98
$63.5**
$8.2*
99
$97.8**
$83.2*
00
$517.9
01
$119.3**
$0.5*
02
$43.5**
($92.6)*
$(1.00) –
98
$0.51**
$0.07*
99
$0.76**
$0.65*
00
$3.77
01
$0.84**
$0.00*
02
$0.27**
($0.58)*
Net before charges for the sale of a subsidiary, a German tax rate change, restructuring expense and unusual charges
Net after charges for the sale of a subsidiary, a German tax rate change, restructuring expense and unusual charges
* Includes charges for the sale of a subsidiary and a German tax rate change of $14,562,000 ($0.11 per share) for the year ended December 31, 1999, and restructuring
expenses and unusual charges of $136,103,000 ($0.85 per share), $118,776,000 ($0.84 per share), and $55,335,000 ($0.44 per share) for the years ended December 31,
2002, 2001 and 1998, respectively.
** Darker shade in graphs excludes charges for the sale of a subsidiary and a German tax rate change of $14,562,000 ($0.11 per share) for the year ended December 31,
1999, and restructuring expenses and unusual charges of $136,103,000 ($0.85 per share), $118,776,000 ($0.84 per share), and $55,335,000 ($0.44 per share) for the years
ended December 31, 2002, 2001 and 1998, respectively.
*** Excluding the write-down of inventories ($70,000,000), restructuring expense ($61,908,000), and purchased research and development ($16,000,000), operating profit
would have been $162,158,000.
**** Excluding the write-down of inventories ($30,856,000), restructuring expense ($30,970,000), and loss on long-term purchase commitments ($106,000,000), operating profit
would have been $87,878,000.
VISHAY INTERTECHNOLOGY, INC.
1
A MESSAGE FROM THE CHAIRMAN
TO OUR SHAREHOLDERS, EMPLOYEES,
CUSTOMERS, AND VENDORS
YEAR 2002
Year 2002 was another difficult year for the entire electronics
industry.Vishay, like other electronic component manufactur-
ers, faced problems related to market demand, inventory, pric-
ing, and other factors. Nevertheless, despite the ongoing
industry-wide downturn,Vishay continued to generate cash,
increase market penetration, and make strategic acquisitions.
As stated in last year’s Annual Report,“We will continue to
pursue acquisition opportunities to facilitate the growth of our
business and to strengthen our position in the markets we
serve.This is consistent with Vishay’s historic ability to maintain
a competitive edge throughout economic cycles. In the year
2002 and beyond, we will continue to build on our position as
a leader in the U.S., European, and Asian electronics markets.”
In this light, in December 2002 Vishay completed its acquisi-
tion of BCcomponents Holdings B.V., a leading manufacturer
of passive components with a strong market position in
Europe and Asia. Its product lines complement Vishay’s passive
component product lines and include additional products,
such as miniature aluminum capacitors, thermistors of the
PTC type, and varistors.The acquisition also provided passive
component manufacturing plants in China and India.These
plants, our first ones for passive components in China and
India, will strengthen considerably our market position in Asia
by making Vishay more cost-competitive and bringing us clos-
er to our customers in Asia.Vishay already has had, for several
years, discrete semiconductor manufacturing facilities in Asia,
with plants in China,Taiwan, the Philippines, and Malaysia. Now
we also have plants in Asia for passive components.
We are very excited about the opportunities presented by
the BCcomponents acquisition, which, barring extraordinary
events, should add approximately $250 million in sales during
year 2003.
During 2002,Vishay also expanded into the measurement and
weighing markets by making a series of small acquisitions:
Sensortronics (in January 2002),Tedea-Huntleigh (in June
2002), the BLH and Nobel businesses of Thermo Electron
Corporation (in July 2002), and Celtron Technologies (in
October 2002). Our Vishay Measurements Group unit
already was the world’s largest manufacturer of strain gages,
which are sold into the global transducers market.With these
acquisitions, which are being consolidated into Vishay
Measurements Group, we have implemented a strategy of ver-
tical market integration.Vishay now manufactures and markets
strain gages (which are used in transducers), the transducers
themselves (metallic structures to which strain gages are
cemented), and the electronic instruments and systems that
use transducers to measure and control output.
The global market for transducers, instruments, and systems
that measure the output of transducers is estimated to be
over $1.5 billion [Company estimate]. Because this market is
relatively fragmented, and because Vishay is now a vertically
integrated player in it,Vishay is well positioned to increase
market share.
FINANCIAL HIGHLIGHTS
For the year ended December 31, 2002, sales were
$1,822,813,000 compared to sales of $1,655,346,000 in the
previous year, an increase of 10%. Before restructuring charges
and other unusual items of $169,800,000, net earnings for the
year ended December 31, 2002 were $43,489,000 or $0.27
per share as compared to net earnings of $119,289,000 or
$0.84 per share, for the year ended December 31, 2001. After
the restructuring charges and other non-recurring items of
$169,800,000, the net loss for the year ended December 31,
2002 was $(92,614,000) or $(0.58) per share. Non-recurring
items incurred during 2002 include a write-down of current
inventory of tantalum and a pre-tax loss on long-term pur-
chase commitments for tantalum in excess of market price in
the amount of $106,000,000.
Cash generation is critical, especially during difficult times.The
Company continued to generate cash from operations during
year 2002. In fact, for the year ended December 31, 2002,
the Company’s cash flow from operations was $366,871,000.
Purchases of property and equipment for the year ended
December 31, 2002 were $110,074,000.
The long-term debt of the Company was $706,316,000 at
December 31, 2002 and the stockholders’ equity at
December 31, 2002 was $2,358,787,000 resulting in a debt to
equity ratio of 0.30. Our cash balance at December 31, 2002
was $339,938,000.
LOOKING AHEAD
We expect our cash generation to continue during 2003 and
beyond, giving us the ability to make acquisitions. Revenues
from our specialty products help to offset the impact of price
2
VISHAY INTERTECHNOLOGY, INC.
Dr. Felix Zandman
Chairman of the Board and Chief Executive Officer
erosion for many of our commodity products. Our broad
product line and global footprint allow us to be a one-stop
shop for discrete semiconductors and passive components,
from single-source and specialty components to commodity
products.
Chairmanship, depending
on the timing of my
retirement, and Marc
following thereafter.
The ongoing industry-wide downturn has a positive side, as it
lowers the cost to Vishay of potential acquisition targets.We
acquired the former Infineon infrared components group and
General Semiconductor in 2001, and successfully integrated
them with our former Vishay Telefunken operations into the
new Vishay Semiconductors unit in 2002.These acquisitions
contributed strongly to our cash generation in the last year.
We acquired BCcomponents at the end of 2002 and anticipate
immediate cost savings and increased revenues during 2003.
Also, I expect that the integration of the recently acquired
transducer companies into Vishay Measurements Group will
increase our revenues and earnings, and will provide an addi-
tional avenue of growth.
Another area where Vishay’s growth during 2002 set the stage
for future growth is Asia. During 2002,Vishay’s revenues in
Asia increased to 38% of our total global revenues.We expect
our growth in Asian sales to continue during year 2003 and
beyond, as Asia, particularly China, assumes an increasingly
important role in the global electronics industry — not just in
manufacturing, but in product design and development as well.
Our acquisition of BCcomponents during 2002 — like our
acquisitions of General Semiconductor (2001), the Infineon
infrared components group (2001),Telefunken and 80.4% of
Siliconix (1998), and the transducer companies Celtron and
Tedea-Huntleigh (2002) — brought with it manufacturing and
sales locations in Asia.Vishay’s ongoing penetration of the
Asian market involves close cooperation with local and
regional sales channel partners in mainland China, Hong Kong,
Taiwan, India, and elsewhere.
In March 2003, Marc Zandman was named Vice Chairman of
the Board of Directors of Vishay, along with existing Vice
Chairman Avi Eden.While I have no current plans for retire-
ment, in a company with the size, worldwide presence, and
technological sophistication of Vishay, it is prudent to plan for
the future. I believe that the present management team of Avi
Eden, Gerald Paul, Richard Grubb, and Marc Zandman assures
the Company of having the strong strategic and operational
direction it will need in the future.The appointment of Marc as
Vice Chairman will now provide for an orderly succession of
experienced leadership at the top, with Avi assuming the
During year 2003, as in
the past,Vishay will con-
tinue to develop and
introduce new manufac-
turing techniques, prod-
ucts, technologies, and
packaging methods. In
2002, our Siliconix unit introduced 127 new products and
achieved 857 new design-wins with customers. Our other
semiconductor unit (Vishay Semiconductors) and our passive
component units also introduced many new products and
achieved design-wins, thus ensuring that Vishay components
will be used in new generations of end products such as laptop
computers, automotive subsystems, computer game systems,
home appliances, televisions, and many other end products.
Vishay, with over four decades of technology leadership,
remains firmly committed to product innovation.
When the electronics industry recovers from the current
downturn,Vishay will be well positioned for enhanced growth.
Meanwhile, and without having to wait for the upturn,Vishay
will do what we have done during all economic cycles, both
good and bad: roll out new and innovative products, generate
cash, explore opportunities for strategic acquisitions, maintain
our focus on cost reduction, and strengthen our relationships
with customers and strategic partners.
We are very grateful to our employees, customers, and suppli-
ers, all of whom worked very hard to meet the challenges of
2002.To our stockholders, thank you sincerely for your confi-
dence in Vishay during the past year, a difficult one for the
entire electronics industry.We look forward to renewed
growth and new accomplishments during 2003 and beyond.
Sincerely,
Felix Zandman
Chairman of the Board and Chief Executive Officer
April 2003
VISHAY INTERTECHNOLOGY, INC.
3
ESSENTIAL BUILDING BLOCKS OF ELECTRONICS
Inside all electronic products — cell phones, computers, medical devices, industrial equipment, and just about
everything else that runs on electricity — are tiny chips and other components. Highly complex chips called
microprocessors, sometimes referred to as the “brains” of many electronic products, coordinate and control
their functions. Supporting the work of microprocessors are discrete semiconductors and passive components.
Vishay manufactures discrete semiconductors and passive components that play key supporting roles and serve
as “building blocks” of all electronic circuits.Vishay offers one of the industry’s widest varieties of discrete semi-
conductors and passive components and sells them to customers in all major industries. Every day, throughout
the world — in homes, offices, factories, hospitals, highways, airports, and military bases — people depend on
electronic components manufactured by Vishay.
• DISCRETE SEMICONDUCTORS (diodes, transistors, and optoelectronic components) typically perform a
single function in electronic circuits.They switch, amplify, or rectify and transmit electrical signals. (Vishay also
makes selected integrated circuits, which perform multiple functions.) Semiconductors are referred to as “active”
components because they require power to function.
• PASSIVE COMPONENTS (resistors, capacitors, inductors) do not require a power supply to handle the sig-
nals that pass through them. Passive components are used to store electrical charges,
to limit or resist electrical current, and to help in filtering, surge suppression,
measurement, timing, and tuning applications.
• STRESS SENSORS AND TRANSDUCERS manufactured by Vishay
include a variety of types of components, materials, and systems for
detecting, measuring, and displaying structural stresses, loads, force,
and pressure. (See page 9 for more information.)
1.1. (cid:138)(cid:138)
(cid:138)(cid:138) 1.1. RECTIFIERS
Rectifiers are semiconductors that convert
alternating current (AC) into direct current
(DC), a unidirectional current required for
operation of many electronic systems. For
example, a bridge rectifier is used in a clock
radio to change the AC voltage from a wall
outlet to a specific DC voltage.
(cid:138)(cid:138) 2.2. DIODES
Diodes are semiconductors that allow current
to travel in only one direction. Different types
of diodes perform different functions.These
include emitting visible light (light-emitting
diodes, or LEDs), emitting infrared energy
(infrared diodes for remote control), voltage
regulation (Zener diodes), switching (switching
diodes), and surge protection (suppressor
diodes).
(cid:138)(cid:138) 3.3. MOSFETS
Metal-oxide-semiconductor field-effect transis-
tors (MOSFETs) are made up of many individ-
ual transistors (as many as several million) on
one piece of silicon. Power MOSFETs conserve
power and prevent components from heating
up.Vishay Siliconix TrenchFET® power
MOSFETs use innovative silicon and packaging
technologies to switch and manage power very
efficiently.
(cid:138)(cid:138) 4.4. TRANSISTORS
Transistors are semiconductors that amplify,
rectify, and switch analog signals, radio frequen-
cy signals, and power.Vishay manufactures both
individual transistors and multiple-transistor
components, including junction field-effect tran-
sistors (JFETs), metal-oxide-semiconductor
field-effect transistors (MOSFETs), and bipolar
junction transistor (BJTs).
(cid:138)(cid:138) 5.5. OPTOELECTRONIC
COMPONENTS
Optoelectronic components emit or detect
light in electronic circuits.Types include
infrared data communications devices (IRDCs)
for two-way data transfer; optocouplers for
circuit isolation; infrared (IR) emitters for
one-way remote control; optical sensors for
detection; and LEDs for light sources.
INTEGRATED CIRCUITS (ICS)
(cid:138)(cid:138) 6.6.
Integrated circuits (ICs) take the functions of
discrete semiconductors and passive compo-
nents and combine them on a single chip.These
may include “on-board” transistors, diodes, resis-
tors, capacitors and other circuit components.
Unlike discrete semiconductor components,
which usually perform one function (such as
switching), ICs can perform multiple functions.
4
VISHAY INTERTECHNOLOGY, INC.
2.2. (cid:138)(cid:138)
3.3. (cid:138)(cid:138)
5.5. (cid:138)(cid:138)
4.4. (cid:138)(cid:138)
8.8. (cid:138)(cid:138)
7.7. (cid:138)(cid:138)
6.6. (cid:138)(cid:138)
9.9. (cid:138)(cid:138)
10.10. (cid:138)(cid:138)
11.11. (cid:138)(cid:138)
(cid:138)(cid:138) 7.7. CAPACITORS
Capacitors are passive components that store
energy and discharge it when needed.Applications
include power conversion, DC-linking, frequency
conversion, bypass, decoupling, and filtering.Types
of capacitors manufactured by Vishay include tan-
talum (both solid and wet), ceramic (both multi-
layer chip and disk), film, power, heavy-current, and
aluminum, as well as high-performance, high-preci-
sion silicon-based capacitors.
(cid:138)(cid:138) 8.8. RESISTORS
Fixed and variable resistors are passive compo-
nents that restrict current flow.Vishay manufac-
tures many different types of resistive products,
including single (discrete) resistors based on foil,
thin film, thick film, metal oxide film, carbon film,
and wirewound technologies, as well as resistor
networks and arrays, in which multiple compo-
nents are combined in a single package.Vishay also
manufactures thermistors (thermally sensitive
resistors) and varistors, which are used to sup-
press sudden voltage increases.Thermistors and
varistors are categorized as non-linear resistors.
INDUCTORS
(cid:138)(cid:138) 9.9.
Inductors are passive components that use an
internal magnetic field to change or resist cur-
rent. Inductor applications include controlling AC
current and voltage and filtering out unwanted
electronic signals. Inductors and transformers
(two inductors on a common core of magnetic
material, which step AC current up or down)
are categorized as magnetics.
INTEGRATED MODULES
(cid:138)(cid:138) 10.10.
Integrated modules combine different compo-
nents in a single package to save space, reduce
assembly costs, and increase reliability.Vishay
FunctionPAK™ dc-to-dc converter modules
include all the active and passive components
required for a complete power conversion
solution in a single package that can be mount-
ed directly to a circuit board.
(cid:138)(cid:138) 11.11. STRESS SENSORS AND
TRANSDUCERS
Vishay Measurements Group, a unit of Vishay,
manufactures a very wide range of stress sensors
and transducers for converting physical variables
such as force, pressure, and displacement into
measurable electrical signals.These include elec-
trical resistance strain gages for both stress
analysis testing and transducer manufacturing
applications; instrumentation; hybrid strain gage
assemblies; transducers for original equipment
manufacturer (OEM) applications; certified load
cells for electronic scales and other weighing
applications; and PhotoStress® products, which
use a unique optical technology to reveal and
measure structural stresses.
VISHAY INTERTECHNOLOGY, INC.
5
VISHAY STRATEGIC ACQUISITIONS
1985
Dale
1987
Draloric
1988
Sfernice
1992
Sprague
1993
Roederstein
1994
Vitramon
1998
Siliconix
Telefunken
2000
Electro-Films
Cera-Mite
Spectrol
INNOVATIVE PRODUCTS, EXPERIENCED MANAGEMENT
Vishay, a leader in technology for over 40 years, remains
firmly committed to product innovation.The research and
development (R&D) efforts of Vishay scientists and engi-
neers lead to new manufacturing techniques, technologies,
and packaging methods, and make possible a steady stream
of new products.
Vishay’s broad product portfolio includes commodity and
specialty products, many of which are protected by patents
and trademarks. Specialty products help to stabilize Vishay’s
revenue base and reduce the impact of industry business
cycles.This is especially important during industry down-
turns, when pricing pressure on commodity products inten-
sifies. New products help Vishay maintain its competitive
marketing advantage.
Vishay’s experienced management team uses strict criteria
to evaluate each potential acquisition, and has a successful
track record of acquiring companies and businesses that
soon become accretive to earnings. Examples include
General Semiconductor and the infrared components busi-
ness of Infineon Technologies, both acquired during 2001.
BCcomponents, the passive component manufacturer
acquired in December 2002, is being rapidly integrated by
Vishay to maximize its positive impact on earnings.The
same applies to our transducer acquisitions.
VISHAY MISSION STATEMENT
PROVIDE OUR CUSTOMERS WITH:
• a single manufacturing source (one-stop shopping) for
discrete semiconductors and passive components
• quality state-of-the-art products at competitive prices
• a continuous stream of new products
•
superior customer service worldwide
PROVIDE OUR SUPPLIERS WITH:
•
reliable long-term relationships
PROVIDE OUR SHAREHOLDERS WITH:
• a good return on their investment
PROVIDE OUR EMPLOYEES WITH:
•
responsible and ethical leadership
• a creative working environment
•
responsible community membership at all Vishay locations
Vishay maintains a relentless focus on cost-cutting. Each
acquisition makes possible reduction of administrative
overhead, new manufacturing efficiencies, enhanced cross-
selling of semiconductors and passive components, and
increased market penetration. Even during difficult times,
Vishay is able to generate substantial cash from operations
and maintain a strong balance sheet.
VISHAY BLUE-CHIP CUSTOMER BASE
ALCATEL
ARROW
AVNET/EBV
BOSCH
CELESTICA
DELPHI
DELTA
DYNAMAR
ERICSSON
IBM
INTEL
JABIL
LG ELECTRONICS
FLEXTRONICS
MOTOROLA
DAIMLER-CHRYSLER
DELL
FUTURE
HI-SPEED
NOKIA
PHILIPS
RYODEN
SAMSUNG
SANMINA-SCI
SEAGATE
SIEMENS
SOLECTRON
SONY
THOMSON
TOMEN
TTI
UPPERTECH
VISTEON
WPI
6
VISHAY INTERTECHNOLOGY, INC.
2001
General Semiconductor
Infrared components
business of Infineon
Tansitor
Mallory (NACC)
2002
BCcomponents
Tedea-Huntleigh
BLH
Celtron
Nobel
Sensortronics
MARKET STRENGTH
Vishay has market shares ranging from substantial to num-
ber-one for each of its products. It is one of the world’s
largest manufacturers of discrete semiconductors, with
these specific product rankings:
• NUMBER-1 WORLDWIDE IN LOW-VOLTAGE POWER MOSFETs
• NUMBER-1 WORLDWIDE IN DIODES AND RECTIFIERS
• NUMBER-1 WORLDWIDE IN INFRARED DATA COMMUNICA-
TIONS DEVICES (IRDCs)
• NUMBER-1 WORLDWIDE IN IR RECEIVERS
• NUMBER-2 WORLDWIDE IN OPTOCOUPLERS
• NUMBER-3 WORLDWIDE IN OPTICAL SENSORS
Vishay is one of the world’s largest manufacturers of pas-
sive electronic components (resistors, capacitors, induc-
tors, transducers), with these specific product rankings:
• NUMBER-1 WORLDWIDE IN FOIL RESISTORS
• NUMBER-1 WORLDWIDE IN THIN FILM RESISTORS
• NUMBER-1 WORLDWIDE IN MELF RESISTORS
• NUMBER-1 WORLDWIDE IN WIREWOUND POWER RESISTORS
• NUMBER-1 WORLDWIDE IN LEADED POWER FILM RESISTORS
• NUMBER-1 WORLDWIDE IN LEADED FUSIBLE RESISTORS
• NUMBER-1 WORLDWIDE IN WET TANTALUM AND
CONFORMAL-COATED CAPACITORS
• NUMBER-1 WORLDWIDE IN STRAIN GAGE SENSORS AND
LOAD CELLS
Vishay partners with leading original equipment manufactur-
ers (OEMs), original design manufacturers (ODMs), elec-
tronic manufacturing services (EMS) companies, and distrib-
VISHAY SALES
BY REGION, 2002
31%
Europe
38%
Asia
31%
Americas
utors worldwide.Today, OEMs outsource a major share of
their manufacturing needs to EMS companies. In some cases,
OEMs outsource not just product manufacturing, but prod-
uct design as well, using ODMs for both. It is estimated that,
by 2004, close to three-quarters of global manufacturing will
be outsourced to EMS companies and ODMs.1 Vishay is a
preferred supplier to leading EMS companies and ODMs.
Vishay, with its broad portfolio of discrete semiconductors
and passive components, offers one-stop shopping for dis-
crete electronic component solutions.This is particularly
valuable as OEMs, distributors, and EMS companies reduce
their vendor bases.
A key part of Vishay’s overall business plan is strengthening
its presence in Asia.Vishay continues to shift manufacturing
to China and other countries with skilled workforces and
relatively low labor costs. During 2002,Vishay’s revenues in
Asia increased to 38% of total global revenues.We expect
our growth in Asian sales to continue during 2003 and
beyond. Our ongoing penetration of the Asian market
involves close cooperation with local and regional sales
channel partners in mainland China, Hong Kong,Taiwan,
Korea, Japan, India, and other countries.
The breadth of Vishay’s product lines greatly simplifies the
purchasing process for Vishay customers.Vishay’s acquisi-
tions have included such top names as Siliconix,Telefunken,
the infrared components business of Infineon, and General
Semiconductor, as well as Dale, Draloric, Sprague,Vitramon,
and BCcomponents (the former passive components busi-
ness of Philips Electronics and Beyschlag).These names and
the products associated with them are integrated into one
global company:Vishay.
1 Source: Electronics.ca Publications Inc., February 2003
VISHAY INTERTECHNOLOGY, INC.
7
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COMPANY BACKGROUND AND HISTORY
INITIAL TECHNOLOGY BREAKTHROUGHS
In the 1950s, 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 such as airplanes and
cars. Dr. Zandman’s research in this area led him to develop
Bulk Metal® foil resistors — ultra-precise, ultra-stable
resistors that continue to 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 foil
resistors, PhotoStress products, and strain gages.
ACQUISITIONS AND GROWTH
By the early ’80s,Vishay was positioned to grow significant-
ly. Because the markets for foil resistors, PhotoStress prod-
ucts, and strain gages were relatively small, the Company
moved to expand into high-volume resistors. Beginning in
1985,Vishay acquired Dale Electronics, Draloric
Electronics, and Sfernice.These acquisitions helped pro-
duce dramatic sales growth.They also brought other pas-
sive electronic components into Vishay, such as inductors,
specialty capacitors, plasma displays, specialty connectors,
transformers, thermistors, potentiometers, and trimmers.
In the early ’90s,Vishay applied its acquisition strategy to
the high-volume capacitor market. 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 mul-
tilayer ceramic chip capacitors.
EXPANSION INTO SEMICONDUCTORS
In 1997,Vishay entered the discrete semiconductor mar-
ket, acquiring 65% of Lite-On Power Semiconductor. In
1998,Vishay 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.Vishay
subsequently sold its interest in Lite-On in order to better
focus on its successful Siliconix and Telefunken businesses.
ONGOING GROWTH
During 2000,Vishay acquired passive component compa-
nies Electro-Films, Cera-Mite, and Spectrol. Each of these
acquisitions, while relatively small, strengthened Vishay’s
position in niche markets.
Vishay’s acquisitions during 2001 included the infrared com-
ponents business of Infineon Technologies, General
Semiconductor, Mallory (North American Capacitor
Company), and Tansitor.The addition of Infineon’s infrared
components group and General Semiconductor enhanced
Vishay’s existing Telefunken and Siliconix businesses — and
propelled Vishay into the top ranks of discrete semiconduc-
tor manufacturers worldwide.Vishay successfully integrated
General Semiconductor, the former Infineon infrared com-
ponents business, and the Vishay Telefunken business into
the new Vishay Semiconductors unit in 2002. General Semi-
conductor contributed strongly to Vishay’s cash generation.
In 2002,Vishay acquired BCcomponents, a leading manufac-
turer of passive components with operations in Europe,
India, and the Far East.This major acquisition has significantly
enhanced Vishay’s global market position in passive compo-
nents.The product lines of BCcomponents include linear and
non-linear resistors; ceramic, film, and aluminum electrolytic
capacitors; switches and trimming potentiometers.
Vishay acquisitions in the transducer area during 2002
included Tedea-Huntleigh, the BLH and Nobel businesses
of Thermo Electron Corporation, Sensortronics, and
Celtron, which are being integrated into Vishay
Measurements Group.
Vishay’s growth has been fueled by research and develop-
ment, strategic acquisitions, a commitment to address cus-
tomer needs, and an ongoing effort to improve product
performance.The Company continues to explore a variety
of acquisition opportunities.
8
VISHAY INTERTECHNOLOGY, INC.
Vishay Measurements Group products include [clockwise from bottom in left photo]
the PhotoStress® Plus System, electrical resistance strain gages for stress analysis
and strain-gage-based transducer applications, and strain gage instrumentation.
Vishay Measurements Group load cells are widely used in small scales for both retail
and industrial applications [center photo] and large-scale weighing and batching
applications in process industries [right photo].
VISHAY MEASUREMENTS GROUP
INNOVATION AND ACQUISITIONS
Vishay has been an industry leader in PhotoStress® products
and strain gages since the Company’s founding in 1962.As it
expanded into other product areas, PhotoStress products
and strain gages — by then consolidated into Vishay
Measurements Group — remained a valuable part of Vishay.
the weighing industry, and also implemented a strategy of
vertical market integration:Vishay Measurements Group
now has a product range from resistance strain gages, to
transducers (the metallic structures to which strain gages
are cemented), to the electronic instruments and systems
that measure and control output of the transducers.
A major change took place in 2002, when Vishay made
acquisitions in the area of transducers:
• Tedea-Huntleigh, which is engaged in the production and sale
of load cells used in digital scales by the weighing industry.
• The BLH and Nobel businesses of Thermo Electron
Corporation, which are engaged in the production and
sale of load-cell-based process weighing systems, weighing
and batching instruments, web tension instruments,
weighing scales, servo control systems, and components
relating to load cells.
• Sensortronics, Inc., a leading manufacturer of load cells
and torque transducers for domestic and international
customers in a wide range of industries.
• Celtron Technologies, a company engaged in the produc-
tion and sale of load cells used in digital scales for the
weighing industry.
VERTICAL INTEGRATION
With these acquisitions,Vishay entered the global markets
for strain-gage-based transducers and instruments used in
As an illustration of these technologies, consider the digital
bathroom scale found in many homes. Small strain gages
are attached to a transducer that is hidden beneath the
platform of the scale.When you stand on the scale, your
weight presses down on the transducer and causes a signal
to be sent to the electronic system that displays your
weight in pounds or kilograms.This process is used not
just in bathroom scales, but also in a wide variety of com-
mercial scales and in business and industrial applications for
process control, force measurement, and other systems.
VISHAY MICRO-MEASUREMENTS AND VISHAY
TRANSDUCERS
Vishay Measurements Group now has two operating divi-
sions:Vishay Micro-Measurements (for strain gages, instru-
ments, and PhotoStress products), and Vishay Transducers
(for load cells, weigh modules, instruments, and weighing
systems).Vishay Transducers includes the operations of
Vishay Tedea-Huntleigh,Vishay BLH,Vishay Nobel,Vishay
Sensortronics, and Vishay Celtron.
VISHAY INTERTECHNOLOGY, INC.
9
THE COMMUNICATIONS MARKET AND VISHAY
Statistics on global cell phone sales show a 6% increase for
year 2002 compared to 2001.1 However, this is only part of
the picture: Many new cell phones include features formerly
associated with personal computers (PCs) and cameras.
According to one report, during the fourth quarter of 2002
worldwide sales of phones able to capture, transmit, and
receive photographs increased 65%.2 It is estimated that,
during 2002, cell phone users worldwide downloaded and
used over one billion ring tones (short excerpts of songs).3
crete semiconductors and passive components needed per
phone in order to adequately support increased functionality.
Another key market trend affecting the converging telecom-
munications and data communications markets is the growth
of wireless technologies including Bluetooth and wireless
LANs (802.11 technology). Bluetooth enables short-distance
two-way data transfer, while wireless LAN technology
enables high-speed data transmission over wider areas.
Meanwhile, cell phones are an increasingly attractive plat-
form for games. It is estimated that, by 2005, cell phone
users worldwide will spend approximately $25 billion on
phone-specific games and other types of video and audio
entertainment.3
In response to the convergence of PCs and cell phones,
many cell phone manufacturers and microprocessor manu-
facturers are focusing significant resources on cell phones
with sophisticated entertainment-related features.4 Advances
in cell phone technology help to drive demand for the types
of electronic components manufactured by Vishay. Increases
in the complexity of functions (including audio and video fea-
tures) per cell phone generally increase the number of dis-
One study projects that, by 2008, the number of people
worldwide using the Web will reach 2 billion — and half of
them will use small portable devices for Web access.5
Vishay components are present not just in cell phones,
portable digital assistants (PDAs), and other handheld com-
munications devices, but in telecommunications infrastruc-
ture equipment as well. Discrete semiconductors and pas-
sive components are widely used in equipment for voice
and data switching, wireless and wired access, line trans-
mission, optical networking, power supplies, communica-
tions satellites, and other telecommunications infrastruc-
ture equipment, and Vishay has long-standing relationships
with blue-chip customers in this area.
10
VISHAY INTERTECHNOLOGY, INC.
Components from Vishay are found in a very wide range
of communications devices and equipment, including [left
to right] GPRS radio cards, cell phones, handheld bar-
code scanners, PDAs, and satellite dishes.
Total worldwide usage of semiconductors in the communi-
cations market, in the categories where Vishay competes, is
projected to grow from $5.338 billion in 2002 to $9.187
billion in 2006.Total worldwide usage of passive compo-
nents (fixed capacitors, fixed resistors, and inductors) in
telecommunications infrastructure equipment and
telecommunications consumer electronics is projected to
grow from $1.833 billion in 2002 to $3.018 billion in 2006.
This global market growth means increasing demand for
the types of discrete semiconductors and passive electron-
ic components manufactured by Vishay.
1 Source: Gartner Dataquest, March 10, 2003
2 Source:Taipei Times, February 13, 2003
3 Source: Red Herring, March 2003
4 Source: Business Week, March 3, 2003
5 Source: alwayson-network.com, March 6, 2003
2002
2003
2004
2005
2006
$5,338
Millions of $, estimated
$5,913
$7,206
$8,242
$9,187
WORLDWIDE SEMICONDUCTOR CONSUMPTION*
IN COMMUNICATIONS ELECTRONICS
*Includes only General Purpose – Analog IC, General Purpose – Discrete,
and General Purpose – Optical
Source: Gartner Dataquest, December 2002
2002
2003
2004
2005
2006
$1,833
Millions of $, estimated
$1,907
$2,161
$2,993
$3,018
WORLDWIDE PASSIVE COMPONENT CONSUMPTION*
IN TELECOMMUNICATIONS
*Includes only Fixed Capacitors, Fixed Resistors, and Inductors
Source: Paumanok, February 2003
VISHAY INTERTECHNOLOGY, INC.
11
THE CONSUMER MARKET AND VISHAY
One of the bright spots in the global electronics industry
has been the growth in consumer entertainment electron-
ics, including game console hardware, DVD players, digital
still cameras and video cameras, MP3 players, and other
devices. It is estimated that, in the U.S., consumers spend
over $9 billion per year on game hardware and software
— more than is spent on admission to movie theaters.1
According to a recent report,Taiwan alone will produce
and ship approximately 16.7 million games consoles during
2003 — a 90% increase over 2002. 2
Between 2000 and 2005, annual sales of DVD players in
the U.S. are projected to increase from approximately
eight million units to over 20 million units. During this
same period, annual U.S. sales of digital cameras are pro-
jected to increase from under five million units to over 15
million units.3
Growth in sales of video and audio entertainment electron-
ics drives demand for types of electronic components man-
ufactured by Vishay.To cite just one example,Vishay Siliconix
power MOSFETs, already used in a leading consumer game
console, are now also in demand for use in portable
devices such as DVD players (which run off 12-volt batter-
ies) and MP3 players (which run off single-cell lithium ion
batteries), where they help to conserve battery life.
No assessment of consumer electronics would be com-
plete without mentioning the impact of music downloading
and file swapping. It is estimated that consumers will
download from the Internet — potentially free of charge
— close to 6.5 billion individual tracks of music during
2003.4 All this “free” music will of course require that con-
sumers buy and use computers, MP3 players, and other
hardware — all of which require electronic components.
Meanwhile, the toy industry, with estimated annual sales of
$20.3 billion, is increasingly focused on toys that require
electronic components in order to function. One industry
analyst has estimated that, of the several thousand new
toys introduced and promoted at the 2003 Toy Fair in
New York City, over two-thirds will include electronic
components.5
Total worldwide usage of semiconductors in the con-
sumer electronics market, in the categories where Vishay
competes, is projected to grow from $7.088 billion in
2002 to $12.673 billion in 2006.Total worldwide usage of
passive components (fixed capacitors, fixed resistors, and
inductors) in consumer audio and video imaging equip-
ment is projected to grow from $3.736 billion in 2002 to
$4.886 billion in 2006.
12
VISHAY INTERTECHNOLOGY, INC.
Commonly used consumer products that use Vishay
components include [left to right] smart cards for elec-
tronic transactions, handheld remote controls for video
and audio systems, video game controllers, digital video
cameras, and home appliances such as washing machines
and dryers.
Another part of the consumer market impacted by
increased usage and sophistication of embedded electron-
ics is “white goods” — refrigerators, washers and dryers,
and other household appliances. In refrigerators, for exam-
ple, electronic functions include LED displays to monitor
food freshness, sophisticated temperature-management
systems, and now even dedicated televisions, e-mail sys-
tems, and Internet access.The so-called “smart home” with
networked appliances is not yet common. However, even
today, appliances capable of being interconnected via a
common network include smoke alarms, coffeemakers,
bathroom scales, and even blood-pressure monitors.6
1 Source: Fortune, December 30, 2002
2 Source: Industrial Technology Information Service (Taiwan), February 2003
3 Sources: Consumer Electronics Association; Photo Marketing
Association; Photo Imaging News; 2002
4 Source:Yankee Group, 2003
5 Source: Business Week, February 24, 2003
6 Source: Machine Design, January 24, 2003
2002
2003
2004
2005
2006
$7,088
Millions of $, estimated
$8,292
$10,264
$11,654 $12,673
WORLDWIDE SEMICONDUCTOR CONSUMPTION*
IN CONSUMER ELECTRONICS
*Includes only General Purpose – Analog IC, General Purpose – Discrete,
and General Purpose – Optical
Source: Gartner Dataquest, December 2002
2002
2003
2004
2005
2006
$3,736
Millions of $, estimated
$4,007
$4,344
$4,895
$4,886
WORLDWIDE PASSIVE COMPONENT CONSUMPTION*
IN CONSUMER AUDIO AND VIDEO IMAGING
EQUIPMENT
*Includes only Fixed Capacitors, Fixed Resistors, and Inductors
Source: Paumanok, February 2003
VISHAY INTERTECHNOLOGY, INC.
13
THE COMPUTER MARKET AND VISHAY
Located on the motherboard of every personal computer
(PC) is a highly sophisticated integrated circuit — the micro-
processor that performs calculations and coordinates the
computer’s activities. PC microprocessing speeds have
increased dramatically — from 200 megahertz (200 million
cycles per second) in 1995 to estimates of 3 gigahertz (3 bil-
lion cycles per second) and higher in 2003.1 Faster micropro-
cessing speeds increase demand for discrete semiconductors
and passive components. For example, the Intel® 486 micro-
processor chip required 124 supporting passive components,
while the Intel Pentium® 4 requires approximately 600.2
A key trend is connectivity via wireless local area networks
(LANs), Bluetooth, and other wireless technologies.
Wireless LANs enable computers connected to a central
access point to transmit and receive data without cables. A
person working in a wireless LAN office environment and
equipped with a notebook computer that has a PCMCIA
card can move about in the office and remain connected to
the company network for file-sharing, e-mail, Internet
access, and access to the company Intranet. A growing
number of airport terminals, coffee shops, and bookstores
offer high-speed, wireless Internet access.
Vishay components are used in PCMCIA cards, as well as
in computer motherboards, monitors, keyboards, mice, disk
drives, and modems.They also are commonly found in
other data processing hardware — from printers, scanners,
photocopiers, and fax machines to mainframes, network
servers, and other infrastructure equipment.
Total worldwide usage of semiconductors in data process-
ing electronics, in the categories where Vishay competes, is
projected to grow from $6.583 billion in 2002 to $9.860
billion in 2006.Total worldwide usage of passive compo-
nents (fixed capacitors, fixed resistors, and inductors) in
computers and peripherals is projected to grow from
$2.833 billion in 2002 to $3.603 billion in 2006.
1 Source: EE Times, February 24, 2002
2 Source: Company estimates
From [left to right] massive mainframes to light notebook
computers to printers, virtually all kinds of computers and
peripherals contain types of semiconductors and passive
components made by Vishay. DC-to-DC converters [far
right] with these components are used to help distribute
power in computers and many other products.
2002
2003
2004
2005
2006
$6,583
Millions of $, estimated
$6,605
$8,146
$9,227
$9,860
WORLDWIDE SEMICONDUCTOR CONSUMPTION*
IN DATA PROCESSING ELECTRONICS
*Includes only General Purpose – Analog IC, General Purpose – Discrete,
and General Purpose – Optical
Source: Gartner Dataquest, December 2002
2002
2003
2004
2005
2006
$2,833
Millions of $, estimated
$3,143
$3,415
$3,789
$3,603
WORLDWIDE PASSIVE COMPONENT CONSUMPTION*
IN COMPUTERS AND PERIPHERALS
*Includes only Fixed Capacitors, Fixed Resistors, and Inductors
Source: Paumanok, February 2003
14
VISHAY INTERTECHNOLOGY, INC.
THE INDUSTRIAL MARKET AND VISHAY
The industrial market accounted for approximately 38% of
Vishay’s global revenues during 2002.Vishay components
are used in critical industrial applications such as power
management, data handling, instrumentation, filtering,
motor control, and many others.Vishay manufactures com-
ponents designed to handle wide voltage and capacitance
ranges, extreme temperatures, space constraints, and other
factors associated with industrial applications.
In a typical retail store, for example, types of electronic
components manufactured by Vishay are used in handheld
barcode readers and electronic cash registers, in the
store’s lighting system, in its air conditioning and heating
systems, and in its electronic security system.They are
used in the factories that produce the items sold in the
store — to manage power and control motors during the
manufacturing process; to help sort, weigh, and package
items; and to perform other functions.Types of electronic
components manufactured by Vishay are also used in the
electrical generating plants that power the factories; in the
trucks, trains, airplanes, and related infrastructure for
transporting manufactured items from factory to store;
and in practically every other type of industrial system.
In the semiconductor categories where Vishay competes,
global semiconductor usage in industrial electronics is
expected to grow from $4.220 billion in 2002 to $6.783
billion in 2006. Meanwhile, global passive component usage
(fixed capacitors, fixed resistors, and inductors) in industri-
al electronics is expected to increase from $580 million in
2002 to $740 million in 2006.
Vishay components play integral roles in [left to right]
factories, industrial robotics, and wind-power turbines for
energy generation. Instrument panels in power stations
[background image] use types of semiconductors and pas-
sive components made by Vishay.
2002
2003
2004
2005
2006
$4,220
Millions of $, estimated
$5,165
$5,746
$6,531
$6,783
WORLDWIDE SEMICONDUCTOR CONSUMPTION*
IN INDUSTRIAL ELECTRONICS
*Includes only General Purpose – Analog IC, General Purpose – Discrete,
and General Purpose – Optical
Source: Gartner Dataquest, December 2002
2002
2003
$580
$621
Millions of $, estimated
2004
$683
2005
$725
2006
$740
WORLDWIDE PASSIVE COMPONENT CONSUMPTION*
IN INDUSTRIAL ELECTRONICS
*Includes only Fixed Capacitors, Fixed Resistors, and Inductors
Source: Paumanok, February 2003
VISHAY INTERTECHNOLOGY, INC.
15
POWERTRAIN
Powertrain
Alternator
Ignition System
Engine Management
BODY CONTROLS
HID-headlights
Suspension
Gear
Headlight Adjustment
Speed Control
Steering
Traction Control
Wiper Control
THE AUTOMOTIVE MARKET AND VISHAY
In all automobiles, mechanical functions continue to be
replaced by electronic functions. For example, a high-end
Audi includes 55 different electronic control units for
everything from climate control to steering.1 Mechanical
and hydraulic components in automobiles tend to be less
reliable than electronic components. Increased use of elec-
tronics provides the benefits of increased engine perform-
ance, fuel efficiency, driver and passenger comfort, and
safety.Thus, even in budget-priced cars, electronic functions
proliferate, and their usage is on the rise. It is estimated
that, between 2002 and 2010, the average percentage of
electronics content in cars will rise from 22% to 35%.2
Vishay manufactures components that are used in a wide
range of automotive applications — powertrain, body con-
trols, safety, comfort, and driver information.Throughout
an automobile, the parts with electronic functionality —
airbags, audio system, brakes, climate-control system,
engine, global positioning system (GPS), lighting, security
system, steering, suspension, transmission, and more — use
discrete semiconductors and passive components.
From powertrain to safety to comfort to body controls to
driver information, automotive subsystems and parts with
electronic functionality depend on types of discrete semi-
conductors and passive components manufactured by
Vishay.
components that function reliably under extreme condi-
tions, including high under-the-hood temperatures and
heavy vibration.Vishay components used in automobiles
include Power Metal Strip® resistors, multilayer ceramic
capacitors, TRANSZORB® transient voltage suppressors,
automotive power MOSFETs, glass-passivated
Superectifiers®, and many others.
Vishay components are helping to enable the transition
from 12-V to 42-V system voltages.The 42-volt on-board
systems expected to become common within the next few
years will require discrete semiconductors and passive
components to handle higher levels of power, more com-
plex system architecture, and other concerns.
Over the years,Vishay has worked closely with automo-
tive suppliers and manufacturers to develop electronic
In the semiconductor categories where Vishay competes,
global semiconductor usage in automotive electronics is
16
VISHAY INTERTECHNOLOGY, INC.
COMFORT
Central Locking
Power Window
Seat/Mirror Adjustment
Window/Mirror Heating
Sunroof
Climate Control
Interior Lighting
Neckrest Control
SAFETY
Anti-lock Braking System
Electronic Stability Program
Automatic Speech Recognition
Airbag
Seatbelt
Immobilizer
Anti-theft
DRIVER INFORMATION
Instrument Cluster
Trip Computer
Audio System
Navigation System
Electric Clock
expected to grow from $2.748 billion in 2002 to $4.217
billion in 2006. Meanwhile, global passive component usage
(fixed capacitors, fixed resistors, and inductors) in automo-
tive electronics is expected to increase from $1.502 billion
in 2002 to $2.159 billion in 2006.
One area that has received particular attention from auto-
motive original equipment manufacturers (OEMs) and sup-
pliers is telematics, the wireless communication between
vehicles, their occupants, and the outside world. According
to a recent industry study, the number of telematics-
enabled vehicles is expected to rise during this decade,
forming a telematics network making use of the Internet,
cellular technologies, and wireless technologies such as
Bluetooth and 802.11. In 2001, approximately two million
telematics systems were built into vehicles, for 3.5% of all
vehicles sold. It is estimated that, by 2007, more than 42%
of all cars sold in the U.S., and 20% of all vehicles sold
worldwide, will be telematics-equipped.3
1 Source: Robert Bosch GmbH, August 2002
2 Source: EE Times, February 14, 2003
3 Source: Machine Design, January 2003
2002
2003
2004
2005
2006
$2,748
Millions of $, estimated
$2,987
$3,437
$3,828
$4,217
WORLDWIDE SEMICONDUCTOR CONSUMPTION*
IN AUTOMOTIVE ELECTRONICS
*Includes only General Purpose – Analog IC, General Purpose – Discrete,
and General Purpose – Optical
Source: Gartner Dataquest, December 2002
2002
2003
2004
2005
2006
$1,502
Millions of $, estimated
$1,515
$1,720
$2,032
$2,159
WORLDWIDE PASSIVE COMPONENT CONSUMPTION*
IN AUTOMOTIVE ELECTRONICS
*Includes only Fixed Capacitors, Fixed Resistors, and Inductors
Source: Paumanok, February 2003
VISHAY INTERTECHNOLOGY, INC.
17
THE MEDICAL MARKET AND VISHAY
The global medical market is characterized by continuing
innovations in technology to better prevent, diagnose, and
treat illness and disease. In this market, where people’s
lives depend on reliable and highly accurate monitoring
and treatment,Vishay components are widely used.Vishay
is a leading manufacturer of telemetry coils for defibrilla-
tors and pacemakers, transformers for defibrillators, tan-
talum capacitors for hearing aids, and electronic compo-
nents for many other types of medical instrumentation
and equipment, from handheld oscilloscopes to MRI and
CAT-scan machines.Vishay has a track record of excellent
relationships with medical manufacturers.
Even the information infrastructure of health care institu-
tions is changing to become more reliant on electronics.
One leading U.S.-based company has provided a system
involving 650 computers to a hospital, with the stated goal
of reducing medical errors by 80%.1 On the other end of the
spectrum, home-based health care will require increasing
numbers of portable diagnostic and treatment devices, many
of which will use types of discrete semiconductors and
passive components made by Vishay.
As evidence of the importance of the medical market,
EMS companies — which as a group are major movers
and shakers in the global electronics supply chain —
expect to realize increased revenues from the medical
device industry: from approximately $5.6 billion in 2001
to $7.1 billion in 2005.2
Passive component consumption worldwide (fixed capaci-
tors, fixed resistors, and inductors) for medical equipment
is projected to rise from $535 million in 2002 to $734
million in 2006. Although statistics for semiconductor
usage in medical equipment are not presented in this
Annual Report, semiconductor usage trends generally
The magnetic resonance image [far left] produced by
an MRI system [far right] is made possible by electronic
circuits containing types of discrete semiconductors and
passive components manufactured by Vishay.These com-
ponents are also used in portable defibrillators [second
from left], medical test equipment of all kinds [third from
left], and numerous other medical products.
2002
2003
$535
$594
Millions of $, estimated
2004
$672
2005
$720
2006
$734
WORLDWIDE PASSIVE COMPONENT CONSUMPTION*
IN MEDICAL EQUIPMENT
*Includes only Fixed Capacitors, Fixed Resistors, and Inductors
Source: Paumanok, February 2003
drive passive component usage trends.Thus, it is logical to
project that, in the semiconductor categories where Vishay
competes, global semiconductor usage in medical equip-
ment will rise as well between 2002 and 2006.
1 Source: Forbes, February 24, 2002
2 Source: EBN, February 14, 2002
18
VISHAY INTERTECHNOLOGY, INC.
THE MILITARY AND AEROSPACE MARKETS AND VISHAY
Types of military and aerospace equipment where Vishay
components have been employed include tanks, sub-
marines, missile systems, jet aircraft, satellites, the Hubble
space telescope, and more.The types of electronic compo-
nents manufactured by Vishay are also used in the growing
field of surveillance and security, where companies are
developing systems to protect against potential attacks on
government facilities, office buildings, airports, energy
plants, and other targets.
One key innovation in military aircraft is the development
and use of unmanned aerial vehicles (UAVs) for reconnais-
sance and combat.These aircraft, which eliminate aircrews
and can significantly decrease airborne equipment costs,
will be able to receive and respond to real-time video
transmitted by satellites and carried by high-bandwidth,
wide-area networks.1 On the ground, some military com-
bat and support personnel from the U.S. and other coun-
tries are equipped with ruggedized laptop computers and
other portable electronic devices.
Vishay components used in military, security, and aerospace
applications are designed to function reliably when subject-
ed to extremely hot and cold temperatures, intense vibra-
tion, and other environmental stresses. In addition,Vishay
has the ability to custom-design and produce components
to meet the high expectations of quality and reliability
demanded by military and aerospace customers.
In the semiconductor categories where Vishay competes,
global semiconductor usage in military/civil aerospace elec-
tronics is expected to increase from $2.666 billion in 2002
to $3.685 billion in 2006. Meanwhile, global passive compo-
nent usage (fixed capacitors, fixed resistors, and inductors)
in military and aerospace electronics is expected to
increase from $470 million in 2002 to $500 million in
2006.
Vishay components for military and aerospace applica-
tions are designed to function reliably when subjected to
extreme environmental conditions, such as those encoun-
tered by the NASA F/A 18 aircraft [left], International
Space Station [center], and U.S. Air Force/Philips labora-
tory satellite [right].
All photos on this page courtesy of NASA.
2002
2003
2004
2005
2006
$2,666
Millions of $, estimated
$2,984
$3,503
$3,630
$3,685
WORLDWIDE SEMICONDUCTOR CONSUMPTION*
IN MILITARY/CIVIL AEROSPACE ELECTRONICS
*Includes only General Purpose – Analog IC, General Purpose – Discrete,
and General Purpose – Optical
Source: Gartner Dataquest, December 2002
2002
2003
$470
$500
Millions of $, estimated
2004
$515
2005
$535
2006
$500
WORLDWIDE PASSIVE COMPONENT CONSUMPTION*
IN MILITARY AND AEROSPACE ELECTRONICS
*Includes only Fixed Capacitors, Fixed Resistors, and Inductors
1 Source: Machine Design, January 24, 2002
Source: Paumanok, February 2003
VISHAY INTERTECHNOLOGY, INC.
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VISHAY PRODUCTS
DISCRETE SEMICONDUCTORS:
Rectifiers
Schottky (single, dual)
Standard, Fast and Ultra-fast Recovery (single, dual)
Clamper/Damper
Bridge
Superectifier®
Sinterglass Avalanche Diodes
Small-Signal Diodes
Schottky and Switching (single, dual)
Tuner/Capacitance (single, dual)
Bandswitching
PIN
Zener and Suppressor Diodes
Zener (single, dual)
TVS (TRANSZORB®, Automotive, ESD, Arrays)
MOSFETs
Power MOSFETs
JFETs
RF Transistors
Bipolar Transistors (AF and RF)
Dual Gate MOSFETs
MOSMICs®
Optoelectronics
IR Emitters, Detectors and IR Receiver Modules
Opto Couplers and Solid State Relays
Optical Sensors
LEDs and 7-Segment Displays
Infrared Data Transceiver Modules
Custom Products
ICs
Power ICs
Analog Switches
PASSIVE COMPONENTS:
Capacitors
Tantalum Capacitors
Solid Tantalum Capacitors
Wet Tantalum Capacitors
Ceramic Capacitors
Multilayer Chip Capacitors
Disc Capacitors
Film Capacitors
Power Capacitors
Heavy Current Capacitors
Aluminum Capacitors
Resistive Products
Foil Resistors
Film Resistors
Thin Film Resistors
Thick Film Resistors
Metal Oxide Film Resistors
Carbon Film Resistors
Wirewound Resistors
Variable Resistors
Cermet Variable Resistors
Wirewound Variable Resistors
Conductive Plastic Variable Resistors
Networks/Arrays
Non-linear Resistors
NTC Thermistors
PTC Thermistors
Varistors
Magnetics
Inductors
Transformers
INTEGRATED MODULES:
DC/DC converters
STRESS SENSORS AND TRANSDUCERS:
Strain Gages and Instruments
PhotoStress® Instruments
Transducers
Load Cells
Weighing Systems
22
VISHAY INTERTECHNOLOGY, INC.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from _______ to _______
Commission file number 1-7416
VISHAY INTERTECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
38-1686453
(IRS employer identification no.)
63 Lincoln Highway
Malvern, Pennsylvania 19355-2143
(Address of principal executive offices)
(610) 644-1300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.10 par value
(Title of Class)
New York Stock Exchange
(Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as defined Exchange Act Rule 12b-2).
Yes X No ____
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference
to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last
business day of the registrant’s most recently completed second fiscal quarter, assuming conversion of all of its Class B common
stock held by non-affiliates into common stock of the registrant, was $3,182,840,000.
As of March 27, 2003, registrant had 144,300,063 shares of its common stock and 15,383,296 shares of its Class B
common stock outstanding.
Portions of the registrant’s definitive proxy statement, which will be filed within 120 days of December 31, 2002, are
incorporated by reference into Part III.
This page intentionally left blank
2
Item 1.
DESCRIPTION OF BUSINESS
General
PART I
Vishay Intertechnology, Inc. is a leading international manufacturer and supplier of passive and discrete
active electronic components. Passive components include resistors, capacitors, transducers and inductors. Active
components include diodes, transistors, rectifiers, power integrated circuits (ICs), infrared transceivers, infrared (IR)
sensors and optocouplers. Passive electronic components and discrete active electronic components are the primary
elements of almost every electronic circuit. We offer our customers “one-stop” access to one of the most
comprehensive electronic component lines of any manufacturer in the United States, Europe and Asia in both the
newer surface mount configuration and the traditional leaded form.
Our components are used in virtually every type of product that contains electronic circuitry, including:
•
(cid:183)
•
(cid:183)
•
(cid:183)
computer-related products,
power management products,
•
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•
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automotive applications,
process control systems,
telecommunications equipment,
•
(cid:183) military and aerospace applications,
•
(cid:183) measuring instruments,
•
(cid:183)
consumer electronics and appliances,
•
(cid:183)
industrial equipment,
•
(cid:183) medical instruments, and
•
(cid:183)
electronic scales.
Since 1985, we have pursued a business strategy that principally consists of the following elements:
1.
expanding within the electronic components industry, primarily through the acquisition of other
manufacturers of electronic components that have established positions in major markets, reputations for product
quality and reliability, and product lines with which we have substantial marketing and technical expertise;
2.
reducing selling, general and administrative expenses through the integration or elimination of
redundant sales offices and administrative functions at acquired companies;
3.
achieving significant production cost savings through the transfer and expansion of manufacturing
operations to regions such as the Czech Republic, Hungary, India, Israel, Malaysia, Mexico, the People’s Republic
of China, the Philippines, Portugal and the Republic of China (Taiwan), where we can take advantage of lower labor
costs and available tax and other government-sponsored incentives;
4.
maintaining significant production facilities in those regions where we market the bulk of our
products in order to enhance the service and responsiveness that we provide to our customers;
5.
6.
consistency rolling out new and innovative products; and
strengthening our relationships with customers and strategic partners.
As a result of this strategy, we have grown from a small manufacturer of precision resistors and resistance
strain gages to one of the world’s largest manufacturers and suppliers of a broad line of electronic components.
3
Our significant acquisitions in the last several years include:
Siliconix and Telefunken. We acquired an 80.4% interest in Siliconix incorporated (NASDAQ; SILI) in
March 1998 from Daimler-Benz A.G. Siliconix is a publicly traded chip maker, based in Santa Clara, California,
which designs, markets and manufactures power and analog semiconductor products, such as metal-oxide-
semiconductor field-effect transistors (MOSFETs), junction field-effect transistors (JFETs), bipolar switches, signal
processing ICs and power ICs for computers, cell phones, fixed communications networks, automobiles and other
electronic systems. Siliconix has manufacturing facilities in Santa Clara, California, maintains assembly and testing
facilities in the Republic of China (Taiwan), is party to a joint venture in Shanghai, the People’s Republic of China
and has subcontractors in the Philippines, the People’s Republic of China and the United States. Siliconix reported
worldwide sales of $372.9 million in 2002, $305.6 million in 2001, and $473.1 million in 2000.
In the same transaction, we acquired from Daimler-Benz the semiconductor business unit of TEMIC
Telefunken Microelectronic GmbH headquartered in Heilbronn, Germany, but promptly disposed of its integrated
circuits division. Telefunken launched our expansion into discrete active components with a product line of diodes,
RF transistors, optoelectronic semiconductors, infrared data transceivers (IRDCs) and light-emitting diodes (LEDs).
Our net cost of these two acquisitions was approximately $444 million.
Electro-Films, Cera-Mite and Spectrol. In May 2000, we acquired Electro-Films, Inc., a manufacturer of
thin film components and networks on ceramic and silicon. In August 2000, we acquired Cera-Mite Corporation, a
worldwide supplier of ceramic capacitors, used in power supplies, electronic lighting and other applications, and
thermistors (temperature-sensitive resistors) used in refrigeration, HVAC, telecommunications and other electronic
applications. Separately, in August 2000, we acquired Spectrol, a manufacturer of sensing potentiometers used
primarily in the automotive industry and trimmer potentiometers used in various kinds of electronic circuitry.
Tansitor and Mallory. In January 2001, we acquired Tansitor, a leading manufacturer of wet tantalum
electrolytic capacitors and miniature conformal coated solid tantalum capacitors. These components have power
management applications in the military, aerospace and medical industries. Later, in November 2001, we acquired
Yosemite Investment, Inc. d/b/a the North American Capacitor Company, known as Mallory, a manufacturer and
distributor of wet tantalum capacitors and other products. As a result of these two acquisitions, we have become the
number one manufacturer of wet tantalum capacitors worldwide.
Infineon. In July 2001, we acquired the infrared components business of Infineon A.G. for approximately
$116 million. As a result, we added several new device types to our optoelectronics portfolio. We also became the
largest supplier outside Japan of optocouplers and the largest supplier worldwide of IRDCs.
General Semiconductor. On November 2, 2001, we completed the acquisition of General Semiconductor,
Inc., a leader in the design, manufacture and distribution of semiconductors for the power management market. In
the transaction, we exchanged 0.563 of a share of Vishay common stock for each share of General Semiconductor
stock. Based on the closing price of our common stock on November 2, 2001, the transaction was valued at
approximately $555 million. General Semiconductor manufactures and distributes a broad range of power
management products, including rectifiers, transient voltage suppressors, small-signal transistors, diodes, MOSFETs
and analog ICs. As a result of this acquisition, we became the number one manufacturer of diodes and rectifiers
worldwide.
Sensortronics, Tedea-Huntleigh, BLH and Nobel, and Celtron. In January 2002, we acquired the
transducer and strain gage business of Sensortronics, Inc. In June 2002, we acquired Tedea-Huntleigh BV, a leading
manufacturer of load cells used in digital scales by the weighing industry. In July 2002, we purchased the BLH and
Nobel businesses from Thermo Electron Corporation. BLH and Nobel are engaged in the production and sale of
load cell based process weighing systems, weighing and batching instruments, web tension instruments, weighing
scales, servo control systems, and components relating to load cells, including strain gages, foil gages and
transducers. In October 2002, we acquired Celtron Technologies, another company engaged in the production and
sale of load cells used in digital scales for the weighing industry. As a result of these acquisitions, the product
portfolio of our Measurements Group has been expanded and we are now a world leader in stress analysis products
and transducers used in the weighing industry (load cells).
4
BCcomponents. In December 2002, we completed the acquisition of BCcomponents Holdings B.V., a
leading manufacturer of passive components with operations in Europe, India and the People’s Republic of China.
The product lines of BCcomponents include linear and non-linear resistors; ceramic, film and aluminum electrolytic
capacitors; switches and trimming potentiometers. BCcomponents had annual sales in 2001 of approximately $320
million. We acquired the outstanding shares of BCcomponents in exchange for ten-year warrants to acquire
7,000,000 shares of Vishay common stock at an exercise price of $20.00 per share and ten-year warrants to acquire
1,823,529 shares of Vishay common stock at an exercise price of $30.30 per share. In the transaction, outstanding
obligations of BCcomponents, including indebtedness, transaction fees and expenses in the amount of approximately
$224 million were paid or assumed. Also, $105 million in principal amount of BCcomponents’ mezzanine
indebtedness and certain other securities of BCcomponents were exchanged for $105 million principal amount of
floating rate unsecured loan notes of Vishay due 2102. This major acquisition has significantly enhanced our global
market position in passive components.
In addition to our acquisition activity, during 2002 we took steps to assure our competitiveness, enhance
our operating efficiency and strengthen our liquidity in the face of the economic downturn, which broadly impacted
the electronics industry during the year. In this regard, we:
(i)
closed or consolidated several manufacturing facilities and administrative offices;
(ii)
approximately 7%;
reduced our headcount, before acquisitions, by approximately 1,400 employees; or a reduction of
(iii)
integrated our acquisitions within our existing management and operational infrastructure; and
(iv)
relying on the strength of our balance sheet, continued our search for suitable acquisition
candidates.
Vishay was incorporated in Delaware in 1962 and maintains its principal executive offices at 63 Lincoln
Highway, Malvern, Pennsylvania 19355-2143. Our telephone number is (610) 644-1300.
Products
We design, manufacture and market electronic components that cover a wide range of products and
technologies. Our products primarily consist of:
•
(cid:183)
resistors,
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(cid:183)
tantalum capacitors,
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(cid:183) multi-layer and disc ceramic capacitors (MLCCs),
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(cid:183)
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(cid:183)
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(cid:183)
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(cid:183)
aluminum and specialty ceramic
capacitors,
film capacitors,
power MOSFETs,
power ICs,
and, to a lesser extent:
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(cid:183)
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(cid:183)
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(cid:183)
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(cid:183)
signal processing ICs,
transistors,
voltage suppressors,
infrared data transceivers (IRDCs),
•
(cid:183)
optocouplers,
IR sensors,
strain gages and load cells, and
diodes and rectifiers
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(cid:183)
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(cid:183)
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(cid:183)
5
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(cid:183)
inductors,
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connectors,
transformers,
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plasma displays,
thermistors, and
potentiometers.
We manufacture one of the broadest lines of surface mount devices, a format for electronic components that has
evolved into the standard required by most customers. In addition, we continue to produce components in the
traditional leaded form. We believe that we produce one of the broadest lines of discrete electronic components
available from any single manufacturer.
Passive Components
Passive components include resistors, capacitors and inductors. They are referred to as “passive” because
they do not require power to operate. These components adjust and regulate voltage and current, store energy and
filter frequencies. We also include in this category the products and services of our Measurements Group that
employ passive components in electro-mechanical measurements.
Resistors are basic components used in all forms of electronic circuitry to adjust and regulate levels of
voltage and current. They vary widely in precision and cost, and are manufactured from numerous materials and in
many forms. Resistive components are classified as variable or fixed, depending on whether or not their resistance is
adjustable. Resistors can also be used as measuring devices. We manufacture a line of thermistors, which are heat
sensitive resistors. Other types of resistive sensors are strain gages for measurement of mechanical stress. See
“Measurements Group” below.
We manufacture virtually all types of fixed resistors, both in discrete and network forms. These resistors
are produced for virtually every segment of the resistive product market, from resistors used in the highest quality
precision instruments for which the performance of the resistor is the most important requirement, to low-cost
resistors for which price is the most important factor.
Capacitors perform energy storage, frequency control, timing and filtering functions in most types of
electronic equipment. The more important applications for capacitors are:
•
(cid:183)
•
(cid:183)
•
(cid:183)
electronic filtering for linear and switching power supplies;
decoupling and bypass of electronic signals for integrated circuits and circuit boards; and
frequency control, timing and conditioning of electronic signals for a broad range of applications.
Our capacitor products include solid tantalum surface mount chip capacitors, solid tantalum leaded capacitors,
wet/foil tantalum capacitors, MLCC capacitors, disc ceramic capacitors, aluminum and specialty ceramic capacitors,
and film capacitors. Each capacitor product has unique physical and electrical performance characteristics that
make that type of capacitor useful for specific applications. Tantalum and MLCC capacitors are generally used in
conjunction with integrated circuits in applications requiring low to medium capacitance values, “capacitance” being
the measure of the capacitor’s ability to store energy. The tantalum capacitor is the smallest and most stable type of
capacitor for its range of capacitance and is best suited for applications requiring medium capacitance values.
MLCC capacitors, on the other hand, are more cost-effective for applications requiring lower capacitance. Disc
ceramic capacitors are used for high voltage applications. Aluminum capacitors are used for high capacitance
applications.
Inductors use an internal magnetic field to change the phase of electric current. They are utilized in
electronic circuitry to control alternating current and voltage, and to filter out unwanted electronic signals. They are
also used in transformers to change voltage levels.
6
Measurements Group
Vishay Measurements Group is a leading manufacturer of products for precision measurement of
mechanical strains. Our products include strain gages, load cells, force measurement sensors, displacement sensors,
and photoelastic sensors. These products are used in experimental stress analysis systems, as well as in the electronic
measurement of loads (electronic scales), acceleration and fluid pressure. The Measurements Group also provides
installation accessories for its products, instrumentation to sample and record measurement output, and training
seminars in stress analysis testing and transducer development and manufacture.
As a result of Vishay's acquisitions in 2002, the Measurements Group has implemented a strategy of
vertical market integration, with a product range from resistance strain gages, to transducers (the metallic structures
to which strain gages are cemented), to the electronic instruments and systems that measure and control output of the
transducers. Vishay Measurements Group now has two operating divisions: Vishay Micro-Measurements (for strain
gages, instruments and PhotoStress products) and Vishay Transducers (for load cells, weigh modules, instruments
and weighing systems).
Active Components
Our active electronic components include both discrete devices and integrated circuits (ICs). They are
referred to as “active” because they require power to function. Discrete devices are single components or an
arrangement of components that generate, control, regulate and amplify or switch electronic signals or energy.
Examples of our discrete active components include diodes, rectifiers, transient voltage suppressors, transistors and
power MOSFETs. These devices are interconnected with passive components or other active components to create
an electronic circuit. Our IC devices consist of a number of active and passive components interconnected on a
single chip to perform a specific function. Examples of our integrated circuits include power ICs, motor control ICs
and signal processing ICs. Our discrete active components and ICs are manufactured and marketed primarily
through our majority-owned Siliconix subsidiary, our Telefunken unit and the General Semiconductor business.
We also include in the category of active components our line of optoelectronic components, manufactured
and marketed by our Telefunken unit, and the infrared components business acquired from Infineon A.G.
Discrete Devices
Diodes and rectifiers are used to convert electrical currents from alternating current (AC) into direct current
(DC) by conducting electricity in one direction and blocking it in the reverse direction. Because electrical outlets
carry AC while the vast majority of electronic devices use DC, rectifiers are used in a wide variety of applications.
We offer a broad line of diodes and rectifiers with differing power, speed, cost, packaging and conversion (half
wave or full wave) characteristics. Our rectifiers include a series of high voltage devices that have been optimized
for power correction circuits.
Transient voltage suppressors protect electronic circuits by limiting voltage to a safe level. Examples of
transient events that could damage unprotected circuits include static electricity charges and natural or induced
lightning. Voltage suppressors protect circuits by absorbing large amounts of energy for short periods of time. We
offer a broad range of state-of-the-art transient voltage suppressors for use in most modern electronic equipment.
Small signal diodes and transistors perform amplification, signal blocking, routing and switching functions
at lower current levels. Our small-signal transistors range from the older junction field-effect transistors (JFETs), to
newer products such as those based upon double-diffused metal oxide semiconductor (DMOS) technology.
Discrete power MOSFETs are specialized field-effect transistors used to switch and manage power in a
broad range of electronic devices. These include particularly low-voltage applications such as cell phones, portable
and desktop computers, automobiles, instrumentation and industrial applications. Our innovative “trench” power
MOSFET technology offers very high cell density, very low on-resistance and optimized switching parameters for
high frequency DC-DC power conversion. Power MOSFETs conserve power and help prevent components from
heating up.
7
Integrated Circuits
Power ICs are used in applications such as cell phones, where an input voltage from a battery or other
supply source must be switched, interfaced or converted to a level that is compatible with logic signals used by
microprocessors and other digital components. Our ICs are designed to operate at higher frequencies without
compromising efficiencies. Often our power MOSFETs and power ICs can be used together as chip sets with
complementary performance characteristics optimized for a specific application.
Motor control ICs control the starting, speed or position of electric motors, such as the head positioning and
spindle motors in hard disk drives.
Signal processing ICs are used for analog switching and multiplexing in devices that either receive or
output analog (non-digital) signals. A recent application of this technology is in broadband communications devices
such as DSL modems.
Optoelectronics
Our line of optoelectronic components includes photo emitters and detectors, optocouplers, IRDCs and
LEDs.
Our photo detectors are light-sensitive semiconductor devices, and include linear photo diodes for light
measurement, photo-transistors for light switching applications in printers, copiers, facsimile machines, vending
machines and automobiles, and high speed photo PIN diodes specially designed for infrared data transfer. Our photo
detector products are available in a wide variety of sensitivity angles, light sensitivities, daylight filters and
packaging shapes. Our infrared photo emitters are used for optical switching and data transfer applications, often in
conjunction with our photo detectors, and in devices like infrared remote controls for televisions.
An optocoupler consists of a light emitting diode and a receiver facing each other through an insulation
medium inside a light-isolated housing. The receiver may either be a photodetector or a pair of MOSFETs, and in
the latter case the device is referred to as a solid-state relay (SSR). The function of an optocoupler is to electrically
isolate input and output signals. Our optocouplers are used in switchable power supplies, safety circuitry and
programmable controllers for computer monitors, consumer electronics, telecommunications equipment and
industrial systems.
IRDCs consist of a detector photo diode, an infrared light emitting diode and a control IC. IRDCs are used
for short range, two-way wireless, infrared data transfer between electronic devices such as mobile phones and other
telecommunications equipment, computers and personal digital assistants (PDAs). LEDs are light emitting diodes
used as light indicators in a variety of industries.
Packaging
We have taken advantage of the growth of the surface mount component market, and we are an industry
leader in designing and marketing surface mount devices. Surface mount devices adhere to the surface of a circuit
board rather than being secured by leads that pass through holes to the back side of the board. Surface mounting
provides distinct advantages over through-hole mounting. For example, surface mounting allows the placement of
more components on a circuit board, as well as on both sides of the board. This is particularly desirable in
applications such as hand held computers and cell phones where there is a continuing design trend towards product
miniaturization. Surface mounting also facilitates automated product assembly, resulting in lower production costs
for equipment manufacturers than those associated with leaded or through-hole mounted devices. We believe that
we are a market leader in the development and production of a wide range of surface mount devices, including:
thick film chip resistors,
•
(cid:183) wirewound chip resistors,
•
(cid:183)
•
(cid:183)
thick film resistor networks and arrays,
•
(cid:183) metal film leadless resistors (MELFs),
power strip resistors,
bulk metal foil chip resistors,
•
(cid:183)
•
(cid:183)
8
•
(cid:183) molded tantalum chip capacitors,
•
(cid:183)
coated tantalum chip capacitors,
•
(cid:183) multi-layer ceramic chip capacitors,
thin film chip resistors,
thin film networks,
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(cid:183)
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current sensing chips,
chip inductors,
chip transformers,
chip trimmers,
•
(cid:183) NTC chip thermistors,
certain diodes and transistor products,
•
(cid:183) PTC chip thermistors, and
•
(cid:183)
strain gages.
We also provide a number of component packaging styles to facilitate automated product assembly by our
customers.
Military Qualifications
We have qualified certain products under various military specifications, approved and monitored by the
United States Defense Electronic Supply Center (DESC), and under certain European military specifications. DESC
qualification levels are based in part upon the rate of failure of products. In order to maintain the classification level
of a product, we must continuously perform tests on the product and the results of these tests must be reported to
DESC. If the product fails to meet the requirements for the applicable classification level, the product’s
classification may be reduced to a lower level. Products from some of our United States manufacturing facilities
experience a reduction in product classification levels from time to time. During the time that the DESC
classification level is reduced for a product with military application, net sales and earnings attributable to that
product may be adversely affected.
Customers
We sell our products primarily to original equipment manufacturers (OEMs), electronic manufacturing
services (EMS) companies, which manufacture for OEMs on an outsourcing basis, and independent distributors that
maintain large inventories of electronic components for resale to OEMs.
To better serve our customers, we maintain production facilities in regions where we market the bulk of our
products, principally in the United States, Germany, France, the United Kingdom and more recently, Asia. We work
with our customers so that our products are incorporated into the design of electronic equipment at the research and
prototype stages. We also employ a staff of application and field engineers to assist our customers, independent
manufacturers’ representatives and distributors in solving technical problems and developing products to meet
specific needs.
Our largest customers vary from year to year, and no customer has long-term commitments to purchase our
products. During 2002, no one customer accounted for more than 10% of our sales.
During 2002, approximately 31% of our net sales were attributable to customers in the Americas,
approximately 31% were attributable to customers in Europe, and approximately 38% were attributable to customers
in Asia.
Marketing
Our products are marketed through independent manufacturers’ representatives compensated solely on a
commission basis, by our own sales personnel and by independent distributors. We have regional sales personnel in
9
several North American locations that make sales directly to OEMs and provide technical and sales support for
independent manufacturers’ representatives throughout the United States, Mexico and Canada. As noted, we also
use independent distributors to resell our products. Outside North America, we use similar channels to sell our
products worldwide.
Research and Development
Many of our products and manufacturing techniques, technologies and packaging methods have been
invented, designed and developed by our engineers and scientists. We maintain strategically placed design centers
where proximity to customers enables us to more easily gauge and satisfy the needs of local markets. These design
centers are located predominantly in the United States, France, Germany, Israel, the People’s Republic of China, the
Republic of China (Taiwan) and South Korea.
We also maintain research and development staffs and promote programs at a number of our production
facilities to develop new products and new applications of existing products, and to improve manufacturing
techniques. This decentralized system encourages individual product development at individual manufacturing
facilities that occasionally have applications at other facilities. Company research and development costs (exclusive
of purchased in-process research and development) were approximately $37.1 million for 2002, $30.2 million for
2001, and $37.1 million for 2000. These amounts include expenditures of our Siliconix subsidiary of $19.3 million,
$17.2 million and $21.0 million in 2002, 2001 and 2000, respectively, principally for the development of new power
products and power ICs. These amounts do not include substantial expenditures for the development and
manufacturing of machinery and equipment for new processes and for cost reduction measures.
Although we have numerous United States and foreign patents covering certain of our products and
manufacturing processes, no particular patent is considered material to our business.
Sources of Supplies
Although most materials incorporated in our 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
We are a major consumer of the world’s annual production of tantalum. Tantalum, a metal purchased in
powder or wire form, is the principal material used in the manufacture of tantalum capacitors. There are currently
three major suppliers that process tantalum ore into capacitor grade tantalum powder. Due to the strong demand for
our tantalum capacitors and difficulty in obtaining sufficient quantities of tantalum powder from our suppliers, we
stockpiled tantalum ore in 2000 and early 2001. During 2001 and 2002, we and our competitors experienced a
significant decline in the tantalum capacitor business as well as significant decreases in the market prices for
tantalum. As a result, we recorded in costs of products sold write-downs of $25,700,000 and $52,000,000,
respectively, on tantalum inventories during the years ended December 31, 2002 and 2001. We also recorded a loss
on future purchase commitments of $106,000,000 for the year ended December 31, 2002. If the downward pricing
trend were to continue, the Company could again be required to write down the carrying value of its tantalum
inventory and record additional losses on its long-term purchase commitments.
We have two agreements with Cabot Corporation for the supply of tantalum powder, a July 2000
agreement and a November 2000 agreement. Our purchase commitments with Cabot were entered into at a time
when market demand for tantalum capacitors was high and tantalum powder was in short supply. With the decline
in market demand and prices for tantalum, we began the process of negotiating modifications to the agreements with
Cabot during 2001. Our major competitors in the tantalum capacitor business were also seeking modifications to
their contracts with Cabot. In June 2002, following the prior initiation of legal proceedings by Cabot, we and Cabot
agreed to make certain modifications to the supply agreements. These included price reductions, the extension of
the term of one of the contracts, and the regular scheduling of our purchase commitments.
10
Palladium
Palladium, a metal used to produce multi-layer ceramic capacitors, is currently found primarily in South
Africa and Russia. Palladium is a commodity product that is subject to price volatility. The price of palladium
fluctuated in the range of approximately $222 to $1,090 per troy ounce during the three years ended December 31,
2002, and as of December 31, 2002, the price of palladium was $236 per troy ounce. During the years ended
December 31, 2002 and 2001, respectively, we recorded in costs of products sold write-downs on palladium
inventories of $1,700,000 and $18,000,000.
Inventory and Backlog
We manufacture both standardized products and those designed and produced to meet customer
specifications. We maintain an inventory of resistors and other standardized components. Backlogs of outstanding
orders for our products were $407.6 million, $337.9 million and $773.1 million, respectively, at December 31, 2002,
2001 and 2000. The backlog at December 31, 2002 includes $49.8 million of backlog attributable to the business of
BCcomponents, which was acquired in December 2002. The increase in backlog at December 31, 2002, exclusive of
the business of BCcomponents, as compared to the prior year, primarily reflects the increase in demand during 2002
for our active components as a result of the increase in computer notebooks and feature rich cell phones with
multiple functions, especially in Asia. The passive components backlog has decreased in 2002 due to a global
slowdown in the electronics industry, particularly in the general personal computer and cell phone markets.
Many of the orders that comprise our backlog may be canceled by customers without penalty. Customers
may on occasion double and triple order components from multiple sources to ensure timely delivery when backlog
is particularly long. Customers often cancel orders when business is weak and inventories are excessive, a
phenomenon that we have experienced in the current economic slowdown. Therefore, the amount of our backlog
may exceed the level of orders that will ultimately be delivered. Our results of operations could be adversely
impacted if customers cancel a material portion of orders in our backlog.
Competition
We face strong competition in various product lines from both domestic and foreign manufacturers that
produce products using technologies similar to ours. Our main competitors for tantalum capacitors are KEMET
Corporation, AVX Corporation and NEC Electronics, Inc. For MLCC capacitors, our principal competitors are
KEMET, AVX, Murata and TDK Corp. For thick film chip resistors, our major competitors include Rohm Corp.,
Koa Speer Electronics Inc. and Yageo Corporation. For wirewound and metal film resistors, the principal
competitors are I.R.C. Inc., Rohm Corp. and Ohmite Manufacturing Company. For active components, main
competitors include International Rectifier, Philips, N.V., ON Semiconductor, Rohm Corp., Motorola, Inc., Fairchild
Semiconductor Corp., Maxim, Shindengen Electric Manufacturing Co. Ltd., Sanken Electric Co. Ltd., ST
Microelectronics N.V. and Samsung Co., Ltd. There are many other companies that produce products in the markets
in which we compete.
Our competitive position depends on our product quality, know-how, proprietary data, marketing and
service capabilities and business reputation, as well as on price. We compete for sales of certain products on the
basis of our marketing and distribution network, which provides a high level of customer service. For example, we
work closely with our customers to have our components incorporated into their electronic equipment at the early
stages of design and production and maintain redundant production sites for some of our products to ensure an
uninterrupted supply of products. We have also established a National Accounts Management Program, which
provides our largest customers with one national account executive who can cut across business unit lines for sales,
marketing and contract coordination. In addition, the breadth of our product offerings enables us to strengthen our
market position by providing customers with “one-stop” access to one of the broadest selections of passive
electronic components available directly from a manufacturing source.
Manufacturing Operations
We strive to balance the location of our manufacturing facilities. In order to better serve our customers, we
maintain some of our production facilities in regions where we market the bulk of our products, such as the United
States, Germany, France, the United Kingdom, and more recently, Asia. To maximize production efficiencies, we
seek whenever practicable to establish manufacturing facilities in countries, such as the Czech Republic, Hungary,
11
India, Israel, Malaysia, Mexico, the People’s Republic of China, the Philippines, Portugal, and the Republic of
China (Taiwan), where we can take advantage of lower labor and tax costs and, in the case of Israel, to take
advantage of various government incentives, including grants and tax relief.
Some of our most sophisticated manufacturing operations are the production of power semiconductor
components. This manufacturing process involves two phases of production: wafer fabrication and assembly (or
packaging). Wafer fabrication subjects silicon wafers to various thermal, metallurgical and chemical process steps
that change their electrical and physical properties. These process steps define cells or circuits within numerous
individual devices (termed “dies” or “chips”) on each wafer. Assembly is the sequence of production steps that
divides the wafer into individual chips and encloses the chips in structures (termed “packages”) that make them
usable in a circuit. Both wafer fabrication and assembly phases incorporate wafer level and device level electrical
testing to ensure that device design integrity has been achieved.
At December 31, 2002, approximately 32% of our identifiable assets were located in the United States,
approximately 36% were located in Europe, approximately 14% were located in Israel, and approximately 18% were
located in Asia. In the United States, our manufacturing facilities are located in California, Connecticut, Indiana,
Maine, Maryland, New York, Nebraska, North Carolina, Pennsylvania, Rhode Island, South Dakota, Vermont, and
Wisconsin. In Europe, our main manufacturing facilities are located in Germany and France. We also have
manufacturing facilities in Austria, Belgium, the Czech Republic, Hungary, India, Israel, Malaysia, Mexico, the
Netherlands, the People’s Republic of China, the Philippines, Portugal and the Republic of China (Taiwan). Over
the past several years, we have invested substantial resources to increase capacity and to maximize automation in
our plants, which we believe will further reduce production costs.
We are aggressively undertaking to have the quality systems at most of our major manufacturing facilities
approved under the ISO 9001 international quality control standard. ISO 9001 is a comprehensive set of quality
program standards developed by the International Standards Organization. A majority of our manufacturing
operations have already received ISO 9001 approval and others are actively pursuing such approval.
In 2002, we continued the implementation of our strategy to shift manufacturing emphasis to higher
automation in higher labor cost regions and to relocate a fair amount of production to regions with skilled
workforces and relatively lower labor costs. As a result, we incurred restructuring costs in the year ended December
31, 2002 associated with the downsizing of manufacturing facilities in Europe and the United States. We may
continue to incur such expenses in 2003.
See Note 16 to our Consolidated Financial Statements, “Business Segment and Geographic Area Data,” for
financial information by geographic area.
Israeli Government Incentives
We have substantial manufacturing operations in Israel, where we benefit from the government’s
employment and tax incentive programs designed to increase employment, lower wage rates and increase our ability
to attract a highly-skilled labor force, all of which have contributed substantially to our growth and profitability. For
the year ended December 31, 2002, sales of products manufactured in Israel accounted for approximately 13.0% of
our net sales.
Under the terms of the Israeli government’s incentive programs, once a project is approved, the recipient is
eligible to receive the benefits of the related grants for the life of the project, so long as the recipient continues to
meet preset eligibility standards. None of our approved projects has ever been cancelled or modified, and we have
already received approval for a majority of the projects contemplated by our capital expenditure program. However,
as a result of the recent economic downturn, we were forced to lay off a significant number of employees in Israel in
2001. In 2002, the Israeli government initially withheld certain grant monies claiming that we had not maintained
employment at the required minimum levels; however, we were able to settle our dispute in the fourth quarter and
the government agreed to continue making grant payments to us. While the number of employees continues to
satisfy the eligibility requirements for our Israeli government grants, economic circumstances could compel future
additional layoffs. Also, over the past few years, the Israeli government has scaled back or discontinued some of its
incentive programs. There can be no assurance that we will maintain our eligibility for existing projects or that in the
12
future the Israeli government will continue to offer new incentive programs applicable to us or that, if it does, such
programs will provide the same level of benefits we have historically received or that we will continue to be eligible
to take advantage of them. Because we have received approvals for most projects currently contemplated, we do not
anticipate that cutbacks in the incentive programs for new projects would have an adverse impact on our earnings
and operations for at least several years.
We might be materially adversely affected if events were to occur in the Middle East that interfered with
our operations in Israel. However, we have never experienced any material interruption in our Israeli operations in
our 32 years of operations there, in spite of several Middle East crises, including wars.
Environment, Health and Safety
We have adopted an Environmental Health and Safety Corporate Policy that commits us to achieve and
maintain compliance with applicable environmental laws, to promote proper management of hazardous materials for
the safety of our employees and the protection of the environment, and to minimize the hazardous materials
generated in the course of our operations. This policy is implemented with accountability directly to the Chairman of
the Board of Directors. In addition, our manufacturing operations are subject to various federal, state and local laws
restricting discharge of materials into the environment.
We are not involved in any pending or threatened proceedings that would require curtailment of our
operations. We continually expend funds to ensure that our facilities comply with applicable environmental
regulations. In regard to all of our facilities, we have completed our undertaking to comply with environmental
regulations relating to the elimination of chlorofluorocarbons (CFCs) and ozone depleting substances (ODS)
pursuant to the Clean Air Act amendments of 1990. We have completely eliminated the use of CFCs and ODS in
our manufacturing processes, and all facilities are currently in compliance with the Clean Air Act.
While we believe that we are in material compliance with applicable environmental laws, we cannot
accurately predict future developments and do not necessarily have knowledge of past occurrences on sites that we
currently occupy. More stringent environmental regulations may be enacted in the future, and we cannot determine
the modifications, if any, in our operations that any such future regulations might require, or the cost of compliance
with such regulations. Moreover, the risk of environmental liability and remediation costs is inherent in the nature of
our business and, therefore, there can be no assurance that material environmental costs, including remediation
costs, will not arise in the future.
We have been named a Potentially Responsible Party (PRP) at nine Superfund sites, including two
Siliconix facilities, and have become responsible for certain obligations as a PRP in connection with our acquisition
of General Semiconductor. We expend minimal amounts in connection with several of these sites and do not expect
costs associated with the others to be material.
General Semiconductor has also been named as a defendant in two actions in the United States District
Court for the Eastern District of New York in connection with its former operations at a facility in Hicksville, New
York. The plaintiffs in these actions allege that they have suffered personal injury and property damage as a result
of the facility's operations. Although we will vigorously defend these actions, we do not currently possess sufficient
information to estimate reasonably the amount of or timing of liabilities that may be associated with these
litigations. It is our policy to record appropriate liabilities for environmental matters when damage claim payments
are probable and the costs can be reasonably estimated.
The ultimate cost of site cleanup is difficult to predict given the uncertainties regarding the extent of the
required cleanup, the interpretation of applicable laws and regulations and alternative cleanup methods. Based upon
our experience with the foregoing environmental matters, we have concluded that there is at least a reasonable
possibility that we will incur remedial costs in the range of $30 million to $35 million. As of December 31, 2002, we
concluded that the best estimate within this range is $34.4 million, which is included in other long-term liabilities on
the Consolidated Balance Sheet. The majority of the environmental reserve is due to the acquisitions of General
Semiconductor, Inc. and BCcomponents. In view of our financial position and reserves for environmental matters of
$34.4 million, we have concluded that any potential payment of such estimated amounts will not have a material
adverse effect on our consolidated financial position, results of operations or liquidity.
13
With each acquisition, we attempt to identify potential environmental concerns and to minimize, or obtain
indemnification for, the environmental matters we may be required to address. In addition, we establish reserves for
specifically identified potential environmental liabilities. We believe that the reserves we have established are
adequate. Nevertheless, we often unavoidably inherit certain pre-existing environmental liabilities, generally based
on successor liability doctrines. Although we have never been involved in any environmental matter that has had a
material adverse impact on our overall operations, there can be no assurance that in connection with any past or
future acquisition we will not be obligated to address environmental matters that could have a material adverse
impact on our operations.
Employees
As of December 31, 2002, we employed approximately 25,250 full time employees, of whom
approximately 20,730 were located outside the United States. Some of our employees outside the United States are
members of trade unions and employees at one small U.S. facility are represented by a union. Our relationship with
our employees is good. However, no assurance can be given that, if we continue to restructure our operations in
response to changing economic conditions, labor unrest or strikes, especially at European facilities, will not occur.
See “Legal Proceedings.”
Company Information and Website
We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities
and Exchange Commission (SEC) under the Securities Exchange Act of 1934 (the Exchange Act). The public may
read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW,
Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and
information statements, and other information regarding issuers, including us, that file electronically with the SEC.
The public can obtain any documents that we file with the SEC at http://www.sec.gov.
In addition, our company website can be found on the Internet at www.vishay.com. The website contains
information about us and our operations. Copies of each of our filings with the SEC on Form 10-K, Form 10-Q and
Form 8-K, and all amendments to those reports, can be viewed and downloaded free of charge as soon as reasonably
practicable after the reports and amendments are electronically filed with or furnished to the SEC. To view the
reports, access www.vishay.com, click on Company Info, then Investor Relations and then SEC Filings.
Any of the above documents can also be obtained in print by any shareholder who requests them from our
Investor Relations Department at the following address:
Corporate Investor Relations
Vishay Intertechnology, Inc.
63 Lincoln Highway
Malvern, PA 19355-2143
14
Item 2.
PROPERTIES
As of December 31, 2002, we maintained approximately 74 manufacturing facilities. The principal
locations of such facilities, along with available space including administrative offices, are:
Owned Locations
United States
Columbus and Norfolk, NE*
Sanford, ME
Santa Clara, CA
Grafton and Oconto, WI*
Wendell and Statesville, NC*
Monroe, CT
Greencastle, IN
Malvern, PA
____________________
* 2 locations
Non-U.S.
Israel (5 locations)
Germany (8 locations)
France (4 locations)
Republic of China (Taiwan) (2 locations)
Czech Republic (5 locations)
Hungary (2 locations)
Portugal
Netherlands
People’s Republic of China (2 locations)
Belgium (2 locations)
Austria
Philippines
India
Malaysia
Approx. Available
Space (Square Feet)
298,000
225,000
220,000
165,000
159,000
91,000
90,000
79,000
1,060,000
781,000
414,000
391,000
368,000
325,000
301,000
286,000
211,000
180,000
153,000
149,000
140,000
115,000
We own an additional 288,000 square feet of manufacturing facilities located in Maryland, New York,
Rhode Island, South Dakota, Vermont and Mexico.
Leased facilities in the United States include 217,000 square feet of space located in California,
Massachusetts, New York and South Dakota. Foreign leased facilities consist of 778,000 square feet in China,
127,000 square feet in Mexico, 13,000 square feet in the United Kingdom, 196,000 square feet in Germany, 75,000
square feet in the Czech Republic, 39,000 square feet in Israel and 41,000 square feet in Sweden.
In the opinion of management, our properties and equipment generally are in good operating condition and
are adequate for our present needs. We do not anticipate difficulty in renewing existing leases as they expire or in
finding alternative facilities.
Item 3.
LEGAL PROCEEDINGS
From time to time we are involved in routine litigation incidental to our business. Management believes
that such matters, either individually or in the aggregate, should not have a material adverse effect on our business or
financial condition.
15
Our 80.4% owned subsidiary, Siliconix, is a party to two environmental proceedings. The first involves
property that Siliconix vacated in 1972. In July 1989, the California Regional Water Quality Control Board
(RWQCB) issued Cleanup and Abatement Order No. 89-115 both to Siliconix and the current owner of the property.
The Order alleged that Siliconix contaminated both the soil and the groundwater on the property by the improper
disposal of certain chemical solvents. The RWQCB considered both parties to be liable for the contamination and
sought to have them decontaminate the site to acceptable levels. Siliconix subsequently reached a settlement of this
matter with the current owner of the property. The settlement provided that the current owner will indemnify
Siliconix and its employees, officers, and directors against any liability that may arise out of any governmental
agency actions brought for environmental cleanup of the subject site, including liability arising out of RWQCB
Order No. 89-115, to which Siliconix remains nominally subject.
The second proceeding involves Siliconix’s Santa Clara, California facility, which Siliconix has owned and
occupied since 1969. In February 1989, the RWQCB issued Cleanup and Abatement Order No. 89-27 to Siliconix.
The Order is based on the discovery of contamination of both the soil and the groundwater on the property by
certain chemical solvents. The Order calls for Siliconix to specify and implement interim remedial actions and to
evaluate final remedial alternatives. The RWQCB issued a subsequent order requiring Siliconix to complete the
decontamination. Siliconix has substantially completed its compliance with the RWQCB’s orders.
Our subsidiary General Semiconductor has been named a PRP at several Superfund sites and as a defendant
in two lawsuits in the United States District Court for the Eastern District of New York. See “Environment, Health
and Safety.”
In February and March 2001, several purported class action complaints were filed in the Delaware Court of
Chancery and the California Superior Court against us, Siliconix and the directors of Siliconix in connection with
our proposal in February 2001 to purchase all issued and outstanding shares of Siliconix that we did not already
own. The class actions alleged that our proposed offer was unfair and a breach of fiduciary duty. One of the
Delaware class actions also alleged that we had usurped Siliconix inventory and patents, appropriated Siliconix’s
separate corporate identity, and obtained a below-market loan from Siliconix. The actions sought injunctive relief,
damages and other relief. The Delaware Chancery Court denied a preliminary injunction motion seeking to enjoin
our tender offer, which was commenced in May 2001 but not successfully completed. In December 2002, the
Delaware Chancery Court dismissed without prejudice the Delaware litigation. Also in December 2002, the
plaintiffs in the action filed in the California Superior Court filed a motion for dismissal of the action without
prejudice. Defendants have consented to that motion, which is still pending.
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
16
Item 4A.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding our executive officers as of March 31, 2003.
Name
Felix Zandman*
Avi D. Eden*
Gerald Paul*
Marc Zandman
Richard N. Grubb*
Robert A. Freece*
William J. Spires
Age
Positions Held
74
55
54
41
56
62
61
Chairman of the Board and Chief Executive
Officer
Vice-Chairman of the Board, Executive Vice
President and General Counsel
Chief Operating Officer, President and
Director
Vice-Chairman of the Board, President-
Vishay Israel Ltd.
Executive Vice President, Treasurer, Chief
Financial Officer and Director
Senior Vice President and Director
Vice President and Secretary
* Member of the Executive Committee of the Board of Directors.
Dr. Felix Zandman, a founder of the Company, has been the Chief Executive Officer and a Director of the
Company since its inception. Dr. Zandman had been President of the Company from its inception until March 16,
1998, when Dr. Gerald Paul was appointed President of the Company. Dr. Zandman has been Chairman of the
Board since March 1989.
Avi D. Eden has been a Director and General Counsel of the Company since June 1988, and has been Vice-
Chairman of the Board and an Executive Vice President of the Company since August 1996.
Dr. Gerald Paul has served as a Director of the Company since May 1993 and has been Chief Operating
Officer and an Executive Vice President of the Company since August 1996. On March 16, 1998, Dr. Paul was
appointed President of the Company. He was President of Vishay Electronic Components, Europe from January
1994 to August 1996. Dr. Paul has been Managing Director of Draloric Electronic GmbH, an affiliate of the
Company, since January 1991. Dr. Paul has been employed by Draloric since February 1978.
Marc Zandman was appointed Vice-Chairman of the Board as of March 1, 2003. He has been a Director of
the Company since May 2001, President of Vishay Israel Ltd. since April 1998, and Group Vice President of
Measurements Group since August 2002. Mr. Zandman has served in various other capacities with the Company
since August 1984. He is the son of Dr. Felix Zandman, the Company's Chief Executive Officer.
17
Richard N. Grubb has been a Director, Vice President, Treasurer and Chief Financial Officer of the
Company since May 1994, and has been an Executive Vice President of the Company since August 1996. Mr.
Grubb has been associated with the Company in various capacities since 1972.
Robert A. Freece has been a Director of the Company since 1972. He was a Vice President of the Company
from 1972 until 1994, and has been a Senior Vice President since May 1994.
William J. Spires has been a Vice President and Secretary of the Company since 1981. Mr. Spires has been
Vice President - Industrial Relations since 1980 and has been employed by the Company since 1970.
18
PART II
Item 5.
MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
Our 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 our common stock as reported on the New York Stock Exchange
Composite Tape for the quarterly periods within the 2001 and 2002 calendar years indicated. We do not currently
pay cash dividends on our capital stock. Our policy is to retain earnings to support the growth of our business and
we do not intend to change this policy at the present time. In addition, we are restricted from paying cash dividends
under the terms of our revolving credit agreement. See Note 6 to our Consolidated Financial Statements. Holders of
record of our common stock totaled approximately 1,791 at March 27, 2003.
COMMON STOCK MARKET PRICES
Calendar 2001
Calendar 2002
High
$22.75
$27.98
$25.25
$21.88
Low
$13.75
$17.00
$16.08
$16.86
High
$22.50
$26.15
$22.00
$15.10
Low
$17.05
$19.31
$ 8.51
$ 6.70
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
At March 27, 2003, we had outstanding 15,383,296 shares of Class B common stock, par value $.10 per
share, each of which entitles the holder to ten votes. The Class B common stock generally is not transferable except
in certain very limited instances, and there is no market for those shares. The Class B common stock is convertible,
at the option of the holder, into common stock on a share for share basis. Substantially all of such Class B common
stock is owned by Dr. Felix Zandman, our Chairman and Chief Executive Officer, the estate of Mrs. Luella B.
Slaner, a former director, and trusts for the benefit of the grandchildren of Mrs. Slaner, either directly or
beneficially.
See Item 12 for certain equity compensation information with respect to equity compensation plans
approved by security holders and equity compensation plans not approved by security holders.
19
Item 6.
SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information of the Company as of and for the
fiscal years ended December 31, 2002, 2001, 2000, 1999 and 1998. This table should be read in conjunction with
our Consolidated Financial Statements and the related notes thereto included elsewhere in this Form 10-K.
Income Statement Data (in thousands, except per share
amounts):
Net sales
Interest expense
(Loss) earnings before income taxes and
minority interest
Income taxes (benefit)
Minority interest
Net (loss) earnings
Basic (loss) earnings per share (5)
Diluted (loss) earnings per share (5)
Weighted average shares outstanding – basic (5)
Weighted average shares outstanding – diluted (5)
Balance Sheet Data (in thousands):
As of and for the Year Ended December 31,
2002(1)
2001 (2)
2000
1999 (3)
1998 (4)
$1,822,813
28,761
$1,655,346
16,848
$2,465,066
25,177
$1,760,091
53,296
$1,572,745
49,038
(100,045)
(16,900)
9,469
(92,614)
$(0.58)
$(0.58)
159,413
159,413
10,103
5,695
3,895
513
$0.00
$0.00
141,171
142,514
690,225
148,186
24,175
517,864
$3.83
$3.77
135,295
137,463
134,711
36,940
14,534
83,237
$ 0.66
$ 0.65
126,678
128,233
42,646
30,624
3,810
8,212
$ 0.07
$ 0.07
126,665
126,797
Total assets
Long-term debt
Working capital
Stockholders’ equity
$4,315,159
706,316
897,456
2,358,787
$3,951,523
605,031
1,096,034
2,366,545
$2,783,658
140,467
1,057,200
1,833,855
$2,323,781
656,943
604,150
1,013,592
$2,462,744
814,838
650,483
1,002,519
_______________________________________________________________________
(1)
(2)
Includes the results from January 1, 2002 of Infineon Malaysia, January 31, 2002 of Sensortronics, July 1, 2002 of Tedea
Huntleigh, August 1, 2002 of BLH/Nobel, and October 1, 2002 of Celtron. Also includes restructuring expenses, net of taxes
of $11,984,000; write-down of raw materials inventory, net of taxes of $22,533,000; accrual of loss on long-term purchase
commitments, net of taxes of $91,160,000; and other expenses, net of taxes, of $10,426,000 for a total of $136,103,000
($0.85 per share).
Includes the results from January 1, 2001 of Tansitor, July 27, 2001 of Infineon U.S., November 2, 2001 of General
Semiconductor, and November 7, 2001 of Mallory. Also includes restructuring expenses, net of taxes, of $39,972,000;
write-down of raw materials inventory, net of taxes, of $57,431,000; purchased research and development (no tax effect) of
$16,000,000; and other expenses, net of taxes, of $5,373,000 for a total of $118,776,000 ($0.84 per share).
(3) The sale of Nicolitch, S.A. and a tax rate change in Germany reduced net earnings by $14,562,000 ($0.11 per share).
(4)
Includes the results from March 1, 1998 of Siliconix and Telefunken and special charges after taxes of $55,335,000 ($0.44
per share).
(5) Adjusted to reflect a three-for-two stock split distributed June 9, 2000, a five-for-four stock split distributed June 22, 1999
and a 5% stock dividend paid on June 11, 1998.
20
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Market conditions in the electronics industry remained difficult in 2002. The continuing worldwide
economic slowdown, general lack of investor confidence, consumer ambivalence and political instabilities were
reflected in the markets we serve. With regard to particular industries in 2002, our management perceived stability
in the automotive market, continuing weakness in the markets for telecom equipment and consumer products
generally, and signs of modest recovery in computer laptops and game consoles. Geographically, our business in
the Americas and Europe remained at depressed levels, while our Asian business faired relatively better. Our
visibility of future demand is limited, and management cannot gauge with any confidence when the current cyclical
downturn is likely to reverse itself.
Product Demand and Pricing
Sales volume and pricing are the top line indicators of demand for our products. Compared to the
substantial drop-off in business in 2001, 2002 results remained relatively weak but without major signs of increasing
deterioration. Sales rose slightly in 2002 as compared to 2001, with higher volumes offsetting the effects of still
declining prices. The increased volumes were due in part to the effects of acquisition activity. Average selling
prices continued their decline in 2002, but at a rate that was less than in 2001. We experienced a weighted average
pricing decline in 2002 compared to 2001 of 9%, while the decline for 2001 compared to 2000 was 3%.
Backlog, which is one indication of trends in customer demand, was relatively stable in 2002 as compared
to 2001, but still down substantially from 2000. In uncertain economic times, such as those we experienced in 2002
and 2001, orders are more susceptible to cancellation. Accordingly, backlog as a measure of future sales in these
circumstances becomes less reliable.
Another important indicator of demand in our industry is the book-to-bill ratio, which is the ratio of the
amount of product ordered during a period as compared with the product that we ship during that period. A book-to-
bill ratio that is greater than one indicates that our orders are building and that we are likely to see increasing
revenues in future periods. Conversely, a book-to-bill ratio that is less than one is an indicator of declining demand
and may foretell declining sales.
The quarter-to-quarter trends in backlog and book-to-bill ratio can also be an important indicator of the
likely direction of our business. The following table shows the end-of-period backlog and the book-to-bill ratio for
our business as a whole during the five quarters beginning with the fourth quarter of 2001 and through the fourth
quarter of 2002. The relatively flat backlog amounts and book-to-bill ratios hovering at or slightly below one are
consistent with a business environment that remains stagnant and with no clear signs of recovery.
4th Quarter 2001
1st Quarter 2002
2nd Quarter 2002
3rd Quarter 2002
4th Quarter 2002
End of Period
Backlog
$337,883,000 (1)
$396,900,000
$421,500,000
$378,500,000
$407,600,000 (2)
Book-to-Bill Ratio
0.89
1.14
1.02
0.90
0.93
(1)
(2)
Includes $70,360,000 of backlog attributable to the business of General Semiconductor, which was acquired November
2, 2001.
Includes $49,800,000 of backlog attributable to the business of BCcomponents, which was acquired in December 2002.
Segments
Our management evaluates our operating results along the lines of two major segments, passive
components and active components. Passive components include resistors, capacitors and inductors. These are
necessary elements of all electronic circuits and are referred to as passive because they do not require power to
21
operate. We include in this segment our Measurements Group, which manufactures and markets strain gages, load
cells, transducers, instruments and weighing systems. The core components of these devices are resistors that are
sensitive to various types of mechanical stress. We began our business as a manufacturer of passive components,
and this remains a significant part of our business. In December 2002, we completed our first major acquisition in
the passive segment in over ten years with the purchase of BCcomponents Holdings B.V., a manufacturer of a broad
line of resistors and capacitors. We also completed a series of smaller acquisitions in the Measurements Group in
2002, including Celtron Technologies, the BLH and Nobel businesses of Thermo Electron Corporation, Tedea-
Huntleigh BV and the transducer and strain gage businesses of Sensortronics, Inc. With these acquisitions, we
established ourselves as one of the world’s leading manufacturers and suppliers of strain gage products.
We are now also one of the world’s leading manufacturers of active electronic components. These include
transistors, diodes, rectifiers, certain types of integrated circuits and optoelectronic products. These components are
referred to as active because they require power to function. We entered the active component business in 1997
when Vishay purchased a 65% interest in Lite-On Power Semiconductor Corporation (LPSC), a Taiwan-based
company that is a major supplier of discrete active electronic components in Asia. In March 2000, we agreed to sell
our interest in LPSC to Lite-On JV Corporation (the Lite-On Group), the owner of the remaining 35% interest in
LPSC, for consideration consisting of cash and the assignment or transfer to Vishay of the Lite-On Group’s rights
under stock appreciation rights. In 1998, we increased our entry into the active components business with the
acquisition from Daimler-Benz of TEMIC Telefunken Microelectronics GmbH, a manufacturer of optoelectronic
components and small signal transistors, and of an 80.4% interest in Siliconix Incorporated, a manufacturer of power
integrated circuits. In 2001, we substantially increased our presence in the active component market, first with the
acquisition in July of the optoelectronic infrared business of Infineon A.G., and later with the acquisition in
November of General Semiconductor, Inc., a manufacturer of rectifiers and power management components whose
business is complementary to that of Siliconix. As a percentage of our total sales, active components were 58% in
2002, 39% in 2001 and 34% in 2000.
The passive and active segments of our business have historically responded differently to phases of the
business cycle. Having strong capabilities in both areas not only gives us a broad line of products to offer our
customers, it also smoothes, to some extent, the business swings that we experience. When business slows down,
active components are usually first to feel the effects of the downturn that are later experienced by passive
components. Similarly, when business begins to increase, our semiconductor products usually lead the recovery,
followed some time later by resistors, inductors and capacitors. Results in 2002 were on the whole better in the
active segment than the passive segment, but results and trends varied for products within the two segments. Our
resistor and inductor business stabilized in 2002, but capacitors continued to deteriorate. As in the past, specialty
products performed reasonably well despite the economic downturn, but commodity products continued to suffer
from strong pricing pressures. The active side of our business evidenced improvement in 2002, mainly at Siliconix
and to a lesser extent in our remaining semiconductor operations. Even in the active segment, however, backlog and
book-to-bill ratios do not reflect strong near-term recovery.
The following table shows our sales and book-to-bill ratios broken out by segment for the five quarters
beginning with the fourth quarter of 2001 and through the fourth quarter of 2002:
Sales ($)/
Book-to-bill
Passive
Components
Active
Components
4th Quarter 2001
1st Quarter 2002
2nd Quarter 2002
3rd Quarter 2002
4th Quarter 2002
$178,295,000
0.83
$202,856,000 (1)
0.94 (1)
$184,572,000
1.02
$249,568,000
1.22(2)
$187,430,000
0.98
$270,447,000
1.04
$196,702,000
0.96
$274,717,000
0.85
$198,542,000
1.00
$260,835,000
0.88
(1)
(2)
Includes $51,274,000 attributable to General Semiconductor for active components. Excluding General Semiconductor,
the book-to-bill ratio for active components during the fourth quarter of 2001 would have been 0.95.
The book-to-bill ratio for the active components for the quarter ended March 31, 2002 reflected, in part, an unusual
spike in orders in March 2002.
22
The increase in backlog in the actives segment reflects the increase in demand for computer notebooks and feature
rich cell phones with multiple functions, especially in Asia. The decrease in passives backlog is due to the global
slowdown in the electronics industry, particularly in the general personal computer and cell phone markets.
Cost and Inventory Management
We place a strong emphasis on reducing our costs. One way we do this is by moving production to the
extent possible from high labor cost markets, such as the United States and Western Europe, to lower labor cost
markets, such as Israel, Mexico, the Republic of China (Taiwan), the People’s Republic of China and Eastern
Europe. The percentage of our total headcount in lower labor cost countries is a measure of the extent to which we
are successful in implementing this program. This percentage was 65% at the end of 2002 as compared to 61% at the
end of 2001 and 57% at the end of 2000. We expect that this trend will continue with the acquisition in December
2002 of BCcomponents, where we intend to move production to lower cost jurisdictions, primarily in Asia.
We are placing particular emphasis on cost reduction in our capacitor lines, which have been hardest hit by
the current downturn and where the business continues to suffer from worldwide overcapacity. We expect to
complete the transfer of our power capacitor production from Western Europe to the Czech Republic by mid-year
and to begin moving our molded tantalum capacitor business to the People’s Republic of China. We also expect to
consolidate our existing film capacitor line within the newly acquired business of BCcomponents.
We also focus on our inventory turns as a measure of how well we are managing our inventory. We define
inventory turns for a financial reporting period as our cost of products sold for that period divided by our average
inventory for the period. A higher level of inventory turns reflects more efficient use of our capital. In 2002,
inventory turns improved to 2.52 from 2.26 in 2001, which we attribute to somewhat improved selling conditions
and enhanced selling efficiencies implemented during the year.
Israeli Government Incentives
Our production facilities in Israel benefit from incentives offered by the Israeli government for creation of
jobs and capital investment in that country. These benefits take the form of government grants and reduced tax rates
that are lower than those in the United States. These reduced tax rates apply to projects specifically approved by the
Israeli government and, depending on project size, are available for periods of ten or fifteen years. Due to the write-
down of inventories and the loss on long-term purchase commitments in 2002, the application of the Israeli tax rates
rather than United States tax rates resulted in an increase in net loss of $24,769,000. In 2001 and 2000, lower tax
rates in Israel, as compared to the statutory rate in the United States, resulted in an increase in net earnings of
$3,009,000 and $89,745,000, respectively.
Israeli government grants are awarded to specific projects. These grants are intended to promote sales and
employment in Israel’s industrial sector and are conditioned on the recipient maintaining certain prescribed
employment levels. Grants are paid when the related projects become operational, and the Israeli government
approves the project. Israeli government grants, recorded as a reduction in the costs of products sold, were
$17,322,000, $19,064,000 and $15,721,000 in the years 2002, 2001 and 2000, respectively. At December 31, 2002,
our balance sheet reflected $42,345,000 in deferred grant income.
During the second quarter of 2002, the government of Israel informed us that since the headcount in our
Israeli subsidiaries decreased significantly over the previous 18 months, the government intended to withhold a
$15,000,000 grant otherwise due to us. The grant, which was made by the Israeli government under an economic
stimulus program, was conditioned in part on the employment levels at certain of our Israeli facilities. The Israeli
government argued that we had not maintained employment at the required minimum levels. During the fourth
quarter of 2002, we settled our dispute with the government of Israel by negotiating certain of our commitments, and
the government agreed to continue making grant payments to us. We therefore recorded a catch up adjustment of
approximately $1,070,000 of grant income for the fourth quarter of 2002 and reversed the allowances against the
grant and deferred income reflected on the September 30, 2002 balance sheet.
23
If we were no longer able to maintain the required level of employment in the future, we could be required
to return some grant funds that were previously awarded to us. The effect of the return of these funds would be to
reduce our income in future years. Also, if the current business climate continues, we might not initiate new
projects that qualify for grants or reduced tax rates or the Israeli government could curtail or eliminate the programs
from which we have benefited in the past.
Write-Downs of Inventory and Purchase Commitments
Tantalum is the principal material used in the manufacture of tantalum capacitors. We generally purchase
this metal in powder or wire form, although in 2000 and early 2001, when we perceived possible supply shortages,
we also stockpiled quantities of tantalum ore. In July and November of 2000, we entered into purchase contracts
with Cabot Corporation for tantalum powder and wire that committed us to minimum purchases of these materials at
fixed prices through 2005. We regularly utilize tantalum powder and wire in the production of tantalum capacitors
but have not used our stockpile of tantalum ore since 2000. Palladium is a precious metal used in the production of
multi-layer ceramic capacitors that we purchase under short-term contracts.
In 2001, as a result of the general downturn in the electronics business, we experienced a significant
decrease in capacitor sales. Prices of tantalum ore, powder and wire and of palladium also experienced significant
declines. Accordingly, we recorded write-downs of our raw material inventories of these metals including
$38,000,000 for tantalum ore, $14,000,000 for tantalum wire and powder and $18,000,000 for palladium.
In June 2002, following initiation of a lawsuit by Cabot regarding its tantalum supply contracts with
Vishay, we agreed with Cabot to modify the contracts, including reducing prices, providing for purchases at regular
intervals and extending one of the contracts through 2006. In the fourth quarter of 2002, our management concluded
that the depressed prices for tantalum were not attributable to temporary imbalances in distributor inventories for
tantalum capacitors and that the prices for tantalum were likely to remain at their currently depressed levels for the
foreseeable future. Also during the fourth quarter, one of our competitors settled its dispute with Cabot regarding
long-term tantalum purchase commitments at prices that we understand are in the same range as the prices under our
June 2002 settlement with Cabot. Our management therefore concluded that it was unlikely to obtain further price
concessions from Cabot. Accordingly, we determined that it was appropriate to accrue a loss of our purchase
commitments under our supply contracts with Cabot to reflect the difference between the prices that we are required
to pay under the contracts and current market prices for tantalum. For the same reasons, we also determined to
further write down our raw material inventories of tantalum ore, powder and wire. These charges amounted to
approximately $106,000,000 for the purchase commitments and $25,700,000 for inventory. In 2002, we also
recorded a write-down of $1,700,000 on palladium inventories.
We anticipate, based on current and foreseeable demand for tantalum capacitors, that our minimum
purchase commitments under the contracts with Cabot will substantially exceed our requirements over the terms of
the contracts. See “Contractual Commitments” below. Also, we do not anticipate utilizing our stockpile of tantalum
ore at any time in the foreseeable future. Tantalum ore, powder and wire have an indefinite shelf life; therefore, we
believe that we will eventually utilize all of the material in our inventory or purchased under the contracts. Our
visibility of future demand is limited, however, and actual consumption may differ substantially from the amounts
that we now estimate.
Foreign Currency
In 2002, we realized approximately 69% of our revenues from customers outside the United States. Any
third party sales not using the U.S. dollar as the functional currency must be reported in the local currency and be
translated at the weighted average exchange rate. This translation will have an impact on the net sales line of the
income statement and also on the expense lines of the income statement. We generally do not purchase foreign
currency exchange contracts or other derivative instruments to hedge our exposure to foreign currency fluctuations.
24
Critical Accounting Policies
Our significant accounting policies are summarized in Note 1 to our Consolidated Financial Statements.
We identify here a number of policies that entail significant judgments or estimates.
Revenue recognition
We record revenues at the time that we ship products to our customers. Many of our shipments are to
distributors, who purchase for resale to end-users. The distributors have certain limited rights to return products.
They are also entitled to certain price protection benefits, which give them credit for unsold products that they
continue to hold in inventory when we reduce our book prices for these items. At the time we record sales to these
distributors, we also recognize allowances against net sales for estimated product returns and price protection. To
estimate these allowances, we review historical returns and price adjustments on both a consolidated level and on an
individual distributor level as well as the general business and economic climate. These procedures require the
exercise of significant judgments, but we believe they enable us to estimate reasonably future credits for returns and
price adjustments.
Accounts Receivable
Our receivables represent a significant portion of our current assets. We are required to estimate the
collectability of our receivables and to establish allowances for the amount of receivables that will prove
uncollectible. We base these allowances on our historical collection experience, the length of time our receivables
are outstanding, the financial circumstances of individual customers, and general business and economic conditions.
Inventories
We value our inventories at the lower of cost or market, with cost determined under the first-in first-out
method and market based upon net realizable value. The valuation of our inventories requires our management to
make market estimates. For instance, in the case of tantalum powder, we estimate market value by obtaining current
quotations from available sources of supply. For work in progress goods, we are required to estimate the cost to
completion of the products and the prices at which we will be able to sell the products. For finished goods, we must
assess the prices at which we believe the inventory can be sold. As noted, we recorded substantial write-downs of
our tantalum and palladium inventories in 2002.
Estimates of Restructuring Expense and Purchase Related Restructuring Costs
In 2002, we recorded restructuring costs of approximately $48,000,000 related to our acquisitions and
$30,970,000 related to our existing businesses. Our acquisition-related restructuring costs included, among other
things, costs related to our acquisition of BCcomponents in December 2002. Our restructuring activities related to
our existing business were designed to reduce both our fixed and variable costs, particularly in response to the
reduced demand for our products occasioned by the continuing electronics industry downturn in 2002. These
included the disposition of fixed assets and the termination of employees. Acquisition-related costs are included in
the allocation of the cost of the acquired business and generally add to goodwill. Other restructuring costs are
expensed during the period in which we determine that we will incur those costs, and all of the requirements for
accrual are met.
Because these costs are recorded based upon estimates, our actual expenditures for the restructuring
activities may differ from the initially recorded costs. If this happens, we will have to adjust our estimates in future
periods. In the case of acquisition-related restructuring costs, this would generally require a change in value of the
goodwill appearing on our balance sheet, but would not affect our earnings. In the case of other restructuring costs,
we could be required either to record additional expenses in future periods, if our initial estimates were too low, or
to reverse part of the charges that we recorded initially, if our initial estimates were too high.
25
Raw Material Write-downs
As indicated, in the fourth quarter of 2002 we took charges of approximately $106,000,000 against
contractual commitments to purchase tantalum powder and wire through 2006 and wrote-off approximately
$25,700,000 of our existing inventory of tantalum ore, powder and wire. We did this because the current market
prices of tantalum are substantially below the prices at which we are committed to purchase tantalum in the future
under long-term contracts and the prices at which we were carrying our tantalum raw materials inventory. These
actions involved significant judgments on our part, including decisions of whether to take these charges and write-
downs, their timing and their amount.
We made the decision to take the charges and write-downs after our management concluded that the
substantial fall-off in the demand for tantalum capacitors was likely to continue for the foreseeable future.
Combining this assessment with the worldwide over-capacity in tantalum production, we could not foresee when
tantalum prices might recover from their currently depressed levels. We made this determination in the fourth
quarter of 2002 after it was apparent that the inventory levels of our customers had dropped without any effect on
the demand or pricing for tantalum capacitors and after the settlement of our competitor’s tantalum pricing litigation,
described above. Although we believe that both the charges and write-downs as well as their timing were
appropriate under the circumstances, our visibility for future demand and pricing is limited and the judgments made
by our management necessarily involved subjective assessments.
The write-down of our current tantalum inventory and the charges with respect to our future tantalum
commitments were calculated based on current market prices for tantalum. There is no established market on which
tantalum raw materials are regularly traded and quoted. We based our determination of current market price on
quotations from two suppliers of these materials. We cannot say that the prices at which we could currently enter
into contracts for the purchase of tantalum would be the same as these quoted prices. Also, in quantifying the
charges that we took against our future purchase commitments, we assumed for lack of any other benchmark that
current market prices would continue through 2006, when our purchase commitments end. Had we made other
assumptions on current and future prices for tantalum, the amount of the inventory write-downs and the charges
against our purchase commitments would have been different.
If tantalum prices were to recover in the future, we would not reverse the write-downs that we have taken
on our raw materials inventory or the charges that we have recorded against our purchase commitments, so that our
cost of materials will continue to reflect these write-downs and charges regardless of future price increases in
tantalum. This could have the effect of increasing the earnings that we realize in future periods from what they
would have been had we not taken these actions until future raw material prices were known with certainty. We
could also be required to take further write-downs and charges if tantalum prices experience further declines.
Goodwill
Goodwill represents the excess of the cost of businesses acquired over the fair value of the related net
assets at the date of acquisition. In accordance with Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, we no longer amortize goodwill, but test for impairment of goodwill using a
market multiple approach.
Long-Lived Assets
We assess the impairment of our long-lived assets, other than goodwill and trademarks, including property,
plant and equipment, and identifiable intangible assets subject to amortization whenever events or changes in
circumstances indicate the carrying value may not be recoverable. Factors we consider important which could
trigger an impairment review include significant changes in the manner of our use of the acquired asset, changes in
historical or projected operating performance and significant negative economic trends.
26
Results of Operations
Income statement captions as a percentage of sales and the effective tax rates were as follows:
2002
79.8%
20.2
17.1
(4.4)
(5.5)
(5.1)
(16.9)
Costs of products sold
Gross profit
Selling, general and
administrative expenses
Operating (loss) income
(Loss) earnings before income
taxes (benefit) and minority
interest
Net (loss) earnings
Effective tax rate
Net Sales, Gross Profits and Margins
Year Ended December 31
2001
77.0%
23.0
16.8
0.9
0.6
0.0
56.4
2000
59.2%
40.8
12.1
28.3
28.0
21.0
21.5
Sales for the year ended December 31, 2002 increased by $167,467,000 or 10.1% over the prior year. This
combines a substantial increase in sales in the active segment, attributable in large measure to 2001 acquisitions
reflected only partially in 2001 but fully in 2002, and a continuing drop in sales in the passive segment in 2002. The
weakening of the U.S. dollar against foreign currencies for the year ended December 31, 2002, in comparison to the
prior year, resulted in increases in reported sales of $18,000,000.
Costs of products sold as a percentage of net sales were 79.8% for the year ended December 31, 2002 as
compared to 77.0% for the prior year. Gross profit, as a percentage of net sales, for the year ended December 31,
2002 was 20.2% as compared to 23.0% for the prior year. The erosion in overall profit margins reflects the
continuing weakness in the passive segment, offset in substantial part by improvements in the active segment. Both
volume reduction and further declines in average selling prices contributed to the declining profit margins in the
passive segment. Profit margins in the active segment benefited from higher volumes, even as average selling prices
continued to decline in various product lines. For the year ended December 31, 2002, costs of products sold
included $27,400,000 for the write-down of tantalum and palladium inventories as compared to $70,000,000 for the
write-down of tantalum and palladium inventories in 2001.
Sales for the year ended December 31, 2001 decreased $809,720,000 or 32.9% from the prior year,
reflecting the downturn in the electronics industry that we experienced in 2001. The strengthening of the U.S. dollar
against foreign currencies for the year ended December 31, 2001, in comparison to the prior year, resulted in
decreases in reported sales of $16,338,000. We experienced lower sales in both our active and passive components
businesses. The decline was particularly pronounced in our commodity business for passive components such as
capacitors and resistors. The decline in the year-to-year sales numbers reflects both lower unit sales volume and
substantial downward pricing pressure. The decline was evidenced in virtually all of our end markets, but was
particularly pronounced in wireless communications and computers.
Costs of products sold as a percentage of net sales were 77.0% for the year ended December 31, 2001 as
compared to 59.2% for the prior year. Gross profit, as a percentage of net sales, for the year ended December 31,
2001 was 23.0% as compared to 40.8% for the prior year. The erosion in profit margins, in both the active and
passive segments, reflected reduced volume and lower prices in 2001, offset, to some extent, by a reduction in fixed
costs during the year. For the year ended December 31, 2001, costs of products sold included $70,000,000 for the
write-down of tantalum and palladium inventories.
27
See “Israeli Government Incentives” regarding Israeli government grants, which are recorded as a
reduction in costs of products sold.
The following tables show sales and gross profit margins separately for our passive and active segments.
Passive Components
2002
Year Ended December 31
2001
2000
Net Sales
Gross Profit Margin
$767,246,000
8.9%
$1,010,634,000
20.6%
$1,627,860,000
41.7%
Net sales of passive components for the year ended December 31, 2002 decreased by $243,388,000 or
24.1% from comparable sales of the prior year. The decrease in net sales was attributable to a combination of lower
volume and a continuing slide in prices. While our resistor and inductor business has stabilized and even showed
signs of improvement in the second half of the year over the prior year’s depressed results, the capacitor business
continues to be extremely problematic. This business is suffering from the poor environment for electronics
generally, and worldwide overcapacity for capacitor production and supply in particular. However, with a slowing
of the erosion in average selling prices for capacitors in the fourth quarter of 2002, it is possible that the capacitor
business may also be stabilizing, albeit at a low level. Additionally, write-downs of $27,400,000 on tantalum and
palladium inventories were taken during the year ended December 31, 2002, negatively impacting gross profit.
Gross profit margin for the segment in 2002 combined a positive profit margin of 19% for resistors and inductors
and a negative 6% for capacitors.
The passive segment includes our Measurements Group, which experienced significant acquisition activity
in 2002. See “Overview-Segments” above. Excluding these acquisitions, sales in the passive segment decreased by
$288,939,000 or 29% from the prior year. The acquisition of BCcomponents, a worldwide manufacturer of resistors
and capacitors, in December 2002 had no effect on the 2002 results for the passive segment.
Net sales of passive components for the year ended December 31, 2001 decreased by $617,227,000 or
37.9% from comparable sales of the prior year. The decrease in net sales was primarily due to low volume and
strong pricing pressure with respect to commodity products and, in particular, for tantalum molded capacitor
products. The decrease in the passive components business gross profit margins in 2001 was related to strong
pricing pressure, particularly with respect to commodity products, excess capacity and higher costs for palladium
and tantalum powder. Additionally, write-downs of $70,000,000 on tantalum and palladium inventories were taken
during the year ended December 31, 2001, negatively impacting gross profit.
Active Components
2002
Year Ended December 31
2001
2000
Net Sales
Gross Profit Margin
$1,055,567,000
28.4%
$644,712,000
26.9%
$837,206,000
39.0%
Net sales of the active components business for the year ended December 31, 2002 increased by
$410,855,000 or 63.7% from comparable sales of the prior year. The increase was in substantial measure due to the
acquisitions of General Semiconductor and the Infineon infrared business in 2001, which were included in our
results for all of 2002 but for only portions of 2001. However, it also reflects sales recovery at our existing
semiconductor operations. The increased volume that we experienced in 2002 was offset to some extent by modest
declines in average selling prices in various product lines. The improvement in gross profit margins to 28.4% from
26.9% is attributable primarily to improvements at our 80.4% owned Siliconix subsidiary and to a lesser extent at
our other semiconductor operations. Siliconix’s net sales for 2002 were $372,944,000 as compared to $305,566,000
in 2001, a 22.1% increase, and its gross profit margins rose from 24.6% for the year ended December 31, 2001 to
30.9% for the year ended December 31, 2002.
28
Revenues in the active segment for 2002 included revenues of $350,885,000 from the Infineon infrared
business and General Semiconductor, compared to revenues of $82,655,000 from these businesses in 2001.
Excluding the contribution of these acquisitions, net sales in 2002 would have increased by 25.4% as compared to
2001 and gross profit margin would have been 29.5%.
Net sales of the active components business for the year ended December 31, 2001 decreased by
$192,494,000 or 23% from comparable sales of the prior year. The decrease in the active components business net
sales was primarily due to the decrease in net sales of Siliconix. Siliconix’s net sales for the year ended December
31, 2001 were $305,566,000 as compared to $473,145,000, a 35.4% decrease. The decrease from the prior year was
primarily due to the downturn in the computer and cell phone handset markets, which resulted in reduced demand
for our products, and overly optimistic industry forecasts for the cell phone handset market, which led to excess
handset inventories.
Revenues in the active segment for 2001 reflect revenues of $82,655,000 from the Infineon infrared
business acquired in July 2001 and General Semiconductor acquired in November 2001. Excluding the contribution
of these acquisitions, net sales in 2001 would have decreased by 32.9% as compared to 2000 and gross profit margin
would have been 26.9%.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses for the year ended December 31, 2002 were 17.1% of net
sales as compared to 16.8% of net sales for the prior year. The amount of these expenses increased by $33,080,000
for the year ended December 31, 2002 as compared to the prior year. The higher percentage and amount in 2002 was
due primarily to acquisition activity. We continue to implement cost reduction initiatives company-wide, with
particular emphasis on reducing headcount in high labor cost countries.
Selling, general, and administrative expenses for the year ended December 31, 2001 were 16.8% of net
sales as compared to 12.1% of net sales for the prior year. The higher percentage in 2001 was due to reduced sales
levels. Selling, general and administrative expenses decreased by $19,144,000 for the year ended December 31,
2001 as compared to the prior year.
Restructuring Expense
Our restructuring activities have been designed to cut both fixed and variable costs, particularly in response
to the reduced demand for products occasioned by the electronics industry downturn beginning in 2001. These
activities included the closing of facilities and the termination of employees. Restructuring costs are expensed
during the period in which we determine that we will incur those costs and all applicable requirements of accrual
accounting for recognizing such expenses are satisfied. Because costs are recorded based upon estimates, actual
expenditures for the restructuring activities may differ from the initially recorded costs. If the initial estimates were
too low or too high, we could be required either to record additional expenses in future periods or to reverse
previously recorded expenses. We anticipate that we will realize the benefits of the restructuring through lower
labor costs and other operating expenses in future periods, although it is not possible to quantify the expected
savings.
We recorded restructuring expense for the year ended December 31, 2002 of $30,970,000. These expenses
are comprised of termination costs for 1,438 employees in Europe, Israel and the United States. Through the end of
2002, we paid $18,440,000 of these costs, corresponding to the termination of 783 employees. The balance
remaining at December 31, 2002 is expected to be paid out by the end of 2003. We recorded $61,908,000 in
restructuring expense in 2001, including costs for both employee termination and facility closure. The remaining
balance at December 31, 2002 of $1,564,000 is expected to be paid out by the end of 2003. For additional detail on
restructuring expense in 2001 and 2002, see Note 4 to our Consolidated Financial Statements.
Restructuring expense is separate from plant closure, employee termination and similar integration costs we
incur in connection with our acquisition activities. These amounts are included in the costs of our acquisitions and
do not affect earnings or losses on our statement of operations. For a discussion of these costs in 2001 and 2002, see
Note 2 to our Consolidated Financial Statements.
29
Interest Expense
Interest expense for the year ended December 31, 2002 increased by $11,913,000 compared to the prior
year. This increase was a result of higher average outstanding bank borrowings attributable to our acquisition
activity, offset in part by somewhat lower interest rates.
Interest expense for the year ended December 31, 2001 decreased by $8,329,000 compared to the prior
year. This decrease was a result of lower average outstanding bank borrowings and lower interest rates on
borrowings in 2001 as compared to the prior year. During the second quarter of 2001, we paid down the debt then
outstanding under our revolving credit agreement with the proceeds received from the issuance of Liquid Yield
Option Notes (LYONs). We also added $172,500,000 principal amount of 5.75% Convertible Subordinated
Debentures and $85,000,000 of bank debt in November 2001 from the acquisition of General Semiconductor.
Other Income
Other income for the year ended December 31, 2002 was $8,664,000 as compared to $12,701,000 for the
comparable prior year period. Other income for the year ended December 31, 2001 was $12,701,000 as compared to
$18,904,000 for the comparable prior year period. Other income in both 2002 and 2001 consisted primarily of
interest income, as well as gains on disposal of property and equipment, and foreign exchange gains. For additional
information, see Note 8 to our Consolidated Financial Statements.
Minority Interest
Minority interest increased by $5,574,000 for the year ended December 31, 2002 as compared to the prior
year, primarily due to the increase in net earnings of Siliconix, of which we own 80.4%. Minority interest decreased
by $20,280,000 for the year ended December 31, 2001 as compared to the prior year, primarily due to the decrease
in net earnings of Siliconix.
Income Taxes
The effective tax rate for the year ended December 31, 2002 was 16.9%, reflecting an income tax benefit,
compared to 56.4% for the prior year, reflecting income tax expense. The low effective rate in 2002 is primarily a
consequence of the losses before income taxes in low tax jurisdictions. While we continue to benefit from low tax
rates in Israel, we recognized a large taxable loss in Israel in 2002, with the effect of reducing our overall tax benefit
on our losses. The more favorable Israeli tax rates are applied to specific approved projects and are normally
available for a period of ten or fifteen years (see the discussion of our Israeli tax benefits in “Overview-Israeli
Government Incentives” above). Comparatively, in 2001, the high effective tax rate was due to low net earnings and
the non-tax deductibility of purchased research and development expense related to the General Semiconductor
acquisition.
The effective tax rate for the year ended December 31, 2001 was 56.4% as compared to 21.5% for the prior
year. The increase in the tax rate for 2001 reflected a significant decrease in net earnings, as compared to 2000, in
low tax jurisdictions, and the non-tax deductibility of the purchased research and development expense
($16,000,000) related to the acquisition of General Semiconductor. The low tax rates in Israel applicable to us, as
compared to the statutory rate in the United States, resulted in increases in net earnings of $3,009,000 and
$89,745,000 for the years ended December 31, 2001 and 2000, respectively.
Financial Condition and Liquidity
Cash flows from operations were $366,871,000 for the year ended December 31, 2002 compared to
$161,418,000 for the prior year. The increase in cash generated from operations reflects improved working capital
management, including reductions in inventory and accounts receivable. The inventory reduction reflects production
adjustments we implemented in response to the business slowdown in order to control inventory levels. Net
purchases of property and equipment for the year ended December 31, 2002 were $110,074,000 compared to
$162,493,000 in the prior year. The decrease reflects an effort to rationalize our capital spending to the realities of
30
the current economic environment, while making prudent investments in our capital infrastructure in order to remain
competitive and efficient. We also used $278,735,000 in cash for acquisitions in 2002, primarily for our acquisitions
of BCcomponents in December 2002 and other smaller acquisitions in our Measurements Group during the year.
The acquisitions were funded in part by our cash balances and in part from borrowings. See Note 2 to our
Consolidated Financial Statements for discussion of these acquisitions.
We made net payments of $14,000,000 on our revolving credit lines during 2002, funded from cash flow
from operations. See Notes 2 and 4 to our Consolidated Financial Statements for discussion of acquisition related
restructuring costs paid during 2002 and expected to be paid in the future. Other accrued expenses include
$95,470,000 of acquisition-related costs and other restructuring costs expected to be paid in cash subsequent to
2002.
In May 2001, we completed the offering of $550 million aggregate principal amount at maturity of Liquid
Yield Option Notes (LYONs) at an offering price of $551.26 per $1,000 aggregate principal amount at maturity of
notes. The net proceeds to us of this offering were approximately $294.1 million. The LYONs are convertible into
approximately 9.7 million shares of our common stock. The LYONs may be put to us at their accreted value on
June 4 of each of 2004, 2006, 2011 and 2016 at a purchase price per $1,000 aggregate principal amount at maturity
of $602.77, $639.76, $742.47 and $816.67, respectively. See Note 6 to our Consolidated Financial Statements for
discussion of the terms of the LYONs.
We completed our acquisition of General Semiconductor on November 2, 2001 in a stock-for-stock
transaction resulting in the issuance of 21,305,127 shares of our common stock. General Semiconductor had
outstanding $172.5 million principal amount 5.75% convertible notes, which as a result of the acquisition are now
convertible into approximately 6.3 million shares of our common stock. As required by the terms of the notes,
following the merger, General Semiconductor made an offer to repurchase the notes at 101% of their principal
amount plus accrued interest. As a result of this offer, we acquired notes with a principal amount of $1.5 million in
January 2002.
In connection with our acquisition of BCcomponents in December 2002, we issued $105,000,000 principal
amount of our floating rate unsecured loan notes due 2102. The notes bear interest at LIBOR plus 1.5% through
December 31, 2006 and at LIBOR thereafter. The interest payable on the notes could be further reduced to 50% of
LIBOR after December 31, 2010 if the price of our common stock trades above a specified target price, as provided
in the notes. The notes are subject to a put and call agreement under which the holders may at any time put the notes
to us in exchange for 6,176,471 shares of our common stock in the aggregate, and we may call the notes in exchange
for cash or for shares of our common stock after 15 years from the date of issuance.
Also in December 2002, we amended our long-term revolving credit and swing line facility to, among other
things, reduce the aggregate bank commitments under this facility from $660,000,000 to $500,000,000. This amount
may be increased in the future under certain circumstances. As of December 31, 2002, we had $111,000,000
outstanding under this facility. Letters of credit totaling $30,633,000 were outstanding at December 31, 2002.
Borrowings under the facility bear interest at variable rates based, at our option, on the prime rate or a eurocurrency
rate, and in the case of any swing line advance, the quoted rate. The borrowings are secured by pledges of stock in
certain of our significant subsidiaries and indirect subsidiaries and guaranteed by certain of our significant
subsidiaries. We are required to pay facility fees on the long-term facility. The credit facility restricts us from
paying cash dividends, and requires us to comply with certain financial covenants. The facility expires on June 1,
2005, although we may request year-to-year renewals. See Note 6 to our Consolidated Financial Statements for
additional information.
At December 31, 2002, we had a current ratio (current assets to current liabilities) of 2.6 to 1, compared
with a ratio of 3.3 to 1 at December 31, 2001. The decrease in 2002 is attributable to cash spent on acquisitions,
lower inventories resulting from our inventory management efforts and lower accounts receivable. Our ratio of long-
term debt, less current portion, to stockholders’ equity was 0.30 to 1 at December 31, 2002 compared to 0.26 to 1 at
December 31, 2001. The increase in long-term debt ratio reflects the issuance of the floating rate notes in connection
with the BCcomponents acquisition and the net loss for 2002.
31
Contractual Commitments
As of December 31, 2002 the Company had contractual obligations in the form of non-cancelable operating
leases (see Note 13 to our Consolidated Financial Statements) and long-term contracts for the purchase of tantalum
powder and wire (see Note 15 to our Consolidated Financial Statements), as follows:
(in thousands)
Operating Leases
Tantalum purchases
Total
Inflation
Payments Due by Period
Total
$ 76,974
380,800
$457,774
Less than
1 year
$ 21,978
100,300
$122,278
1-3
years
$ 28,094
220,400
$248,494
4-5
years
$22,163
60,100
$82,263
After
5
years
$4,739
-
$4,739
Normally, inflation does not have a significant impact on our operations as our products are not generally
sold on long-term contracts. Consequently, we can adjust our selling prices, to the extent permitted by competition,
to reflect cost increases caused by inflation.
Safe Harbor Statement
From time to time, information provided by us, including but not limited to statements in this report, or
other statements made by or on our behalf, may contain “forward-looking” information within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks, uncertainties and
contingencies, many of which are beyond our control, which may cause actual results, performance or achievements
to differ materially from those anticipated. Set forth below are important factors that could cause our results,
performance or achievements to differ materially from those in any forward-looking statements made by us or on
our behalf.
Economic Environment, Competition, Backlog
• We and others in the electronic and semiconductor component industry have for the past
several years experienced a decline in product demand on a global basis, resulting in order
cancellations and deferrals. This decline is primarily attributable to a slowing of growth in the
personal computer and cellular telephone product markets. This slowdown may continue and
may become more pronounced. The current slowdown in demand, as well as recessionary
trends in the global economy, makes it more difficult for us to predict our future sales, which
also makes it more difficult to manage our operations, and could adversely impact our results
of operations.
• Our business is highly competitive worldwide, with low transportation costs and few import
barriers. We compete principally on the basis of product quality and reliability, availability,
customer service, technological innovation, timely delivery and price. The electronic
components industry has become increasingly concentrated and globalized in recent years and
our major competitors, some of which are larger than us, have significant financial resources
and technological capabilities.
• Many of the orders that comprise our backlog may be canceled by customers without penalty.
Customers may on occasion double and triple order components from multiple sources to
ensure timely delivery when backlog is particularly long. Customers often cancel orders when
32
business is weak and inventories are excessive, a phenomenon that we are experiencing in the
current economic slowdown. Therefore, we cannot be certain the amount of our backlog does
not exceed the level of orders that will ultimately be delivered. Our results of operations could
be adversely impacted if customers cancel a material portion of orders in our backlog.
Product Development, Business Expansion, Military Qualifications
• Our future operating results are dependent, in part, on our ability to develop, produce and
market new and innovative products, to convert existing products to surface mount devices
and to customize certain products to meet customer requirements. There are numerous risks
inherent in this complex process, including the risks that we will be unable to anticipate the
direction of technological change or that we will be unable to timely develop and bring to
market new products and applications to meet customers’ changing needs.
• Our long-term historical growth in revenues and net earnings has resulted, in large part, from
our strategy of expansion through acquisitions. However, we cannot assure you that we will
identify or successfully complete transactions with suitable acquisition candidates in the
future. We also cannot assure you that acquisitions we complete will be successful. If an
acquired business fails to operate as anticipated or cannot be successfully integrated with our
other businesses, our results of operations, enterprise value, market value and prospects could
all be materially and adversely affected.
•
If we were to undertake a substantial acquisition for cash, the acquisition would likely need to
be financed in part through bank borrowings or the issuance of public or private debt. This
would likely decrease our ratio of earnings to fixed charges and adversely affect other
leverage criteria. Under our existing credit facility, we are required to obtain our lenders’
consent for certain additional debt financing, to comply with other covenants including the
application of specific financial ratios, and are restricted from paying cash dividends on our
capital stock. We cannot assure you that the necessary acquisition financing would be
available to us on acceptable terms when required. If we were to undertake an acquisition for
equity, the acquisition may have a dilutive effect on the interests of the holders of our
common stock.
• Any drop in demand or increase in supply of our products due to the overcapacity of our
competitors could cause a dramatic drop in average sales prices causing a decrease in gross
margins.
• We have qualified certain of our products under various military specifications. Products
from some of our United States manufacturing facilities experience a reduction in product
classification levels from time to time. During the time that the classification level is reduced
for a product with military application, net sales and earnings attributable to that product may
be adversely affected.
Foreign Operations and Sales
• We have operations in 17 countries around the world outside the United States, and
approximately 69% of our revenues during 2002 were derived from sales to customers outside
the United States. Some of the countries in which we operate have in the past experienced and
may continue to experience political, economic and military instability or unrest. These
conditions could have an adverse impact on our ability to operate in these regions and,
depending on the extent and severity of these conditions, could materially and adversely
affect our overall financial condition and operating results. In particular, current tensions in
the Middle East could adversely affect our business operations in Israel and elsewhere.
33
• We have increased our operations in Israel over the past several years. The low tax rates in
Israel applicable to earnings of our operations in that country compared to the rates in the
United States, have historically had the effect of increasing our net earnings, although that
was not the effect in 2002. In addition, we have taken advantage of certain incentive programs
in Israel, which take the form of grants designed to increase employment in Israel. Any
significant increase in the Israeli tax rates or reduction or elimination of the Israeli grant
programs that have benefited us could have an adverse impact on our results of operations.
See Note 1 to our Consolidated Financial Statements for a description of our accounting
policy for grants received by certain subsidiaries from governments outside the United States.
Restructuring and Cost Reduction Activities
• Our strategy is aimed at achieving significant production cost savings through the transfer and
expansion of manufacturing operations to and in countries with lower production costs,
including the Czech Republic, Hungary, India, Israel, Malaysia, Mexico, the People’s
Republic of China, the Philippines, Portugal and the Republic of China (Taiwan). In this
process, we may experience under-utilization of certain plants and factories in high labor cost
regions and capacity constraints in plants and factories located in lower labor cost regions.
This may result, initially, in production inefficiencies and higher costs. These costs include
those associated with compensation in connection with work force reductions and plant
closings in the higher labor cost regions, start-up expenses, manufacturing and construction
delays, and increased depreciation costs in connection with the initiation or expansion of
production in lower labor cost regions.
• As we implement transfers of certain of our operations, we may experience strikes or other
types of labor unrest as a result of lay-offs or termination of employees in higher labor cost
countries.
• Our strategy also focuses on the reduction of selling, general and administrative expenses
through the integration or elimination of redundant sales offices and administrative functions
at acquired companies. Our inability to achieve these goals could have an adverse effect on
our results of operations.
Raw Materials
• Our results of operations may be adversely impacted by:
1.
2.
3.
difficulties in obtaining raw materials, supplies, power, natural resources and
any other items needed for the production of our products;
the effects of quality deviations in raw materials, particularly tantalum powder,
palladium and ceramic dielectric materials; and
the effects of significant fluctuations in the prices for tantalum or palladium on
existing inventories and purchase commitments for these materials. See
“Description of the Business - Sources of Supplies” above.
Environmental Issues
• Our manufacturing operations, products and/or product packaging are subject
to
environmental laws and regulations governing air emissions, wastewater discharges, the
handling, disposal and remediation of hazardous substances, wastes and certain chemicals
used or generated in our manufacturing processes, employee health and safety labeling or
other notifications with respect to the content or other aspects of our processes, products or
packaging, restrictions on the use of certain materials in or on design aspects of our products
34
or product packaging and responsibility for disposal of products or product packaging. More
stringent environmental regulations may be enacted in the future, and we cannot presently
determine the modifications, if any, in our operations that any such future regulations might
require, or the cost of compliance with these regulations. In order to resolve liabilities at
various sites, we have entered into various administrative orders and consent decrees, some of
which may be, under certain conditions, reopened or subject to renegotiation.
The Class B Common Stock
• We have two classes of common stock: common stock and Class B common stock. The
holders of common stock are entitled to one vote for each share held, while the holders of
Class B common stock are entitled to 10 votes for each share held. Currently, Dr. Zandman,
our Chairman and CEO, owns or has voting power over substantially all of our Class B
common stock and accordingly controls approximately 49.1% of our outstanding voting
power. As a result, Dr. Zandman is able to effectively control stockholder action.
• Effective control of our company by holders of the Class B common stock may make us less
attractive as a target for a takeover proposal. It may also make it more difficult or discourage
a merger proposal or proxy contest for the removal of the incumbent directors. Accordingly,
this may deprive the holders of common stock of an opportunity they might otherwise have to
sell their shares at a premium over the prevailing market price in connection with a merger or
acquisition of the Company with or by another company.
35
New Accounting Standards
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections. In addition to other technical provisions, this
Statement rescinds SFAS No. 4, which required all gains and losses from extinguishment of debt to be aggregated
and, if material, classified as an extraordinary item, net of tax. The provisions of SFAS 145 were adopted by the
Company on January 1, 2003.
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. This statement nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146
requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is
incurred rather than at the date of an entity’s commitment to an exit plan. The provisions of SFAS 146 will be
adopted by the Company for exit or disposal activities initiated after December 31, 2002.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure. SFAS 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition to SFAS 123’s fair value method of accounting for stock-based employee
compensation. The Company is evaluating the potential impact of adopting the fair value method of accounting for
its stock-based employee compensation.
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk Disclosure
Our cash flows and earnings are subject to fluctuations resulting from changes in foreign currency
exchange rates and interest rates. We manage our exposure to these market risks through internally established
policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. Our
policies do not allow speculation in derivative instruments for profit or execution of derivative instrument contracts
for which there are no underlying exposures. We do not use financial instruments for trading purposes and we are
not a party to any leveraged derivatives. We monitor our underlying market risk exposures on an ongoing basis and
believe that we can modify or adapt our hedging strategies as needed.
We are exposed to changes in U.S. dollar LIBOR interest rates on our floating rate revolving credit facility.
At December 31, 2002, the outstanding balance under this facility was $111,000,000. On a selective basis, we from
time to time enter into interest rate swap or cap agreements to reduce the potential negative impact increases in
interest rates could have on our outstanding variable rate debt. The impact of interest rate instruments on our results
of operations in each of the three years ended December 31, 2002, 2001 and 2000 was not significant. See Notes 6
and 14 to our Consolidated Financial Statements for components of our long-term debt and interest rate swap
arrangements.
In August 1998, we entered into six interest rate swap agreements with a total notional amount of
$300,000,000 to manage interest rate risk related to our multicurrency revolving line of credit. As of December 31,
2002, five of these six agreements had been terminated. The remaining agreement, which expires in August 2003,
has a notional amount of $100,000,000 and requires us to make payments to the counterparty at variable rates based
on USD-LIBOR-BBA rates. At December 2002, 2001, and 2000, we paid a weighted average fixed rate of 5.77%
and received a weighted average variable rate of 1.40%, 1.93%, and 6.66%, respectively. The fair value of our
interest rate swap agreements, based on current market rates, approximated a net payable of $3,309,000 at December
31, 2002 and a net payable of $4,686,000 at December 31, 2001. During the year ended December 31, 2001, the
Company recorded a pre tax loss of $3,668,000 relating to an ineffective hedge for a portion of time relating to an
interest rate swap agreement (see Note 8 to our Consolidated Financial Statements).
36
Foreign Exchange Risk
We are exposed to foreign currency exchange rate risks. Our significant foreign subsidiaries are located in
Germany, France, Israel and Asia. In most locations, we have introduced a “netting” policy where subsidiaries pay
all intercompany balances within thirty days. As of December 31, 2002, we did not have any outstanding foreign
currency forward exchange contracts.
In the normal course of business, our financial position is routinely subjected to a variety of risks, including
market risks associated with interest rate movements, currency rate movements on non-U.S. dollar denominated
assets and liabilities and collectability of accounts receivable.
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements of the Company and our subsidiaries, together with the
report of independent auditors thereon, are presented under Item 15 of this report:
Report of Independent Auditors.
Consolidated Balance Sheets -- December 31, 2002 and 2001.
Consolidated Statements of Operations -- for the years ended December 31, 2002, 2001 and 2000.
Consolidated Statements of Cash Flows -- for the years ended December 31, 2002, 2001 and 2000.
Consolidated Statements of Stockholders’ Equity -- for the years ended December 31, 2002, 2001
and 2000.
Notes to Consolidated Financial Statements -- December 31, 2002.
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
37
PART III
Item 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required under this Item with respect to Directors is contained in our definitive proxy
statement, which will be filed within 120 days of December 31, 2002, our most recent fiscal year, and is
incorporated herein by reference.
Information required under this Item with respect to our Executive Officers is set forth in Part I, Item 4A
hereof under the caption, “Executive Officers of the Registrant.”
Item 11.
EXECUTIVE COMPENSATION
Information required under this Item is contained in our definitive proxy statement, which will be filed
within 120 days of December 31, 2002, our most recent fiscal year, and is incorporated herein by reference.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Information required under this Item concerning security ownership of certain beneficial owners and
management is contained in our definitive proxy statement, which will be filed within 120 days of December 31,
2002, our most recent fiscal year, and is incorporated herein by reference.
Equity Compensation Plan Information
The following table sets forth certain equity compensation plan information with respect to both equity
compensation plans approved by security holders and equity compensation plans not approved by security holders.
Plan category
Equity compensation plans approved by
security holders:
1997 Stock Option Program(1)
1998 Stock Option Program(1)
General Semiconductor Stock Plan(2)
Subtotal
Equity compensation plans not approved
by security holders:
None
Subtotal
Total
Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights
(a)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
(b)
Number of securities
remaining available for
future issuance
under equity compensation
plans
(excluding securities
reflected in column (a)
(c)
2,159,000
3,027,000
4,045,000
9,231,000
-
9,231,000
9,231,000
$12.51
$15.62
$18.31
$16.07
-
$16.07
$16.07
-
1,036,000
-
1,036,000
-
1,036,000
1,036,000
__________________
(1) See Note 12 to our Consolidated Financial Statements for further description of these plans.
(2) The General Semiconductor Stock Plan was assumed in the Company’s acquisition of General Semiconductor
Inc. on November 2, 2001. See Note 12 to our Consolidated Financial Statements for further description of this
plan.
38
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this Item is contained in our definitive proxy statement, which will be filed
within 120 days of December 31, 2002, our most recent fiscal year, and is incorporated herein by reference.
Item 14.
DISCLOSURE CONTROLS AND PROCEDURES
An evaluation was performed as of a date within 90 days prior to the filing date of this report, under the
supervision and with the participation of our management, including the CEO and CFO, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on that evaluation, our management,
including the CEO and CFO, concluded that our disclosure controls and procedures are effective in ensuring that all
material information required to be filed in this report has been made known to them in a timely fashion.
There have been no significant changes in our internal controls or in other factors that could significantly
affect internal controls subsequent to the date management completed their evaluation.
39
Item 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PART IV
(a)
(1)
All Consolidated Financial Statements of the Company and its subsidiaries for
the year ended December 31, 2002 are filed herewith. See Item 8 of this Report
for a list of such financial statements.
(2)
All financial statement schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
(3)
Exhibits -- See response to paragraph (c) below.
(b)
Report on Form 8-K, dated December 23, 2002, reporting Item 2 (Acquisition or
Disposition of Assets), Item 5 (Other Events), and Item 7 (Financial Statements and
Exhibits). Financial Statements of Business Acquired and Pro Forma Financial
Information were filed by amendment to the Form 8-K, dated February 26, 2003.
(c)
Exhibits:
Agreement and Plan of Merger, dated as of July 31, 2001, by and among Vishay Intertechnology,
Inc., Vishay Acquisition Corp., and General Semiconductor, Inc. Incorporated by reference to
Annex A to the Joint Proxy Statement/Prospectus forming a part of the Registration Statement on
Form S-4 (No. 333-69004) filed on September 6, 2001.
Share Sale and Purchase Agreement between Phoenix Acquisition Company S.ar.l; Other
Investors (as defined); Mezzanine Lenders (as defined); Vishay Intertechnology, Inc.; Vishay
Europe Gmbh; and BCcomponents International B.V., dated as of November 10, 2002.
Incorporated by reference to Exhibit 2.1 to Form 8-K File filed December 23, 2002.
Amendment to the Share Sale and Purchase Agreement between Phoenix Acquisition Company
S.ar.l; Other Investors (as defined); Mezzanine Lenders (as defined); Vishay Intertechnology, Inc.;
Vishay Europe Gmbh; and BCcomponents International B.V., dated as of December 4, 2002.
Incorporated by reference to Exhibit 2.2 to Form 8-K File filed December 23, 2002.
Composite Amended and Restated Certificate of Incorporation of the Company dated August 3,
1995. Incorporated by reference to Exhibit 3.1 to the Company’s quarterly report on Form 10-Q
for the quarter ended June 30, 1995 (the “1995 Form 10-Q”). Certificate of Amendment of
Composite Amended and Restated Certificate of Incorporation of the Company. Incorporated by
reference to Exhibit 3.1 to Form 10-Q for the quarter ended June 30, 1997 (the “1997 Form 10-
Q”). Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the
Company. Incorporated by reference to Exhibit 3.1 to Form 8-K File filed November 13, 2001.
Amended and Restated Bylaws of Registrant. Incorporated by reference to Exhibit 3.1 to the
Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2001.
Indenture dated as of June 4, 2001 between Vishay Intertechnology, Inc. and Bank of New York
as Trustee. Incorporated by reference to Exhibit 4.1 to Current Report of Registrant on Form 8-K
filed on June 18, 2001 under the Securities Exchange Act of 1934 except that clause (x) of Section
5 thereof is corrected to read “(x) 0.0625% of the average LYON Market Price for the Five Day
Period with respect to such Contingent Interest Period and”.
2.1
2.2
2.3
3.1
3.2
4.1
40
4.2
4.3
4.4
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Indenture dated as of December 14, 1999 between General Semiconductor, Inc. and The Bank of
New York as Trustee. Incorporated by reference to Exhibit 4.5 to the Registration Statement on
Form S-3 (No. 333-94513) filed by General Semiconductor, Inc. on January 12, 2000.
First Supplemental Indenture dated as of November 2, 2001 among General Semiconductor, Inc.,
Vishay Intertechnology, Inc., and The Bank of New York as Trustee to Indenture dated as of
December 14, 1999. Incorporated by reference to Exhibit 4.3 to the Company’s annual report on
Form 10-K for the year ended December 31, 2001.
Second Supplemental Indenture dated as of January 8, 2002 among General Semiconductor, Inc.,
Vishay Intertechnology, Inc., and The Bank of New York as Trustee to Indenture dated as of
December 14, 1999. Incorporated by reference to Exhibit 4.4 to the Company’s annual report on
Form 10-K for the year ended December 31, 2001.
Performance-Based Compensation Plan for Chief Executive Officer of Registrant. Incorporated by
reference to Exhibit 10.1 to Form 10-K for fiscal year ended December 31, 1993.
Vishay Intertechnology, Inc. Amended and Restated Long Term Revolving Credit Agreement,
dated as of June 1, 1999, by and among Vishay and the Permitted Borrowers (as defined therein),
the Lenders (as defined therein), and Comerica Bank, as administrative agent. Incorporated by
reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-3 (No. 333-52594)
filed December 22, 2000.
First Amendment to Amended and Restated Vishay Intertechnology, Inc. Long Term Revolving
Credit Agreement and Other Loan Documents, dated as of August 31, 2000, by and among the
Company and the Permitted Borrowers (as defined therein), Comerica Bank and the other Lenders
signatory thereto, and Comerica Bank, as administrative agent. Incorporated by reference to
Exhibit 10.2 to the Company’s Registration Statement on Form S-3 (No. 333-52594) filed
December 22, 2000.
Second Amendment to Amended and Restated Vishay Intertechnology, Inc. Long Term Revolving
Credit Agreement and Consent, made as of December 13, 2002, by and among Vishay
Intertechnology, Inc. the Permitted Borrowers (as defined), Comerica Bank and the Lenders
signatory thereto and Comerica Bank as administrative agent. Incorporated by reference to
Exhibit 4.6 to Form 8-K filed on December 13, 2002.
Employment Agreement, dated as of March 15, 1985, between the Company and Dr. Felix
Zandman. Incorporated by reference to Exhibit 10.12 to the Company’s Registration Statement on
Form S-2 (No. 33-13833).
Vishay Intertechnology, Inc. 1995 Stock Option Program. Incorporated by reference to the
Company’s Definitive Proxy Statement on Schedule 14ADR filed April 7, 1995.
Vishay Intertechnology, Inc. 1997 Stock Option Program. Incorporated by reference to the
Company’s Definitive Proxy Statement on Schedule 14A filed April 16, 1998.
Vishay Intertechnology, Inc. 1998 Stock Option Program. Incorporated by reference to the
Company’s Definitive Proxy Statement on Schedule 14A filed April 16, 1998.
Money Purchase Plan Agreement of Measurements Group, Inc. Incorporated by reference to
Exhibit 10(a)(6) to Amendment No. 1 to the Company’s Registration Statement on Form S-7 (No.
2-69970).
41
10.10 Agreement Amending Supply Agreements among Cabot Corporation through its Cabot
Performance Materials Division, Vishay Sprague, Inc. and Vishay Intertechnology, Inc. dated as
of June 6, 2002.
21.
23.
99.1
99.2
Subsidiaries of the Registrant.
Consent of Independent Auditors.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 – Dr. Felix Zandman, Chief Executive Officer.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 – Richard N. Grubb, Chief Financial Officer.
42
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
March 31, 2003
VISHAY INTERTECHNOLOGY, INC.
/s/ Felix Zandman
Felix Zandman, Chairman
of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated below.
March 31, 2003
March 31, 2003
March 31, 2003
March 31, 2003
March 31, 2003
March 31, 2003
March 31, 2003
/s/ Felix Zandman
Felix Zandman, Chairman
of the Board and Chief
Executive Officer
(Principal Executive Officer)
/s/ Avi D. Eden
Avi D. Eden, Vice-Chairman
of the Board, Executive Vice President
and General Counsel
/s/Gerald Paul
Gerald Paul, Director, President
and Chief Operating Officer
/s/Marc Zandman
Marc Zandman, Vice-Chairman
of the Board, President-Vishay Israel Ltd.
/s/Richard N. Grubb
Richard N. Grubb, Director,
Executive Vice President, Treasurer and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
/s/Robert A. Freece
Robert A. Freece, Director,
Senior Vice President
/s/Eli Hurvitz
Eli Hurvitz, Director
43
March 31, 2003
March 31, 2003
March 31, 2003
March 31, 2003
March 31, 2003
March 31, 2003
/s/Abraham Ludomirski
Abraham Ludomirski, Director
/s/Edward B. Shils
Edward B. Shils, Director
/s/Ziv Shoshani
Ziv Shoshani, Director
/s/Mark I. Solomon
Mark I. Solomon, Director
/s/Jean-Claude Tine
Jean-Claude Tine, Director
/s/Ruta Zandman
Ruta Zandman, Director
44
I, Dr. Felix Zandman, certify that:
CERTIFICATIONS
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Vishay Intertechnology, Inc.;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this annual report;
Based on my knowledge, the financial statements, and other financial information included in this annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a)
b)
c)
designed such disclosure controls and procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being prepared;
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date
within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
presented in this annual report our conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the
registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the
equivalent functions):
a)
b)
all significant deficiencies in the design or operation of internal controls which could adversely
affect the registrant’s ability to record, process, summarize and report financial data and have
identified for the registrant’s auditors any material weaknesses in internal controls; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal controls; and
6.
The registrant’s other certifying officers and I have indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 31, 2003
/s/ Dr. Felix Zandman
Dr. Felix Zandman
Chief Executive Officer
45
I, Richard N. Grubb, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Vishay Intertechnology, Inc.;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this annual report;
Based on my knowledge, the financial statements, and other financial information included in this annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a)
b)
c)
designed such disclosure controls and procedures to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is being prepared;
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date
within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
presented in this annual report our conclusions about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the Evaluation Date;
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the
registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the
equivalent functions):
a)
b)
all significant deficiencies in the design or operation of internal controls which could adversely
affect the registrant’s ability to record, process, summarize and report financial data and have
identified for the registrant’s auditors any material weaknesses in internal controls; and
any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal controls; and
6.
The registrant’s other certifying officers and I have indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 31, 2003
/s/ Richard N. Grubb,
Richard N. Grubb,
Chief Financial Officer
46
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Vishay Intertechnology, Inc.
Consolidated Financial Statements
Years ended December 31, 2002, 2001, and 2000
Contents
Report of Independent Auditors ................................................................................................................................ F-1
Audited Consolidated Financial Statements
Consolidated Balance Sheets ..................................................................................................................................... F-2
Consolidated Statements of Operations ..................................................................................................................... F-4
Consolidated Statements of Cash Flows.................................................................................................................... F-5
Consolidated Statements of Stockholders’ Equity..................................................................................................... F-7
Notes to Consolidated Financial Statements.............................................................................................................. F-8
47
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, 2002 and 2001, and the related consolidated statements of operations, cash flows, and
stockholders’ equity for each of the three years in the period ended December 31, 2002. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Vishay Intertechnology, Inc. at December 31, 2002 and 2001, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended
December 31, 2002, in conformity with accounting principles generally accepted in the United States.
As discussed in Note 1 to the consolidated financial statements, in 2002 the Company changed its method
of accounting for goodwill.
Philadelphia, PA
February 6, 2003
/s/ Ernst & Young, LLP
F-1
Vishay Intertechnology, Inc.
Consolidated Balance Sheets
(In thousands, except per share and share amounts)
December 31
2002
2001
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, less allowances of $18,172 and $17,126
Inventories:
$
339,938
343,511
$
367,115
382,358
Finished goods
Work in process
Raw materials
Deferred income taxes
Prepaid expenses and other current assets
Total current assets
Property and equipment – at cost:
Land
Buildings and improvements
Machinery and equipment
Construction in progress
Less allowances for depreciation
219,769
142,846
191,451
47,297
188,881
1,473,693
118,000
339,869
1,609,931
61,830
2,129,630
(854,780)
1,274,850
260,161
136,842
204,454
63,084
160,613
1,574,627
92,311
289,672
1,397,262
82,269
1,861,514
(693,981)
1,167,533
Goodwill
1,356,293
1,077,790
Other intangible assets, net of amortization of $8,187 and $1,017
122,417
83,337
Other assets
Total assets
87,906
4,315,159
$
48,236
3,951,523
$
F-2
Liabilities and stockholders’ equity
Current liabilities:
Notes payable to banks
Trade accounts payable
Payroll and related expenses
Other accrued expenses
Income taxes
Current portion of long-term debt
Total current liabilities
Long-term debt – less current portion
Deferred income taxes
Deferred income
Minority interest
Other liabilities
Accrued pension costs
Stockholders’ equity:
December 31
2002
2001
$
18,161
123,999
103,184
303,609
8,734
18,550
576,237
706,316
52,935
42,345
75,985
279,462
223,092
$
11,241
89,467
71,841
292,596
13,081
367
478,593
605,031
90,340
57,208
66,516
139,273
148,017
Preferred Stock, par value $1.00 per share:
authorized – 1,000,000 shares; none issued
Common Stock, par value $.10 per share:
authorized – 300,000,000 shares; 144,297,101 and 143,795,355
shares outstanding after deducting 332,850 shares in treasury
Class B convertible Common Stock, par value $.10 per share:
authorized – 40,000,000 shares; 15,383,581 and 15,496,634
shares outstanding after deducting 279,453 shares in treasury
Capital in excess of par value
Retained earnings
Unearned compensation
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
14,429
14,380
1,538
1,910,994
523,354
(413)
(91,115)
2,358,787
4,315,159
$
1,550
1,865,979
615,968
(921)
(130,411)
2,366,545
3,951,523
$
See accompanying notes.
F-3
Vishay Intertechnology, Inc.
Consolidated Statements of Operations
(In thousands, except per share and share amounts)
2002
Year ended December 31
2001
2000
Net sales
Costs of products sold
Gross profit
$
$
1,822,813
1,454,540
368,273
$
1,655,346
1,273,827
381,519
2,465,066
1,459,784
1,005,282
Selling, general, and administrative expenses
Amortization of goodwill
Restructuring expense
Loss on long-term purchase commitments
Purchased research and development
Other income (expense):
Interest expense
Other
(Loss) earnings before income taxes (benefit)
and minority interest
Income taxes (benefit)
Minority interest
Net (loss) earnings
Basic (loss) earnings per share
Diluted (loss) earnings per share
Weighted average shares outstanding:
Basic
Diluted
$
$
$
See accompanying notes.
311,251
–
30,970
106,000
–
(79,948)
(28,761)
8,664
(20,097)
(100,045)
(16,900)
9,469
(92,614)
(0.58)
(0.58)
$
$
$
278,171
11,190
61,908
–
16,000
14,250
(16,848)
12,701
(4,147)
10,103
5,695
3,895
513
0.00
0.00
$
$
$
297,315
11,469
–
–
–
696,498
(25,177)
18,904
(6,273)
690,225
148,186
24,175
517,864
3.83
3.77
159,413,000
159,413,000
141,171,000
142,514,000
135,295,000
137,463,000
F-4
Vishay Intertechnology, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year ended December 31
2001
2000
2002
$
(92,614)
$
513
$
517,864
180,748
–
296
9,469
–
–
115
9,325
12,363
106,000
102,322
106,818
6,257
455
(29,766)
(44,917)
366,871
(110,074)
20,621
(278,735)
–
(368,188)
163,387
–
(1,472)
3,895
–
16,000
3,668
5,313
20,975
–
120,095
6,038
(7,321)
(71,761)
(105,685)
7,773
161,418
(162,493)
9,911
(172,468)
–
(325,050)
140,840
(5,851)
2,320
24,175
2,577
–
–
–
–
–
(148,414)
(140,084)
(62,687)
28,507
106,084
76,988
542,319
(229,781)
7,267
(42,384)
33,162
(231,736)
Operating activities
Net (loss) earnings
Adjustments to reconcile net (loss) earnings to net
cash provided by operating activities:
Depreciation and amortization
Gain on sale of subsidiaries
Loss (gain) on disposal of property and
equipment
Minority interest in net earnings of consolidated
subsidiaries
Equity in earnings of affiliate
Purchased research and development
Noncash charge for change in fair value of
interest rate swap
Accretion of interest on convertible debentures
Writedowns of property and equipment included
in restructuring expense
Loss on long-term purchase commitments
Changes in operating assets and liabilities, net of
effects of businesses acquired or sold:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Accounts payable
Other current liabilities
Other
Net cash provided by operating activities
Investing activities
Purchases of property and equipment
Proceeds from sale of property and equipment
Purchases of businesses, net of cash acquired
Net cash proceeds from divestitures
Net cash used in investing activities
(Continues on following page.)
F-5
Vishay Intertechnology, Inc.
Consolidated Statements of Cash Flows (continued)
(In thousands)
Year ended December 31
2001
2000
2002
$
Financing activities
Net payments on revolving credit lines
Proceeds from long-term borrowings
Principal payments on long-term debt
Proceeds from convertible subordinated debentures
Purchase of treasury stock
Proceeds from sale of common stock
Proceeds from stock options exercised
Net changes in short-term borrowings
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash
(Decrease) increase in cash and cash equivalents
$
(14,000)
201
(17,217)
–
–
–
3,161
(10,452)
(38,307)
12,447
(27,177)
$
(100,047)
415
(444)
294,096
(850)
–
854
3,274
197,298
(3,764)
29,902
(506,686)
–
(385)
–
(5,765)
395,449
39,873
39
(77,475)
(1,088)
232,020
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
367,115
339,938
$
337,213
367,115
$
105,193
337,213
$
See accompanying notes.
F-6
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F-7
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements
December 31, 2002
Vishay Intertechnology, Inc. is an international manufacturer and supplier of passive and active electronic
components, including resistors, capacitors, inductors, strain gages, load cells, force measurement sensors,
displacement sensors, photoelastic sensors, power MOSFETS, power conversion and motor control
integrated circuits, transistors, diodes and optoelectronic components. Electronic components manufactured
by the Company are used in virtually all types of electronic products, including those in the computer,
telecommunications, military/aerospace, instrument, automotive, medical, and consumer electronics
industries.
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Vishay Intertechnology, Inc. and its majority-
owned subsidiaries, after elimination of all significant intercompany transactions, accounts, and profits.
Investments in 20%- to 50%-owned companies are accounted for on the equity method. Investments in
other companies are carried at cost.
Revenue Recognition
The Company recognizes revenue when products are shipped to customers. The Company has agreements
with distributors that provide limited rights of return and protection against price reductions initiated by the
Company. The effect of these programs is estimated based on historical experience and provisions are
recorded at the time of shipment.
Shipping and Handling Costs
Shipping and handling costs are included in costs of products sold.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ significantly from those
estimates.
F-8
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Inventories
Inventories are stated at the lower of cost, determined by the first-in, first-out method, or market.
Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. The allowance is determined through an analysis of
the aging of accounts receivable and assessments of risk that are based on historical trends and an
evaluation of the impact of current and projected economic conditions. The Company evaluates the past-
due status of its trade receivables based on contractual terms of sale. If the financial condition of the
Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. Bad debt expense was $6,672,000, $7,112,000 and $3,020,000 for
the years ended December 31, 2002, 2001, and 2000, respectively.
Depreciation
Depreciation is computed principally by the straight-line method based upon the estimated useful lives of
the assets. Machinery and equipment are being depreciated over useful lives of seven to ten years.
Buildings and building improvements are being depreciated over useful lives of twenty to forty years.
Depreciation of capital lease assets is included in total depreciation expense. Depreciation expense was
$172,174,000, $149,225,000, and $126,285,000, for the years ended December 31, 2002, 2001, and 2000,
respectively.
Construction in Progress
The estimated cost to complete construction in progress at December 31, 2002 was $21,838,000.
Goodwill and Other Intangible Assets
The Company adopted Statements of Financial Accounting Standards (“SFAS”) No. 141, Business
Combinations, and No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002.
F-9
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Goodwill and Other Intangible Assets (continued)
The most significant changes made by SFAS 142 were: (1) goodwill and indefinite lived intangible assets
will no longer be amortized, (2) goodwill will be tested for impairment at least annually at the reporting
unit level, (3) intangible assets deemed to have an indefinite life will be tested for impairment at least
annually, and (4) the amortization period of intangible assets with finite lives will no longer be limited to
forty years. SFAS 142 prescribes a two-step method for determining goodwill impairment. In the first step,
we determine the fair value of the reporting unit using a comparable companies market multiple approach.
If the net book value of the reporting unit exceeds the fair value, we would then perform the second step of
the impairment test which requires allocation of the reporting unit’s fair value to all of its assets and
liabilities in a manner similar to a purchase price allocation, with any residual fair value being allocated to
goodwill. The fair value of the goodwill is then compared to its carrying amount to determine impairment.
An impairment charge will be recognized only when the implied fair value of a reporting unit’s goodwill is
less than its carrying amount. SFAS 142 requires the Company to perform transitional impairment tests of
its trademarks and goodwill as of January 1, 2002, as well as perform impairment tests on an annual basis
and whenever events or circumstances occur indicating that the trademarks or goodwill may be impaired.
The Company has identified the following reporting units and associated goodwill (in thousands):
Actives
Passives
Measurements
Group
Total
Goodwill Balance at December 31, 2002
$
861,201
$
462,251
$
32,841
$ 1,356,293
The Company has assigned an indefinite useful life to its trademarks ($56,000,000) and discontinued the
amortization of both its goodwill and trademarks. Completed technology ($67,000,000) is being amortized
over useful lives of seven to ten years. Noncompete agreements ($7,604,000) are being amortized over a
period of one to five years. Amortization expense was $7,171,000, $1,017,000, and $0 for the years ended
F-10
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
December 31, 2002, 2001, and 2000, respectively. Estimated annual amortization expense for each of the
next five years is as follows: 2003 - $11,248,000; 2004 - $8,414,000; 2005 - $7,993,000; 2006 -
$7,593,000; and 2007 - $7,593,000.
The Company completed the transitional impairment test of its trademarks as of January 1, 2002. The fair
value of the trademarks, as determined by an independent appraiser, was measured as the discounted cash
flow savings realized from owning such trademarks and not having to pay a royalty for their use. No
impairment of the trademarks was determined to exist at January 1, 2002. An annual impairment test of
trademarks was completed as of October 1, 2002, with no impairment recognized.
The Company completed a transitional goodwill impairment test as of January 1, 2002. Fair value of
reporting units was determined using comparable company market multiples. The Company determined
that there was no goodwill impairment as of January 1, 2002.
The Company performed an additional goodwill impairment test, as required under SFAS 142, with
particular attention to the Company’s market capitalization as compared with the Company’s net asset
value at September 30, 2002. The Company determined that there was no goodwill impairment. The
Company’s required annual impairment test will be performed on October 1st of each subsequent year.
The interim impairment test of goodwill was performed in accordance with the provisions of SFAS 142,
which states that, if an event occurs or circumstances change that would more likely than not reduce the fair
value of a reporting unit below its carrying amount, an impairment test is required. During the nine months
ended September 30, 2002, events and circumstances indicated that approximately $204 million of
goodwill of the passives reporting unit might be impaired. However, the Company’s estimate of fair value
of the passives reporting unit using a comparable companies market multiple approach indicated that the
fair value of the reporting unit exceeded its net book value. Nonetheless, it is reasonably possible that the
fair value of the passives reporting unit may decrease in the near term resulting in the need to write down
that goodwill to fair value.
F-11
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Long-Lived Assets
The Company evaluates impairment of its intangible assets subject to amortization and other long-lived
assets, other than goodwill and intangible assets not subject to amortization, in accordance with SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which has been adopted by the
Company as of January 1, 2002. SFAS 144 requires an impairment loss to be recognized only if the
carrying amounts of long-lived assets to be held and used are not recoverable from their expected
undiscounted cash flows. Adoption of SFAS 144 had no effect on the Company’s financial position or its
results of operations.
Cash Equivalents
Cash and cash equivalents includes demand deposits and highly liquid investments with maturities of three
months or less when purchased.
Research and Development Expenses
The amount charged to expense for research and development (exclusive of purchased in-process research
and development) aggregated $37,095,000, $30,176,000, and $37,103,000 for
the years ended
December 31, 2002, 2001, and 2000, respectively. The Company spends additional amounts for the
development of machinery and equipment for new processes and for cost reduction measures.
Grants
Grants received by certain foreign subsidiaries from foreign governments, primarily in Israel, are
recognized as income in accordance with the purpose of the specific contract and in the period in which the
related expense is incurred. Grants from the Israeli government recognized as a reduction of costs of
products sold were $17,322,000, $19,064,000, and $15,721,000 for the years ended December 31, 2002,
2001, and 2000, respectively. Grants receivable of $16,374,000 and $14,858,000 are included in other
current assets at December 31, 2002 and 2001, respectively. Deferred grant income was $42,345,000 and
$57,208,000 at December 31, 2002 and 2001, respectively. The grants are subject to certain conditions,
including maintaining specified levels of employment for periods up to ten years. Noncompliance with
such conditions could result in the repayment of grants. However, management expects that the Company
will comply with all terms and conditions of the grants.
F-12
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Minority Interest
Minority interest represents the ownership interests of third parties in the net assets and results of
operations of certain consolidated subsidiaries.
Stock-Based Compensation
SFAS No. 123, Accounting for Stock-Based Compensation, encourages entities to record compensation
expense for stock-based employee compensation plans at fair value but provides the option of measuring
compensation expense using the intrinsic value method prescribed in APB Opinion No. 25, Accounting for
Stock Issued to Employees. The Company accounts for stock-based compensation in accordance with APB
25 and related interpretations. The following is provided to comply with the disclosure requirements of
SFAS 123 as amended. If compensation cost for the Company’s stock option programs had been
determined using the fair-value method prescribed by SFAS 123, the Company’s results would have been
reduced to the pro forma amounts indicated below (in thousands, except per share amounts):
Net (loss) income, as reported
Deduct: Total stock-based employee
compensation expense determined under fair
value-based method for all awards, net of
related tax effects
Pro forma net (loss) income
Earnings (loss) per share:
Basic—as reported
Basic—pro forma
Diluted—as reported
Diluted—pro forma
2002
Year ended December 31
2001
2000
$
(92,614)
(2,430)
(95,044)
(0.58)
(0.60)
(0.58)
(0.60)
$
$
$
$
$
$
$
$
$
$
$
513
$
517,864
(3,742)
(3,229)
0.00
(0.02)
0.00
(0.02)
(2,568)
515,296
3.83
3.81
3.77
3.75
$
$
$
$
$
F-13
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Summary of Significant Accounting Policies (continued)
1.1. Summary of Significant Accounting Policies (continued)
Based Compensation (continued)
Stock--Based Compensation (continued)
Stock
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 2002 had a weighted average
fair value of $8.62 and an exercise price equal to the market value. All options granted in 2000 had a
weighted average fair value of $11.64 and a weighted average exercise price of $25.34.
Expected dividend yield
Risk-free interest rate
Expected volatility
Expected life (in years)
Derivative Financial Instruments
Derivative Financial Instruments
2002
2002
Grants
Grants
–
3.5%
63.2%
4.5
2000
2000
Grants
Grants
–
5.8%
58.2%
4.7
Effective January 1, 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS 133 requires all derivative instruments to be recognized as either assets or
liabilities and measured at fair value. The accounting for changes in fair value depends upon the purpose of
the derivative instrument and whether it is designated and qualifies for hedge accounting. The Company
uses interest rate swap agreements to modify variable rate obligations to fixed rate obligations, thereby
reducing exposure to market rate fluctuations. The interest rate swap agreements are designated as hedges.
The effective portion of gains or losses is reported in other comprehensive income and the ineffective
portion, if any, is reported in net income (loss).
Commitments and Contingencies
Commitments and Contingencies
Liabilities for loss contingencies, including environmental remediation costs, arising from claims,
assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability
has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.
The costs for a specific environmental cleanup site are discounted if the aggregate amount of the
F-14
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Summary of Significant Accounting Policies (continued)
1.1. Summary of Significant Accounting Policies (continued)
Commitments and Contingencies (continued)
Commitments and Contingencies (continued)
obligation and the amount and timing of the cash payments for that site are fixed or reliably determinable
generally based upon information derived from the remediation plan for that site. Recoveries from third
parties that are probable of realization and can be reasonably estimated are separately recorded, and are not
offset against the related environmental liability.
ng Adoption
Accounting Pronouncements Pending Adoption
Accounting Pronouncements Pendi
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections. In addition to other technical
provisions, this Statement rescinds SFAS No. 4, which required all gains and losses from extinguishment of
debt to be aggregated and, if material, classified as an extraordinary item, net of tax. The provisions of
SFAS 145 will be adopted by the Company on January 1, 2003.
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. This Statement nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred rather than at the date of an entity’s commitment to an exit plan.
The provisions of SFAS 146 will be adopted by the Company for exit or disposal activities initiated after
December 31, 2002.
Reclassifications
Reclassifications
Certain prior-year amounts have been reclassified to conform to the current financial statement
presentation.
F-15
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Acquisitions and Divestitures
2.2. Acquisitions and Divestitures
Year ended December 31, 2002
In January 2002, the Company acquired the transducer and strain gage businesses of Sensortronics, Inc.
Sensortronics is a leading manufacturer of load cells and torque transducers for domestic and international
customers in a wide range of industries with manufacturing facilities in Covina, California, Costa Rica,
and, under a joint venture arrangement, India. The acquisition included the wholly owned subsidiary of
Sensortronics, JP Technologies, a manufacturer of strain gages, located in San Bernardino, California. The
purchase price was $10 million in cash. The purchase price has been allocated, with resulting goodwill of
$3,027,000. The results of operations of Sensortronics are included in the results of the passives segment
from January 31, 2002.
In June 2002, the Company acquired Tedea-Huntleigh BV, a subsidiary of Tedea Technological
Development and Automation Ltd. Tedea-Huntleigh BV is engaged in the production and sale of load cells
used in digital scales by the weighing industry. The purchase price was approximately $21 million in cash.
Additionally, Vishay will pay Tedea a $1 million consulting fee over a three-year period and repaid a
$9 million loan of Tedea to Tedea-Huntleigh. Tedea-Huntleigh operates two plants in Israel, in Netanya
and Carmiel, where it employs approximately 350 people, as well as a number of facilities outside Israel.
Tedea-Huntleigh also has load cell operations in the Peoples Republic of China. The purchase price has
been allocated, with resulting goodwill of $13,841,000. Results of operations are included in the passives
segment beginning July 1, 2002.
On July 31, 2002, the Company acquired the BLH and Nobel businesses of Thermo Electron Corporation.
BLH and Nobel are engaged in the production and sale of load cell-based process weighing systems,
weighing and batching instruments, web tension instruments, weighing scales, servo control systems, and
components relating to load cells including strain gages, foil gages, and transducers. The purchase price
was $18.5 million in cash. The purchase price has been allocated, with resulting goodwill of $11,262,000.
The results of operations are included in the passives segment beginning August 1, 2002.
In October 2002, the Company acquired Celtron Technologies. Celtron is engaged in the production and
sale of load cells used in digital scales for the weighing industry, with manufacturing facilities and offices
in Taiwan, the Peoples Republic of China, and California. The purchase price of $13.5 million in cash has
been allocated with resulting goodwill of $4,711,000.
F-16
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Acquisitions and Divestitures (continued)
2.2. Acquisitions and Divestitures (continued)
On December 13, 2002, the Company acquired BCcomponents Holdings B.V., a leading manufacturer of
passive components with operations in Europe, India, and the Far East. The product lines of BCcomponents
include linear and non-linear resistors; ceramic, film and aluminum electrolytic capacitors; and switches
and trimming potentiometers.
Vishay acquired the outstanding shares of BCcomponents in exchange for ten-year warrants to acquire
7,000,000 shares of Vishay common stock at an exercise price of $20.00 per share and ten-year warrants to
acquire 1,823,529 shares of Vishay common stock at an exercise price of $30.30 per share.
In the transaction, outstanding obligations of BCcomponents, including indebtedness and transaction fees
and expenses, in the amount of approximately $224 million were paid ($191,000,000) or assumed
($33,000,000). Also, $105 million in principal amount of BCcomponents’ mezzanine indebtedness and
certain other securities of BCcomponents were exchanged for $105 million principal amount of floating
rate unsecured loan notes of Vishay due 2102. The Vishay notes bear interest at LIBOR plus 1.5% through
December 31, 2006 and at LIBOR thereafter. The interest note could be further reduced to 50% of LIBOR
after December 31, 2010 if the price of Vishay common stock trades above a specified target price, as
provided in the notes. The notes are subject to a put and call agreement under which the holders may at any
time put the notes to Vishay in exchange for 6,176,471 shares of Vishay common stock in the aggregate,
and Vishay may call the notes in exchange for cash or for shares of its common stock after 15 years from
the date of issuance. The purchase price was as follows:
Cash consideration
Warrants issued
Acquisition costs
Total purchase price
$
$
191,000,000
39,462,000
3,000,000
233,462,000
Under purchase accounting, the total purchase price is allocated to assets acquired and liabilities assumed
based on their estimated fair values. The allocation of the purchase price is based on a preliminary
evaluation of the fair value of BCcomponents’ tangible and identifiable intangible assets acquired and
liabilities assumed at the date of the merger based upon currently available information. There can be no
assurance that the estimated amounts represent the final purchase allocation. The purchase price has been
F-17
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Acquisitions and Divestitures (continued)
2.2. Acquisitions and Divestitures (continued)
preliminarily allocated, pending finalization of appraisals for property, plant, and equipment, debt,
intangible assets and warrants, to the acquired assets and liabilities based on fair values as follows:
Current assets
Property, plant, and equipment
Other assets
Trademarks
Completed technology
Current liabilities
Long-term debt
Other noncurrent liabilities
Goodwill
Total purchase price
$
$
96,071,000
127,626,000
4,805,000
21,000,000
22,000,000
(118,238,000)
(126,328,000)
(29,527,000)
236,053,000
233,462,000
In connection with the BCcomponents acquisition, the Company recorded restructuring liabilities of
$48,000,000 in connection with an exit plan that management began to formulate prior to the acquisition
date. Approximately $46,000,000 of these liabilities relate to employee termination costs covering
approximately 780 technical, production, administrative and support employees located in the United
States, Europe, and the Pacific Rim. The liability is recorded in other accrued expenses and is expected to
be paid out by December 31, 2003. The exit plan is not yet finalized. Future adjustments to increase or
decrease the restructuring liabilities would increase or decrease goodwill.
Year ended December 31, 2001
In January 2001, the Company purchased Tansitor, a manufacturer of wet tantalum electrolytic capacitors
and miniature conformal coated solid tantalum capacitors, for $18.3 million in cash. The acquisition was
accounted for as a purchase and included in the results of operations of the passives segment from
January 1, 2001.
On July 27, 2001, the Company agreed to purchase from Infineon Technologies AG, Munich, the Infineon
optoelectronic infrared components business. This business produces optocouplers and optoelectric infrared
data components transceivers (IRDC). The total purchase price for this transaction was approximately
$116 million in cash. A partial payment of $78 million was made on July 27, 2001. A second payment of
F-18
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Acquisitions and Divestitures (continued)
2.2. Acquisitions and Divestitures (continued)
$38 million was made on December 31, 2001 to acquire a manufacturing facility in Malaysia. Under the
terms of the agreement, the Company purchased Infineon’s U.S. development, marketing, and distribution
activities located in the San Jose, California headquarters and a manufacturing facility located in Malaysia.
The results of operations of Infineon’s U.S. infrared components business are included in the results of the
actives segment from July 27, 2001. The results of operations of the Malaysia facility are included from
December 31, 2001, its acquisition date. The purchase price was allocated to the acquired assets and
liabilities based on fair values as follows:
Current assets
Property, plant, and equipment
Completed technology
Other assets
Current liabilities
Goodwill
Total purchase price
$
28,121,000
27,575,000
8,000,000
226,000
(14,200,000)
66,351,000
116,073,000
$
On November 2, 2001, the Company acquired General Semiconductor, Inc., a leading manufacturer of
rectifiers and power management devices, following approval of the transaction and related matters by
stockholders of the two companies, for $554.8 million, including acquisition expenses of $7.0 million.
Stockholders of General Semiconductor received 0.563 shares of Vishay Common Stock for each General
Semiconductor share in a tax-free exchange. The Company used an average closing price of its common
stock for the period beginning three trading days immediately prior to the date the acquisition was
announced (August 1, 2001) and ending the three trading days immediately thereafter, or an average of
$23.46 per share. The aggregate fair value was determined by multiplying the total number of shares of
Vishay Common Stock issued (21,305,127) by $23.46 per share (determined as described above), or
approximately $499,818,000. The Company assumed General Semiconductor options that became
exercisable for 4.3 million shares of Vishay Common Stock, with a fair value of $48 million. The fair value
of the options issued was determined using the Black-Scholes method. The significant assumptions used
included an expected dividend yield of 0.0%, a risk-free interest rate of 3%, an expected volatility of 66%,
and an expected life of five years. General Semiconductor also had outstanding $172.5 million principal
F-19
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Acquisitions and Divestitures (continued)
2.2. Acquisitions and Divestitures (continued)
amount of 5.75% convertible notes, of which $1.5 million principal amount was repurchased by the
Company in January 2002. As a result of the acquisition, the notes that remain outstanding are convertible
into approximately 6.2 million shares of Vishay Common Stock. The results of operations of General
Semiconductor are included in the results of the actives segment from November 2, 2001. The final
purchase allocation is as follows:
Current assets
Property, plant, and equipment
Other assets
Noncompete agreements
Trademarks
Completed technology
Purchased in-process technology
Current liabilities
Long-term debt
Other noncurrent liabilities
Goodwill
Total purchase price
$
153,115,000
184,524,000
7,896,000
5,604,000
35,000,000
37,000,000
16,000,000
(188,410,000)
(255,502,000)
(111,290,000)
670,909,000
554,846,000
$
In connection with the General Semiconductor acquisition, the Company recorded restructuring liabilities
of $94,643,000 in connection with an exit plan that management began to formulate prior to the acquisition
date. The exit plan includes downsizing certain European and Taiwan facilities and moving production to
low labor cost areas such as Israel, Czech Republic, and China. The exit plan should be completed by the
second quarter of 2003. The plan also includes reducing selling, general and administrative expenses
through the integration or elimination of redundant sales offices and administrative functions at General
Semiconductor. The goal of the Company is achieving significant production cost savings through the
transfer and expansion of manufacturing operations to regions such as Israel, the Czech Republic, and the
People’s Republic of China, where the Company can take advantage of lower labor costs and available tax
and other government-sponsored incentives. Approximately $88,242,000 of these restructuring liabilities
related to employee termination costs covering approximately 1,460 technical, production, administrative
and support employees located in the United States, Europe, and the Pacific Rim. The remaining
$6,401,000 related to provisions for lease cancellations and other costs. The liability is included in
F-20
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Acquisitions and Divestitures (continued)
2.2. Acquisitions and Divestitures (continued)
other accrued expenses on the consolidated balance sheet and the workforce reduction costs are expected to
be paid out by the second quarter of 2003. The other costs are expected to be paid out by 2005. Any
changes in estimates to the restructuring liability have changed the purchase allocation. A rollforward of
the activity in these restructuring liabilities is as follows (in thousands, except number of employees):
Balance at January 1, 2002
Cash paid
Changes in estimate
Balance at December 31, 2002
Workforce
Workforce
Reduction
Reduction
$ 88,242
(52,118)
(7,900)
$ 28,224
OtherOther
$
$
6,401
(1,249)
–
5,152
Number of
Number of
Employees
Employees
Terminated
Terminated
1,460
(426)
(147)
887
Total
Total
$ 94,643
(53,367)
(7,900)
$ 33,376
On November 7, 2001, the Company acquired Yosemite Investment, Inc. d/b/a North American Capacitor
Company, also known as Mallory, for approximately $45 million in cash. With manufacturing facilities in
Greencastle, Indiana and Glasgow, Kentucky, Mallory is a leading manufacturer of wet tantalum
electrolytic capacitors, among other businesses. Subsequently, in February 2002, Vishay sold the audible
signal business of Mallory for $4,925,000, consisting of $3,925,000 in cash and a $1,000,000 promissory
note and recognized no gain or loss. On April 1, 2002, the Company sold the resale business of Mallory for
$8.8 million, consisting of $7.6 million in cash and a $1.2 million subordinated promissory note and
recognized no gain or loss. The purchase price was allocated to the acquired assets and liabilities based on
fair values as follows:
Current assets
Property, plant, and equipment
Current liabilities
Long-term debt
Goodwill
Total purchase price
$
11,033,000
6,347,000
(3,555,000)
(857,000)
31,684,000
44,652,000
$
F-21
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions and Divestitures (continued)
The BLH, Tansitor, Celtron, Nobel, Tedea-Huntleigh, Sensortronics, Mallory and Infineon acquisitions
were funded with cash on hand and borrowings under Vishay’s revolving credit facility.
Had all of the above acquisitions been made at the beginning of the respective periods, the Company’s pro
forma unaudited results would have been (in thousands, except per share amounts):
Net sales
Net loss
Year ended December 31
2001
2002
$
2,095,657
(132,000)
$
2,415,651
(86,788)
Basic and diluted loss per share
(0.83)
(0.55)
The pro forma information includes adjustments for interest expense that would have been incurred to
finance the acquisitions, adjustments to depreciation based on the fair value of property, plant, and
equipment acquired, write-off of purchased in-process research and development, amortization of
intangible assets and related tax effects. Pro forma net loss for the year ended December 31,2001 includes
pre-tax restructuring charges of $88,846,000 recorded by General Semiconductor and BC components prior
to acquisition. Goodwill related to the acquisitions is not tax-deductible.
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.
Year ended December 31, 2000
During 2000, the Company acquired certain assets and assumed certain liabilities of Spectrol Electronics
Corporation and Spectrol Electronics Limited and acquired 100% of the common stock of Cera-Mite
Corporation and of Electro-Films, Inc. The combined cash purchase price was $42,384,000. The results of
operations of Electro-Films, Cera-Mite, and Spectrol have been included in the Company’s results from
June 1, 2000, August 1, 2000, and September 1, 2000, respectively. The pro forma effect of these
acquisitions was not material for 2000.
F-22
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions and Divestitures (continued)
On May 31, 2000, the Company entered into a definitive agreement for the sale of its 65% interest in Lite-
On Power Semiconductor Corporation (LPSC) to the Lite-On Group for $40,736,000 in cash and the
transfer to the Company of the rights under the SARs (see Note 7) issued in July 1997. The fair value of the
SARs was $108,495,000 as of May 31, 2000. A pretax gain of $8,401,000 is included in other income in
2000 in connection with the sale of the Company’s 65% interest in LPSC.
On November 30, 2000, the Company sold V-Tech Latino Americana LTDA, its Brazilian distribution
subsidiary. In connection with the sale, the Company received cash proceeds of approximately $400,000
and recorded a noncash pretax loss of $2,550,000, which is included in other income (expense).
3. Goodwill
As discussed in Note 1, the Company adopted SFAS 142 on January 1, 2002. The Company’s net income
and earnings per share adjusted to exclude goodwill amortization were as follows:
Reported net (loss) income
Add back: Goodwill amortization, net of tax
Adjusted net (loss) income
Basic earnings per share:
Reported net (loss) income
Goodwill amortization, net of tax
Adjusted net (loss) income
Diluted earnings per share:
Reported net (loss) income
Goodwill amortization, net of tax
Adjusted net (loss) income
2002
Year ended December 31
2001
(In thousands)
2000
$ (92,614)
–
(92,614)
$
$
(0.58)
–
(0.58)
(0.58)
–
(0.58)
$
$
$
513
10,414
10,927
$ 517,864
10,692
528,556
0.00
0.08
0.08
0.00
0.08
0.08
$
$
3.83
0.08
3.91
3.77
0.08
3.85
F-23
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
3. Goodwill (continued)
The changes in the carrying amounts of goodwill by segment for the year ended December 31, 2002 were
as follows:
Actives
Passives
(In thousands)
Total
Balance at January 1, 2002
$
864,375
$
213,415
$
1,077,790
Goodwill acquired during the year
Purchase price adjustments
Currency translation adjustments
Balance at December 31, 2002
4. Restructuring Expense
–
(8,332)
5,158
861,201
$
276,606
830
4,241
495,092
$
276,606
(7,502)
9,399
1,356,293
$
Restructuring expense reflects the cost reduction programs currently being implemented by the Company.
These include the closing of facilities and the termination of employees. Restructuring costs are expensed
during the period in which we determine that we will incur those costs and all of the requirements of
accrual are met. Because these costs are recorded based upon estimates, our actual expenditures for the
restructuring activities may differ from the initially recorded costs. We could be required either to record
additional expenses in future periods, if the initial estimates were too low, or to reverse part of the charges
that we recorded initially.
F-24
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Restructuring Expense (continued)
4.4. Restructuring Expense (continued)
Year ended December 31, 2002
Restructuring expense was $30,970,000 for the year ended December 31, 2002. Restructuring of European
and Israeli operations included $10,698,000 of employee termination costs covering approximately 778
technical, production, administrative and support employees located in Czech Republic, France, Hungary,
Israel, Portugal, and Austria. In the United States, $7,909,000 of restructuring expense related to
termination costs for approximately 660 technical, production, administrative and support employees. The
remaining $12,363,000 of restructuring expense relates to the noncash writedown of building and
equipment that are no longer in use. The restructuring expense was incurred as part of the cost reduction
programs currently being implemented by the Company. The restructuring activities related to existing
business were designed to reduce both fixed and variable costs, particularly in response to the reduced
demand for our products occasioned by the electronics industry downturn which began in 2001. Activity
related to these costs is as follows (in thousands, except number of employees):
Workforce
Workforce
Reduction
Reduction
Asset
Asset
Impairment
Impairment
Number of
Number of
Employees
Employees
Terminated
Terminated
Total
Total
Restructuring expense
Utilized
$
18,607
(6,420)
Balance at December 31, 2002
$
12,187
$
$
12,363
(12,363)
1,438
(783)
$
30,970
(18,783)
–
655
$
12,187
The remaining $12,187,000 of severance costs, currently shown in other accrued expenses, should be paid
by December 31, 2003.
Year ended December 31, 2001
Restructuring expense was $61,908,000 for the year ended December 31, 2001. Restructuring of European,
Asia Pacific, and Israeli operations included $27,064,000 of employee termination costs covering
approximately 3,778 technical, production, administrative and support employees located in France,
Hungary, Portugal, Austria, the Philippines, Germany, and Israel. The European operations also recorded
$2,191,000 of noncash costs associated with the writedown of buildings and equipment that are no longer
in use. In the United States, $13,870,000 of restructuring expense relates to termination costs for
F-25
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Restructuring Expense (continued)
4.4. Restructuring Expense (continued)
approximately 1,885 technical, production, administrative and support employees. The remaining
$18,783,000 of restructuring expense relates to the noncash writedown of buildings and equipment that are
no longer in use.
Activity related to these costs is as follows (in thousands, except number of employees):
Workforce
Workforce
Reduction
Reduction
Asset
Asset
Impairment
Impairment
Number of
Number of
Employees
Employees
Terminated
Terminated
Restructuring expense
Utilized
Balance at December 31, 2001
Cash paid
Changes in estimate
Balance at December 31, 2002
$
$
40,934
(18,114)
22,820
(19,865)
(1,391)
1,564
$
$
20,974
(20,974)
–
–
–
–
5,663
(4,913)
750
(612)
–
138
Total
Total
$
$
61,908
(39,088)
22,820
(19,865)
(1,391)
1,564
The remaining $1,564,000 of severance costs, currently shown in other accrued expenses, is expected to be
paid by December 31, 2003.
5.5.
Income Taxes
Income Taxes
Earnings before income taxes and minority interest consists of the following components:
Domestic
Foreign
2002
2002
Year ended December 3131
Year ended December
2001
2001
(In thousands)
2000
2000
$
(59,882)
(40,163)
$ (100,045)
$
$
(55,598)
65,701
10,103
$ 177,852
512,373
$ 690,225
F-26
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
5.
Income Taxes (continued)
Significant components of income taxes are as follows:
Current:
U.S.
Foreign
State
Deferred:
U.S.
Foreign
State
2002
(41,991)
6,111
776
(35,104)
30,590
(16,152)
3,766
18,204
(16,900)
$
$
Year ended December 31
2001
(In thousands)
$
$
6,194
9,197
641
16,032
(12,392)
4,031
(1,976)
(10,337)
5,695
$
$
2000
51,965
11,936
4,744
68,645
62,156
17,540
(155)
79,541
148,186
F-27
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
5.
Income Taxes (continued)
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:
Deferred tax assets:
Pension and other retiree obligations
Net operating loss carryforwards
Tax credit carryforwards
Restructuring reserves
Other accruals and reserves
Total deferred tax assets
Less valuation allowance
Deferred tax liabilities:
Tax over book depreciation
Non-amortizable intangible assets
Other – net
Total deferred tax liabilities
Net deferred tax assets
December 31
2002
2001
(In thousands)
$
$
47,710
112,770
11,766
13,093
55,699
241,038
(63,192)
177,846
87,483
24,454
30,359
142,296
35,550
$
$
41,500
38,869
13,080
23,678
51,348
168,475
(10,256)
158,219
88,377
26,412
16,284
131,073
27,146
F-28
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
5.
Income Taxes (continued)
A reconciliation of income tax expense at the U.S. federal statutory income tax rate to actual income tax
expense (benefit) is as follows:
Tax at statutory rate
State income taxes, net of U.S. federal tax
benefit
Effect of foreign operations
Purchased research and development
Other
2002
Year ended December 31
2001
(In thousands)
2000
$
(35,016)
$
3,536
$
241,579
2,540
11,090
–
4,486
(16,900)
$
(382)
(4,894)
5,600
1,835
5,695
$
3,064
(99,520)
–
3,063
148,186
$
At December 31, 2002, the Company had the following significant net operating loss carryforwards for tax
purposes (in thousands):
Czech Republic
France
Germany
Israel
Portugal
United States
$
608
8,720
50,560
153,442
3,550
58,236
Expires
2005 – 2007
2005 – 2007
No expiration
No expiration
2005 – 2007
2021
Approximately $25,280,000 of the carryforward in Germany resulted from the Company’s acquisition of
Roederstein, GmbH in 1993. Valuation allowances of $6,208,000 and $7,324,000 have been recorded at
December 31, 2002 and 2001, respectively, for deferred tax assets related to foreign net operating loss
carryforwards. In 2002 and 2001, respectively, tax benefits recognized through reductions of the valuation
allowance had the effect of reducing goodwill of acquired companies by $491,000 and $4,901,000. If
additional tax benefits are recognized in the future through further reduction of the valuation allowance,
$2,523,000 of such benefits will reduce goodwill.
F-29
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
5.
Income Taxes (continued)
In addition, as part of the BCcomponents acquisition, the Company has the following estimated pre-
acquisition NOL carryforwards for tax purposes (in thousands):
Expires
Austria
Belgium
Netherlands
$ 4,329
No expiration
60,504
74,688
No expiration
No expiration
The Company has recorded valuation allowances against the deferred tax assets arising from these net
operating loss carryforwards. If the Company recognizes future tax benefits through the use of these pre-
acquisition losses, the benefit of such utilization will be recorded as a reduction to goodwill.
F-30
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
5.
Income Taxes (continued)
At December 31, 2002, the Company had the following tax credit carryforwards available (in thousands):
Federal Alternative Minimum Tax
California Investment Credit
California Research Credit
$
5,802
5,644
3,402
Expires
No expiration
2003 – 2009
No expiration
At December 31, 2002, no provision had been made for U.S. federal and state income taxes on
approximately $897,550,000 of foreign earnings, which are expected to be reinvested indefinitely. Upon
distribution of those earnings in the form of dividends or otherwise, the Company would be subject to
U.S. income taxes (subject to an adjustment for foreign tax credits), state income taxes, and withholding
taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred
U.S. income tax liability is not practicable because of the complexities associated with its hypothetical
calculation.
Income taxes paid were $2,910,000, $72,953,000, and $45,703,000 for the years ended December 31, 2002,
2001, and 2000, respectively.
6. Long-Term Debt
Long-term debt consists of the following:
Multicurrency revolving credit loans
Convertible subordinated notes, LYONs, due 2021
Other debt and capital lease obligations
Convertible unsecured notes, BCcomponents, due 2102
Convertible subordinated notes, GSI, due 2006
Less current portion
December 31
2002
2001
(In thousands)
$
$
111,000
317,830
21,689
105,000
169,347
724,866
18,550
706,316
$
$
125,000
308,506
1,390
–
170,502
605,398
367
605,031
F-31
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
6. Long-Term Debt (continued)
On December 13, 2002, the Company entered into an amendment to its long-term revolving credit and
swing line facility. The aggregate commitment under this facility was reduced from $660,000,000 to
$500,000,000, subject to increase under certain circumstances, and certain changes were made to other
terms of the facility. This facility, which matures on June 1, 2005, is subject to the Company’s right to
request year-to-year renewals. Interest on the long-term facility is payable at prime or other variable
interest rate options. The Company is required to pay facility fees on the long-term facility. As of
December 31, 2002, the Company had $111,000,000 outstanding under the long-term revolving credit
facility (interest rate of 3.03%; 5.77% after giving effect to interest rate swaps). Letters of credit totaling
$30,633,000 were issued under the revolving credit facility at December 31, 2002. $358,367,000 was
available under the credit and swing line facility at December 31, 2002.
Borrowings under the credit facility are secured by pledges of stock in certain significant subsidiaries and
certain guarantees by significant subsidiaries. The credit facility restricts the Company from paying cash
dividends and requires the Company to comply with other covenants, including the maintenance of specific
financial ratios.
On December 13, 2002, the Company completed the acquisition of BCcomponents Holdings B.V. In
connection with this acquisition, $105,000,000 in principal amount of BCcomponents’ mezzanine
indebtedness and certain other securities of BCcomponents were exchanged for $105,000,000 principal
amount of floating rate unsecured loan notes of the Company, due 2102. The notes bear interest at LIBOR
plus 1.5% through December 31, 2006 and at LIBOR thereafter. The interest rate could be further reduced
to 50% of LIBOR after December 31, 2010 if the price of the Company’s common stock trades above a
specified target price, as provided in the notes. The notes are subject to a put and call agreement under
which the holders may at any time put the notes to the Company in exchange for 6,176,471 shares of the
Company’s common stock in the aggregate, and the Company may call the notes in exchange for cash or
for shares of its common stock after 15 years from the date of issuance.
On June 4, 2001, the Company completed a private placement of $550,000,000 face amount Liquid Yield
Option Notes (LYONs) due 2021. In connection with the sale of the LYONs, the Company received net
proceeds of $294,096,000 and used the proceeds to pay down existing bank debt. Each LYON has a $1,000
face amount and was offered at a price of $551.26 (55.126% of the principal amount at maturity). The
Company will not pay interest on the LYONs prior to maturity unless contingent interest becomes payable.
F-32
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Term Debt (continued)
6.6. LongLong--Term Debt (continued)
The issue price of each LYON represents a yield to maturity of 3.00%, excluding any contingent interest.
The LYONs are subordinated in right of payment to all of the Company’s existing and future senior
indebtedness.
At any time on or before the maturity date, the LYONs are convertible into Vishay Common Stock at a rate
of 17.6686 shares of Common Stock per $1,000 principal amount at maturity. The conversion rate may be
adjusted under certain circumstances, but it will not be adjusted for accrued original issue discount.
The Company is required to pay contingent interest to the holders of the LYONs during the six-month
period commencing June 4, 2006 and during any six-month period thereafter if the average market price of
a LYON for a certain measurement period immediately preceding the applicable six-month period equals
120% or more of the sum of the issue price and accrued original issue discount for such LYON. The
amount of contingent interest payable during any six-month period will be the sum of any contingent
interest payable in the first and second three-month periods during such six-month period. During any
three-month period in which contingent interest becomes payable, the contingent interest payable per
LYON for such period will be equal to the greater of (1) 0.0625% of the average market price of a LYON
for the measurement period referred to above or (2) the sum of all regular cash dividends paid by the
Company per share on its common stock during such three-month period multiplied by the number of
shares of common stock issuable upon conversion of a LYON at the then-applicable conversion rate.
The holders of the LYONs may require the Company to repurchase all or a portion of their LYONs on
June 4, 2004, 2006, 2011, and 2016 at various prices set forth in the notes. The Company may choose to
pay the purchase price in cash, Common Stock, or a combination of both. The Company may redeem for
cash all or a portion of the LYONs at any time on or after June 4, 2006 at the prices set forth in the notes.
General Semiconductor, which was acquired by the Company on November 2, 2001, had outstanding
$172.5 million principal amount of 5.75% convertible subordinated notes due December 15, 2006. The
notes were recorded at their fair value of $170.5 million as of the November 2, 2001 acquisition date.
Interest on the convertible notes is payable semiannually on June 15 and December 15 of each year. As a
consequence of the Company’s acquisition of General Semiconductor, the convertible notes became
convertible into approximately 6.2 million shares of the Company’s Common Stock. The convertible notes
F-33
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Term Debt (continued)
6.6. LongLong--Term Debt (continued)
are redeemable at the Company’s option, in whole or in part, at any time on or after December 15, 2002 at
a premium of 103.286% of par value declining annually to 100.821% at December 15, 2005 and thereafter.
Aggregate annual maturities of long-term debt, assuming that the Company is required to repurchase the
LYONs in 2004, are as follows: 2003 – $18,550,000; 2004 – $318,869,000; 2005 – $111,533,000; 2006 –
$169,373,000; 2007 – $11,000; and thereafter – $106,530,000.
At December 31, 2002, the Company had committed and uncommitted short-term credit lines with various
U.S. and foreign banks aggregating $77,803,000, of which $59,642,000 was unused. The weighted average
interest rate on short-term borrowings outstanding as of December 31, 2002 and 2001 was 2.80% and
2.53%, respectively.
Interest paid was $17,977,000, $15,685,000, and $29,930,000, for the years ended December 31, 2002,
2001, and 2000, respectively.
Stockholders’ Equity
7.7. Stockholders’ Equity
The Company’s Class B Common Stock carries ten votes per share while the Common Stock carries one
vote per share. Class B shares are transferable only to certain permitted transferees while the Common
Stock is freely transferable. Class B shares are convertible on a one-for-one basis at any time into shares of
Common Stock.
The Company completed a public offering of its Common Stock on May 15, 2000, selling 8,392,500 shares
at a price of $49.00 (adjusted for the June 9, 2000 three-for-two stock split). The total net proceeds to the
Company from the offering, after deducting the underwriting discount and estimated expenses, were
approximately $395,449,000. These proceeds were used to repay a portion of the debt outstanding under its
long-term revolving credit facility.
In connection with the Company’s acquisition of 65% of LPSC in July 1997, the Company issued stock
appreciation rights (SARs) to the Lite-On Group (former owners of LPSC). The SARs represented the right
to receive, in stock, the increase in value on the equivalent of 3,200,000 shares of the Company’s Common
Stock, above $11.68 per share. On January 24, 2000, the Company exercised its right to call the SARs.
Based on the call price of $26.43 per share and the average closing price of Vishay shares for the thirty
F-34
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
7.7. Stockholders’ Equi
ty (continued)
Stockholders’ Equity (continued)
days prior to January 24, 2000, the Company would have had to issue 2,294,000 shares of Common Stock
to settle the SARs. In connection with the sale of its 65% interest in LPSC to the Lite-On Group (see
Note 2), the Lite-On Group transferred its rights under the SARs to Vishay.
On November 2, 2001, the stockholders approved an increase in the authorized capital stock of the
Company. The total authorized Common Stock was increased from 150,000,000 to 300,000,000 shares and
the Class B Common Stock was increased from 20,000,000 to 40,000,000 shares.
On August 10, 2000, the Board of Directors of the Company authorized the repurchase of up to 5,000,000
shares of its Common Stock from time to time in the open market. As of December 31, 2002, the Company
had repurchased 248,500 shares for a total of $6,616,000.
Unearned compensation relating to Common Stock issued under employee stock plans is being amortized
over periods ranging from three to five years. At December 31, 2002, 305,126 shares were available for
issuance under stock plans.
At December 31, 2002, the Company has reserved shares of Common Stock for future issuance as follows:
Employee stock plan
Common stock options outstanding
Common stock options available to grant
Common stock warrants
Convertible unsecured notes, BCcomponents
Convertible subordinated notes, LYONs
Class B common stock
Convertible subordinated notes, General Semiconductor
305,126
9,231,000
1,036,000
8,823,529
6,176,471
9,717,730
15,383,581
6,191,166
56,864,603
F-35
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
8. Other Income (Expense)
Other income (expense) consists of the following:
Foreign exchange (losses) gains
Loss on ineffective interest rate swap
Interest income
Dividend income
Equity in net income of affiliates
Gain on termination of interest rate swap
agreements
Gains on sale of subsidiaries
(Losses) gains on disposal of property and
equipment
Other
2002
Year ended December 31
2001
(In thousands)
2000
$
$
(777)
(115)
7,952
100
–
–
–
(296)
1,800
8,664
$
611
(3,668)
15,092
–
–
–
–
$
(7,305)
–
9,652
–
2,577
8,919
5,851
1,472
(806)
12,701
$
(2,320)
1,530
18,904
$
In connection with repayments of debt in 2000, the Company terminated $200,000,000 notional amount of
interest rate swap agreements (see Note 14) and recognized pretax gains of $8,919,000.
During the year ended December 31, 2000, the Company sold its 65% interest in LPSC and all of the assets
of V-Tech Latino American LTDA. The sale of LPSC resulted in a pretax gain of $8,401,000 and the sale
of V-Tech resulted in a pretax loss of $2,550,000 (see Note 2).
F-36
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
9. Other Accrued Expenses
Other accrued expenses consists of the following (in thousands):
Restructuring
Returns and allowances
Loss on tantalum purchase commitment – current portion
Other
2002
2001
$
$
95,127
39,803
25,334
143,345
303,609
$
$
143,033
32,140
–
117,423
292,596
10. Other Comprehensive Income (Loss)
The cumulative balance of each component of other comprehensive income (loss) and the income tax
effects allocated to each component are as follows:
December 31, 2002
Pension liability adjustment
Currency translation adjustment
Loss on derivative financial
instruments
December 31, 2001
Pension liability adjustment
Currency translation adjustment
Loss on derivative financial
instruments
December 31, 2000
Pension liability adjustment
Currency translation adjustment
Beginning
Balance
Before-Tax
Amount
Tax
Benefit
(Expense)
(In thousands)
Net-of-Tax
Amount
Ending
Balance
$ (13,694)
(116,072)
$ (35,562)
64,343
$ 12,332
–
$ (23,230)
64,343
$ (36,924)
(51,729)
(645)
$(130,411)
(2,291)
$ 26,490
474
$ 12,806
(1,817)
$ 39,296
(2,462)
$ (91,115)
$
(5,137)
(108,434)
$ (13,281)
(7,638)
–
$ (113,571)
(1,019)
$ (21,938)
$
(5,043)
(75,966)
$ (81,009)
$
1,258
(32,468)
$ (31,210)
$
$
$
$
4,724
–
374
5,098
$
(8,557)
(7,638)
$ (13,694)
(116,072)
(645)
$ (16,840)
(645)
$(130,411)
(1,352)
–
(1,352)
$
(94)
(32,468)
$ (32,562)
$
(5,137)
(108,434)
$ (113,571)
F-37
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. 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 U.S. pension plans of General Semiconductor are included
beginning on November 2, 2001. The following table sets forth a reconciliation of the benefit obligation,
plan assets, and accrued benefit cost related to these plans:
Pension Benefits
Other Benefits
2002
2001
2002
(In thousands)
2001
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Employee contributions
Actuarial losses (gains)
Plan amendments
Benefits paid
Assumption change
Acquisition of General Semiconductor
Benefit obligation at end of year
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
Acquisition of General Semiconductor
Fair value of plan assets at end of year
Funded status
Unrecognized net actuarial loss (gain)
Unrecognized transition obligation (asset)
Unamortized prior service cost
Additional minimum liability
Net amount recognized
$ 193,273
3,433
13,598
1,680
(1,158)
–
(16,090)
12,299
–
$ 207,035
$ 165,186
(11,224)
4,226
1,680
(16,090)
–
$ 143,778
$ (63,257)
60,957
(101)
–
(48,682)
$ (51,083)
$ 116,008
3,092
9,023
2,019
(169)
–
(7,565)
–
70,865
$ 193,273
$ 102,918
(1,078)
5,113
2,019
(7,565)
63,779
$ 165,186
$ (28,087)
26,812
(302)
–
(13,638)
$ (15,215)
$ 20,286
279
1,465
–
1,400
(410)
(1,530)
509
–
$ 21,999
$
7,964
240
678
–
325
–
(523)
–
11,602
$ 20,286
$ (21,999)
1,237
1,934
182
–
$ (18,646)
$ (20,286)
(671)
2,128
639
–
$ (18,190)
F-38
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits (continued)
Amounts recognized in the consolidated
balance sheets consist of:
Accrued benefit liability
Accumulated other comprehensive loss
Net amount recognized
Weighted-average assumptions
as of December 31:
Discount rate
Expected return on plan assets
Rate of compensation increase
Pension Benefits
2002
2001
Other Benefits
2002
2001
(In thousands)
$ (82,726)
31,643
$ (51,083)
$ (24,079)
8,864
$ (15,215)
$ (18,646)
–
$ (18,646)
$ (18,190)
–
$ (18,190)
6.75%
7.25%
6.75%
7.25%
8.50%-8.75% 8.50%-9.50%
4.50%-6.50% 4.50%-6.50%
Components of net periodic
benefit cost:
Annual service cost
Less expected employee
contributions
Net service cost
Interest cost
Expected return on plan
assets
Amortization of prior
service cost
Amortization of transition
obligation
Amortization of (gains)
losses
Net periodic benefit cost
Pension Benefits
2001
2002
2000
2002
(In thousands)
Other Benefits
2001
2000
$ 5,424
$ 5,388
$ 4,595
$
279
$
240
$
225
1,991
3,433
13,598
2,296
3,092
9,023
2,067
2,528
7,858
(14,227)
(10,048)
(8,703)
–
6
(201)
311
67
110
–
279
1,466
–
47
–
240
678
–
93
–
225
545
–
93
194
194
194
1,474
$ 4,077
514
$ 2,898
556
$ 2,416
–
$ 1,986
–
$ 1,205
(17)
$ 1,040
F-39
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits (continued)
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the
pension plans with accumulated and projected benefit obligations in excess of plan assets were
$207,035,000, $194,760,000, and $143,778,000, respectively, as of December 31, 2002 and $121,472,000,
$107,553,000, and $99,210,000, respectively, as of December 31, 2001.
The Company maintains two unfunded nonpension postretirement plans funded as costs are incurred. One
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 second plan
covers all full-time U.S. General Semiconductor employees not covered by a collective bargaining
agreement who meet defined age and service requirements. This plan is the primary provider of benefits for
retirees up to age 65, after which Medicare becomes the primary provider. 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 $2,990,000, $3,182,000, and $3,161,000 for the years ended December 31, 2002, 2001, and 2000,
respectively.
The Company provides pension and similar benefits to employees of certain foreign subsidiaries consistent
with local practices. Certain foreign subsidiaries of the Company have defined benefit pension plans. The
foreign pension plans of General Semiconductor are included as of November 2, 2001. The foreign pension
plans of BCcomponents are included as of December 13, 2002. The following table sets forth a
reconciliation of the benefit obligation, plan assets, and accrued benefit cost related to the foreign defined
benefit plans:
F-40
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits (continued)
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial gains
Benefits paid
Foreign currency translation
Curtailment gains
Acquisitions
Benefit obligation at end of year
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
Fair value of plan assets at end of year
Funded status
Unrecognized net actuarial (gains) losses
Unrecognized transition asset
Unamortized prior service cost
Net amount recognized
2002
2001
(In thousands)
$
$
$
$
93,397
525
5,630
(1,572)
(4,869)
13,055
(1,336)
14,343
119,173
13,137
(894)
2,449
(2,454)
2,407
14,645
$ (104,528)
(636)
21
(3)
$ (105,146)
$
$
$
$
$
$
90,548
391
5,301
(26)
(4,845)
(3,845)
–
5,873
93,397
13,417
1,019
1,947
(2,440)
(806)
13,137
(80,260)
1,560
18
(6)
(78,688)
F-41
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits (continued)
Amounts recognized in the consolidated balance
sheets consist of:
Accrued benefit liability
Accumulated other comprehensive loss
Net amount recognized
Weighted-average assumptions as of December 31:
Discount rate
Rate of compensation increase
2002
2001
(In thousands)
$ (110,427)
5,281
$ (105,146)
$
$
(83,518)
4,830
(78,688)
6.00% - 6.25%
2.60% - 3.00%
6.50%
3.00%
Components of net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of transition asset
Curtailment gains
Amortization of (gains) losses
Net periodic benefit cost
2002
2001
(In thousands)
2000
$
$
525
5,630
(489)
–
(3)
(1,336)
(94)
4,233
$
$
391
5,301
(444)
36
(3)
–
97
5,378
$
$
440
5,755
(440)
45
(4)
–
151
5,947
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the
foreign pension plans with accumulated benefit obligations and projected benefit obligations in excess of
plan assets were $119,173,000, $118,646,000, and $14,645,000, respectively, as of December 31, 2002 and
$81,463,000, $81,646,000, and $13,137,000, respectively, as of December 31, 2001.
F-42
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
12. Stock Options
The Company has three stock option programs. Under the 1995 Stock Option Program, certain key
executives of the Company were granted options on March 19, 1995, to purchase 2,283,000 shares of the
Company’s Common Stock. The options were fully vested on the date of grant and expired March 1, 2000,
with one-third exercisable at $12.21, one-third exercisable at $15.36, and one-third exercisable at $21.94.
As of December 31, 2000, options to purchase 2,010,000 shares had been exercised under this plan and the
remaining options had been canceled.
Under the 1997 Stock Option Program, certain executive officers, key employees, and consultants of the
Company were granted options on May 21, 1998, to purchase 2,687,000 shares of the Company’s Common
Stock. The options were fully vested on the date of grant and expire June 1, 2008, with one-third
exercisable at $10.89, one-third exercisable at $12.53, and one-third exercisable at $13.61. As of
December 31, 2002, options to purchase 528,000 shares have been exercised under this plan.
Under the 1998 Stock Option Program, certain executive officers and key employees were granted options,
as summarized in the following table:
Date of Grant
# of
Options
Exercise
Price
Vesting
Expiration
October 6, 1998
October 8, 1999
August 4, 2000
1,598,000
1,334,000
50,000
$ 5.60
15.33
30.00
October 12, 2000
October 1, 2001
through
August 5, 2002
1,114,000
15,000
25.13
$14.40 –
$25.07
Evenly over 6 years
Evenly over 6 years
Evenly over 5 years,
beginning August 4,
2003
Evenly over 6 years
Evenly over 6 years
March 16, 2008
October 8, 2009
August 4, 2010
October 12, 2010
October 1, 2011
through
August 5, 2012
On May 18, 2000, the stockholders of the Company approved an increase in the number of shares available
for grant under Vishay’s 1998 Stock Option Program. As a result, the number of shares available for grant
under this program increased from 2,953,500 to 4,453,500. As of December 31, 2002, options to purchase
362,000 shares have been exercised under this plan.
F-43
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
12. Stock Options (continued)
On November 2, 2001, Vishay acquired General Semiconductor and General Semiconductor became a
wholly owned subsidiary of the Company. As a result of the acquisition, each outstanding option to acquire
General Semiconductor common stock became exercisable for shares of Vishay Common Stock. Based on
the conversion ratio in the acquisition of 0.563 of a Vishay share for each General Semiconductor share, the
former General Semiconductor options become exercisable in the aggregate for 4,282,000 shares of Vishay
Common Stock. All such options were immediately vested and exercisable as a result of the merger but the
terms of the options otherwise remained unchanged. As of December 31, 2002, options to purchase
190,000 shares have been exercised under this plan.
The following table summarizes the Company’s stock option activity (options in thousands):
2002
2001
2000
Number
of
Options
Weighted
Average
Exercise
Price
Number
of
Options
Weighted
Average
Exercise
Price
Number
of
Options
Weighted
Average
Exercise
Price
Outstanding at beginning
of year
Granted
Exercised
Canceled
Acquisition of General
Semiconductor
Outstanding at end of year
Exercisable at end of year
9,569
15
(261)
(92)
–
9,231
7,626
$ 15.97
17.75
12.12
17.14
–
16.07
5,646
–
(86)
(273)
4,282
9,569
$ 14.29
–
9.99
17.82
18.10
15.97
7,493
1,164
(2,656)
(355)
–
5,646
$ 12.67
25.34
15.08
10.41
–
14.29
15.79
7,358
15.74
2,651
11.96
Available for future grants
1,036
958
760
F-44
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
12. Stock Options (continued)
The following table summarizes information concerning stock options outstanding and exercisable at
December 31, 2002 (options in thousands):
Options Outstanding
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise Price
Options Exercisable
Number of
Options
Weighted
Average
Exercise Price
1.57
5.74
5.39
5.35
2.48
6.74
7.59
5.88
3.23
7.48
$ 2.64
5.60
11.76
13.28
14.46
15.33
15.97
18.95
22.44
25.93
$ 16.07
3
584
1,289
1,283
55
510
1,369
1,361
592
580
7,626
$ 2.64
5.60
11.76
13.28
14.46
15.33
15.97
18.95
22.42
26.47
$ 15.79
Range of
Exercise Prices
Number of
Options
$2.64
$5.60
$10.89 – $12.53
$12.54 – $13.61
$14.32 – $14.99
$15.33
$15.43 – $16.41
$16.52 – $20.86
$21.43 – $25.07
$25.13 – $34.52
Total
3
962
1,289
1,283
62
1,033
1,369
1,366
595
1,269
9,231
13. Commitments and Contingencies
Total rental expense under operating leases was $27,652,000, $22,994,000, and $21,431,000 for the years
ended December 31, 2002, 2001, and 2000, respectively.
Future minimum lease payments for operating leases with initial or remaining noncancelable lease terms in
excess of one year are as follows: 2003 – $21,978,000; 2004 – $15,419,000; 2005 – $12,675,000; 2006 –
$11,390,000; 2007 – $10,773,000 and thereafter – $4,739,000.
Environmental Matters
The Company is subject to various federal, state, local and foreign laws and regulations governing
environmental matters, including the use, discharge and disposal of hazardous materials. The Company’s
manufacturing facilities are believed to be in substantial compliance with current laws and regulations.
Complying with current laws and regulations has not had a material adverse effect on the Company’s
financial condition.
F-45
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
13. Commitments and Contingencies (continued)
Environmental Matters (continued)
As part of the acquisition of General Semiconductor by Vishay on November 2, 2001, the Company
assumed ongoing environmental matters. As part of the acquisition of BCcomponents on December 13,
2002, the Company has recorded environmental liabilities of $7,600,000.
The Company has engaged independent consultants to assist management in evaluating potential liabilities
related to environmental matters. Management assesses the input from these independent consultants along
with other information known to the Company in its effort to continually monitor these potential liabilities.
Management assesses its environmental exposure on a site-by-site basis, including those sites where the
Company has been named as a “potentially responsible party.” Such assessments include the Company’s
share of remediation costs, information known to the Company concerning the size of the hazardous waste
sites, their years of operation and the number of past users and their financial viability. The Company has a
reserve of $22,405,000 recorded at December 31, 2002 for environmental matters relating to General
Semiconductor. While the ultimate outcome of these matters cannot be determined, management does not
believe that the final disposition of these matters will have a material adverse effect on the Company’s
financial position, results of operations, or cash flows beyond the amounts previously provided for in the
financial statements.
The Company’s present and past facilities have been in operation for many years, and over that time in the
course of those operations, such facilities have used substances which are or might be considered
hazardous, and the Company has generated and disposed of wastes which are or might be considered
hazardous. Therefore, it is possible that additional environmental issues may arise in the future, which the
Company cannot now predict.
Litigation
In February and March 2001, several purported class-action complaints were filed in the Delaware Court of
Chancery and the California Superior Court against the Company, Siliconix, and the directors of Siliconix
in connection with a proposal by the Company in February 2001 to purchase all issued and outstanding
shares of Siliconix that the Company did not already own. The class actions alleged that the Company’s
proposed offer was unfair and a breach of fiduciary duty. One of the Delaware class actions also
F-46
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
13. Commitments and Contingencies (continued)
Litigation (continued)
alleged that the Company had usurped Siliconix inventory and patents, appropriated Siliconix’s separate
corporate identity, and obtained a below-market loan from Siliconix. The actions sought injunctive relief,
damages and other relief. In June 2001, the Delaware Chancery Court denied a preliminary injunction
motion seeking to enjoin the Company’s tender offer, which was commenced in May 2001 but not
successfully completed. Subsequently, the Company and Siliconix filed motions to dismiss the actions in
Delaware and for summary judgment. The actions in California were stayed. In the fourth quarter of 2002,
based largely on the June 2001 Delaware Court of Chancery ruling, the parties agreed to dismiss the case
without prejudice.
The Company is a party to various claims and lawsuits arising in the normal course of business. The
Company is of the opinion that these litigations or claims will not have a material negative effect on its
consolidated financial position, results of operations, or cash flows.
14. Financial Instruments
The Company uses financial instruments in the normal course of its business, including derivative financial
instruments, for purposes other than trading. These financial instruments include debt and interest rate swap
agreements. The notional or contractual amounts of these commitments and other financial instruments are
discussed below.
Concentration of Credit Risk
Financial instruments with potential credit risk consist principally of cash and cash equivalents and
accounts receivable. The Company maintains cash and cash equivalents with various major financial
institutions. Concentrations of credit risk with respect to receivables are generally limited due to the
Company’s large number of customers and their dispersion across many countries and industries. At
December 31, 2002 and 2001, the Company had no significant concentrations of credit risk.
F-47
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
14. Financial Instruments (continued)
Interest Rate Swap Agreements
In August 1998, the Company entered into six interest rate swap agreements, maturing in 2003, with a total
notional amount of $300,000,000 to manage interest rate risk related to its multicurrency revolving line of
credit. These interest rate swap agreements required the Company to make payments to the counterparties
at the fixed rate stated in the agreements, and in return to receive payments from the counterparties at
variable rates. During fiscal year 2000, the Company terminated $200,000,000 notional amount of interest
rate swap agreements and recognized a pretax gain of $8,919,000. At December 31, 2002, the Company
had outstanding one interest rate swap agreement with a notional amount of $100,000,000. At
December 31, 2002, 2001, and 2000, the Company paid a weighted average fixed rate of 5.77%,
respectively, and received a weighted average variable rate of 1.40%, 1.93%, and 6.66%, respectively. The
fair value of the interest rate swap agreements, based on current market rates, approximated a net payable
of $3,309,000 and $4,686,000 at December 31, 2002 and 2001, respectively. For the years ended
December 31, 2002 and 2001, the Company recorded a pretax loss of $115,000 and $3,668,000,
respectively, relating to an ineffective hedge for a portion of time relating to an interest rate swap
agreement (see Note 8).
Cash and Cash Equivalents, Notes Payable, and Long-Term Debt
The carrying amounts of cash and cash equivalents reported in the consolidated balance sheets approximate
their fair values. The fair value of the long-term debt is $723,429,000 as compared to its carrying value of
$724,866,000. The fair value of long-term debt was estimated based on trading prices and market prices of
debt with similar terms and features.
15. Current Vulnerability Due to Certain Concentrations
Customer Concentrations
A material portion of the Company’s revenues are derived from the worldwide communications and
computer markets. These markets have historically experienced wide variations in demand for end
products. If demand for these end products should continue to decrease, the producers thereof could reduce
their purchases of the Company’s products, which could have a material adverse effect on the Company’s
results of operations and financial position.
F-48
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Current Vulnerability Due to Certain Concentrations (continued)
15.15. Current Vulnerability Due to Certain Concentrations (continued)
Sources of Supplyply
Sources of Sup
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.
Many of Vishay’s products require the use of raw materials that are produced in only a limited number of
regions around the world or are available from only a limited number of suppliers. Vishay’s results of
operations may be materially and adversely affected if Vishay has difficulty obtaining these raw materials,
the quality of available raw materials deteriorates or there are significant price increases for these raw
materials. For example, the prices for tantalum and palladium, two raw materials that Vishay uses in its
capacitors, are subject to fluctuation. For periods in which the prices of these raw materials are rising,
Vishay may be unable to pass on the increased cost to Vishay’s customers, which would result in decreased
margins for the products in which they are used. For periods in which the prices are declining, Vishay may
be required to write down its inventory carrying cost of these raw materials which, depending on the extent
of the difference between market price and its carrying cost, could have a material adverse effect on
Vishay’s net earnings.
Vishay is a major consumer of the world’s annual production of tantalum. Tantalum, a metal purchased in
powder or wire form, is the principal material used in the manufacture of tantalum capacitors. There are
currently three major suppliers that process tantalum ore into capacitor grade tantalum powder. Due to the
strong demand for its tantalum capacitors and difficulty in obtaining sufficient quantities of tantalum
powder from its suppliers, Vishay stockpiled tantalum ore in 2000 and early 2001. During 2001, Vishay
and its competitors experienced a significant decline in the tantalum capacitor business. Vishay’s usage of
tantalum declined from 602,585 pounds in 2000 to 248,640 pounds in 2001 and 119,900 pounds in 2002.
The market prices for tantalum also decreased significantly during 2002. As a result, Vishay recorded, in
costs of products sold, writedowns of $25,700,000 and $52,000,000, respectively, on tantalum inventories
during the years ended December 31, 2002 and 2001, respectively. The net book value of tantalum
inventories is $49,609,000 and $49,337,000 at December 31, 2002 and 2001, respectively. The Company
also recorded a loss on future purchase commitments of $106,000,000 for the year ended December 31,
2002. Vishay’s purchase commitments were entered into at a time when market demand for tantalum
capacitors was high and tantalum powder was in short supply. If the downward pricing trend were to
F-49
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Current Vulnerability Due to Certain Concentrations (continued)
15.15. Current Vulnerability Due to Certain Concentrations (continued)
rces of Supply (continued)
SouSources of Supply (continued)
continue, the Company could again be required to write down the carrying value of its tantalum inventory
and record additional losses on its long-term purchase commitments.
Under the terms of these future purchase commitments, the Company’s purchase commitments are
approximately $100,300,000 for 2003, $103,800,000 for 2004, $116,600,000 for 2005, and $60,100,000 for
2006. If certain conditions of the contract are not met, the commitment could increase to $145,900,000 for
2003, $147,600,000 for 2004, $149,300,000 for 2005, and $81,300,000 for 2006. The Company purchased
$53,280,000, $23,395,000, and $15,495,000 under these contracts for the years ended December 31, 2002,
2001, and 2000, respectively.
Palladium, a metal used to produce multi-layer ceramic capacitors, is currently found primarily in South
Africa and Russia. Palladium is a commodity product that is subject to price volatility. The price of
palladium fluctuated in the range of approximately $222 to $1,090 per troy ounce during the three years
ended December 31, 2002, and as of December 31, 2002, the price of palladium was $236 per troy ounce.
During the years ended December 31, 2002 and 2001, respectively, the Company recorded in costs of
products sold writedowns of $1,700,000 and $18,000,000, respectively, on palladium inventories. The net
book value of palladium inventories is $5,644,000 and $12,260,000 at December 31, 2002 and 2001,
respectively.
From time to time there have been short-term market shortages of raw material utilized by Vishay. While
these shortages have not historically adversely affected Vishay’s ability to increase production of products
containing tantalum and palladium, they have historically resulted in higher raw material cost for Vishay.
Vishay cannot assure that any of these market shortages in the future would not adversely affect Vishay’s
ability to increase production, particularly during periods of growing demand for Vishay’s products.
Geographic Concentration
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
F-50
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
Current Vulnerability Due to Certain Concentrations (continued)
15.15. Current Vulnerability Due to Certain Concentrations (continued)
Geographic Concentration (continued)
Geographic Concentration (continued)
abatement programs. Israeli incentive programs have contributed substantially to the growth and
profitability of the Company. The Company might be materially and adversely affected if these incentive
programs were no longer available to the Company or if events were to occur in the Middle East that
materially interfered with the Company’s operations in Israel.
16.16. Business Segment an
d Geographic Area Data
Business Segment and Geographic Area Data
Vishay designs, manufactures, and markets electronic components that cover a wide range of products and
technologies. The Company has two reportable segments: Passive Electronic Components (Passives)
consisting principally of fixed resistors, solid tantalum surface mount chip capacitors, solid tantalum leaded
capacitors, wet/foil tantalum capacitors, multi-layer ceramic chip capacitors, film capacitors and inductors,
and Active Electronic Components (Actives) consisting principally of diodes, transistors, power
MOSFETS, power conversion, motor control integrated circuits, optoelectronic components and IRDCs.
The Company evaluates business segment performance on operating income, exclusive of restructuring
charges, amortization of goodwill and unusual and non-recurring items.
The Company evaluates performance and allocates resources based on several factors, of which the primary
financial measure is business segment operating income excluding amortization of intangibles and special
charges. The accounting policies of the business segments are the same as those described in the summary
of significant accounting policies (see Note 1). The operating results of Passives reflect the acquisitions of
Celtron as of October 1, 2002, BLH/Nobel as of August 1, 2002, Tedea-Huntleigh BV as of June 1, 2002,
and Sensortronics as of January 31, 2002. The operating results of Actives reflect the acquisitions of
Infineon Malaysia as of December 31, 2001, General Semiconductor as of November 2, 2001, and Infineon
U.S. as of July 27, 2001, and include LPSC from July 1, 1997 through its divestiture in 2000. Business
segment assets are the owned or allocated assets used by each business.
The corporate component of operating income represents corporate selling, general, and administrative
expenses. Corporate assets include corporate cash, property, plant, and equipment, and certain other assets.
During the year 2000, one North American distributor accounted for 14% of total net sales. During the
years 2002 and 2001, no individual customer accounted for more than 10% of net sales.
F-51
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
16. Business Segment and Geographic Area Data (continued)
Business segment information
Net sales:
Passives
Actives
Operating income (loss):
Passives
Actives
Corporate
Restructuring expense
Purchased research and development
Loss on long-term purchase commitments
Amortization of goodwill
Restructuring expense:
Passives
Actives
Depreciation expense:
Passives
Actives
Corporate
2002
2001
(In thousands)
2000
$
$
$
$
$
$
$
$
767,246
1,055,567
1,822,813
(61,317)
139,140
(20,801)
(30,970)
–
(106,000)
–
(79,948)
30,049
921
30,970
80,084
87,609
4,481
172,174
$
$
$
$
$
$
$
$
1,010,634
644,712
1,655,346
60,137
65,181
(21,970)
(61,908)
(16,000)
–
(11,190)
14,250
57,498
4,410
61,908
83,735
61,238
4,252
149,225
$
$
$
$
$
$
$
$
1,627,860
837,206
2,465,066
547,156
204,640
(43,829)
–
–
–
(11,469)
696,498
–
–
–
73,803
52,250
232
126,285
F-52
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
16. Business Segment and Geographic Area Data (continued)
Interest expense:
Passives
Actives
Corporate
Income tax expense (benefit):
Passives
Actives
Corporate
Total assets:
Passives
Actives
Corporate
Capital expenditures:
Passives
Actives
Corporate
2002
2001
(In thousands)
2000
$
$
$
$
$
$
$
$
963
10,545
17,253
28,761
(33,674)
21,286
(4,512)
(16,900)
2,125,443
2,046,944
142,772
4,315,159
45,105
62,933
2,036
110,074
$
$
$
$
$
$
$
$
680
1,988
14,180
16,848
(2,912)
11,862
(3,255)
5,695
1,876,282
1,980,841
94,400
3,951,523
91,028
68,463
3,002
162,493
$
$
$
$
$
$
$
$
60
1,389
23,728
25,177
106,353
51,469
(9,636)
148,186
1,931,610
809,360
42,688
2,783,658
131,318
95,343
3,120
229,781
F-53
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
16. Business Segment and Geographic Area Data (continued)
The following geographic area data include net sales based on revenues generated by subsidiaries located
within that geographic area and property, plant, and equipment based on physical location:
Geographic area information
Net sales:
United States
Germany
Asia Pacific
France
Israel
Other
Property, plant, and equipment – net:
United States
Germany
Israel
Asia Pacific
France
Other
17. Earnings (Loss) per Share
2002
2001
(In thousands)
2000
$
$
$
$
482,154
382,932
542,859
69,635
75,238
269,995
1,822,813
307,783
154,288
328,315
253,937
37,687
192,840
1,274,850
$
$
$
$
638,326
452,839
315,550
85,046
32,646
130,939
1,655,346
345,602
116,435
351,375
221,819
33,745
98,557
1,167,533
$
$
$
$
1,034,985
678,398
279,645
85,686
296,704
89,648
2,465,066
355,291
116,910
317,840
77,337
24,272
81,904
973,554
Basic (loss) earnings per share is computed using the weighted average number of common shares
outstanding during the periods presented. Diluted (loss) earnings per share is computed using the weighted
average number of common shares outstanding adjusted to include the potentially dilutive effect of stock
options granted under the Company’s 1995, 1997, and 1998 stock option plans (see Note 12), stock
appreciation rights issued in connection with the LPSC acquisition (see Note 2), and other potentially
dilutive securities.
F-54
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
17. Earnings (Loss) per Share (continued)
The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands,
except per share amounts):
Numerator
Numerator for basic (loss) earnings per share –
net (loss) income
Denominator
Denominator for basic (loss) earnings per
share – weighted average shares
Effect of dilutive securities:
Employee stock options
Stock appreciation rights
Other
Dilutive potential common shares
2002
Year ended December 31
2001
2000
$
(92,614)
$
513
$
517,864
159,413
141,171
135,295
–
–
–
–
1,201
–
142
1,343
1,831
144
193
2,168
Denominator for diluted earnings per share –
adjusted weighted average shares
159,413
142,514
137,463
Basic (loss) earnings per share
Diluted (loss) earnings per share
$
$
(0.58)
(0.58)
$
$
0.00
0.00
$
$
3.83
3.77
F-55
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
17. Earnings (Loss) per Share (continued)
For the year ended December 31, 2002, options to purchase 9,231,000 shares of common stock at prices
ranging from $2.64 to $34.52, for the year ended December 31, 2001, options to purchase 1,164,000 shares
of common stock at prices ranging from $25.13 to $30.00 per share, and for the year ended December 31,
2000, options to purchase 1,114,000 shares of common stock at $25.13 per share were not included in the
computation of diluted earnings per share because their inclusion would have been anti-dilutive. For the
year ended December 31, 2002, warrants to purchase 8,823,529 shares were not included in the
computation of diluted earnings per share because the warrants’ strike prices were greater than the average
market price on the common shares. Additionally, for the years ended December 31, 2002 and 2001,
convertible notes, convertible into approximately 22,085,000 and 15,908,896 shares, respectively, have not
been included in the calculation of diluted earnings per share because their effect would be antidilutive.
18. Related Party Transactions
On December 12, 2002, the Company’s Board of Directors passed resolutions to terminate the stock
purchase programs for corporate officers and key employees (together the “Plan”) and to offer to all Plan
participants the opportunity to surrender to the Company the shares of Vishay common stock purchased
with their Plan loans in satisfaction of such loans and all accrued interest thereon. Under the resolutions,
the Company agreed that it would compensate the Plan participants for any income tax that the participants
are required to recognize as a result of the surrender. Two directors of the Company are among the
participants in the Plan. For all Plan participants, the current market value of the Vishay common stock
purchased with Plan loans is significantly below the outstanding balances of the loans. The Company
recorded a writedown for the loans and accrued interest, and an accrual for compensation expense
attributable to taxes owing by Plan participants on surrender, totaling $2,591,000 as of December 31, 2002.
This amount is recorded in selling, general, and administrative expense.
F-56
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This page intentionally left blank
CORPORATE INFORMATION
VISHAY INTERTECHNOLOGY, INC.
BOARD OF DIRECTORS
SHAREHOLDERS’ INFORMATION
Corporate Headquarters
Vishay Intertechnology, Inc.
63 Lincoln Highway
Malvern, PA 19355-2143 USA
Phone 610-644-1300
Fax 610-296-0657
www.vishay.com
CORPORATE OFFICERS
Dr. Felix Zandman
Chairman of the Board
Chief Executive Officer
Avi D. Eden
Vice Chairman of the Board
Executive Vice President
Dr. Gerald Paul
President
Chief Operating Officer
Marc Zandman
Vice Chairman of the Board
Group Vice President, Measurements Group
President,Vishay Israel Ltd.
Richard N. Grubb
Executive Vice President,
Treasurer, Chief Financial Officer
Robert A. Freece
Senior Vice President
William J. Spires
Vice President, Secretary
William M. Clancy
Assistant Secretary
Steven Klausner
Assistant Treasurer
ANNUAL MEETING
May 22, 2003 at 10:30 a.m.
Four Seasons Hotel
South Ballroom
Lobby Level
One Logan Square
Philadelphia, PA 19103
HONORARY CHAIRMAN OF THE BOARD
Alfred P. Slaner
(Deceased March 14, 1996)
Dr. Felix Zandman
Chairman of the Board
Chief Executive Officer
Vishay Intertechnology, Inc.
Avi D. Eden
Vice Chairman of the Board
Executive Vice President
Vishay Intertechnology, Inc.
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
Marc Zandman
Vice Chairman of the Board
Group Vice President, Measurements Group
President,Vishay Israel Ltd.
Vishay Intertechnology, Inc.
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
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.
SEC FORM 10-K
A copy of the Company’s Form 10-K Annual
Report for the year ended December 31, 2002,
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-
2143 or through Vishay’s website at
www.vishay.com.
Robert A. Freece
Senior Vice President
Vishay Intertechnology, Inc.
Richard N. Grubb
Executive Vice President,
Treasurer, Chief Financial Officer
Vishay Intertechnology, Inc.
Eliyahu Hurvitz
Chairman of the Board
Teva Pharmaceutical Industries, Ltd.
Dr.Abraham Ludomirski
Founder and Managing Director of
Vitalife Fund
Dr. Gerald Paul
President
Chief Operating Officer
Vishay Intertechnology, Inc.
Dr. Edward B. Shils
George W.Taylor Professor Emeritus of
Entrepreneurial Studies
The Wharton School
University of Pennsylvania
Ziv Shoshani
Executive Vice President, Resistor Group
Vishay Intertechnology, Inc.
Mark I. Solomon
Founder and Chairman
CMS Companies
Jean-Claude Tiné
Investor
Ruta Zandman
Public Relations Associate
Vishay Intertechnology, Inc.
VISHAY INTERTECHNOLOGY, INC.
CORPORATE HEADQUARTERS
63 Lincoln Highway
Malvern, PA 19355-2143
United States
Phone (610) 644-1300
Fax (610) 296-0657
www.vishay.com
© Copyright 2003 Vishay Intertechnology, Inc.
® Registered Trademarks of Vishay Intertechnology, Inc., and Siliconix incorporated
All rights reserved.