VISHAY INTERTECHNOLOGY, INC.
ANNUAL REPORT 2003
Fortune® Magazine (March 8, 2004)
“America’s Most Admired Companies” (2004)
Inclusion in “Semiconductors” Category
Wall Street Journal (March 8, 2004)
“Shareholder Scoreboard” Number-One Ranking
In “Electric Components & Equipment” Category
One of the World’s Largest Manufacturers
of Discrete Semiconductors and Passive Components
Vishay Intertechnology, Inc.
Vishay 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, in the
industrial, computer, automotive, consumer, telecommunications, military, aerospace, and medical markets.
Vishay’s global footprint includes manufacturing facilities in China and other Asian countries, Israel, Europe,
and the Americas, and sales offices around the world. Its worldwide sales rank as number-one or number-two
in many different product categories. Vishay’s product innovations, successful acquisition strategy, focus on
cost reduction, and ability to provide “one-stop shop” service 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
Industry Leadership, Market Strength.......................................6
The Vishay Story .......................................................................8
Innovative Products, Global Markets ......................................10
Strong Manufacturing Base in Asia.........................................14
Financial Summary..................................................................16
Product List .............................................................................18
Form 10-K
Corporate Information.....................................inside back cover
About the Cover
The cover features superimposed images of two silicon wafers (at different magnifications) used in the manufacturing of
Vishay Siliconix semiconductors. The products running across the bottom of the cover are representative samples of Vishay’s
broad product portfolio.
(Note: Products are not shown to scale.)
F I N A N C I A L H I G H L I G H T S
As of and for the year
ended December 31
(In thousands, except per share amounts)
2003
2002
2001
Net sales .................................................................................................. $ 2,170,597
$ 1,822,813
$ 1,655,346
Operating profit (loss) ..............................................................................
Net earnings (loss) ...................................................................................
Depreciation and amortization .................................................................
Basic earnings (loss) per share ............................................................... $
Diluted earnings (loss) per share ............................................................. $
Weighted average shares outstanding – basic ........................................
Weighted average shares outstanding – diluted ......................................
57,972
26,842
194,055
0.17
0.17
159,631
160,443
(79,948)
(92,614)
180,748
$
$
(0.58)
(0.58)
159,413
159,413
14,250
513
163,387
$
$
0.00
0.00
141,171
142,514
Cash flows from operations ...................................................................... $
255,756
$ 366,871
$ 161,418
Working capital.........................................................................................
Property and equipment – net ..................................................................
Long-term debt.........................................................................................
1,049,892
1,219,795
836,606
Stockholders’ equity .................................................................................
2,514,034
897,456
1,274,850
706,316
2,358,787
1,096,034
1,167,533
605,031
2,366,545
NET SALES
$ in millions
2500 –
2000 –
1500 –
1000 –
500 –
0 –
01
$1,655.3
02
$1,822.8
03
$2,170.6
200 –
100 –
0 –
-100 –
200 –
100 –
0 –
-100 –
OPERATING PROFIT (LOSS)*
$ in millions
01
$14.3
02
($79.9)
03
$58.0
200 –
100 –
0 –
-100 –
NET EARNINGS (LOSS)*
$ in millions
01
$0.5
02
($92.6)
03
$26.8
OPERATING PROFIT, ADJUSTED**
$ in millions
NET EARNINGS, ADJUSTED**
$ in millions
200 –
100 –
0 –
-100 –
01
$119.3
02
$43.5
03
$45.2
01
$162.2
02
$87.9
03
$104.4
The following table reconciles amounts as reported to the adjusted operating profit and adjusted net earnings presented in the charts above. (in millions)
* As reported
Restructuring and severance costs
Inventory write-downs and loss on purchase commitments
Purchased research and development
Gain on insurance claim
Other
Net tax benefit of reconciling items
** Adjusted
Operating Profit (Loss)
2002
$ (79.9)
31.0
136.8
—
—
—
—
$ 87.9
2003
$ 58.0
29.6
16.8
—
—
—
—
$104.4
2001
$ 14.3
61.9
70.0
16.0
—
—
—
$162.2
Net Earnings (Loss)
2002
$ (92.6)
31.0
136.8
—
—
2.1
(33.8)
$ 43.5
2001
$ 0.5
61.9
70.0
16.0
—
8.7
(37.8)
$119.3
2003
$ 26.8
29.6
16.8
—
(33.9)
9.9
(4.0)
$ 45.2
Management believes that adjusted operating profit and adjusted net earnings, “non-GAAP” measures, are meaningful to investors because they provide
insight with respect to ongoing operating results of the Company. Reconciling items to arrive at adjusted operating profit and adjusted net earnings represent
significant charges or credits that are important to an understanding of the Company’s ongoing operations. These reconciling items are more fully described
in the Company’s consolidated financial statements. Measurements such as adjusted operating profit and adjusted net earnings are not recognized in
generally accepted accounting principles (GAAP) and should not be viewed as alternatives to GAAP measures of performance.
VISHAY INTERTECHNOLOGY, INC.
1
A M E S S A G E F R O M T H E C H A I R M A N
To Our Shareholders, Employees,
Customers, and Vendors
components, many of our customers are sending us their bills
of materials (BOMs) and asking us to cross-reference Vishay
products in all categories, including categories where Vishay
products were not designed-in previously. This way, customers
I am happy to confirm that electronic industry conditions have
can order many components for their BOMs from one source
improved significantly during the past several months. Business
— Vishay. This results in fast market penetration by Vishay at
is strong in all Vishay product lines. Our bookings, capacity uti-
low costs. Once again, our strategy of being a “one-stop
lization, and revenues are increasing, and we are seeing an
shop” is paying off.
overall decrease in the rate of price declines for our products. In
Additionally, during 2003 we improved service by consoli-
fact, prices for some of our specialty products are rising. There
dating our product inventory and shipping functions into a
are even short-term shortages of some Vishay products.
global logistics organization. This enables us to respond more
Vishay is particularly well positioned for the current indus-
rapidly to customer requests, enhance labor utilization and
try-wide upturn because, during the downturn that took place
productivity, and minimize costs. In 2003 we increased our
during 2001, 2002, and part of 2003, we continued to cut
average on-time delivery rate to 93%.
costs aggressively and relocate production to lower-labor-cost
In 2003 we exploited synergies between our different divi-
countries. In spite of the difficult times of the past few years,
sions to reduce material costs. We also cut costs by closing
Vishay was profitable on an adjusted net earnings basis, and
redundant facilities, consolidating sales forces, reducing or
took advantage of its strong balance sheet to make several
terminating various sales-related expenses, and reducing
key acquisitions that enhanced our already extensive product
overhead expenses.
portfolio, increased our market share, and further strength-
In addition, we decreased costs during 2003 by continuing
ened our presence in China and the rest of Asia.
to move production from high-labor-cost countries to lower-
Year
2003 During 2003, as in the past, our business upturn
labor-cost countries such as the Czech Republic, India, Israel,
and — most important of all — China. By the end of 2003, we
had decreased the percentage of our workforce in high-labor-
began in the discrete semiconductor area and was followed
cost countries to 31%. We expect to decrease this still further
by an upturn in our passive components area as well.
to 27% by the end of 2004, with a long-term goal of 20%.
The product lines that we acquired through our acquisitions
I am very pleased to report that, during 2003, we complete-
in 2002 (BCcomponents and five small transducer companies)
ly rebuilt the Vishay Electro-Films facility in Warwick, Rhode
and 2001 (General Semiconductor and the infrared components
Island, U.S.A. After the facility was devastated by fire in 2002,
business of Infineon) contributed to our bottom line during 2003.
we obtained a settlement from our insurance company. Using
We integrated the product lines of BCcomponents and our
money provided by the insurance company, we turned the
transducer acquisitions (Sensortronics, Tedea-Huntleigh, BLH,
facility into a state-of-the-art manufacturing plant with
Nobel, and Celtron) during 2003, and our efforts to consoli-
increased productivity.
date manufacturing of these product lines in lower-labor-cost
Yet another successful initiative was our signing of a tech-
countries are fully on target. Also on target is our consolidation
nological and marketing agreement with Walsin Technology
in China of the manufacturing of our General Semiconductor
Corporation, a Taiwan-based manufacturer of multilayer
products, which started in December 2003 and is planned for
ceramic capacitors (MLCCs), mainly for the consumer market.
completion during 2004.
Previously, our MLCC efforts were focused primarily on special-
The upturn that began at the end of 2003 increased sales
ized Vishay Vitramon MLCCs for the high-reliability automotive
of new and improved products in all our product categories.
market (where Vishay is a market leader in the U.S. and Europe),
New products increase our share of existing markets, and
rather than the markets for low-priced commodity MLCCs. Our
open up new ones for us. It is worth noting that, in 2003, 61%
agreement with Walsin enables us to compete aggressively
of our revenues came from products that didn’t exist 10 years
and gain market share in sales of commodity MLCCs.
ago. At our Siliconix subsidiary, the comparable figure is 88%.
In addition, we increased future Siliconix semiconductor
During 2003 we expanded the scope of the Vishay Sample
capacity by signing an agreement with a Japanese manufac-
Service Center from one region (the Americas) to all regions. It
turer of silicon wafers. Siliconix also signed a memorandum of
now provides a single global source for Vishay product sam-
understanding with an Israeli manufacturer of silicon wafers.
ples. Because of this service and our ability to provide “one-
We expect a definitive agreement with the Israeli manufacturer
stop shop” service for discrete semiconductors and passive
to be signed in the first half of 2004.
2
VISHAY INTERTECHNOLOGY, INC.
A M E S S A G E F R O M T H E C H A I R M A N
Financial
uct lines, fully integrated into our Company product portfolio,
Highlights
Sales for the year ended December 31, 2003
will contribute even more strongly to our bottom line.
were $2.2 billion compared to sales of $1.8 billion for the year
Our acquisitions in 2002 and 2001 brought with them not only
ended December 31, 2002. Net earnings for the year ended
new products, but also manufacturing plants in China, other
December 31, 2003 were $26.8 million or $0.17 per share,
countries in Asia, and Israel, as well as in Europe. This made
compared with a net loss for the year ended December 31,
possible consolidation of manufacturing in lower-labor-cost
2002 of $92.6 million or $0.58 per
share. Adjusted net earnings for 2003
and 2002 were $45.2 million and $43.5
million, respectively, or $0.28 and
$0.27 per share. Earnings for the year
ended December 31, 2003 were
impacted by restructuring and sever-
ance costs of $29.6 million, a loss on
extinguishment of debt of $9.9 million,
a loss on long-term purchase commit-
ments of $11.4 million, and a write-
down of tantalum inventories on hand
to market value of $5.4 million, offset
by a gain on an insurance claim of
$33.9 million. The year ended
December 31, 2002 included charges
countries during 2003, an initiative that
will continue during 2004. Also continu-
ing during 2004 will be other efforts to
streamline operations and reduce costs.
Siliconix products are used in portable
devices, such as notebook computers
and cell phones, that are enjoying rising
market demand. I am confident that
Siliconix revenues will continue to
increase. Additionally, I expect that our
other discrete semiconductor business
unit, Vishay Semiconductors (comprising
the former General Semiconductor,
Infineon infrared components, and Vishay
Telefunken businesses) will continue to
benefit from rising market demand during
Dr. Felix Zandman
Chairman of the Board and Chief Executive Officer
for restructuring, inventory write-downs, a loss on purchase
the months to come. I also am confident that our passive compo-
commitments and other charges of $169.9 million.
nents business will continue to grow, as passive components are
The Company continued to generate cash from operations
used in all electronic circuits in conjunction with semiconductors.
during year 2003. In fact, for the year ended December 31,
As always, we will continue to roll out new and improved
2003, the Company’s cash flow from operations was $255.8
products. Our strategy of a broad product line (“one-stop shop”
million. Purchases of property and equipment for the year
service), opportunistic acquisitions, new product introductions,
ended December 31, 2003 were $126.6 million, as compared
and cost reduction efforts enabled us to generate operating
to depreciation and amortization for the year ended December
profits during 2003, despite the difficult times, and now will be
31, 2003 of $194.1 million.
The long-term debt of the Company was $836.6 million
(substantially all in convertibles) at December 31, 2003 and
the foundation for future growth as the economy turns positive.
Vishay was included in Fortune® magazine’s year 2004 list of
“America’s Most Admired Companies” in the category of semi-
stockholders’ equity was $2,514 million, resulting in a debt-to-
conductors. Vishay also was ranked number-one in the “Electric
equity ratio of 0.33. Our cash balance at December 31, 2003
Components & Equipment” industry category in the March 8,
was $555.6 million and our net debt was only $281 million.
2004 Wall Street Journal “Shareholder Scoreboard.”
Looking
Ahead Looking ahead to the rest of 2004 and beyond, I am
decade as a Company, we are grateful to our employees, cus-
tomers, vendors, and strategic business partners. To our stock-
quite optimistic. I anticipate that the positive trends that began
holders, thank you for continuing to believe in Vishay. I look for-
during the end of 2003 and have continued into 2004 —
ward with confidence to the rest of year 2004 and beyond.
As we look forward to continued growth during our fifth
improved bookings, improved capacity utilization, reduced
pricing pressure, increased profit margins — will continue.
Sincerely,
We acquired BCcomponents, the transducer companies,
and General Semiconductor — as well as the infrared compo-
nents business of Infineon — during the industry downturn,
when prices for acquisitions were lowest. Now that our rev-
Felix Zandman
enues are increasing in all product areas, the acquired prod-
Chairman of the Board and Chief Executive Officer
April 2004
VISHAY INTERTECHNOLOGY, INC.
3
Essential Building Blocks of Electronics
Sophisticated microprocessor chips and other complex integrated circuits (ICs)
coordinate and control the functions of electronic products. Supporting the
work of microprocessors are discrete semiconductors and passive components.
Vishay is one of the world’s largest manufacturers of discrete semiconductors
and passive components that serve as “building blocks” of electronic circuits.
Vishay offers one of the industry’s widest varieties, and sells them to customers
in all major industries worldwide, providing “one-stop shop” service.
DISCRETE SEMICONDUCTORS
Discrete semiconductors (diodes, transistors, and optoelectronic components) typically perform a single function in electronic circuits, such as
switching, amplifying, or rectifying and transmitting electrical signals. Semiconductors are referred to as “active” components because they
require power to function.
Rectifiers
Rectifiers 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.
Small-Signal Diodes
All diodes allow current to travel in only one direction. Small-signal diodes, which typical-
ly pass electrical currents of up to one-half amp, are commonly used in routing, switch-
ing, and signal blocking. For example, a band-switching diode is used to switch VHF and
UHF bands in a television.
Suppressor and Zener Diodes
Suppressor diodes protect electronic equipment from sudden increases in voltage
caused by lightning, power line fluctuations, and other power line problems. Zener
diodes, which come in a wide variety of voltage and power-handling specifications,
are used to maintain a fixed voltage in electronic circuits.
RF Transistors
RF transistors amplify analog or digital signals. They are designed specifically to
handle small-signal radio frequencies in the front ends of radios, television sets, mobile
phones, and other devices to amplify antenna signals.
Optoelectronics
Optoelectronic components emit or detect light. Types include infrared data communica-
tions devices (IRDCs) for two-way data transfer; optocouplers for circuit isolation; IR emit-
ters for one-way remote control (as used in television remote controls, for example); opti-
cal sensors for detection; and LEDs for light sources.
Power MOSFETs
Power metal-oxide-semiconductor field-effect transistors (MOSFETs), made up of many
individual transistors (as many as several million) on one piece of silicon, conserve power
and prevent components from overheating. Vishay Siliconix TrenchFET® power MOSFETs
use innovative silicon and packaging technologies to reduce the size of the MOSFET and
to switch and manage power very efficiently.
Integrated Circuits (ICs)
ICs take the functions of discrete semiconductors and passive components and combine
them on a single silicon chip. These may include “on-board” transistors, diodes, resistors,
capacitors, and other circuit components. Unlike discrete semiconductor components,
which usually perform one function (such as switching), ICs can perform multiple func-
tions. Vishay produces analog switching ICs and power ICs.
Integrated Modules
Integrated modules combine different discrete components in a single package to save
space, reduce assembly costs, and increase reliability. Vishay FunctionPAK™ dc-to-dc
converters include all the active and passive components required for a complete power
conversion solution in a single package.
4
VISHAY INTERTECHNOLOGY, INC.
PASSIVE COMPONENTS
Passive components (resistors, capacitors, inductors, transducers) do not require a power supply to handle the signals that pass through them.
They are used to store electrical charges, to limit or resist electrical current, and to help in filtering, surge suppression, measurement, timing, and
tuning applications.
Capacitors
Capacitors 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 tantalum (both solid and wet), ceramic
(both multilayer chip and disk), film, power, heavy-current, and aluminum, as well as
high-performance, high-precision silicon-based RF capacitors.
Resistive Products
Resistors restrict current flow. Vishay manufactures 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 resistors are combined in a single package. Vishay also man-
ufactures thermistors and varistors, which are used to suppress voltage increases.
Magnetics
Inductors and transformers are categorized as magnetics. Inductors use an internal
magnetic field to change current phase or resist current. Inductor applications include
controlling AC current and voltage and filtering out unwanted electrical signals.
Transformers (two inductors on a common core of magnetic material) increase or
decrease AC voltage or AC currents.
Strain Gages and Instruments
Strain gages are sensors used to detect strain. They are widely used in weighing,
process control, force measurement, and other systems. Related instruments are used
to measure, display, and record the information detected by strain gages.
PhotoStress®
PhotoStress coatings and instruments use a unique optical process to reveal and
measure the distribution of stresses and strains in structures under live load condi-
tions. They are used to improve structural design in aerospace, automotive, military,
civil engineering, industrial, and medical applications.
Transducers
Load-cell-type transducers measure weight. For example, in a digital bathroom scale,
small strain gages are attached to a transducer that is hidden beneath the platform of
the scale. A person’s weight pressing down on the transducer causes the strain gages
to issue a signal to the electronic system that displays the weight in pounds or kilograms.
Products are not shown to scale.
VISHAY INTERTECHNOLOGY, INC.
5
I N D U S T R Y L E A D E R S H I P, M A R K E T S T R E N G T H
Industry Leadership,
Market Strength
“Vishay’s successful business strategy
enables it to take advantage of both upturns
and downturns in the global electronics
industry. Vishay has a strong financial
position, a broad product portfolio, and
sound prospects for continued growth.”
Felix Zandman, Chairman and CEO
Successful Long-Term
Strategy
Vishay’s long-term business strategy is geared
(end products). Vishay’s product portfolio includes specialty
products, a number of which are protected by patents and
trademarks. These specialty products generally are not signif-
icantly impacted by pricing pressures, and thus help to offset
declining prices for commodity products and stabilize
Vishay’s revenue base.
Innovations in
Technology Over the years, the electronic end prod-
ucts used every day by consumers and businesses — from
telephones to computers to subsystems in cars — have
become increasingly complex and sophisticated. We take it
for granted, for example, that each new generation of note-
book computers is faster and more powerful than the preced-
ing one. Meanwhile, the first electronic computers — mas-
sive, noisy contraptions that filled entire rooms — now exist
to all phases of the global electronics industry’s economic
only as museum pieces or references in books. To cite anoth-
cycles. Vishay’s consistent focus on new products, acquisi-
er example, every automobile sold today — from budget-
tions, and cost reduction enables it to take advantage of both
priced subcompacts to luxury models — relies on electronic
upturns and downturns. As a result, Vishay is an industry-lead-
circuits for a wide range of functions.
ing company with a strong financial position, a broad product
Through our ongoing research and development (R&D)
portfolio, and sound prospects for continued growth.
efforts, we have developed technological breakthroughs that
Vishay was profitable on an adjusted net earnings basis (net
include packageless power MOSFETs, the industry’s first sili-
earnings minus restructuring and severence costs and other
con-based RF capacitors, dc-to-dc converter modules with all
items described in the table in Financial Highlights on page 1)
the active and passive components required for a complete
during the industry-wide downturn that took place during 2001,
power conversion solution, and more. The new components
2002, and the beginning of 2003. The actions that Vishay took
increase our share of existing markets, and open up new
during this difficult period included strategic acquisitions that
ones for us.
enhanced sales, internal restructuring that decreased costs,
In addition to homegrown R&D, when we acquire new
and refinancing of outstanding indebtedness that improved
companies, we continue the process of innovation responsi-
Vishay’s P&L and balance sheet. Vishay is well prepared for an
industry-wide upturn. At the same time, it has proven its ability
to generate substantial cash from operations and maintain a
strong balance sheet even when times are tough.
ble for their success. The result has been a steady stream of
new products: Power Metal Strip® resistors, IHLP inductors,
chipscale MICRO FOOT® power MOSFETs, and many more.
Vishay’s CSM foil resistor (a member of Vishay’s oldest prod-
Vishay was founded in 1962 to manufacture and market foil
uct category) was selected as one of the top 100 products of
resistors and strain gages — innovative products that, even
2003 by a prestigious industry magazine. Shortly afterwards,
now, over four decades later, have unsurpassed technical per-
a leading industry Web site chose the Vishay Siliconix Si9122
formance. The Company has grown to become a Fortune 1000
family of integrated circuits (ICs) as a “Product of the Year”
Company and one of the world’s largest manufacturers of dis-
for its “strong technical merit, design innovation, and mar-
crete semiconductors and passive components. Vishay’s
ketability.”
acquisitions include such top names as Siliconix, Telefunken,
the infrared component business of Infineon, and General
Semiconductor, as well as Dale, Draloric, Sprague, Vitramon,
Strong Presence
in Asia Market trends have also been a significant fac-
and BCcomponents (the former passive components business
tor for the electronics industry. One such trend is the shift of
of Philips Electronics and Beyschlag).
Broad Product
Portfolio
Vishay’s original product line has been
expanded greatly to include a broad range of components
used in virtually all types of electronic devices and equipment
manufacturing from North America, Western Europe, and
Taiwan to the People’s Republic of China. China has become
an increasingly attractive manufacturing location. For exam-
ple, it was estimated during 2003 that more than half of all
notebook computers manufactured worldwide during 2003
would be made in China, largely by companies from Taiwan.1
6
VISHAY INTERTECHNOLOGY, INC.
Vishay Blue-Chip
Customer Base
Alcatel
Arrow
Avnet/EBV
Bosch
Celestica
Cisco
Compal
Continental Temic
DaimlerChrysler
Dell
Delphi
Delta
Dynamar
Ericsson
Flextronics
Future
Hella
Hewlett-Packard
Highland
Hi-Speed
IBM
Intel
JABIL
LG Electronics
Motorola
Nokia
Philips
Quanta
Ryoden
Samsung
Sanmina-SCI
Seagate
Siemens
Solectron
Sony
Tomen
TTI
Uppertech
Visteon
WPI
...and others
I N D U S T R Y L E A D E R S H I P, M A R K E T S T R E N G T H
Also, more than three-quarters of all DVD players are made in
China by Japanese companies.2
service. These include integrating the sales personnel and
offices (including personnel and offices in Asia) from its year
Consistent with this trend, many of Vishay’s customers now
2001 General Semiconductor and year 2002 BCcomponents
manufacture their products in China. As discussed more
acquisitions into the global Vishay sales force. Vishay previous-
extensively below, Vishay has responded by greatly expand-
ly pursued this strategy successfully following its 1998 TEMIC
ing its manufacturing presence in China. Currently, Vishay has
acquisition (Telefunken and 80.4% of Siliconix).
manufacturing plants in four different
We also have expanded the scope of our product sample
Chinese cities. Vishay continues to
service for design engineers, which now serves all regions.
expand its manufacturing presence in
Quick turnaround time and a complete range of Vishay prod-
China and other countries in Asia, as
uct samples enable customers worldwide to rely on us for
well as in Israel and Eastern Europe. In
discrete electronic component solutions. In addition, we have
doing so, Vishay has decreased the
consolidated our product inventory and shipping functions
percentage of its workforce in high-
into a global logistics organization. This enables us to
labor-cost countries to 31 percent, with
increase productivity and reduce costs.
a long-term goal of 20 percent.
“One-Stop
Shop” Service
Global Industry
Leader
Vishay participates in multiple markets and part-
Another key mar-
ners with leading original equipment manufacturers (OEMs),
ket trend is consolidation, which has
original design manufacturers (ODMs), electronic manufactur-
impacted all players in the global elec-
ing services (EMS) companies, and distributors worldwide.
tronics industry supply chain — from
Vishay is a preferred supplier to many companies, and has a
component manufacturers to distribu-
diverse roster of customers that includes blue-chip compa-
tors to customers.
nies based in the Americas, Europe, and Asia.
Vishay, as part of its long-term busi-
ness strategy, has established one of
the industry’s broadest lines of discrete
electronic components, in part through
opportunistic acquisitions of other com-
panies and businesses. Each acquisi-
tion has been planned carefully by
Vishay’s experienced management
team. As Vishay has continued to grow
I N D U S T R Y R A N K I N G S
Leading Worldwide Manufacturer
Discrete semiconductors
Number-1 worldwide in low-voltage power MOSFETs
Number-1 worldwide in diodes and rectifiers
Number-1 worldwide in infrared data communication devices (IRDCs)
Number-1 worldwide in IR receivers
Number-2 worldwide in optocouplers
Number-3 worldwide in optical sensors
through acquisitions and expand its
...and others
global footprint, it has become an
increasingly attractive strategic partner
for customers seeking to reduce their
vendor base. Many customers are
sending us their bills of materials
(BOMs) and asking us to cross-refer-
ence Vishay products in all categories,
including categories where Vishay
products were not designed-in previ-
ously. Our strategy of providing “one-stop shop” service is
paying off: Customers can order many components for their
BOMs from one source — Vishay.
Passive components
Number-1 worldwide in wirewound power resistors
Number-1 worldwide in foil resistors
Number-1 worldwide in thin film resistors
Number-1 worldwide in MELF 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
...and others
Vishay has market shares ranging from substantial to num-
ber-one for each of its products. Its broad product portfolio,
innovations in technology, superior product quality, successful
acquisition strategy, and focus on cost reduction have made
Improved
Service
To enhance our ability to provide “one-stop shop”
it a global industry leader.
service and support our “one face to the customer” initiative,
1 Sources: IMS Research, CNETAsia; August 7, 2003
Vishay has taken several important steps to improve customer
2 Source: In-Stat/MDR, November 2003
VISHAY INTERTECHNOLOGY, INC.
7
T H E V I S H AY S T O R Y
The Vishay Story
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 air-
planes and cars. Dr. Zandman’s research in this area led him
to develop Bulk Metal® foil resistors — ultra-precise, ultra-sta-
ble resistors with 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 resis-
“Vishay’s growth has been fueled by R&D, strategic
tors, PhotoStress products, and strain gages.
acquisitions, a commitment to address customer needs,
and an ongoing effort to improve product performance.
Vishay has a successful track record of acquisitions
that soon become accretive to earnings.”
Passive Component
Acquisitions
Because the markets for foil
resistors, PhotoStress products, and strain gages
were relatively small, the Company moved to
Dr. Gerald Paul, President and COO
expand into high-volume resistors. Beginning in
1985, Vishay acquired Dale Electronics, Draloric
Electronics, and Sfernice. These acquisitions
helped produce dramatic sales growth. They also brought other
passive 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 manufacturer of multilayer ceramic chip capacitors.
More recent passive component acquisitions have included
Electro-Films, Cera-Mite, and Spectrol in 2000; Tansitor and
North American Capacitor Company (Mallory) in 2001; and
These photos show some of the state-of-the-art thin film
manufacturing operations at the Vishay Electro-Films facility
BCcomponents in 2002. The acquisition of BCcomponents, a
in Warwick, Rhode Island, U.S.A.
leading manufacturer of passive components with operations
8
VISHAY INTERTECHNOLOGY, INC.
T H E V I S H AY S T O R Y
in Europe and Asia, sig-
nificantly enhanced
Vishay’s global market
position in passive com-
ponents. The acquired
Strategic Acquisitions
BCcomponents product
2002
BCcomponents
Sensortronics
Tedea-Huntleigh
BLH
Nobel
Celtron
lines (now divided into
Vishay BCcomponents
and Vishay Beyschlag)
include thin-film chip
resistors; linear and
non-linear resistors;
ceramic, film and alu-
minum electrolytic
capacitors; and switch-
es and trimming poten-
tiometers.
Expansion in
Semiconductors
In 1997, Vishay entered
2001
Infineon’s infrared business
General Semiconductor
Mallory (NACC)
Tansitor
2000
Electro-Films
Cera-Mite
Spectrol
1998
Siliconix
Telefunken
1994
Vitramon
1993
Roederstein
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).
Vishay Measurements Group:
the discrete semicon-
1992
Sprague
Vertical Integration
Vishay acquisitions during 2002
ductor market, acquiring
65% of Lite-On Power
Semiconductor. In 1998,
1988
Sfernice
1987
Draloric
Vishay acquired the
1985
Dale
Semiconductor Business
Group of TEMIC, which
included the Sensortronics, Tedea-Huntleigh, BLH, Nobel, and
Celtron businesses, which have been integrated into Vishay
Measurements Group. With these acquisitions, Vishay entered
the global markets for strain-gage-based transducers and
instruments used in the weighing industry, and also imple-
mented a strategy of vertical market integration: Vishay
included Telefunken and 80.4% of Siliconix, producers of tran-
Measurements Group now has a product range from resist-
sistors, diodes, optoelectronics, and power and analog switch-
ance strain gages, to transducers (the metallic structures to
ing integrated circuits. Vishay subsequently sold its interest in
which strain gages are cemented), to the electronic instru-
Lite-On in order to better focus on its successful Siliconix and
ments and systems that measure and control output of the
Telefunken businesses.
transducers.
Vishay’s next semiconductor acquisition came in 2001, with
As an illustration of these technologies, consider the typical
the purchase of the infrared components business of Infineon
digital bathroom scale. Small strain gages are attached to a
Technologies. That was followed in 2001 by the acquisition of
transducer beneath the platform of the scale. When you stand
General Semiconductor, a leading global manufacturer of
on the scale, your weight presses down on the transducer
diodes and rectifiers. The addition of Infineon’s infrared com-
and causes the strain gages to issue a signal to the electronic
ponents group and General Semiconductor enhanced
system that displays the weight in pounds or kilograms. This
Vishay’s existing Telefunken and Siliconix businesses — and
process is used not just in bathroom scales, but also in a
propelled Vishay into the top ranks of discrete semiconductor
wide variety of business and industrial applications for
manufacturers worldwide.
process control, force measurement, and other systems.
VISHAY INTERTECHNOLOGY, INC.
9
Innovative Products,
Global Markets
V I S H AY M A R K E T S
Computer • 20%
Consumer • 14%
Medical • 2%
Military/Aerospace • 3%
Automotive • 17%
Industrial • 33%
Vishay’s Participation in
Multiple Markets: 2003
Telecommunications • 11%
Industrial
Market
Vishay components are used in critical indus-
Computer
Market
Located on the motherboard of every person-
trial applications such as power management, data handling,
al computer (PC) is a highly sophisticated integrated circuit
instrumentation, filtering, motor control, and many others.
(IC) — the microprocessor that performs calculations and coor-
Vishay manufactures components designed to handle wide
dinates the computer’s activities. PC microprocessing speeds
voltage, resistance, and capacitance ranges; extreme temper-
have increased dramatically — from 200 megahertz (200 mil-
atures; space constraints; and other factors associated with
lion cycles per second) in 1995 to several gigahertz (billions of
industrial applications.
In a retail store, for example, types of electronic compo-
nents 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
cycles per second) now. Faster microprocessing speeds
increase demand for discrete semiconductors and passive
components. For example, the Intel® 486 microprocessor chip
required 124 supporting passive components, while the Intel
Pentium 4® requires approximately 600.1 It is estimated that
the Intel P5® potentially available in year 2008 will require
between 800 and 1,000 supporting passive components.2
control motors during the manufacturing process; to help sort,
Estimates indicate that 187 million PCs will be sold world-
weigh, and package items; and to perform other functions.
Types of electronic components manufactured by Vishay are
wide in 2004, an increase of 13.9% over sales in 2003.3
Vishay components are used not just in PCs, but also in
also used in the electrical generating plants and distribution
PCMCIA cards, computer motherboards, monitors, keyboards,
systems that power the factories; in the trucks, trains, air-
mice, disk drives, and modems. They also are commonly
planes, and related infrastructure for transporting manufac-
found in other data processing hardware — from printers,
tured items from factory to store; and in practically every other
scanners, photocopiers, and fax machines to mainframes, net-
type of industrial system.
work servers, and other infrastructure equipment.
Connectivity of computers via wireless local area networks
(LANs), Bluetooth®, IrDA systems, and other wireless technolo-
gies is an important trend. Airports, hotels, and retail stores
such as coffee shops and bookstores promote their availability
of high-speed, wireless Internet access. A wide assortment of
Vishay products, including both semiconductor and passive
electronic components, find applications in these technologies.
10
VISHAY INTERTECHNOLOGY, INC.
V I S H AY M A R K E T S
Innovative Products,
Global Markets
Automotive
Market
In all automobiles, mechanical functions con-
Consumer
Market
Sales of video and audio electronic end prod-
tinue to be replaced by electronic functions. Increased use of
ucts for the consumer market drive increased demand for types
electronics provides the benefits of increased engine perform-
of electronic components manufactured by Vishay. For exam-
ance, fuel efficiency, driver and passenger comfort, and safety.
ple, Vishay Siliconix power MOSFETs are used to conserve
It is estimated that, for an average car, electronic systems rep-
battery life in computer game consoles, as well as portable
resent more than 20% of total vehicle cost. By year 2008, it is
projected that this figure will increase to more than 30%.4
devices such as CD players, DVD players, and MP3 players.
Key consumer entertainment end products include digital
Vishay manufactures components that are used in a wide
TV set-top boxes. It is estimated that 36 million digital TV set-
range of automotive applications — powertrain, body controls,
top boxes were sold worldwide in 2003, an increase of 28%
safety, comfort, and driver information. All automobile parts
over the previous year. The estimated sales figure for year 2004
with electronic functionality — airbags, audio system, brakes,
climate-control system, engine, global positioning system
shows growth that is even more dramatic: projected sales of
50.3 million units, an increase of 39% compared to 2003.5
(GPS), lighting, security system, steering, suspension, trans-
Another example of growth in consumer entertainment elec-
mission, and more — use types of discrete semiconductors
tronics is the DVD recorder. Global sales of DVD recorders
and passive components produced by Vishay.
Over the years, Vishay has worked closely with automotive
increased more than 200% in 2003. It is projected that sales
of DVD recorders will continue to increase.6
suppliers and manufacturers to develop electronic compo-
Another part of the consumer market impacted by
nents that function reliably under extreme conditions, including
increased usage and sophistication of embedded electronics
high under-the-hood temperatures and heavy vibration. Vishay
that use components manufactured by Vishay is “white goods”
components help to make possible “drive-by-wire,” in which
— refrigerators, washers and dryers, and other household
precise electronic-sensor-based systems take the place of
appliances. In refrigerators, for example, electronic functions
hydraulic and mechanical systems for steering, braking, and
include LED displays to monitor food freshness, sophisticated
other functions. (The original version of this technology, called
temperature-management systems, and now even dedicated
“fly-by-wire” and widely used in jet airplanes, also uses types
televisions, e-mail systems, and Internet access.
of components made by Vishay.)
Vishay components also are helping to enable the transition
from 12-V to 42-V system voltages. The 42-volt on-board sys-
1 Source: Company estimates
2 Source: Paumanok Publications, 2003
tems expected to become common within the next few years
3 Sources: Business Wire, February 12, 2004; Gartner, Inc., 2004
will require discrete semiconductors and passive components
4 Sources: Electronic Business, November 2003; Strategy Analytics, 2003
to handle higher levels of power and more complex system
architecture.
5 Sources: Business Wire, December 16, 2003; Strategy Analytics, 2003
6 Sources: Business Wire, February 17, 2004; In-Stat/MDR, 2004
VISHAY INTERTECHNOLOGY, INC.
11
V I S H AY M A R K E T S
Innovative Products,
Global Markets
Telecommunications
Market
It is projected that total worldwide sales of
cell phones will increase from 460 million in 2003 to a record
level of over 500 million in 2004.1 This increase is driven in
part by the growing popularity of models with advanced fea-
tures such as cameras, Internet access, and email. During the
first half of 2003, 25 million cell phones with built-in cameras
were sold worldwide, compared to 4 million during the same
period in 2002.2 Looking ahead, it is estimated that close to
100 million cell phones with built-in cameras will be sold
worldwide in 2004.3
Two-way data transfer in cell phones and other wireless
devices is being driven by advances in wireless LAN (802.11)
technology, Bluetooth, and IrDA systems.
As is the case in PCs, where microprocessors are support-
ed by discrete semiconductors and passive components,
advances in cell phone technology help to drive demand for
the types of electronic components manufactured by Vishay:
Additional features require additional electronic components.
Vishay components are present not just in cell phones,
portable digital assistants (PDAs), and other handheld com-
munications devices, but in telecommunications infrastructure
equipment as well. Discrete semiconductors and passive
Component Content in Samsung SCH-E300 Cell Phone*
(Potential Vishay Bill of Materials)
Resistors. . . . . . . . . . . . . . . . 161
Power MOSFETs . . . . . . . . . . . . 3
MLCCs . . . . . . . . . . . . . . . . . 226
Tantalum Capacitors . . . . . . . . 13
(Polymer Tantalum, Coated Tantalum)
Inductors . . . . . . . . . . . . . . . . 18
(HF Inductors, Power Inductors)
Crystals . . . . . . . . . . . . . . . . . . 1
Total Passive Components . . 419
Power ICs . . . . . . . . . . . . . . . . . 8
Diodes, rectifiers . . . . . . . . . . . 17
ESD/TVS** . . . . . . . . . . . . . . . . 8
LEDs . . . . . . . . . . . . . . . . . . . 21
Total Semiconductors . . . . . . 57
Total Passive Components and Semiconductors . . .476
LED
Resistor
HF Inductor
Power IC
Polymer Tantalum
Capacitor
MLCC
components are widely used in equipment for voice and data
switching, wireless and wired access, line transmission, opti-
Coated Tantalum
Capacitor
cal networking, power supplies, communications satellites,
and other telecommunications infrastructure equipment, and
Vishay has long-standing relationships with blue-chip cus-
tomers in this area.
Crystal
Diode
ESD
Power MOSFET
Power Inductor
also located inside this phone
Shown above are the exterior and one side of an internal
printed circuit board of the Samsung SCH-E300, a W-CDMA
cellular telephone. Identified and highlighted on the printed
circuit board (and listed in the text table on this page) are
types of components manufactured by Vishay.
* List contains only types of components manufactured by Vishay
** Electrostatic discharge / transient voltage suppressor components
12
VISHAY INTERTECHNOLOGY, INC.
V I S H AY M A R K E T S
Innovative Products,
Global Markets
Military and
Aerospace Markets The defense electronics
market has grown steadily during the past five years: from
$121 billion in 1999 to approximately $171 billion in 2003.4 A
significant portion of the increase during 2003 is associated
with the War on Terrorism.
Medical
Market
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 monitor-
ing and treatment, Vishay components are widely used.
Military and aerospace equipment where Vishay compo-
Vishay is a leading manufacturer of telemetry coils for defibril-
nents have been employed include tanks, submarines, missile
lators and pacemakers, transformers and chip resistors for
guidance systems, radar sites, command-and-control sys-
defibrillators, tantalum capacitors for hearing aids, and elec-
tems, high frequency communications, jet aircraft, satellites,
tronic components for all types of medical instrumentation and
the Hubble space telescope, and other equipment. The types
equipment, from handheld oscilloscopes to MRI and CAT-scan
of electronic components manufactured by Vishay play sup-
machines. Vishay has a track record of excellent relationships
porting roles in the ruggedized laptop computers and other
with medical manufacturers.
portable electronic devices used by law enforcement and mili-
Health care institutions are the primary consumers of
tary personnel. They also are used in detection equipment at
sophisticated medical instrumentation, where even the infor-
U.S. airports, harbors, and other sites as part of homeland
mation infrastructure is changing to become more reliant on
security activities.
electronics. At the other end of the spectrum, home-based
Vishay components used in military, security, and aero-
health care will require increasing numbers of portable diag-
space equipment are designed to function reliably when sub-
nostic and treatment devices, many of which will depend on
jected to extremely hot and cold temperatures, intense vibra-
types of components manufactured by Vishay.
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
1 Source: Reuters, September 5, 2003
2 Sources: Dow Jones Newswire, September 22, 2003; Strategy Analytics
military and aerospace customers. Vishay has a close relation-
3 Source: Reuters, September 5, 2003
ship with leading aircraft manufacturers, and makes compo-
4 Source: Passive Component Industry, November/December 2003
nents for the “fly-by-wire” systems that control aircraft throttle-
control, turning, and braking.
VISHAY INTERTECHNOLOGY, INC.
13
Strong Manufacturing Base in Asia
“Vishay has a strong and diverse manufacturing
presence with plants in China. Vishay plant
locations in Southeast Asia also include
Taiwan, the Philippines, Malaysia, and India.”
Felix Zandman, Chairman and CEO
All major Vishay business units (Siliconix, Vishay Semiconductors,
Resistors, Capacitors, and the Measurements Group) have Vishay-owned manufactur-
Sales
Manufacturing
Sales and Manufacturing
Design Center
Regional Headquarters
(includes Sales)
Delhi
INDIA
Pune
Loni
Bangalore
Chennai
ing facilities in China, Taiwan, the Philippines, Malaysia, or India.
Chinese factories that manufacture Vishay components are located in Shanghai
(three plants for MOSFETs, optoelectronics, small-signal diodes, and film capacitors);
Tianjin (two plants for rectifiers, transient voltage suppressors, and transducers);
Danshui (one plant for ceramic capacitors, tantalum capacitors, and non-linear resis-
tors); and Beijing (one plant for transducers). Cities in other Asian countries with fac-
tories that manufacture Vishay components include Loni, India (aluminum capacitors,
film capacitors, and resistors); Krubong, Malaysia (optoelectronics); Manila, the
Philippines (ICs, MOSFETs, and optoelectronics); Kaohsiung, Taiwan (ICs and
MOSFETs); and Taipei, Taiwan (rectifiers and transducers).
Vishay’s well-established manufacturing presence in Asia, particularly China, gives
Vishay direct access to the companies that produce cell phones, laptop computers,
and other electronic end products in Asia. Increasingly, these products are being made
in China. Vishay’s U.S. and European customers are relocating or outsourcing production
to China, if they have not already done so. In addition, current and potential cus-
tomers based in Taiwan, Japan, Korea, and other Asian countries now produce many
of their products in China. These trends are expected to continue: China’s global
share of outsourced manufacturing is projected to be 50% in 2004.1
Vishay has had sales locations in Asia for many years, but growth in Asia started in
earnest with Vishay’s 1998 TEMIC acquisition (Telefunken and 80.4% of Siliconix). This
acquisition brought with it manufacturing plants in China, Taiwan, and the Philippines,
as well as sales offices in Hong Kong and Shanghai. Three years later, Vishay acquired
General Semiconductor, the leading global manufacturer of diodes and rectifiers. This
acquisition brought with it facilities in Tianjin, China, and Taipei, Taiwan.
During 2002, Vishay’s presence grew organically with an additional warehouse
building and with expansion of the Vishay optoelectronics factory in Shanghai. Later
in October 2002, Vishay officials and Tianjin state officials attended the groundbreak-
ing ceremony for the Vishay General Semiconductor plant in Tianjin. This ceremony
marked the start of Vishay’s Phase II expansion plan for Tianjin. The expansion was
completed in late 2003.
Also during 2002, Vishay’s acquisitions of Tedea-Huntleigh and Celtron
Technologies enhanced its presence in China through factories in Beijing and Tianjin.
14
VISHAY INTERTECHNOLOGY, INC.
JAPAN
Tokyo
These photos of Vishay’s discrete semiconductor manufactur-
ing operations in Shanghai, China, show Vishay personnel,
manufacturing equipment, and the front of one of the buildings.
Beijing
Seoul
Osaka
Tianjin
Gumi
Shanghai
S. KOREA
Taipei
CHINA
Shenzhen
Danshui
Hong Kong
TAIWAN
Kaohsiung
Manila
PHILIPPINES
THAILAND
Bangkok
MALAYSIA
Penang
Krubong
SINGAPORE
26%
Americas
36%
Asia
38%
Europe
10%
Asia
42%
Europe
48%
Americas
2003
1997
Vishay Sales by Region2
Vishay Tedea-Huntleigh and Vishay Celtron have been
integrated into the Vishay Transducers division of Vishay
Measurements Group.
The year 2002 was capped by Vishay’s acquisition of
BCcomponents, a leading global manufacturer of passive
components. The BCcomponents acquisition brought with
it manufacturing facilities in Shanghai and Danshui, both
in China, as well as a plant in Loni, India.
As of December 31, 2003, Vishay employed approxi-
mately 10,000 people in its operations in Asia. Vishay
sales offices in Asia were responsible for the generation
of approximately $781.4 million in revenues (36% of total
Vishay revenues) during 2003.
Recent organic growth by Vishay in China includes major expansion of its
1 Source: In-Stat/MDR, November 2003
optoelectronics operations in Shanghai and its Tianjin operations (diodes and
2 Based on sold-to location
transducers). Vishay is a local source of discrete semiconductors and passive
components to companies that manufacture electronic end products in China.
VISHAY INTERTECHNOLOGY, INC.
15
F I N A N C I A L S U M M A R Y
SUMMARY OF OPERATIONS
(in thousands, except per share amounts)
2003
2002
2001
2000
Net sales ................................................................................... $2,170,597
$1,822,813
$1,655,346
$2,465,066
Costs of products sold .............................................................
1,690,267
1,454,540
1,273,827
1,459,784
Loss on purchase commitments ..............................................
Gross profit...........................................................................
Selling, general, and administrative expenses ........................
Amortization of goodwill ...........................................................
Other operating expenses (credits) .........................................
Operating profit (loss)...............................................................
Other income (expense):
Interest expense....................................................................
Other......................................................................................
Total other income (expense) ........................................
Earnings (loss) before income taxes, minority interest, and
cumulative effect of accounting change...............................
Income tax provision (benefit) ..................................................
Minority interest.........................................................................
Earnings (loss) before cumulative effect of accounting change
Cumulative effect of accounting change .................................
11,392
468,938
381,406
—
29,560
57,972
(37,831)
26,285
(11,546)
46,426
11,528
8,056
26,482
—
106,000
262,273
311,251
—
30,970
(79,948)
(28,761)
8,664
(20,097)
(100,045)
(16,900)
9,469
(92,614)
—
Net earnings (loss) ................................................................ $
26,482
$ (92,614)
Earnings (loss) per share:
Basic ..................................................................................... $
Diluted .................................................................................. $
0.17
0.17
$
$
(0.58)
(0.58)
Shares used in computing earnings (loss) per share:
$
$
$
—
381,519
278,171
11,190
77,908
14,250
(16,848)
12,701
(4,147)
10,103
5,695
3,895
513
—
513
—
1,005,282
297,315
11,469
—
696,498
(25,177)
18,904
(6,273)
690,225
148,186
24,175
517,864
—
$ 517,864
0.00
0.00
$
$
3.83
3.77
Basic......................................................................................
Diluted ...................................................................................
159,631
160,443
159,413
159,413
141,171
142,514
135,295
137,463
FINANCIAL DATA (in thousands, except ratios)
Cash and cash equivalents ...................................................... $ 555,540
$ 339,938
$ 367,115
$ 337,213
Working capital .........................................................................
1,049,892
897,456
1,096,034
1,057,200
Current ratio ..............................................................................
2.79
2.56
3.29
Property and equipment – net..................................................
1,219,795
1,274,850
1,167,533
Capital expenditures.................................................................
Depreciation and amortization .................................................
126,635
194,055
110,074
180,748
162,493
163,387
3.53
973,554
229,781
140,840
Total assets ...............................................................................
4,572,513
4,315,159
3,951,523
2,783,658
Long-term debt.........................................................................
836,606
706,316
605,031
140,467
Stockholders' equity .................................................................
2,514,034
2,358,787
2,366,545
1,833,855
Note: This table should be read in conjunction with the related consolidated financial statements and accompanying notes and management’s dis-
cussion and analysis of financial condition and results of operations. Earnings per share amounts and weighted average shares outstanding have
been retroactively restated for stock dividends and stock splits. Basic and diluted earnings per share for 1993 includes $0.01 for the cumulative
effect of an accounting change for income taxes.
16
VISHAY INTERTECHNOLOGY, INC.
F I N A N C I A L S U M M A R Y
1999
1998
1997
1996
1995
1994
1993
$1,760,091
$1,572,745
$1,125,219
$1,097,979
$1,224,416
1,299,705
1,189,107
858,020
825,866
902,518
—
460,386
254,282
12,360
—
193,744
(53,296)
(5,737)
(59,033)
134,711
36,940
14,534
83,237
—
—
383,638
234,840
12,272
42,601
93,925
(49,038)
(2,241)
(51,279)
42,646
30,624
3,810
8,212
—
—
267,199
136,876
7,218
14,503
108,602
(18,819)
(222)
(19,041)
89,561
34,167
2,092
53,302
—
—
272,113
141,765
6,494
38,030
85,824
(17,408)
2,430
(14,978)
70,846
17,741
489
52,616
—
$987,837
748,135
—
239,702
137,124
4,609
—
97,969
$ 856,272
663,239
—
193,033
118,906
3,294
(562)
71,395
—
321,898
158,821
6,461
4,200
152,416
(29,433)
(24,769)
(20,624)
272
916
123
(29,161)
(23,853)
(20,501)
123,255
30,307
281
92,667
—
74,116
15,169
—
58,947
—
50,894
8,246
—
42,648
1,427
$
83,237
$
$
0.66
0.65
$
$
$
8,212
$
53,302
$
52,616
$
92,667
$ 58,947
$ 44,075
0.07
0.07
$
$
0.42
0.42
$
$
0.41
0.41
$
$
0.78
0.78
$
$
0.55
0.55
$
$
0.43
0.43
126,678
128,233
126,665
126,797
126,627
126,904
126,632
126,717
117,857
117,923
106,571
106,571
101,593
101,593
$ 105,193
$ 113,729
$
55,263
$
20,945
$
19,584
604,150
2.87
930,545
119,638
139,676
650,483
3.13
997,067
151,682
127,947
455,134
3.38
709,142
78,074
81,874
434,199
3.27
710,662
136,276
77,247
411,286
2.80
669,228
165,699
69,547
$ 26,876
328,322
2.41
543,402
91,571
57,742
2,323,781
2,462,744
1,719,648
1,558,515
1,543,331
1,345,070
656,943
814,838
1,013,592
1,002,519
347,463
959,648
229,885
945,230
228,610
907,853
402,337
565,088
$ 10,949
205,806
2.09
422,668
79,377
48,578
950,670
266,999
376,503
VISHAY INTERTECHNOLOGY, INC.
17
P R O D U C T L I S T
Discrete Semiconductors
Passive Components
■ Rectifiers
■ Capacitors
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
Optocouplers and Solid-state Relays
Optical Sensors
LEDs and 7-Segment Displays
Infrared Data Transceiver Modules
Custom Products
■ ICs
Power ICs
Analog Switches
Integrated Modules
■ DC/DC Converters
Tantalum Capacitors
Solid Tantalum Capacitors
Wet Tantalum Capacitors
Ceramic Capacitors
Multilayer Chip Capacitors
Disc Capacitors
Film Capacitors
Power Capacitors
Heavy-Current Capacitors
Aluminum Capacitors
Silicon 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
Strain Sensors and Transducers
■ Strain Gages and Instruments
■ PhotoStress® Instruments
■ Transducers
Load Cells
Weighing Systems
18
VISHAY INTERTECHNOLOGY, INC.
UNITED STATES
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, 2003
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(cid:146)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(cid:146)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 stock held by non-affiliates computed by reference to the price at which the common equity
was last sold as of the last business day of the registrant(cid:146)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 $1,909,596,000. There is no non-voting stock outstanding.
As of March 9, 2004, registrant had 145,539,733 shares of its common stock and 14,979,440 shares of its Class B common stock
outstanding.
Portions of the registrant(cid:146)s definitive proxy statement, which will be filed within 120 days of December 31, 2003, are incorporated by
reference into Part III.
- 1 -
This page intentionally left blank.
- 2 -
Item 1.
DESCRIPTION OF BUSINESS
PART I
General
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 (cid:147)one-stop(cid:148) 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:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
computer-related products,
power management products,
(cid:120)(cid:3)
(cid:120)(cid:3)
automotive applications,
process control systems,
telecommunications equipment,
(cid:120)(cid:3) military and aerospace applications,
(cid:120)(cid:3) measuring instruments,
(cid:120)(cid:3)
consumer electronics and appliances,
(cid:120)(cid:3)
industrial equipment,
(cid:120)(cid:3) medical instruments, and
(cid:120)(cid:3)
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(cid:146)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.
consistently 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(cid:146)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(cid:146)s Republic of China
and has subcontractors in the Philippines, the People(cid:146)s Republic of China, Israel, and the United States. Siliconix
reported worldwide sales of $392.1 million in 2003, $372.9 million in 2002, and $305.6 million in 2001.
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(cid:146)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. 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, we paid or assumed outstanding obligations of BCcomponents, including indebtedness,
transaction fees and expenses in the amount of approximately $224 million. Also, we exchanged $105 million in
principal amount of BCcomponents(cid:146) mezzanine indebtedness and certain other securities of BCcomponents 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 in recent years, we have taken 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 in recent years. In this regard, we:
(i)
(ii)
(iii)
(iv)
closed or consolidated several manufacturing facilities and administrative offices;
reduced our headcount, particularly in high labor cost countries;
integrated our acquisitions within our existing management and operational infrastructure; and
relying on the strength of our balance sheet, continued our search for suitable acquisition
candidates.
Vishay also intends to explore opportunities for investments of non-controlling interests in privately held
developers or manufacturers of electronic components, where Vishay believes that it can forge strategic alliances
with such companies.
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:120)(cid:3)
(cid:120)(cid:3)
resistors,
tantalum capacitors,
(cid:120)(cid:3) multi-layer and disc ceramic capacitors (MLCCs),
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
aluminum and specialty ceramic capacitors,
film capacitors,
power MOSFETs,
power ICs,
signal processing ICs,
transistors,
voltage suppressors,
infrared data transceivers (IRDCs),
optocouplers,
IR sensors,
strain gages and load cells, and
diodes and rectifiers
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
- 5 -
and, to a lesser extent:
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
inductors,
connectors,
transformers,
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
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 (cid:147)passive(cid:148) 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. Linear resistive components are classified as variable or fixed, depending on whether or not their
resistance is adjustable. Non-linear 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 (cid:147)Measurements Group(cid:148) below.
We manufacture virtually all types of fixed resistors, both in discrete and network forms, as well as many
variable types. 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, discharge, coupling, timing and filtering functions.
The more important applications for capacitors are:
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
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,
(cid:147)capacitance(cid:148) being the measure of the capacitor(cid:146)s ability to store energy. The tantalum capacitor is the smallest
type of capacitor for its range of capacitance. 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. Film capacitors are for general use in telecommunications,
automotive, consumer and industrial products. They are the most stable capacitors.
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(cid:146)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 (cid:147)active(cid:148) 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 (cid:147)trench(cid:148) 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
over-heating.
- 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 light emitting diodes (LEDs), infrared emitters (IREDs)
and photo detectors, infrared receiver modules, optocouplers, solid-state relays (SSRs), optical sensors, and infrared
transceivers (IRDCs).
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 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 an infrared 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 switch mode 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 the surface of a circuit board, and also allows placement 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.
- 8 -
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:120)(cid:3) wirewound chip resistors,
thick film resistor networks and arrays,
(cid:120)(cid:3) metal film leadless resistors (MELFs),
(cid:120)(cid:3) molded tantalum chip capacitors,
(cid:120)(cid:3)
coated tantalum chip capacitors,
(cid:120)(cid:3) multi-layer ceramic chip capacitors,
thin film chip resistors,
thin film networks,
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
power strip resistors,
bulk metal foil chip resistors,
current sensing chips,
chip inductors,
chip transformers,
chip trimmers,
(cid:120)(cid:3) NTC chip thermistors,
certain diodes and transistor products,
(cid:120)(cid:3) PTC chip thermistors, and
power MOSFETs,
(cid:120)(cid:3)
strain gages.
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
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 product(cid:146)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.
the requirements for the applicable classification level,
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, Israel, Mexico, Germany, France, the United Kingdom, Austria, Hungary,
and the Czech Republic. In Asia, we have facilities in the People(cid:146)s Republic of China, Taiwan, Malaysia, and the
Philippines. 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(cid:146) representatives and distributors in solving technical problems and
developing products to meet specific needs.
Our top 30 customers are quite stable despite not having long-term commitments to purchase our products.
With selected customers, we have signed two to three year contracts for specific products.
During 2003, approximately 26% of our net sales were attributable to customers in the Americas,
approximately 38% were attributable to customers in Europe, and approximately 36% were attributable to customers
in Asia.
- 9 -
Marketing
Our products are marketed through independent manufacturers(cid:146) representatives compensated solely on a
commission basis, by our own sales personnel and by independent distributors. We have regional sales personnel in
several North American locations that make sales directly to OEMs and provide technical and sales support for
independent manufacturers(cid:146) 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(cid:146)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. Our research and development costs (exclusive of
purchased in-process research and development) were approximately $45.4 million for 2003, $37.1 million for 2002,
and $30.2 million for 2001. These amounts include expenditures of our Siliconix subsidiary of $19.5 million, $19.3
million, and $17.2 million in 2003, 2002, and 2001, 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(cid:146)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. From 2001 to 2003, 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 $25.7 million and $52.0 million,
respectively, on tantalum inventories during the years ended December 31, 2002 and 2001. We also recorded a loss
on future purchase commitments of $106.0 million for the year ended December 31, 2002.
In 2003, prices of
tantalum continued to decline. As a result, we recorded write-downs of $5.4 million to reduce our tantalum
inventories to current market value in 2003. We also recorded a loss on future purchase commitments of $11.4
million in 2003. Our purchase commitments were entered into at a time when market demand for tantalum
capacitors was high and tantalum powder was in short supply. If the downward pricing trend were to continue, we
could again be required to write down the carrying value of our tantalum inventory and record additional losses on our
long-term purchase commitments.
- 10 -
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.
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 $148 to $1,090 per troy ounce during the three years ended December 31,
2003, and as of December 31, 2003, the price of palladium was approximately $195 per troy ounce. During the years
ended December 31, 2003, 2002 and 2001, we recorded in costs of products sold write-downs on palladium
inventories of $1.6 million, $1.7 million and $18.0 million, respectively.
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 $532.0 million, $407.6 million, and $337.9 million, respectively, at December 31,
2003, 2002, and 2001. The backlog at December 31, 2003 and 2002 includes $58.9 million and $49.8 million,
respectively, of backlog attributable to the business of BCcomponents, which was acquired in December 2002. The
increase in our backlog at December 31, 2003 compared to December 31, 2002 is indicative of improving market
conditions.
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 situation
that we experienced in the recent 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, our 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.,
STMicroelectronics N.V. and Samsung Co., Ltd. There are many other companies that produce products in the
markets in which we compete.
- 11 -
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 (cid:147)one-stop(cid:148) 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,
India, Israel, Malaysia, Mexico, the People(cid:146)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 (cid:147)dies(cid:148) or (cid:147)chips(cid:148)) on each wafer. Assembly is the sequence of production steps that
divides the wafer into individual chips and encloses the chips in structures (termed (cid:147)packages(cid:148)) 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, 2003, approximately 21% of our fixed assets were located in the United States,
approximately 30% were located in Europe, approximately 26% were located in Israel, and approximately 23% 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, France, Hungary, and the Czech
Republic, with other facilities in Austria, Belgium, Portugal, and the Netherlands. We also have manufacturing
facilities in India, Israel, Malaysia, Mexico, the People(cid:146)s Republic of China, the Philippines, 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 2003, 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, 2003 associated with the downsizing of manufacturing facilities in Europe and the United States. We may
continue to incur such expenses in 2004.
See Note 16 to our consolidated financial statements, (cid:147)Business Segment and Geographic Area Data,(cid:148) for
financial information by geographic area.
- 12 -
Israeli Government Incentives
We have substantial manufacturing operations in Israel, where we benefit from the government(cid:146)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, 2003, sales of products manufactured in Israel accounted for approximately 17% of
our net sales.
Under the terms of the Israeli government(cid:146)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
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 33 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.
- 13 -
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 three 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(cid:146)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, 2003,
we concluded that the best estimate within this range is $32.7 million, of which $23.5 million is included in other
non-current liabilities on the consolidated balance sheet, and $9.2 million is included in accrued expenses on the
consolidated balance sheet. Of this reserve, approximately $18.7 million is due to the acquisition of General
Semiconductor, but not including any liability that we may incur in connection with the litigation relating to the
Hicksville, New York facility described above; approximately $8.4 million is due to the acquisition of
BCcomponents; and approximately $5.6 million is reserved for other miscellaneous environmental liabilities,
primarily at our Vitramon subsidiary in the United States. In view of our financial position and provisions for
environmental matters of $32.7 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.
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, 2003, we employed approximately 25,200 full time employees, of whom
approximately 21,850 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.
- 14 -
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(cid:146)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.
The following corporate governance related documents are also available on our website:
(cid:120)(cid:3) Corporate Governance Principles
(cid:120)(cid:3) Code of Business Conduct and Ethics
(cid:120)(cid:3) Code of Ethics Applicable to the Company(cid:146)s Chief Executive Officer, Chief Financial Officer,
Principal Accounting Officer or Controller and Financial Managers
(cid:120)(cid:3) Audit Committee Charter
(cid:120)(cid:3) Nominating and Corporate Governance Committee Charter
(cid:120)(cid:3) Compensation Committee Charter.
To review these documents, go to our website, click on Company Info, then Investor Relations and then
Corporate Governance.
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
- 15 -
Item 2.
PROPERTIES
As of December 31, 2003, we maintained approximately 77 manufacturing facilities. The principal
locations of such facilities, along with available space including administrative offices, are:
Owned Locations
Approx. Available
Space (Square Feet)
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)
Hungary (2 locations)
Germany (8 locations)
People(cid:146)s Republic of China (4 locations)
Czech Republic (5 locations)
Republic of China (Taiwan) (3 locations)
France (3 locations)
Portugal
Netherlands
Belgium (2 locations)
Austria
Philippines
India
Malaysia
298,000
225,000
220,000
165,000
159,000
91,000
90,000
79,000
1,058,000
961,000
561,000
514,000
446,000
397,000
332,000
301,000
286,000
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 190,000 square feet of space located in California,
Massachusetts, New York, Connecticut and South Dakota. Foreign leased facilities consist of 817,000 square feet in
China, 204,000 square feet in Germany, 127,000 square feet in Mexico, 120,000 square feet in Austria, 75,000
square feet in the Czech Republic, 43,000 square feet in Sweden, 24,000 square feet in Israel, and 13,000 square feet
in the United Kingdom, and 3,000 square feet in Taiwan.
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.
- 16 -
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.
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(cid:146)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(cid:146)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 (cid:147)Environment, Health
and Safety.(cid:148)
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
- 17 -
Item 4A.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding our executive officers as of March 15, 2004.
Name
Dr. Felix Zandman*
Dr. Gerald Paul*
Marc Zandman*
Richard N. Grubb
Ziv Shoshani*
Age
Positions Held
75
55
42
57
38
Chairman of the Board and Chief Executive
Officer
Chief Operating Officer, President and
Director
Vice-Chairman of the Board, President-
Vishay Israel Ltd.
Executive Vice President, Treasurer, and
Chief Financial Officer
Executive Vice President, Resistor and
Inductor Group and Director
* 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.
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(cid:146)s Chief Executive Officer.
Richard N. Grubb has been 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, and was a Director from 1994 through 2003.
Ziv Shoshani has been Executive Vice President of the Resistor and Inductor Group since 2002. He was
Executive Vice President of the Capacitors Group in 2001 and 2002 and was Executive Vice President, Specialty
Products Division in 2000 and 2001, including responsibility for oversight of Vishay(cid:146)s Measurements Group
Division. Prior to that, Mr. Shoshani served in various capacities including Senior Vice President Precision
Resistors, Worldwide Foil Resistors Manager, Plant Manager, Holon, Israel, and Quality Control Manager, Holon.
Mr. Shoshani has been employed by the Company since 1995. He is the nephew of Dr. Felix Zandman, the
Company(cid:146)s Chief Executive Officer.
- 18 -
PART II
Item 5.
MARKET FOR REGISTRANT(cid:146)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 2002 and 2003 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 2,007 at March 9, 2004.
COMMON STOCK MARKET PRICES
Calendar 2002
Calendar 2003
High
$22.50
$26.15
$22.00
$15.10
Low
$17.05
$19.31
$ 8.51
$ 6.70
High
$13.24
$15.15
$19.00
$23.15
Low
$ 8.77
$ 9.93
$12.47
$17.45
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
At March 9, 2004, we had outstanding 14,979,440 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 the 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, the children of Mrs. Slaner, and trusts for the benefit of the grandchildren of Mrs. Slaner,
either directly or beneficially. Directly, and as voting trustee under a voting trust agreement, Dr. Zandman has
voting power over substantially all of the outstanding Class B common stock.
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, 2003, 2002, 2001, 2000, and 1999. 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
Earnings (loss) before income tax provision
(benefit) and minority interest
Income tax provision (benefit)
Minority interest
Net earnings (loss)
Basic earnings (loss) per share(5)
Diluted earnings (loss) per share(5)
Weighted average shares outstanding (cid:150) basic (5)
Weighted average shares outstanding (cid:150) diluted (5)
Balance Sheet Data (in thousands):
As of and for the Year Ended December 31,
2003 (1)
2002 (2)
2001 (3)
2000
1999 (4)
$2,170,597
37,831
$1,822,813
28,761
$1,655,346
16,848
$2,465,066
25,177
$1,760,091
53,296
46,426
11,528
8,056
26,842
$0.17
$0.17
159,631
160,443
(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
Total assets
Long-term debt
Working capital
Stockholders(cid:146) equity
_______________________________________________________________________
$4,572,513
836,606
1,049,892
2,514,034
$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
(1)
(2)
(3)
Includes the results of BCcomponents, acquired in December 2002. Also includes net charge of $22,362,000 for
restructuring and severance costs, inventory write-downs, a loss on purchase commitments, and a loss on extinguishment of
debt, partially offset by a gain on insurance proceeds. These items and their tax related consequences had a negative $0.11
effect on earnings per share. These items are more fully described in the notes to the consolidated financial statements.
Includes the results from January 1, 2002 of Infineon Malaysia optoelectronic infrared components business, 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 charges for restructuring and severance costs, inventory write-downs, a loss on purchase commitments and
other charges of $169,900,000. These items and their tax related consequences had a negative $0.85 effect on earnings per
share. These items are more fully described in the notes to the consolidated financial statements.
Includes the results from January 1, 2001 of Tansitor, July 27, 2001 of Infineon U.S. optoelectronic infrared components
business, November 2, 2001 of General Semiconductor, and November 7, 2001 of Mallory. Also includes charges for
restructuring and severance costs, inventory write-downs, a write-off of purchased in-process research and development, and
other charges of $156,590,000. These items and their tax related consequences had a negative $0.84 effect on earnings per
share. These items are more fully described in the notes to the consolidated financial statements.
(4) The sale of Nicolitch, S.A. and a tax rate change in Germany reduced net earnings by $14,562,000 ($0.11 per share).
(5) Adjusted to reflect a three-for-two stock split distributed June 9, 2000, and a five-for-four stock split distributed June 22,
1999.
Management believes that stating the impact on net earnings of items such as restructuring, inventory write-downs, losses on
purchase commitments, losses on early extinguishment of debt, gains on insurance proceeds, write-offs of in-process research
and development, and other charges is meaningful to investors because its provides insight with respect to ongoing operating
results of the Company.
- 20 -
Item 7. MANAGEMENT(cid:146)S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Sales for the year ended December 31, 2003 were $2.171 billion compared to sales of $1.823 billion for the
year ended December 31, 2002. Net earnings for the year ended December 31, 2003 were $26.8 million or $0.17 per
share, compared with a net loss for the year ended December 31, 2002 of $92.6 million or $0.58 per share. Earnings
for the year ended December 31, 2003 were impacted by restructuring and severance costs of $29.6 million, a loss
on extinguishment of debt of $9.9 million, a loss on long-term purchase commitments of $11.4 million, and a write-
down of tantalum inventories on hand to market value of $5.4 million, offset by a gain on an insurance claim of
$33.9 million. These items and their tax related consequences had a negative $0.11 effect on earnings per share. The
year ended December 31, 2002 included charges for restructuring, inventory write-downs, a loss on purchase
commitments and other charges of $169.9 million resulting in a reduction of $0.85 in net earnings per share.
Following a difficult 2002 and 2001, in which the electronic components business generally was depressed
both in the United States and much of the world, market conditions remained difficult in first half of 2003. In the
latter half of the year, we noted substantial improvement of the general economic outlook worldwide. We have seen
a rapid acceleration of demand in electronics in all regions, in almost all market segments, beyond pure seasonality
and stock replenishment. We noted, in particular, strength in automotive products, computers and mobile phones.
The economic recovery began in the actives business, consistent with historical trends and as seen in the third
quarter of 2003. The passives business is also showing indications of recovery. Pricing pressure has started to abate
in the active products markets, but its presence continues to be felt in the passive segment, particularly for
commodity products.
Capacity utilization is a reflection, in part, of product demand trends. We were approaching full capacity in
most of our active facilities during the latter half of the year. We are working to alleviate capacity constraints in the
active segment by addressing production bottlenecks in our fabrication facilities, expanding our backend operations
and expanding and broadening our foundry activities. Capacity utilization showed some improvement in the passive
segment during 2003, where capacity for resistors and inductors ranged from 60% to 75%, while in the capacitor
lines it averaged around 50%.
Despite these positive trends, operating results for 2003 remained depressed because of pricing pressures.
Average selling prices continued to decline during 2003 in both the passive and active segments, though
considerably less rapidly in the second half of the year. Operating results for the first half of 2003 also suffered
from the severe acute respiratory syndrome, or SARS, outbreak, particularly in the active segment which does a
substantial portion of its business in Asia.
Financial Metrics
We utilize several financial measures and metrics to evaluate the performance and assess the future
direction of our business. These key financial measures and metrics include sales, end-of-period backlog, the book-
to-bill ratio, and inventory turnover. We also monitor changes in average selling prices.
End-of-period backlog is one indicator of future sales. However, if demand falls below customers(cid:146)
forecasts, or if customers do not control their inventory effectively, they may cancel or reschedule the shipments that
are included in our backlog, in many instances without the payment of any penalty. Therefore, the backlog is not
necessarily indicative of the results of future periods.
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.
- 21 -
We also focus on our inventory turnover as a measure of how well we are managing our inventory. We
define inventory turnover 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 turnover reflects more efficient use of our capital. In
2003, inventory turnover improved to 3.16 from 2.52 in 2002, which we attribute to somewhat improved selling
conditions and enhanced selling efficiencies implemented during the year. Exclusive of tantalum and palladium
write-downs, inventory turnover would have been approximately 3.15 in 2003 as compared to 2.47 in 2002.
The quarter-to-quarter trends in these financial metrics can also be an important indicator of the likely
direction of our business. The following table shows sales, 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 2002 and through the fourth
quarter of 2003.
4th Quarter 2002
1st Quarter 2003
2nd Quarter 2003
3rd Quarter 2003
4th Quarter 2003
Sales
$459,377,000
$532,127,000(1)
$538,103,000(1)
$533,168,000(1)
$567,199,000(1)
End-of-Period
Backlog
Book-to-Bill
Ratio
$407,600,000
$438,200,000
$419,800,000
$434,000,000
$532,000,000
0.93
1.05
0.96
1.03
1.14
(1)
Includes $69,300,000, $63,600,000, $60,800,000, and $63,900,000 attributable to BCcomponents for the
first, second, third and fourth quarters of 2003, respectively.
Management believes that these trends are an encouraging indication of broad-based demand into 2004, in
all of our major markets and all geographic areas.
Pricing in our industry is volatile. During 2003, we experienced significant declines in average selling
prices, particularly in the first half of the year in our actives business. Prices stabilized in the second half of the
year, and we expect relatively stable pricing to continue into 2004.
Segments
Vishay operates in two segments, passive components and active components. We are the leading
manufacturer of passive components in the United States and Europe. These components include resistors,
capacitors, inductors, strain gages and load cells. 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 are also one
of the world(cid:146)s leading manufacturers of active electronic components, also referred to as discrete semiconductors.
These include transistors, diodes, rectifiers, certain types of integrated circuits and optoelectronic products. Our
active segment includes our 80.4% owned subsidiary, Siliconix. The passive components business had historically
predominated at Vishay until the purchase of General Semiconductor in November 2001, after which the lead
position shifted to the active business. With the acquisition of BCcomponents in December 2002, revenues from our
active and passive businesses are essentially split evenly between the segments. For 2003, approximately 51% of
our revenues were attributable to our passive business and 49% to our active business.
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 for the second half of 2003 are indicative of
these past trends, where we saw improvements in active products beginning in the third quarter, which was followed
by improvements in our passive products in the fourth quarter. We expect these trends to continue into 2004.
- 22 -
The following table shows sales and book-to-bill ratios broken out by segment for the five quarters
beginning with the fourth quarter of 2002 through the fourth quarter of 2003:
4th Quarter 2002
1st Quarter 2003
2nd Quarter 2003
3rd Quarter 2003
4th Quarter 2003
Passive
Components
Sales
Book-to-Bill
Ratio
Active
Components
Sales
Book-to-Bill
Ratio
$198,542,000
$274,874,000(1)
$280,056,000(1)
$268,368,000(1)
$281,558,000 (1)
1.00
1.07
0.96
0.97
1.06
$260,835,000
$257,253,000
$258,047,000
$264,800,000
$285,641,000
0.88
1.03
0.96
1.09
1.23
(1)
Includes $69,300,000, $63,600,000, $60,800,000, and $63,900,000 attributable to BCcomponents for the
first, second, third and fourth quarters of 2003, respectively.
Cost 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(cid:146)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 69% at the end of 2003, as compared to 65% at
the end of 2002, 61% at the end of 2001, and 57% at the end of 2000. We continue to target improvement in this
area as we proceed with the integration of the business of BCcomponents, acquired in December 2002. The long-
term target remains between 75% and 80% of our headcount in lower-labor-cost countries.
We are placing particular emphasis on cost reduction in our capacitor lines, which have been hardest hit by
the recent market downturn and where the business continues to suffer from worldwide overcapacity. In 2003, we
completed the transfer of our power capacitor production from Western Europe to the Czech Republic and began
moving our molded tantalum capacitor business to the People(cid:146)s Republic of China. We also began to consolidate
our existing film capacitor line within the business of BCcomponents.
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-
downs of inventories and the losses on long-term purchase commitments in 2002 and 2003, the application of the
Israeli tax rates rather than United States tax rates resulted in an increase in net loss of $24.8 million in 2002 and a
decrease in net earnings of $3.1 million in 2003. In 2001, lower tax rates in Israel, as compared to the statutory rate
in the United States, resulted in an increase in net earnings of $3.0 million.
- 23 -
Israeli government grants are awarded to specific projects. These grants are intended to promote
employment in Israel(cid:146)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 $12.4
million, $17.3 million and $19.1 million in the years 2003, 2002 and 2001, respectively. At December 31, 2003, our
balance sheet reflected $27.7 million 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 up to
$15 million 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, and the government agreed to continue
making grant payments to us. Under the terms of the settlement with the Israeli government, Vishay is required to
employ at least an additional 1,500 employees in Israel over the next three years in order to preserve its eligibility
for the government grant. We have hired an additional 1,319 employees to date and expect to comply with these
requirements. We therefore recorded a catch up adjustment of approximately $1.0 million 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.
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 $38.0
million for tantalum ore, $14.0 million for tantalum wire and powder and $18.0 million 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 on 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 $106.0 million for the purchase commitments and $25.7 million for inventory. In 2002, we also
recorded a write-down of $1.7 million on palladium inventories.
- 24 -
Prices for tantalum continued to decline in 2003. We recorded write-downs of $5.4 million to reduce
tantalum inventories to current market value, and a loss on purchase commitments for future delivery of tantalum of
$11.4 million. In addition, we recorded a write-down of $1.6 million of palladium inventory in the first quarter of
2003.
The raw materials write-downs have the effect of improving gross margins in subsequent periods by
reducing cost of goods sold as inventory is utilized. This effect cannot be quantified in any specific reporting
period, however, because of the large number of affected products and the impracticality of tracking raw material
inventory usage on a product-by-product basis.
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 (cid:147)Contractual Commitments(cid:148) 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. Based on
usage currently expected in 2004, our purchase commitments represent approximately 7.5 years of usage. We have
little visibility of the demand for our tantalum capacitor products beyond twelve months. It is almost certain that our
actual requirements of tantalum will differ from those projected, and likely that the difference will be material.
Foreign Currency
In 2003, we realized approximately 74% 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 has an impact on the net sales line of the
consolidated statements of operations and also on the expense lines of the consolidated statements of operations.
We generally do not purchase foreign currency exchange contracts or other derivative instruments to hedge our
exposure to foreign currency fluctuations.
Critical Accounting Policies and Estimates
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 recognize revenue on product sales during the period when the sales process is complete. This
generally occurs when products are shipped to the customer in accordance with terms of an agreement of sale, title
and risk of loss have been transferred, collectibility is reasonably assured and pricing is fixed or determinable. We
have agreements with distributors that historically provided limited rights of product return. Beginning in 2002, we
modified these arrangements to allow distributors a limited credit for unsaleable products, which we term a (cid:147)scrap
allowance.(cid:148) Consistent with industry practice, we also have a (cid:147)stock, ship and debit(cid:148) program whereby we consider,
and grant in our discretion, requests by distributors for credits on previously purchased products that remain in
distributors(cid:146) inventory, to enable the distributors to offer more competitive pricing. In addition, we have contractual
arrangements whereby we provide distributors with protection against price reductions that we initiate after sale of
product to the distributor and prior to resale by the distributor.
We record end of period accruals for each of the programs based upon our estimate of future credits under
the programs that will be attributable to sales recorded through the end of the period. We calculate reductions of
revenue attributable to each of the programs during any period by computing the change in the accruals from the
prior period and adding the credits actually given to distributors during the period under the programs. These
procedures require the exercise of significant judgments, but we believe they enable us to estimate reasonably future
credits under the programs.
- 25 -
Recording and monitoring of these accruals takes place at our subsidiaries and divisions, with input from
sales and marketing personnel and review, assessment and, if necessary, adjustment by corporate management.
While our subsidiaries and divisions utilize different methodologies based on their individual experiences, all of the
methodologies take into account sales to distributors during the relevant period, inventory levels at the distributors,
current and projected market trends and conditions, recent and historical activity under the relevant programs,
changes in program policies, and open requests for credits. These are the elements that management considers
relevant, and, in our judgment, the different methodologies provide us with equally reliable estimates upon which to
base our accruals. We do not track the credits that we record against specific products sold from distributor
inventories, so as to directly compare revenue reduction for credits recorded during any period with credits
ultimately awarded in respect of products sold during that period. Nevertheless, we believe that we have an
adequate basis to assess the reasonableness and reliability of our estimates.
Accounts Receivable
Our receivables represent a significant portion of our current assets. We are required to estimate the
collectibility 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 write-downs of our tantalum
and palladium inventories in 2002 and 2003. Inventories are also adjusted for estimated obsolescence and written
down to net realizable value based upon estimates of future demand, technology developments and market
conditions.
Estimates of Restructuring and Severance Costs and Purchase Related Restructuring Costs
In 2003, we recorded restructuring costs of approximately $29.6 million related to our existing businesses.
In 2002, we recorded restructuring costs of approximately $48.0 million related to our acquisitions and $31.0 million
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 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 electronics industry downturn. 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.
- 26 -
Raw Material Write-downs
In 2002 and 2003, we took charges against contractual commitments to purchase tantalum powder and wire
through 2006 and wrote-down our existing inventory of tantalum ore, powder and wire to present market value. 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. 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 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. 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, so that our cost of materials will continue to reflect these write-downs 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.
Based upon similar considerations, we recorded write-downs of our palladium inventory to market value in
both 2002 and 2003.
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. Goodwill is tested for impairment at least annually. These tests will be performed
more frequently if there are triggering events. SFAS No. 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(cid:146)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. An impairment charge will be recognized only when the implied fair value of a reporting
unit(cid:146)s goodwill is less than its carrying amount.
Fair value of reporting units is determined using comparable company market multiples. The comparable
companies utilized in our evaluation are the members of our peer group utilized in the presentation of our stock
performance in our annual proxy statement.
- 27 -
Impairment of Long-Lived Assets
We assess the impairment of our long-lived assets, other than goodwill and tradenames, including property
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.
Results of Operations
Income statement captions as a percentage of sales and the effective tax rates were as follows:
Costs of products sold
Gross profit*
Selling, general and
administrative expenses
Operating income (loss)
Earnings (loss) before income
taxes (benefit) and minority interest
Net earnings (loss)
Effective tax rate
2003
77.9%
21.6%
17.6%
2.7%
2.1%
1.2%
24.8%
Year Ended December 31
2002
79.8%
14.4%
17.1%
(4.4%)
(5.5%)
(5.1%)
16.9%
2001
77.0%
23.0%
16.8%
0.9%
0.6%
0.0%
56.4%
* - Reflects losses on purchase commitments of $11.4 million and $106.0 million during the years
ended December 31, 2003 and 2002.
Net Sales, Gross Profits and Margins
Net sales for the year ended December 31, 2003 increased by $347.8 million or 19.1% over the prior year.
The increase primarily reflects the acquisitions of BCcomponents in December 2002, Celtron Technologies in
October 2002, BLH and Nobel in July 2002 and Tedea-Huntleigh BV in September 2002. Excluding these
acquisitions, net sales increased $49.1 million, or 3%. The weakening of the U.S. dollar against foreign currencies
for the year ended December 31, 2003, in comparison to the prior year, resulted in increases in reported sales of $74
million.
Net sales for the year ended December 31, 2002 increased by $167.5 million or 10.1% over the prior year.
This reflects 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, partially offset by 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 million.
- 28 -
We deduct, from the sales that we record to distributors, allowances for future credits that we expect to
provide for returns, scrapped product and price adjustments under various programs made available to the
distributors. We make deductions corresponding to particular sales in the period in which the sales are made,
although the corresponding credits may not be issued until future periods. We estimate the deductions based on
sales levels to distributors, inventory levels at the distributors, current and projected market trends and conditions,
recent and historical activity under the relevant programs, changes in program policies and open requests for credits.
We recorded deductions from gross sales under our distributor incentive programs of $67.2 million, $67.4 million,
and $56.1 million for the years ended December 31, 2003, 2002, and 2001, respectively, or, as a percentage of gross
sales 3.0%, 3.6%, and 3.2%, respectively. Actual credits issued under the programs for the years ended December
31, 2003, 2002, and 2001, were approximately $62.4 million, $63.4 million, and $52.7 million, respectively. The
increase in the incentives from 2001 is attributable primarily to the adverse business climate that developed
following 2000 and the resulting pricing pressures that affected our distributors and the electronic component
industry generally.
Costs of products sold as a percentage of net sales for the year ended December 31, 2003 was 77.9% as
compared to 79.8% for the prior year. Gross profit as a percentage of net sales for year ended December 31, 2003
was 21.6% as compared to 14.4% for the prior year. Price declines were offset in substantial part by volume
increases and cost savings programs. Gross profit for 2003 reflects write-downs of raw material inventory to lower
of cost or market of $7.0 million, which is included in cost of products sold, and an accrual of loss on long-term
purchase commitments of $11.4 million. Gross profit for 2002 reflects a write-down of raw material inventory to
market value of $27.4 million, which is included in cost of products sold, and an accrual of loss on long-term
purchase commitments of $106.0 million.
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 14.4% as compared to 23.0% for the prior year. Gross profit for 2002 includes a write-down of raw
material inventory to market value of $27.4 million, which is included in cost of goods sold, and accruals for losses
on purchase commitments of $106.0 million. The erosion in overall profit margins in 2002 reflected 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, 2001, gross profit reflected write-
downs of tantalum and palladium inventories of $70.0 million.
See (cid:147)Israeli Government Incentives(cid:148) 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
2003
Year Ended December 31
2002
2001
Net Sales
Gross Profit Margin
$1,104,856,000
17.3%
$767,246,000
(4.9%)
$1,010,634,000
20.6%
Net sales of passive components for the year ended December 31, 2003 increased $337.6 million or 44% as
compared to the prior year. Without the acquisition of BCcomponents, Celtron Technologies, BLH and Nobel, and
Tedea-Huntleigh, the passive components business sales would have increased by $38.9 million or 5% as compared
to the prior year. The organic increase in net sales is attributable to the volume increases in the resistor and inductor
product lines, partially offset by price declines, and the positive impact of foreign currency exchange rates. The
average selling price was down versus the prior year.
- 29 -
Our resistor and inductor business stabilized in 2002 and began an improvement in the latter part of that
year which continued into 2003. Our capacitor business, which was particularly hard hit during the recent global
slowdown in the electronics industry, continues to experience the lingering effects of worldwide overcapacity in
both production and supply. However, with the slowing of the erosion in average selling prices that began in the
fourth quarter of 2002, the capacitor business appears to have stabilized and is showing modest signs of
improvement.
Gross margins were 17.3% for the year ended December 31, 2003, as compared to negative 4.9% for the
prior year. Results for 2003 reflected average margins of 29% for our resistor and inductor lines and 5% for our
capacitor lines. Margins were affected negatively by raw material related write-downs in 2003 and 2002, as market
prices for these materials continued to decline. During 2003, we recorded write-downs of $5.4 million to reduce
tantalum inventories to current market value, and a loss on purchase commitments for future delivery of tantalum of
$11.4 million. In addition, we recorded a write-down of $1.6 million of palladium inventory. In 2002, we recorded
a loss on long-term purchase commitments of tantalum of $106.0 million and write-downs of $27.4 million on
tantalum and palladium inventories. The raw material write-downs have the effect of improving gross margins in
subsequent periods by reducing cost of goods sold as inventory is utilized. This effect cannot be quantified in any
specific reporting period, however, because of the large number of affected products and the impracticality of
tracking raw material inventory usage on a product-by-product basis.
We continue to implement cost reduction programs, particularly in our passives business, in order to reduce
costs and thereby stabilize our margins. We have initiated several significant cost reduction programs in all of our
products lines, including facility combinations and shifts of production to lower-cost regions, with particular
emphasis on reducing headcount in high-labor-cost countries. Sixty-nine percent of our labor force was in low-
labor-cost countries as of December 31, 2003. The impact of these cost savings plans has been partially offset by the
underutilization of capacity in the commodity products.
Net sales of passive components for the year ended December 31, 2002 decreased by $243.4 million 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. Excluding the significant acquisition activity in our Measurements Group
in 2002, sales in the passive segment would have decreased by $288.9 million or 29% from the prior year. Gross
profit margin in 2002 was negatively impacted by a loss on long-term purchase commitments of tantalum of $106.0
million and write-downs of $27.4 million on tantalum and palladium inventories. Even excluding the loss on long-
term purchase commitments, our capacitor business had negative average gross margins of 6% in 2002, compared
with positive average gross margins of 19% for resistors and capacitors. The acquisition of BCcomponents, a
worldwide manufacturer of resistors and capacitors, in December 2002 had no material effect on the 2002 results for
the passive segment.
- 30 -
Active Components
2003
Year Ended December 31
2002
2001
Net Sales
Gross Profit Margin
$1,065,741,000
26.1%
$1,055,567,000
28.4%
$644,712,000
26.9%
Net sales of the active components business for year ended December 31, 2003 increased by $10.2 million,
or 1%, from sales of the comparable prior year period. The active segment continued to experience pricing pressure
in 2003, especially during the first half of the year. Sales for the first half of 2003 actually decreased from the
comparable 2002 period, primarily as a result of the SARS outbreak in Asia where Siliconix sells approximately
75% of its total sales. The modest revenue growth for the year was fueled by a significant rebound in Asian
business during the second half, driven by demand for computer components and by distributors restocking
inventories. Gross margins were 26.1% for the year ended December 31, 2003 as compared to 28.4% for the prior
year. Margins were negatively impacted by product mix changes at Siliconix, where there was a higher share of
commodity products as compared to the comparable prior year periods. Also, because of capacity constraints that it
has begun to experience, Siliconix made greater use of subcontractors during 2003, which has the effect of driving
down margins. Siliconix(cid:146)s net sales for 2003 were $392.1 million, compared to $372.9 million in 2002, a 5%
increase, and its gross profit margins declined from 31% for 2002 to 29% for 2003.
Net sales of the active components business for the year ended December 31, 2002 increased by $410.9
million or 63.7% from comparable sales of the prior year. As detailed below, 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. It also reflects sales recovery at our existing
semiconductor operations that began in 2002. 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 Siliconix and to a lesser extent at our
other semiconductor operations. Siliconix(cid:146)s net sales for 2002 were $372.9 million as compared to $305.6 million
in 2001, a 22.1% increase, and its gross profit margins rose from 25% for 2001 to 31% for 2002.
Revenues in the active segment for 2002 included revenues of $350.9 million from the Infineon infrared
business and General Semiconductor, compared to revenues of $82.7 million 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%.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses for the year ended December 31, 2003 were 17.6% of net
sales as compared to 17.1% of net sales for the prior year. This increase was mainly due to the costs associated with
the acquisition and integration of BCcomponents. Our continuing cost reduction initiatives referred to above also
target selling, general, and administrative costs and offset, in part, the acquisition related increases in SG&A
margins.
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 higher percentage and amount in 2002 was due
primarily to acquisition activity.
- 31 -
Restructuring and Severance Costs
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 include the closing of facilities and the termination of employees. Beginning January 1, 2003,
restructuring costs have been accounted for under SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities. This statement requires that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Because costs are recorded based upon estimates, actual expenditures for
the restructuring activities may differ from the initially recorded costs. If the initial estimates are 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 our restructuring through lower labor costs and other
operating expenses in future periods.
We recorded restructuring and severance costs for the year ended December 31, 2003 of $29.6 million,
$28.6 million of which was workforce reduction expense and $1.0 million of which was fixed asset impairment.
The workforce reduction expense was comprised of termination costs for 708 employees in Europe, Asia and the
United States. Through the end of 2003, we paid $14.2 million of these workforce reduction costs, corresponding to
the termination of 653 employees. The balance of workforce reduction expense remaining at December 31, 2003 is
expected to be paid by the end of 2004. The fixed asset impairment related to facility closure. As a result of
restructuring activities initiated in 2003, we expect an annual increase in gross profit of approximately $10.4 million.
We recorded restructuring and severance costs for the year ended December 31, 2002 of $31.0 million, of
which $18.6 million was workforce reduction expense and $12.4 million was fixed asset impairment. The
workforce reduction expense was comprised of termination costs for 1,438 employees in Europe, Israel and the
United States. Through the end of 2003, we paid $16.5 million of these workforce reduction costs, corresponding to
the termination of 1,422 employees. The balance of workforce reduction expense remaining at December 31, 2003
is expected to be paid in 2004. The fixed asset impairment related to facility closure. We continue to realize annual
cost savings associated with restructuring activities initiated in 2002.
We recorded $61.9 million in restructuring and severance costs for the year ended December 31, 2001, of
which $40.9 million was workforce reduction expense and $21.0 million was fixed asset impairment. The workforce
reduction expense was comprised of termination costs for 5,663 employees in Europe, Israel and Asia. A balance of
$1.6 million of workforce reduction costs remaining at December 31, 2002 was paid in 2003. The fixed asset
impairment related to facility closure. We continue to realize annual cost savings associated with restructuring
activities initiated in 2001.
For additional detail on restructuring and severance costs, see Note 4 to our consolidated financial
statements.
Restructuring and severance costs are 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,
see Note 2 to our consolidated financial statements.
Interest Expense
Interest expense for the year ended December 31, 2003 increased by $9.1 million, as compared to the prior
year. This increase was primarily a result of debt issued or assumed in the various acquisitions made in 2002 and
the issuance in August 2003 of our $500 million principal amount 3-5/8% convertible subordinated notes due 2023,
net of debt repaid with the proceeds of these notes of $398 million. Acquisition related debt included, in particular
borrowings of $116 million under our revolving credit facility and the issuance of $105 million principal amount of
unsecured loan notes, currently bearing interest at LIBOR plus 1.5%, in connection with the BCcomponents
acquisition in December 2002. The debt we repaid with the proceeds of our 3-5/8% notes included approximately
$171 million principal amount of General Semiconductor(cid:146)s 5.75% convertible notes, approximately $97 million
accreted principal amount of Liquid Yield Option(cid:153) Notes (LYONs) and $130 million in borrowings under our
revolving credit facility.
- 32 -
Interest expense for the year ended December 31, 2002 increased by $11.9 million 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.
Other Income (Expense)
We recorded a loss of $9.9 million for extinguishment of debt during the year ended December 31, 2003 on
the redemption of $171 principal amount of the General Semiconductor notes and the repurchase of $97.0 million in
accreted principal amount of our LYONs. Also during 2003, we recorded a gain of $33.9 million on the receipt of
insurance proceeds in excess of book value on account of the destruction of the thin film resistor facility of our
Electro-Films, Inc. subsidiary in Providence, Rhode Island. That facility has now been completely rebuilt into a
state-of-the-art production center. No comparable losses or gains were recorded in the prior year.
Excluding the items described above, other income was $2.3 million for the year ended December 31,
2003, as compared to $8.7 million for the prior year. This decrease was primarily due to higher foreign exchange
losses in 2003. Foreign exchange losses of $5.2 million were reported for 2003 as compared to foreign exchange
losses of $0.8 million for the comparable prior year period. In 2003, we also had losses of $2.5 million on the
disposal of property and equipment, compared to losses of $0.3 million in 2002. Interest income decreased by $0.7
million for the year ended December 31, 2003 compared to the prior year, primarily due to lower interest rates. We
recognized a gain on expiration of an interest rate swap of $3.8 million in 2003, compared to a loss on ineffective
interest rate swaps of $0.1 million in 2002. Additionally, 2002 included other income of approximately $1.4 million
received from the Chinese government as an incentive for being a foreign partner in China.
Other income for the year ended December 31, 2002 was $8.7 million as compared to $12.7 million for the
prior year. 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.
Minority Interest
Minority interest in earnings decreased by $1.4 million for the year ended December 31, 2003 as compared
to the prior year, primarily due to the decrease in net earnings of Siliconix, of which we own 80.4%. Minority
interest increased by $5.6 million for the year ended December 31, 2002 as compared to the prior year, primarily
due to the increase in net earnings of Siliconix.
Income Taxes
The effective tax rate for the year ended December 31, 2003 was 24.8%, reflecting tax expense, as
compared to 16.9% for the prior year, reflecting a tax benefit. The effective tax rate in 2003 reflects the fact that we
could not recognize for accounting purposes the tax benefit of losses incurred in certain jurisdictions, although these
losses are available to offset future taxable income. Under applicable accounting principles, we may not recognize
deferred tax assets for loss carryforwards in jurisdictions where there is a recent history of cumulative losses, where
there is no taxable income in the carryback period, where there is insufficient evidence of future earnings to
overcome the loss history and where there is no other positive evidence, such as the likely reversal of temporary
timing differences, that would result in the utilization of loss carryforwards for tax purposes.
We enjoy favorable tax rates on our income in Israel from specific approved projects. The low rates, which
generally are available for a period of ten or fifteen years, ordinarily result in greater earnings than what they would
be if the Israeli income was subject to statutory United States tax rates. However, due to losses reported in Israel, the
low rates did not improve net earnings for 2003 and 2002, respectively.
- 33 -
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 (cid:147)Overview-Israeli
Government Incentives(cid:148) 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.
Financial Condition and Liquidity
Cash and cash equivalents were $556 million at December 31, 2003, of which $279 million belonged to
Of the remaining amount of $277 million, approximately $180 million is held by our non-U.S.
Siliconix.
subsidiaries.
Our financial condition at December 31, 2003, continued to be strong, with a current ratio (current assets to
current liabilities) of 2.8 to 1, compared with a ratio of 2.6 to 1 at December 31, 2002. Our ratio of long-term debt,
less current portion, to stockholders(cid:146) equity was 0.33 to 1 at December 31, 2003, compared to a ratio of 0.30 to 1 at
December 31, 2002. The increase in long-term debt ratio from December 31, 2002 reflects the debt issued in the
third quarter of 2003, net of debt repaid.
Cash flows from operations were $255.8 million for the year ended December 31, 2003 as compared to
$366.9 million for the year ended December 31, 2002. During 2003, accounts receivable attributable to our existing
businesses and inventory levels continued to decline as a result of the lingering effects of the business slowdown
that began in 2001, although the drop was substantially less pronounced than in the prior year. The increase in
accounts receivable at December 31, 2003 versus December 31, 2002 was primarily due to the net sales of
BCcomponents, which was acquired in December 2002. Net purchases of property and equipment for the year
ended December 31, 2003 were $126.6 million, as compared to $110.1 million in the prior year. The increase was
primarily attributable to spending to expand capacity in the active business and to shift manufacturing to low labor
cost regions in the passive business. We used $278.7 million 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. Purchase of businesses, net of cash acquired,
of $41.2 million, for the year ended December 31, 2003 represents payments made related to liabilities assumed
from previous acquisitions.
Our debt levels have increased significantly since 2000. This is primarily attributable to acquisition
activity. Additionally, in 2003, we issued $500 million of convertible subordinated notes, using a majority of the
proceeds to repay other higher interest rate debt.
In connection with the acquisition of BCcomponents in December 2002, we issued $105 million principal
amount of floating rate unsecured loan notes due 2102. The notes bear interest at LIBOR plus 1.5% through
December 31, 2006 and at LIBOR thereafter. The interest payable on the notes may be further reduced to 50% of
LIBOR after December 31, 2010 if the price of Vishay common stock trades above a specified target price, as
provided in the notes. The notes are subject to a put and call agreement under which the holders may at any time put
the notes to us in exchange for 6,176,471 shares of Vishay common stock in the aggregate, and we may call the
notes in exchange for cash or for shares of Vishay common stock after 15 years from the date of issuance.
- 34 -
On August 6, 2003, we sold $450 million aggregate principal amount of 3-5/8% convertible subordinated
notes due 2023 and granted the initial purchasers an option to purchase, within 30 days of the date of the offering
memorandum relating to the notes, an additional $50 million of the notes. This option was exercised, and the
additional $50 million of notes was issued on September 3, 2003. The notes will pay interest semi-annually.
Holders may convert their notes into shares of Vishay common stock, subsequent to the occurrence of certain
conditions that had not occurred as of December 31, 2003, at a conversion price of $21.28 per share. This
conversion price is the equivalent to a conversion rate of 46.9925 shares per $1,000 principal amount of notes. The
notes are subordinated in right of payment to all of our existing and future senior indebtedness and are effectively
subordinated to all existing and future liabilities of its subsidiaries. The notes will be redeemable at our option
beginning August 1, 2010 at a redemption price equal to 100% of the principal amount plus accrued and unpaid
interest, if any. Holders of the notes will have the right to require us to repurchase all or some of their notes at a
purchase price equal to 100% of their principal amount of the notes, plus accrued and unpaid interest, if any, on
August 1, 2008, August 1, 2010, August 1, 2013 and August 1, 2018. In addition, holders of the notes will have the
right to require us to repurchase all or some of their notes upon the occurrence of certain events constituting a
fundamental change. On any required repurchase, we may choose to pay the purchase price in cash or shares of
Vishay common stock or any combination of cash and Vishay common stock. The proceeds of the offering of these
convertible subordinated notes were used to repay other outstanding debt, as well as general corporate purposes.
The early extinguishment of the LYONs and the General Semiconductor notes, described below, resulted in a pretax
loss of $9.9 million in the third quarter of 2003. It is anticipated that the early extinguishment will reduce interest
expense by $3.5 million per year going forward.
We used approximately $130 million of the proceeds of the offering of the convertible subordinated notes
to repay amounts outstanding under our revolving credit facility. At the same time, we agreed with the lenders
under this facility to an amendment and restatement of the agreement governing the facility. The maximum
availability under the facility, in light of our anticipated liquidity needs, was changed from $500 million to $400
million, and the final maturity of the facility was extended from June 2005 to May 2007. The restatement decreases
our minimum tangible net worth requirement to $850 million plus 50% of net income (without offset for losses) and
75% of net proceeds of equity offerings from July 1, 2003, eliminates the covenant on minimum earnings before
interest and tax, permits securitization of up to $200 million of non-U.S. accounts receivable, allows for the release
of all collateral (other than subsidiary stock and pledges by the Company and its subsidiaries of intercompany notes)
under certain circumstances and creates an event of default upon the occurrence of a fundamental change as defined
under our convertible subordinated notes. At December 31, 2003, there were no borrowings outstanding under this
credit facility. Our tangible net worth at the end of 2003 stood at $904 million, which is $45 million more than the
minimum required under the related credit facility covenant.
We used approximately $97.4 million of the proceeds of the offering of the convertible subordinated notes
to fund the purchase of approximately $97.0 million accreted principal amount ($165.0 million face amount) of our
Liquid Yield Option(cid:153) Notes (LYONs).
Pursuant to the terms of the LYONs, on June 4, 2004, the remaining
holders of the LYONs will have the right to (cid:147)put(cid:148) these notes to us for an aggregate purchase price of $235 million.
Holders may also put these notes to us on June 4, 2006, June 4, 2011, and June 4, 2016 at various prices set forth in
the notes. If these notes are put to us, we expect to be able to utilize our revolving credit facility or Vishay common
stock to finance the repurchase.
We used approximately $176.6 million of the proceeds of the offering of the convertible subordinated notes
to fund principal and premium in connection with the redemption of all of the outstanding 5.75% convertible
subordinated notes due 2006 of our General Semiconductor subsidiary. Prior to redemption, there was $171 million
principal amount of the General Semiconductor notes outstanding. The notes were redeemed at a price of 103.286%
of their principal amount, plus accrued but unpaid interest to the date of redemption of $2.3 million.
- 35 -
Commercial Commitments
We maintain a secured revolving credit facility of $400 million. As of December 31, 2003, we had no
amounts outstanding under the revolving credit facility. Letters of credit totaling $6.1 million, were issued under the
revolving credit facility at December 31, 2003. At December 31, 2003, $393.9 million was available under the
credit facility.
Borrowings under the revolving credit facility are secured by pledges of stock in certain significant
subsidiaries and certain guarantees by significant subsidiaries. The subsidiaries would be required to perform under
the guarantees in the event that Vishay failed to make principal or interest payments under the revolving credit
facility. If any subsidiary were to borrow under the credit facility, Vishay would provide a similar guarantee with
respect to the subsidiary. The credit facility restricts us from paying cash dividends and requires us to comply with
other covenants, including the maintenance of specific financial ratios.
At December 31, 2003, we had committed and uncommitted short-term credit lines with various U.S. and
foreign banks aggregating approximately $69 million, of which approximately $51 million was unused.
Contractual Commitments
As of December 31, 2003 we had contractual obligations as follows:
Payments due by period
(in thousands)
Long-term debt
Operating leases
Expected pension funding
Estimated costs to complete
construction in progress
Tantalum purchases
Total
Total
$ 837,888
75,250
10,000
14,500
280,500
$1,218,138
Less than 1
year
$
1,282
24,106
10,000
14,500
103,800
$ 153,688
1-3 years
4-5 years
$ 1,569
32,779
-
-
176,700
$211,048
833
$
14,774
-
-
-
$ 15,607
After 5
years
$834,204
3,591
-
-
-
$837,795
Pursuant to the terms of the Liquid Yield Option(cid:153) Notes (LYONs), on June 4, 2004, the remaining holders
of the LYONs will have the right to (cid:147)put(cid:148) these notes to us for an aggregate purchase price of $235 million. Holders
may also put these notes to us on June 4, 2006, June 4, 2011, and June 4, 2016 at various prices set forth in the
notes. If these notes are put to us, we expect to be able to utilize our revolving credit facility or Vishay common
stock to finance the repurchase.
On December 31, 2003, the Company and Siliconix announced the signing of a memorandum of
understanding with Tower Semiconductor for a long-term manufacturing and supply arrangement between Siliconix
and Tower. Pursuant to the terms of the memorandum of understanding, Siliconix would place with Tower orders
valued at approximately $200 million for the purchase of semiconductor wafers to be manufactured in Tower(cid:146)s Fab
1 over a seven to ten year period, of which approximately $53 million would be guaranteed and would be delivered
over the three year period starting at the first anniversary of the definitive agreement. Siliconix would advance to
Tower $20 million to be used for the purchase of additional equipment required to satisfy Siliconix(cid:146)s orders, which
would be credited towards the purchase price of the wafers. The transaction is subject to the approval of both
companies(cid:146) boards of directors, Tower(cid:146)s lending bank and the Israeli investment center and to the negotiation of
definitive documentation. While there can be no assurances that a definitive agreement will be reached, Vishay and
Siliconix expect a definitive agreement to be signed during the first half of 2004. If a definitive agreement is not
reached, Vishay and Siliconix will have no commitments related to this memorandum of understanding.
- 36 -
Inflation
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.
Recent Accounting Pronouncements
In November 2002, the Emerging Issues Task Force (EITF) issued EITF Issue No. 00-21, Revenue
Arrangements with Multiple Deliverables, which provides guidance on the timing and method of revenue
recognition for sales arrangements that include the delivery of more than one product or service. EITF 00-21 is
effective prospectively for arrangements entered into in fiscal periods beginning after June 15, 2003. The adoption
of EITF 00-21 did not have a material impact on our consolidated financial statements.
In April 2002, the Financial Accounting Standards Board ((cid:147)FASB(cid:148)) 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 No. 145 were adopted on January 1, 2003. Our early extinguishment of debt in 2003 was
accounted for and presented in our financial statements pursuant to the requirements of SFAS No. 145.
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 No. 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(cid:146)s commitment to an exit plan. The provisions of SFAS No. 146 were
adopted for our exit or disposal activities initiated after December 31, 2002.
In November 2002, the FASB issued Interpretation No. 45, Guarantor(cid:146)s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB
Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34 ((cid:147)FIN 45(cid:148)). The interpretation requires
that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it
assumes under that obligation. This interpretation is intended to improve the comparability of financial reporting by
requiring identical accounting for guarantees issued with separately identified consideration and guarantees issued
without separately identified consideration. The recognition and measurement provisions of FIN 45 are applicable
to guarantees issued or modified after December 31, 2002. The future impact will depend upon whether Vishay
enters into or modifies any material guarantee arrangements.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition to SFAS No. 123(cid:146)s fair value method of accounting for stock-based
employee compensation. We have made the additional disclosures required by SFAS No. 148. We are evaluating
the potential impact of adopting the fair value method of accounting for our stock-based employee compensation.
In January 2003, the FASB issued Interpretation No. 46 ((cid:147)FIN 46(cid:148)), Consolidation of Variable Interest
Entities, an interpretation of ARB 51. The primary objectives of this interpretation are to provide guidance on the
identification of entities for which control is achieved through means other than through voting rights ((cid:147)variable
interest entities(cid:148)) and how to determine when and which business enterprise (the (cid:147)primary beneficiary(cid:148)) should
consolidate the variable interest entity. This new model for consolidation applies to an entity in which either (i) the
equity investors (if any) do not have a controlling financial interest; or (ii) the equity investment at risk is
insufficient to finance that entity’s activities without receiving additional subordinated financial support from other
parties. In addition, FIN 46 requires that the primary beneficiary, as well as all other enterprises with a significant
variable interest in a variable interest entity, make additional disclosures. Certain disclosure requirements of FIN 46
were effective for financial statements issued after January 31, 2003. In December 2003, the FASB issued FIN 46
(revised December 2003), Consolidation of Variable Interest Entities ((cid:147)FIN 46-R(cid:148)) to address certain FIN 46
implementation issues. The effective dates and impact of FIN 46 and FIN 46-R are as follows: (i) Special-purpose
- 37 -
entities ((cid:147)SPEs(cid:148)) created prior to February 1, 2003: We must apply either the provisions of FIN 46 or early adopt the
provisions of FIN 46-R at the end of the first interim or annual reporting period ending after December 15, 2003. (ii)
Non-SPEs created prior to February 1, 2003: We are required to adopt FIN 46-R at the end of the first interim or
annual reporting period ending after March 15, 2004. (iii) All entities, regardless of whether an SPE, that were
created subsequent to January 31, 2003: The provisions of FIN 46 were applicable for variable interests in entities
obtained after January 31, 2003. The adoption of the provisions applicable to SPEs and all other variable interests
obtained after January 31, 2003 did not have a material impact on our financial position, results of operations, or
liquidity. We do not expect the adoption of FIN 46-R provisions applicable to Non-SPEs created prior to February 1,
2003, to have a material impact on our financial position, results of operations or liquidity.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments
and Hedging Activities, which is effective for contracts entered into or modified after June 30, 2003, with certain
exceptions, and for hedging relationships designated after June 30. The guidance is to be applied prospectively.
The adoption of this standard did not have a material impact on our financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity. The Standard specifies that instruments within its scope embody
obligations of the issuer and that, therefore, the issuer must classify them as liabilities. We have not issued any such
financial instruments.
In December 2003, the FASB issued a revision to SFAS No. 132, Employers(cid:146) Disclosures about Pensions
and Other Postretirement Benefits. The revised standard retains the disclosure requirement contained in the original
standard and requires additional disclosures about the assets, obligations, cash flows and net period cost of defined
pension plans and other defined benefit postretirement plans. We adopted the disclosure requirements required by
SFAS No. 132 (revised 2003) for our U.S. pension and other postretirement plans. As permitted by SFAS No. 132,
certain disclosures regarding non-U.S. pension plans and estimated future benefit payments for both U.S. and non-
U.S. pension and other postretirement benefit plans will be delayed until 2004.
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 (cid:147)forward-looking(cid:148) 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.
Factors related to our business generally
Our business is cyclical and the recent decline in demand in the electronic component industry may resume
and may become more pronounced.
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, lower average selling
prices, and a material and adverse impact on our results of operations. This decline was primarily attributable to a
slowing of growth in the personal computer and cellular telephone product markets. We have seen indications of
improvements in the economy and electronic and semiconductor component industry and expect improvements in
2004. However, such improvements in the economy and the electronic and semiconductor component industry may
not materialize. The slowdown may resume and may become more pronounced. A 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.
- 38 -
We have incurred and may continue to incur restructuring costs.
To remain competitive, particularly when business conditions are difficult, we attempt to reduce our cost structure
through restructuring activities. This includes acquisition-related restructuring, where we attempt to streamline the
operations of companies we acquire and achieve synergies between our acquisitions and our existing business. It
also includes restructuring our existing businesses, where we seek to eliminate redundant facilities and staff
positions and move operations, where possible, to jurisdictions with lower labor costs. In 2002, we recorded
restructuring costs of approximately $48 million related to acquisitions and $31 million related to our existing
businesses. We incurred approximately $29.6 million of additional restructuring and severance costs in 2003 and
expect to continue to incur such expenses during 2004.
In the past we have grown through acquisitions but this may not continue.
Our long-term historical growth in revenues and net earnings has resulted in large part from our strategy of
expansion through acquisitions. We cannot assure you, however, that we will identify or successfully complete
transactions with suitable acquisition candidates in the future. We also cannot assure you that acquisitions that we
complete in the future 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.
Our debt levels have recently increased, which could adversely affect the perception in the financial markets
of our financial condition.
Our outstanding debt increased from approximately $141 million at the end of 2000 to approximately $838 million
at the end of 2003. The marketplace could react negatively to our current debt levels which in turn could affect our
share price and also make it more difficult for us to obtain financing in the future.
In June 2004, holders of our Liquid Yield Option(cid:153) Notes (LYONs) will have the right to (cid:147)put(cid:148) these notes to us at
an aggregate price of approximately $235 million. We believe that, if necessary, we will have adequate cash
resources to finance the purchase of any LYONs that are put to us. Also, we may elect to pay all or part of the
purchase price for the LYONs that are put to us in shares of our common stock. Nevertheless, our obligation to
purchase the LYONs in June 2004 could be a cause of concern in the financial markets.
To remain successful, we must continue to innovate.
Our future operating results are dependent on our ability to continually develop, introduce and market new and
innovative products, to modify existing products, to respond to technological change and to customize certain
products to meet customer requirements. There are numerous risks inherent in this process, including the risks that
we will be unable to anticipate the direction of technological change or that we will be unable to develop and market
new products and applications in a timely fashion to satisfy customer demands. If this occurs, we could lose
customers and experience adverse effects on our financial condition and results of operations.
Future acquisitions could require us to issue additional indebtedness or equity.
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 acquisition financing 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 the lenders(cid:146) consent for certain additional debt financing and to comply with other
covenants including the application of specific financial ratios. We are also 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.
- 39 -
Our results are sensitive to raw material availability, quality and cost.
Many of our products require the use of raw materials that are produced in only a limited number of regions around
the world, may be available from only a limited number of suppliers, and may be subject to price volatility. We are
a major consumer of the world(cid:146)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. We also utilize palladium, a metal used
to produce multi-layered ceramic capacitors, which is currently found primarily in South Africa and Russia.
Palladium is a commodity product subject to price volatility. Our results of operations may be materially and
adversely affected if we have difficulty obtaining these raw materials, the quality of available raw materials
deteriorates or there are significant price increases for these raw materials. For periods in which the prices of these
raw materials are rising, we may be unable to pass on the increased cost to our customers which would result in
decreased margins for the products in which they are used. For periods in which the prices are declining, we may be
required to write down our inventory carrying cost of these raw materials, since we record our inventory at the lower
of cost or market. Depending on the extent of the difference between market price and our carrying cost, this write-
down could have a material adverse effect on our net earnings. We recorded write-downs of our tantalum inventory
in these years of $52.0 million, $25.7 million, and $5.4 million in 2001, 2002, and 2003 respectively, and write-
downs of our palladium inventory in these years of $18.0 million, $1.7 million, and $1.6 million, respectively. Also,
we took charges against our contractual commitments to purchase tantalum of $106.0 million and $11.4 million in
2002 and 2003, respectively.
From time to time there have been short-term market shortages of raw materials. While these shortages have not
historically adversely affected our ability to increase production of products containing tantalum and palladium, they
have historically resulted in higher raw material costs for us. We cannot assure you that any of these market
shortages in the future would not adversely affect our ability to increase production, particularly during periods of
growing demand for our products.
Our backlog is subject to customer cancellation.
As of December 31, 2003, our backlog was $532 million. Many of the orders that comprise our backlog may be
canceled by our customers without penalty. Our customers may on occasion double and triple order components
from multiple sources to ensure timely delivery when backlog is particularly long. They often cancel orders when
business is weak and inventories are excessive, a situation that we have experienced in the recent 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.
We face intense competition in our business, and we market our products to an increasingly concentrated
group of customers.
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 electronics 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.
Our customers have become increasingly concentrated in recent years, and as a result, their buying power has
increased and they have had greater ability to negotiate favorable pricing. This trend has adversely affected our
average selling prices, particularly for commodity components.
- 40 -
We may not have adequate facilities to satisfy future increases in demand for our products.
Our business is cyclical and in periods of a rising economy, we may experience intense demand for our products.
During such periods, we may have difficulty expanding our manufacturing to satisfy demand. Factors which could
limit such expansion include delays in procurement of manufacturing equipment, shortages of skilled personnel and
capacity constraints at our facilities. If we are unable to meet our customers(cid:146) requirements and our competitors
sufficiently expand production, we could lose customers and/or market share. This loss could have an adverse effect
on our financial condition and results of operations.
Future changes in our environmental liability and compliance obligations may harm our ability to operate or
increase costs.
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 or product packaging and responsibility for
disposal of products or product packaging. We establish reserves for specifically identified potential environmental
liabilities which we believe 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. In addition, 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 renegotiations.
Our products may experience a reduction in product classification levels under various military
specifications.
We have qualified certain of our products under various military specifications, approved and monitored by the
United States Defense Electronic Supply Center, and under certain European military specifications. These products
are assigned certain classification levels. 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 governmental agencies. If
any of our products fails to meet the requirements of the applicable classification level, that product(cid:146)s classification
may be reduced to a lower level. A decrease in the classification level for any of our products with a military
application could have an adverse impact on the net sales and earnings attributable to that product.
Factors relating to Vishay(cid:146)s operations outside the United States
We obtain substantial benefits by operating in Israel, but these benefits may not continue.
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 had the effect of
increasing our net earnings, although this was not the case in 2003 and 2002. Also, we have benefited from
employment incentive grants made by the Israeli government. Recently, the Israeli government suspended payment
on one of these grants after we were forced to lay off a significant number of employees as a result of the current
economic downturn. Although we reached agreement with the Israeli government to resume payment on this grant,
there can be no assurance that we will maintain our eligibility for this or other existing project grants. There can also
be no assurance in the future the Israeli government will continue to offer new grant and tax 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. 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.
- 41 -
We attempt to improve profitability by operating in countries in which labor costs are low, but the shift of
operations to these regions may entail considerable expense.
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, such as Israel, Mexico, Portugal, the
Czech Republic, Malaysia, the Republic of China (Taiwan) and the People(cid:146)s Republic of China. 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 low labor cost regions. This under-utilization 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, and 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 our employees in high labor cost countries.
We are subject to the risks of political, economic and military instability in countries outside the United States in
which we operate.
We have operations outside the United States, and approximately 74% of our revenues during 2003 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.
Our business was affected by the outbreak of SARS in 2003 and the effects of that outbreak may linger.
The outbreak of severe acute respiratory syndrome, or SARS, that began in the People(cid:146)s Republic of China
adversely affected our business during the first six months of 2003, particularly in Asia where we derived
approximately 36% and 38% of our revenue in 2003 and 2002, respectively. This impact included disruptions in the
operations of our customers, a slowdown in customer orders and reduced sales in certain end markets. If an outbreak
of SARS or like disease were to recur on a comparable scale in Asia, we could experience similar disruptions to our
business.
General Economic and Business Factors
In addition to the factors relating specifically to our business, a variety of other factors relating to general conditions
could cause actual results, performance, or achievements to differ materially from those expressed in any of our
forward-looking statements. These factors include:
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
(cid:120)(cid:3)
overall economic and business conditions;
competitive factors in the industries in which we conduct our business;
changes in governmental regulation;
changes in tax requirements, including tax rate changes, new tax laws, and revised tax law interpretations;
changes in generally accepted accounting principles or interpretations of those principles by governmental
agencies and self-regulatory groups;
interest rate fluctuations, foreign currency rate fluctuations, and other capital market conditions; and
economic and political conditions in international markets, including governmental changes and restrictions
on the ability to transfer capital across borders.
Also, we operate in a continually changing business environment, and new factors emerge from time to time. Other
unknown and unpredictable factors also could have material adverse effects on our future results, performance, or
achievements.
- 42 -
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, 2003, there were no amounts outstanding under this facility. 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, 2003, 2002 and 2001 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
million 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 had a notional amount of $100 million
and required us to make payments to the counterparty at variable rates based on USD-LIBOR-BBA rates. This
agreement expired in 2003. At December 2002 and 2001, we paid a weighted average fixed rate of 5.77% and
received a weighted average variable rate of 1.40% and 1.93%, respectively. The fair value of our interest rate swap
agreements, based on current market rates, approximated a net payable of $3.3 million at December 31, 2002.
During the year ended December 31, 2003, we had a pre-tax gain of approximately $3.8 million related to the
expiration of the final swap agreement. During the years ended December 31, 2002 and 2001, we recorded pre-tax
losses of $3.7 million and $0.1 million, respectively, relating to an ineffective hedge for a portion of time relating to
an interest rate swap agreement (see Note 14 to our consolidated financial statements).
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 (cid:147)netting(cid:148) policy where subsidiaries pay
all intercompany balances within thirty days. As of December 31, 2003, 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 collectibility of accounts receivable.
- 43 -
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, 2003 and 2002.
Consolidated Statements of Operations -- for the years ended December 31, 2003, 2002 and 2001.
Consolidated Statements of Cash Flows -- for the years ended December 31, 2003, 2002 and 2001.
Consolidated Statements of Stockholders(cid:146) Equity -- for the years ended December 31, 2003, 2002
and 2001.
Notes to Consolidated Financial Statements.
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
Item 9A.
DISCLOSURE CONTROLS AND PROCEDURES
An evaluation was performed 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 CEO and CFO concluded that our disclosure controls and procedures are
effective as of the end of the fourth quarter of 2003, including for purposes of ensuring that all material information
required to be filed in this report has been made known to the Company(cid:146)s management, including the CEO and
CFO, in a timely fashion.
There has not been any change in our internal controls over financial reporting during the fourth quarter of
fiscal 2003 that has materially affected, or is reasonably likely to materially affect, the Company(cid:146)s internal control
over financial reporting.
- 44 -
Item 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
PART III
We have a code of ethics applicable to our chief executive officer, chief financial officer, principal
accounting officer or controller and financial managers. The text of this code has been posted on our website. To
view the code, go to our website at www.vishay.com, click on Company Info, then Investor Relations and then
Corporate Governance. You can obtain a printed copy of this code, free of charge, by contacting us at the following
address:
Corporate Investor Relations
Vishay Intertechnology, Inc
63 Lincoln Highway
Malvern, PA 19355-2143
It is the intention of the Company to satisfy the disclosure requirement under Item 10 of Form 8-K
regarding an amendment to, or a waiver from, a provision of this code by posting such information on our website,
at the aforementioned address and location.
Information required under this Item with respect to our Executive Officers is set forth in Part I, Item 4A
hereof under the caption, (cid:147)Executive Officers of the Registrant.(cid:148)
Other information required under this Item is contained in our definitive proxy statement, which will be
filed within 120 days of December 31, 2003, our most recent fiscal year, and is incorporated herein by reference.
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, 2003, our most recent fiscal year, and is incorporated herein by reference.
- 45 -
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table sets forth certain equity compensation plan information, as of December 31, 2003, with
respect to both equity compensation plans approved by security holders and equity compensation plans not approved
by security holders.
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
2,820,000
3,789,000
8,768,000
-
8,768,000
8,768,000
$12.51
$15.63
$18.65
$16.17
-
$16.17
$16.17
-
1,143,000
-
1,143,000
-
1,143,000
1,143,000
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
__________________
(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(cid:146)s acquisition of General
Semiconductor Inc. on November 2, 2001. See Note 12 to our consolidated financial statements
for further description of this plan.
Security Ownership of Certain Beneficial Owners and Management
Information required under this caption is contained in our definitive proxy statement, which will be filed
within 120 days of December 31, 2003, our most recent fiscal year, and is incorporated herein by reference.
- 46 -
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, 2003, our most recent fiscal year, and is incorporated herein by reference.
Item 14.
PRINCIPAL ACCOUNTANTS FEES AND SERVICES
Information required under this Item is contained in our definitive proxy statement, which will be filed
within 120 days of December 31, 2003, our most recent fiscal year, and is incorporated herein by reference.
Item 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PART IV
(1)
All Consolidated Financial Statements of the Company and its subsidiaries for
(a)
the year ended December 31, 2003 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)
Reports on Form 8-K:
(1)
On October 29, 2003, the Company filed a current report under Item 12 of Form
8-K, reporting the financial results of the Company for the quarter and nine-
months ended September 30, 2003.
(c)
Exhibits:
2.1
2.2
2.3
3.1
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(cid:146)s quarterly report on Form 10-Q
for the quarter ended June 30, 1995 (the (cid:147)1995 Form 10-Q(cid:148)). 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 (cid:147)1997 Form 10-
Q(cid:148)). 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.
- 47 -
3.2
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.8
10.9
Amended and Restated Bylaws of Registrant. Incorporated by reference to Exhibit 3.1 to the
Company(cid:146)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 the Company(cid:146)s current report on Form 8-K
filed on June 18, 2001 except that clause (x) of Section 5 thereof is corrected to read (cid:147)(x) 0.0625%
of the average LYON Market Price for the Five Day Period with respect to such Contingent
Interest Period and(cid:148).
Indenture, dated as of August 6, 2003, by and between Vishay Intertechnology, Inc. and Wachovia
Bank, National Association. Incorporated by reference to Exhibit 4.1 to the Company(cid:146)s
Registration Statement on Form S-3 (No. 333-110259) filed on November 5, 2003.
Vishay Intertechnology Section 162(m) Cash Bonus Plan. Incorporated by reference to Annex to
the Company(cid:146)s Proxy Statement, dated April 21, 2003, for its 2003 Annual Meeting of
Stockholders.
Second Amendment to Amended and Restated Vishay Intertechnology, Inc. Long Term Revolving
Credit Agreement and Consent, made as of July 31, 2003, by and among Vishay Intertechnology,
Inc., the Permitted Borrowers (as defined), the Lenders signatory thereto and Comerica Bank, as
Co-lead Arranger Co-Book Running Manager and Administrative agent, et al.
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(cid:146)s Registration Statement on
Form S-2 (No. 33-13833).
Vishay Intertechnology, Inc. 1997 Stock Option Program. Incorporated by reference to the
Company(cid:146)s Definitive Proxy Statement on Schedule 14A filed April 16, 1998.
Vishay Intertechnology, Inc. 1998 Stock Option Program. Incorporated by reference to the
Company(cid:146)s Definitive Proxy Statement on Schedule 14A filed April 16, 1998.
General Semiconductor, Inc. Amended and Restated 1998 Long-Term Incentive Plan as amended
on February 7, 2001. Incorporated by reference to Exhibit 10.9 to General Semiconductor(cid:146)s
annual report on Form 10-K for the year ended December 31, 2000.
Money Purchase Plan Agreement of Measurements Group, Inc. Incorporated by reference to
Exhibit 10(a)(6) to Amendment No. 1 to the Company(cid:146)s Registration Statement on Form S-7 (No.
2-69970).
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.
Incorporated by reference to Exhibit 10.10 to the Company(cid:146)s annual report on
Form 10-K for the year ended December 31, 2002.
10.10
Severance and General Release Agreement, dated November 4, 2003, between the Company and
Avi D. Eden.
10.11
Consulting and Non-Competition Agreement, dated November 4, 2003, between the Company
and Avi D. Eden.
21
Subsidiaries of the Registrant.
23.1
Consent of Independent Auditors.
- 48 -
31.1
31.2
32.1
32.2
Certification pursuant to Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Dr. Felix Zandman, Chief
Executive Officer.
Certification pursuant to Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Richard N. Grubb, Chief
Financial Officer.
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (cid:150) 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 (cid:150) Richard N. Grubb, Chief Financial Officer.
- 49 -
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this amended report to be signed on its behalf by the undersigned,
thereunto duly authorized.
VISHAY INTERTECHNOLOGY, INC.
March 15, 2004
/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 amended 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 15, 2004
March 15, 2004
March 15, 2004
March 15, 2004
March 15, 2004
March 15, 2004
/s/ Felix Zandman
Felix Zandman, Chairman
of the Board and Chief
Executive Officer
(Principal Executive Officer)
/s/ Richard N. Grubb
Richard N. Grubb, Executive Vice President,
Treasurer, and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Marc Zandman
Marc Zandman, Vice-Chairman
of the Board, President-Vishay Israel Ltd.
/s/ Gerald Paul
Gerald Paul, Director, President
and Chief Operating Officer
/s/ Phillipe Gazeau
Phillipe Gazeau, Director
/s/ Zvi Grinfas
Zvi Grinfas, Director
- 50 -
March 15, 2004
March 15, 2004
March 15, 2004
March 15, 2004
March 15, 2004
March 15, 2004
March 15, 2004
/s/ Eli Hurvitz
Eli Hurvitz, Director
/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
- 51 -
SUBSIDIARIES OF THE REGISTRANT
Exhibit 21
Note: Names of Subsidiaries are indented under name of Parent. Directors’ or other shares required by statute in
foreign jurisdictions and totaling less than 1% of equity are omitted.
Name
Vishay Americas, Inc.
Vishay Cera-Mite Inc.
Vishay EFI, Inc.
Vishay Infrared Components Inc.
Yosemite Investment, Inc.
North American Capacitor Company Indiana LLC
North American Capacitor Company Kentucky LLC
Vishay Intertechnology Asia PTE Ltd.
Vishay Japan K.K.
Vishay Hong Kong Ltd.
Vishay Korea Co. Ltd.
Vishay Taiwan
Vishay Pte. Ltd.
BCcomponents Taiwan Limited
Vishay Temic Semiconductor Acquisition Holding Corporation
Siliconix, Inc.
Siliconix Technology C.V.
Siliconix Technology B.V.
Siliconix Israel Ltd.
Shanghai Simconix Electronic Company Ltd.
Siliconix Ltd.
Siliconix Taiwan Ltd.
Siliconix, Ltd. Taiwan
Vishay Pte. Ltd. Singapore
Vishay Siliconix, LLC
Siliconix Sales Corp.
Siliconix Semiconductor, Inc.
General Semiconductor, Inc.
General Semiconductor International Corp.
General Semiconductor Japan, Ltd.
Jurisdiction
Delaware
Wisconsin
Rhode Island
California
Indiana
Indiana
Indiana
Singapore
Japan
Hong Kong
Korea
Taiwan
Singapore
Taiwan
Delaware
Delaware
Netherlands
Netherlands
Israel
China
England
Taiwan
Taiwan
Singapore
Delaware
U.S. Virgin Islands
Delaware
Delaware
New York
Japan
ATC Corp.
Century Components Inc.
General Semiconductor PSD (China) Holdings, Inc.
General Semiconductor (China) Co., Ltd.
GSI-General Semiconductor Ireland
GSI-General Semiconductor (Europe) Ltd.
General Semiconductor of Taiwan, Ltd.
General Semiconductor Korea Co., Ltd.
General Semiconductor France S.A.
General Semiconductor (Singapore) Pte. Ltd.
General Semiconductor Hongkong Ltd.
Delaware
Delaware
Delaware
China
Ireland
Ireland
Taiwan
Korea
France
Singapore
Hong Kong
Percentage of
Equity
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80.4%
100%
100%
100%
95.4%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50% by General
Semiconductor
International, 50% by
General
Semiconductor Inc.
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
- 52 -
SUBSIDIARIES OF THE REGISTRANT, continued
Name
General Semiconductor (UK) Ltd.
General Instrument Europe, N.V.
General Semiconductor (Deutschland) GmbH
Vishay BCcomponents Holdings Ltd.
BCcomponents Holdings B.V.
BCcomponents Lux Sarl
BCcomponents Holdings (Netherlands) B.V.
BCcomponents B.V.
BCcomponents International B.V.
BCcomponents SAS
BCcomponents Estate NV
BCcomponents NV
BCcomponents UK Ltd
Valen Ltd.
BCcomponents Shanghai Company, Ltd
BCcomponents South Europe SRL
Vishay Components India Pvt Ltd
BCcomponents Hong Kong Ltd.
BCcomponents China Ltd
BCcomponents Singapore Pte Ltd.
BCcomponents Trading (Shanghai) Co. Ltd
Nippon Vishay, K.K.
Vishay F.S.C., Inc.
Vishay VSH Holdings, Inc.
Vishay Roederstein Electronics, Inc.
Vishay Measurements Group, Inc.
Vishay Transducers Ltd.
JP Technologies Inc.
Sensortronica de Costa Rica, S.A.
Vishay BLH Inc.
Pharos De Costa Rica S.A.
Celtron Technologies, Inc.
High Goals Investments Limited
Billion Way Industrial Limited
UCC Investment Co. Ltd.
Triumph Electronics (Shanghai) Ltd.
Celtron Technologies (U.S.A.) Inc.
Celtron Technologies (Tianjin) Inc.
Vishay Israel Limited
Z.T.R. Electronics Ltd.
Vishay International Trade Ltd.
Dale Israel Electronics Industries, Ltd.
Draloric Israel Ltd.
V.I.E.C. Ltd.
Vishay Advance Technology, Ltd.
Vilna Equities Holding, B.V.
- 53 -
Jurisdiction
United Kingdom
Netherlands
Germany
Delaware
Netherlands
Luxembourg
Netherlands
Netherlands
Netherlands
France
Belgium
Belgium
United Kingdom
Hong Kong
China
Italy
India
Hong Kong
Hong Kong
Singapore
China
Japan
Barbados
Delaware
Delaware
Delaware
Delaware
Illinois
Costa Rica
Delaware
Costa Rica
Taiwan
British Virgin
Islands
Samoa
Samoa
China
California
China
Israel
Israel
Israel
Israel
Israel
Israel
Israel
Netherlands
Percentage of
Equity
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
95.8%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
68% by Celtron
U.S.A., 32% by UCC
Investment
100%
100%
100%
100%
100%
100%
100%
100%
SUBSIDIARIES OF THE REGISTRANT, continued
Name
Measurements Group (U.K.) Ltd.
Vishay Europe GmbH
BCcomponents Austria GmbH
BCcomponents Holding Gmbh
BCcomponents Beyschlag Gmbh
BCcomponents Vertriebs GmbH
Vishay Electronic GmbH
Roederstein Electronics Portugal Lda.
ECOMAL Deutschland GmbH
Grupo Da Medidas Iberica S.L.
ECOMAL Schweiz A.G.
ECOMAL Austria Ges.mbH
Klevestav-Roederstein Festigheter AB
Vishay Components, S.A.
ECOMAL Nederland BV
ECOMAL Belgium N.V.
ECOMAL Denmark A/S
ECOMAL Finland OY
ECOMAL France S.A.
ECOMAL S.r.O.
ECOMAL UK
Okab Roederstein Finland OY
Rogin Electronic S.A.
Roederstein-Hilfe-GmbH
Vishay Electronic SPOL S RO
Vishay S.A.
Ultronix, Inc.
Vishay Thin Film, Inc.
Vishay Techno Components Corp.
Tedea-Huntleigh B.V.
Tedea-Huntleigh International Ltd
T-H Technology Ltd
Vishay Measurements Group France, S.A.
T-H Industrial Properties Ltd
Tedea-Huntleigh Europe Ltd
Tedea-Huntleigh Sensortechnic GmbH
Tedea-Huntleigh, Inc.
Beijing Tedea-Huntleigh Electronics Co. Ltd
E-Sil Components Ltd.
Vishay Roederstein Limited
Vitramon Limited
Vishay Ltd.
Spectrol GmbH
Grued Corporation
Con-Gro Corp.
Gro-Con, Inc.
- 54 -
Jurisdiction
England & Wales
Germany
Austria
Germany
Germany
Germany
Germany
Portugal
Germany
Spain
Switzerland
Austria
Sweden
Spain
Netherlands
Belgium
Denmark
Finland
France
Czech Republic
England
Finland
Spain
Germany
Czech Republic
France
Delaware
New York
Delaware
Netherlands
Israel
Israel
France
Israel
England
Germany
California
China
England & Wales
England
England
England & Wales
Germany
Delaware
Delaware
Delaware
Percentage of
Equity
100%
85.9% by Vishay
Israel; 13.1% by
Vishay; 1% by Dale
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
44.4%
33%
100%
100%
99.8%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
SUBSIDIARIES OF THE REGISTRANT, continued
Name
Angstrohm Precision, Inc.
Angstrohm Holdings, Inc.
Sfernice, Ltd.
Heavybarter, Unlimited
Dale ACI Components
Vishay Nobel AB
AB Givareteknik
Vishay Nobel Ltd.
Vishay Nobel Oy AB
Vishay Nobel SARL
Vishay Nobel AS
Measurements Group GmbH
Facility Services, GmbH
Vishay Semiconductor GmbH
Vishay Semiconductor Itzehoe GmbH
Vishay (Phils.) Inc.
Vishay Semiconductor GES.M.B.H.
Shanghai Vishay Discrete Semiconductors Ltd.
Shanghai Vishay Opto Semiconductors Ltd.
Vishay Hungary
Vishay Semiconductor Malaysia Sdn Bhd
Vishay Dale Holdings, Inc.
Vishay Dale Electronics, Inc.
Components Dale de Mexico S.A. de C.V.
Electronica Dale de Mexico S.A. de C.V.
Vishay Electronic Components Asia Pte.,Ltd.
Vishay Bradford Electronics, Inc.
Vishay Angstrohm Precision, Inc.
Vishay Sprague Holdings Corp.
Vishay Service Center, Inc.
Vishay Sprague Sanford, Inc.
Vishay Sprague, Inc.
Vishay Sprague Canada Holdings Inc.
Sprague Electric of Canada Limited
Sprague France S.A.
Vishay Sprague Palm Beach, Inc.
Vishay Sprague Limited
Vishay Tansitor Electronics, Inc.
Tansitor Barbados Limited
Vishay Acquisition Holdings Corp.
Vishay Vitramon, Inc.
Vishay Do Brazil Ltda.
Jurisdiction
Delaware
Delaware
England & Wales
England & Wales
England
Sweden
Sweden
England
Finland
France
Norway
Germany
Germany
Germany
Germany
Philippines
Austria
China
China
Hungary
Malaysia
Delaware
Delaware
Mexico
Mexico
Singapore
Delaware
Maryland
Delaware
Massachusetts
Maine
Delaware
Canada
Canada
France
Delaware
England
Delaware
Barbados
Delaware
Delaware
Brazil
Percentage of
Equity
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
- 55 -
I, Dr. Felix Zandman, certify that:
CERTIFICATIONS
Exhibit 31.1
1.
2.
3.
4.
5.
6.
I have reviewed this annual report on Form 10-K of Vishay Intertechnology, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
The registrant(cid:146)s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this annual report is being prepared;
[Intentionally omitted]
Evaluated the effectiveness of the registrant(cid:146)s disclosure controls and procedures and presented in this annual
report our conclusions about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant(cid:146)s internal control over financial reporting that occurred
during the registrant(cid:146)s most recent fiscal quarter (the registrant(cid:146)s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant(cid:146)s internal control
over financial reporting; and
The registrant(cid:146)s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant(cid:146)s auditors and the audit committee of the registrant(cid:146)s board of directors (or
persons performing the equivalent functions):
a)
b)
All significant deficiencies and materially weaknesses in the design or operation of internal control over
financial reporting which could adversely affect the registrant(cid:146)s ability to record, process, summarize and
report financial data and have identified for the registrant(cid:146)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(cid:146)s internal controls; and
The registrant(cid:146)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 15, 2004
/s/ Dr. Felix Zandman
Dr. Felix Zandman
Chief Executive Officer
- 56 -
I, Richard N. Grubb, certify that:
CERTIFICATIONS
Exhibit 31.2
1.
2.
3.
4.
5.
6.
I have reviewed this annual report on Form 10-K of Vishay Intertechnology, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
The registrant(cid:146)s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this annual report is being prepared;
[Intentionally omitted]
Evaluated the effectiveness of the registrant(cid:146)s disclosure controls and procedures and presented in this annual
report our conclusions about the effectiveness of the disclosure controls and procedures based on our
evaluation as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant(cid:146)s internal control over financial reporting that occurred
during the registrant(cid:146)s most recent fiscal quarter (the registrant(cid:146)s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant(cid:146)s internal control
over financial reporting; and
The registrant(cid:146)s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant(cid:146)s auditors and the audit committee of the registrant(cid:146)s board of directors (or
persons performing the equivalent functions):
a)
b)
All significant deficiencies and materially weaknesses in the design or operation of internal control over
financial reporting which could adversely affect the registrant(cid:146)s ability to record, process, summarize and
report financial data and have identified for the registrant(cid:146)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(cid:146)s internal controls; and
The registrant(cid:146)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 15, 2004
/s/ Richard N. Grubb,
Richard N. Grubb,
Chief Financial Officer
- 57 -
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Vishay Intertechnology, Inc. (the (cid:147)Company(cid:148)) on Form 10-K for the year
ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the (cid:147)Report(cid:148)),
I, Dr. Felix Zandman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as
adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
/s/ Dr. Felix Zandman
Dr. Felix Zandman
Chief Executive Officer
March 15, 2004
- 58 -
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Vishay Intertechnology, Inc. (the (cid:147)Company(cid:148)) on Form 10-K for the year
ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the (cid:147)Report(cid:148)),
I, Richard N. Grubb, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as
adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
The Report fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
/s/ Richard N. Grubb
Richard N. Grubb
Chief Financial Officer
March 15, 2004
- 59 -
Vishay Intertechnology, Inc.
Consolidated Financial Statements
Years ended December 31, 2003, 2002, and 2001
Report of Independent Auditors ................................................................................................................................ F-1
Contents
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(cid:146) Equity..................................................................................................... F-6
Notes to Consolidated Financial Statements.............................................................................................................. F-8
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, 2003 and 2002, and the related consolidated statements of operations, cash flows, and
stockholders(cid:146) equity for each of the three years in the period ended December 31, 2003. These financial
statements are the responsibility of the Company(cid:146)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, 2003 and 2002, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended
December 31, 2003, 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.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 5, 2004
F-1
Vishay Intertechnology, Inc.
Consolidated Balance Sheets
(In thousands, except per share and share amounts)
December 31
2003
2002
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, less allowances of $13,704 and $18,172
Inventories:
$
555,540
374,240
$
339,938
343,511
Finished goods
Work in process
Raw materials
Deferred income taxes
Prepaid expenses and other current assets
Total current assets
Property and equipment (cid:150) at cost:
Land
Buildings and improvements
Machinery and equipment
Construction in progress
Less allowances for depreciation
171,447
154,532
189,413
48,471
143,610
1,637,253
219,769
142,846
191,451
47,297
188,881
1,473,693
110,021
375,178
1,644,270
85,169
2,214,638
(994,843)
1,219,795
118,000
339,869
1,609,931
61,830
2,129,630
(854,780)
1,274,850
Goodwill
1,466,714
1,356,293
Other intangible assets
128,955
122,417
Other assets
Total assets
119,796
4,572,513
$
87,906
4,315,159
$
Continues on following page.
F-2
Liabilities and stockholders(cid:146) 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
Other liabilities
Accrued pension and other post retirement costs
Minority interest
Commitments and contingencies
Stockholders(cid:146) equity:
December 31
2003
2002
$
17,511
158,182
111,842
288,432
10,112
1,282
587,361
836,606
35,036
27,659
248,652
239,950
83,215
$
18,161
123,999
103,184
303,609
8,734
18,550
576,237
706,316
52,935
42,345
266,893
235,661
75,985
Preferred Stock, par value $1.00 per share:
authorized (cid:150) 1,000,000 shares; none issued
Common Stock, par value $.10 per share:
authorized (cid:150) 300,000,000 shares; 144,668,594 and 144,297,101
shares outstanding after deducting 332,850 shares in treasury
Class B convertible Common Stock, par value $.10 per share:
authorized (cid:150) 40,000,000 shares; 15,382,296 and 15,383,581
shares outstanding after deducting 279,453 shares in treasury
Capital in excess of par value
Retained earnings
Unearned compensation
Accumulated other comprehensive income (loss)
Total stockholders(cid:146) equity
Total liabilities and stockholders(cid:146) equity
14,467
14,429
1,538
1,918,785
550,196
(306)
29,354
2,514,034
4,572,513
$
1,538
1,910,994
523,354
(413)
(91,115)
2,358,787
4,315,159
$
S e accompanying notes.
e
F-3
Vishay Intertechnology, Inc.
Consolidated Statements of Operations
(In thousands, except per share and share amounts)
2003
Year ended December 31
2002
2001
Net sales
Costs of products sold
Loss on long-term purchase commitments
Gross profit
$
2,170,597
1,690,267
11,392
468,938
$
1,822,813
1,454,540
106,000
262,273
$
1,655,346
1,273,827
(cid:150)
381,519
Selling, general, and administrative expenses
Amortization of goodwill
Restructuring and severance costs
Purchased research and development
Other income (expense):
Interest expense
Gain on insurance claim
Loss on extinguishment of debt
Other
Earnings (loss) before income taxes (benefit)
and minority interest
Income tax provision (benefit)
Minority interest
Net earnings (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Weighted average shares outstanding:
Basic
Diluted
$
$
$
S e accompanying notes.
e
381,406
(cid:150)
29,560
(cid:150)
57,972
(37,831)
33,906
(9,910)
2,289
(11,546)
46,426
11,528
8,056
26,842
0.17
0.17
311,251
(cid:150)
30,970
(cid:150)
(79,948)
(28,761)
(cid:150)
(cid:150)
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)
(cid:150)
(cid:150)
12,701
(4,147)
10,103
5,695
3,895
513
0.00
0.00
159,631,000
160,443,000
159,413,000
159,413,000
141,171,000
142,514,000
F-4
Vishay Intertechnology, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Operating activities
Net earnings (loss)
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:
Depreciation and amortization
Loss (gain) on disposal of property and equipment
Minority interest in net earnings of consolidated subsidiaries
Purchased research and development
Noncash (credit) charge for change in fair value of interest rate swap
Accretion of interest on convertible debentures
Write-downs of tantalum and palladium
Inventory write-offs for obsolescence
Gain on insurance claim
Loss on extinguishment of debt
Asset impairment charges included in restructuring costs
Loss on long-term purchase commitments
Utilization of purchase commitment liability
Deferred grant income
Changes in operating assets and liabilities, net of effects of businesses
acquired:
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 used in investing activities
Financing activities
Net payments on revolving credit lines
Proceeds from long-term borrowings, net of issuance costs
Principal payments on long-term debt
Purchase of treasury stock
Proceeds from stock options exercised
Net changes in short-term borrowings
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash
Increase (decrease) in cash and cash equivalents
2003
Year ended December 31
2002
2001
$
26,842
$
(92,614)
$
513
194,055
2,521
8,056
(cid:150)
(3,783)
8,396
6,991
54,285
(33,906)
9,910
1,014
11,392
(28,000)
(12,359)
(5,634)
(30,448)
51,367
25,474
(6,110)
(24,307)
255,756
(126,635)
19,349
(41,161)
(148,447)
(111,000)
484,206
(284,595)
(cid:150)
4,740
(316)
93,035
15,258
215,602
180,748
296
9,469
(cid:150)
115
9,325
27,400
37,120
(cid:150)
(cid:150)
12,363
106,000
(cid:150)
(17,322)
102,322
42,298
6,257
455
(29,766)
(27,595)
366,871
(110,074)
20,621
(278,735)
(368,188)
(14,000)
201
(17,217)
(cid:150)
3,161
(10,452)
(38,307)
12,447
(27,177)
163,387
(1,472)
3,895
16,000
3,668
5,313
70,000
29,670
(cid:150)
(cid:150)
20,974
(cid:150)
(cid:150)
(19,064)
120,095
(93,632)
(7,321)
(71,761)
(105,685)
26,838
161,418
(162,493)
9,911
(172,468)
(325,050)
(100,047)
294,511
(444)
(850)
854
3,274
197,298
(3,764)
29,902
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
339,938
555,540
$
367,115
339,938
$
337,213
367,115
$
S e accompanying notes.
e
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F
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements
December 31, 2003
Vishay Intertechnology, Inc. ((cid:147)Vishay(cid:148) or the (cid:147)Company(cid:148)) 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
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.
Principles of Consolidation
The consolidated financial statements include the accounts of Vishay and all of its subsidiaries in which a
controlling financial interest is maintained. For those consolidated subsidiaries in which the Company’s
ownership is less than 100 percent, the outside stockholders(cid:146) interests are shown as Minority Interest in the
accompanying consolidated balance sheets. Investments in affiliates over which the Company has
significant influence but not a controlling interest are carried on the equity basis. Investments in affiliates
over which the Company does not have significant influence are accounted for by the cost method. All
significant intercompany transactions, accounts, and profits are eliminated.
Revenue Recognition
The Company recognizes revenue on product sales during the period when the sales process is complete.
This generally occurs when products are shipped to the customer in accordance with terms of an agreement
of sale, title and risk of loss have been transferred, collectibility is reasonably assured and pricing is fixed
or determinable. The Company has agreements with distributors that historically provided limited rights of
product return. Beginning in 2002, the Company modified these arrangements to allow distributors a
limited credit for unsaleable products, which it terms a (cid:147)scrap allowance.(cid:148) Consistent with industry
practice, the Company also has a (cid:147)stock, ship and debit(cid:148) program whereby it considers requests by
distributors for credits on previously purchased products that remain in distributors(cid:146) inventory, to enable
the distributors to offer more competitive pricing. In addition, the Company has contractual arrangements
whereby it provides distributors with protection against price reductions initiated by the Company after
product is sold by the Company to the distributor and prior to resale by the distributor.
The Company records a reduction of revenue during each period, and records a related accrued expense for
the period, based upon its estimate of product returns, scrap allowances, (cid:147)stock, ship and debit(cid:148) credits and
price protection credits that will be attributable to sales recorded through the end of the period. The
Company makes these estimates based upon sales levels to its distributors during the period, inventory
levels at the distributors, current and projected market conditions and historical experience under the
programs. While the Company utilizes a number of different methodologies to estimate the accruals, all of
the methodologies take into account sales levels to distributors during the relevant period, inventory levels
at the distributors, current and projected market trends and conditions, recent and historical activity under
the relevant programs, changes in program policies and open requests for credits. These procedures require
the exercise of significant judgments, but the Company believes that they allow the Company to reasonably
estimate future credits under the programs.
F-8
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Shipping and Handling Costs
Shipping and handling costs are included in costs of products sold.
Research and Development Expenses
Research and development costs are expensed as incurred. The amount charged to expense for research
and development (exclusive of purchased in-process research and development) aggregated $45,377,000,
$37,095,000, and $30,176,000, for the years ended December 31, 2003, 2002, and 2001, 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 $12,359,000, $17,322,000, and $19,064,000, for the years ended December 31, 2003,
2002, and 2001, respectively. Grants receivable of $9,223,000 and $16,374,000 are included in other
current assets at December 31, 2003 and 2002, respectively. Deferred grant income was $27,659,000 and
$42,345,000 at December 31, 2003 and 2002, 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.
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for
income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur
when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes
represents income taxes paid or payable for the current year plus the change in deferred taxes during the
year. Deferred taxes result from differences between the financial and tax bases of the Company(cid:146)s assets
and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation
allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will
not be realized.
Cash Equivalents
Cash and cash equivalents includes demand deposits and highly liquid investments with maturities of three
months or less when purchased.
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(cid:146)s customers were to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. Bad debt expense was $4,181,000, $6,672,000, and $7,112,000 for
the years ended December 31, 2003, 2002, and 2001, respectively.
F-9
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.
Inventories are adjusted for estimated obsolescence and written down to net realizable value based upon
estimates of future demand, technology developments and market conditions.
Property and Equipment
Property and equipment is carried at cost and is depreciated 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. Construction in progress is not depreciated until the assets are placed in service. The
estimated cost to complete construction in progress at December 31, 2003 was approximately $14.5
million. Depreciation of capital lease assets is included in total depreciation expense. Depreciation expense
was $180,706,000, $172,174,000, and $149,225,000, for the years ended December 31, 2003, 2002, and
2001, respectively.
Goodwill and Other Intangible Assets
The Company adopted Statements of Financial Accounting Standards ((cid:147)SFAS(cid:148)) No. 141, Business
Combinations, and No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002.
SFAS No. 142 requires that goodwill and indefinite-lived intangible assets no longer be amortized. In
addition, goodwill and indefinite-lived intangible assets are tested for impairment at least annually. These
tests will be performed more frequently if there are triggering events. The Company has assigned an
indefinite useful life to its tradenames. Prior to adoption of SFAS No. 142, goodwill was amortized over
periods ranging from twenty to forty years.
Definite-lived intangible assets are amortized over their estimated useful lives. Completed technology is
being amortized over useful lives of seven to ten years. Noncompete agreements are being amortized over a
period of one to five years. The Company continually evaluates the reasonableness of the useful lives of
these assets.
SFAS No. 142 prescribes a two-step method for determining goodwill impairment. In the first step, the
Company determines the fair value of the reporting unit using a comparable companies market multiple
approach. If the net book value of the reporting unit were to exceed the fair value, the Company would then
perform the second step of the impairment test which requires allocation of the reporting unit(cid:146)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. An impairment charge will be recognized only when the implied fair value of a
reporting unit(cid:146)s goodwill is less than its carrying amount.
The Company completed the 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(cid:146)s required annual impairment
test is completed as of October 1 of each year. The Company also performed an additional impairment test
at September 30, 2002 because events and circumstances indicated that goodwill of its passives reporting
unit might be impaired. Management concluded that no impairment existed at September 30, 2002.
Additionally, it was determined that no impairment existed based on the annual impairment tests for 2003
and 2002.
F-10
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
The Company completed the transitional impairment test of its tradenames as of January 1, 2002. The fair
value of the tradenames was measured as the discounted cash flow savings realized from owning such
tradenames and not having to pay a royalty for their use. No impairment of the tradenames was determined
to exist at January 1, 2002. The annual impairment test of tradenames is completed as of October 1 of each
year. It was determined that no impairment existed based on the annual impairment tests for 2003 and
2002.
Impairment of Long-Lived Assets
The Company evaluates impairment of its long-lived assets, other than goodwill and indefinite-lived
intangible assets, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-
Lived Assets, which was adopted by the Company as of January 1, 2002. Adoption of SFAS No. 144 had no
effect on the Company(cid:146)s financial position or its results of operations. The carrying value of long-lived
assets held and used, other than goodwill and indefinite-lived intangible assets, is evaluated when events or
changes in circumstances indicate the carrying value may not be recoverable. The carrying value of a long-
lived asset is considered impaired when the total projected undiscounted cash flows from such asset are
separately identifiable and are less than the carrying value. In that event, a loss is recognized based on the
amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market
value is determined primarily using the projected cash flows from the asset discounted at a rate
commensurate with the risk involved. Losses on long-lived assets held for sale, other than goodwill and
indefinite-lived intangible assets, are determined in a similar manner, except that fair market values are
reduced for disposal costs.
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 Accounting Principles Board ((cid:147)APB(cid:148))
Opinion No. 25, Accounting for Stock Issued to Employees. The Company accounts for stock-based
compensation in accordance with APB No. 25 and related interpretations. The following is provided to
comply with the disclosure requirements of SFAS No. 123 as amended. If compensation cost for the
Company(cid:146)s stock option programs had been determined using the fair-value method prescribed by SFAS
No. 123, the Company(cid:146)s results would have been reduced to the pro forma amounts indicated below
(in thousands, except per share amounts):
Net earnings (loss), 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 earnings (loss)
Earnings (loss) per share:
Basic(cid:151)as reported
Basic(cid:151)pro forma
Diluted(cid:151)as reported
Diluted(cid:151)pro forma
2003
Year ended December 31
2002
2000
$
26,842
$
(92,614)
$
513
(1,612)
25,230
$
(2,430)
(95,044)
$
(3,742)
(3,229)
$
$ 0.17
$ 0.16
$ 0.17
$ 0.16
$ (0.58)
$ (0.60)
$ (0.58)
$ (0.60)
$ 0.00
$ (0.02)
$ 0.00
$ (0.02)
F-11
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
The weighted average fair value of the options granted was estimated using the Black-Scholes option-
pricing model, with the assumptions presented below. Options granted in 2003 and 2002 had a weighted
average fair value of $6.53 and $8.62, respectively, and an exercise price equal to the market value. No
options were granted in 2001 under the Vishay stock option programs.
Expected dividend yield
Risk-free interest rate
Expected volatility
Expected life (in years)
2003
Grants
(cid:150)
2.2%
61.2%
4.5
2002
Grants
(cid:150)
3.5%
63.2%
4.5
Derivative Financial Instruments
Derivative instruments are reported on the consolidated balance sheet at their fair values. 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. For instruments 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
earnings (loss). Changes in the fair values of derivative instruments that are not designated as hedges are
recorded in current period earnings. 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. At December 31, 2003, the Company had no outstanding
interest rate swap agreements. See Note 14.
In prior years, the Company used financial instruments such as forward exchange contracts to hedge a
portion, but not all, of its firm commitments denominated in foreign currencies. The purpose of the
Company(cid:146)s foreign currency management is to minimize the effect of exchange rate changes on actual cash
flows from foreign currency denominated transactions. At December 31, 2003 and 2002, the Company had
no outstanding forward exchange contracts.
Foreign Currency Translation
The financial statements for most of the Company(cid:146)s foreign subsidiaries are measured using the local
currency as the functional currency. Foreign assets and liabilities in the consolidated balance sheets have
been translated at the rate of exchange as of the balance sheet date. Revenues and expenses are translated
at the average exchange rate for the year. Translation adjustments do not impact the results of operations
and are reported as a separate component of stockholders(cid:146) equity. Foreign currency transaction gains and
losses are included in the results of operations.
For those foreign subsidiaries where the U.S. dollar is the functional currency, all foreign currency
financial statement amounts are remeasured into U.S. dollars. Exchange gains and losses arising from
remeasurement of foreign currency-denominated monetary assets and liabilities are included in the results
of operations.
F-12
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Commitments and Contingencies
Liabilities for loss contingencies, including environmental remediation costs, arising from claims,
assessments, litigation, fines, 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.
Accrued liabilities for environmental matters recorded at December 31, 2003 and 2002 do not include
claims against third parties and are not discounted.
Accounting Pronouncements Pending Adoption
In January 2003, the FASB issued Interpretation No. 46 ((cid:147)FIN 46(cid:148)), Consolidation of Variable Interest
Entities, an interpretation of ARB 51. The primary objectives of this interpretation are to provide guidance
on the identification of entities for which control is achieved through means other than through voting
rights ((cid:147)variable interest entities(cid:148)) and how to determine when and which business enterprise (the (cid:147)primary
beneficiary(cid:148)) should consolidate the variable interest entity. This new model for consolidation applies to an
entity in which either (i) the equity investors (if any) do not have a controlling financial interest; or (ii) the
equity investment at risk is insufficient to finance that entity’s activities without receiving additional
subordinated financial support from other parties. In addition, FIN 46 requires that the primary beneficiary,
as well as all other enterprises with a significant variable interest in a variable interest entity, make
additional disclosures. Certain disclosure requirements of FIN 46 were effective for financial statements
issued after January 31, 2003. In December 2003, the FASB issued FIN 46 (revised December 2003),
Consolidation of Variable Interest Entities ((cid:147)FIN 46-R(cid:148)) to address certain FIN 46 implementation issues.
The effective dates and impact of FIN 46 and FIN 46-R are as follows: (i) Special-purpose entities
((cid:147)SPEs(cid:148)) created prior to February 1, 2003: The Company must apply either the provisions of FIN 46 or
early adopt the provisions of FIN 46-R at the end of the first interim or annual reporting period ending after
December 15, 2003. (ii) Non-SPEs created prior to February 1, 2003: The Company is required to adopt
FIN 46-R at the end of the first interim or annual reporting period ending after March 15, 2004. (iii) All
entities, regardless of whether an SPE, that were created subsequent to January 31, 2003: The provisions of
FIN 46 were applicable for variable interests in entities obtained after January 31, 2003. The adoption of
the provisions applicable to SPEs and all other variable interests obtained after January 31, 2003 did not
have a material impact on our financial position, results of operations, or liquidity. The Company does not
expect the adoption of FIN 46-R provisions applicable to Non-SPEs created prior to February 1, 2003, to
have a material impact on our financial position, results of operations or liquidity.
In December 2003, the FASB issued a revision to SFAS No. 132, Employers(cid:146) Disclosures about Pensions
and Other Postretirement Benefits. The revised standard retains the disclosure requirement contained in
the original standard and requires additional disclosures about the assets, obligations, cash flows and net
period cost of defined pension plans and other defined benefit postretirement plans. The Company has
adopted the disclosure requirements required by SFAS No. 132 (revised 2003) for our U.S. pension and
other postretirement plans, as included in Note 11. As permitted by SFAS No. 132, certain disclosures
regarding non-U.S. pension plans and estimated future benefit payments for both U.S. and non-U.S.
pension and other postretirement benefit plans will be delayed until 2004.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current financial statement
presentation.
F-13
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions
As part of its growth strategy, the Company seeks to expand through the acquisition of other manufacturers
of electronic components that have established positions in major markets, reputations for product quality
and reliability, and product lines with which the Company has substantial marketing and technical
expertise. In the past three years, the Company has taken advantage of the downturn in the electronics
industry and the strength of its own balance sheet to acquire businesses for consideration that it believes
was lower than what it would have been required to pay in other economic environments. In pricing an
acquisition, the Company focuses primarily on the target(cid:146)s revenues and customer base, the strategic fit of
its product line with the Company(cid:146)s existing product offerings, opportunities for cost cutting and
integration with the Company(cid:146)s existing operations and production and other postacquisition synergies
rather than on the target(cid:146)s assets, such as its property, equipment and inventory. As a result, the fair value
of the acquired assets may correspond to a relatively smaller portion of the acquisition price, with the
Company recording a substantial amount of goodwill related to the acquisition.
These principles apply in particular to acquisitions in the passive segment. The passive electronics
business is a mature industry that, in general, has a slow organic growth rate linked to macro-economic
trends. The Company(cid:146)s business strategy for growth in the passive segment relies primarily upon the
acquisition of other electronic components manufacturers whose operations satisfy its acquisition criteria.
Rather than focusing on the assets of the acquired company, the Company seeks to capture its sales and
customers, which it expects to service in substantial measure with its own long-term assets and personnel.
In this regard, the Company anticipates that, following the acquisition, it will be able to maintain sales
levels on the strength of its relationships with original equipment manufacturers (OEMs), distributors and
electronic manufacturers(cid:146) supply (EMS) companies. The Company also anticipates that it will be able to
achieve fairly rapid cost reductions by eliminating or combining redundant sales offices, sales personnel,
commission representatives and administrative staff; eliminating or consolidating manufacturing facilities;
and transferring manufacturing operations from high-labor-cost countries to low-labor-cost jurisdictions.
These savings and synergies were made possible in the recent environment of depressed activity in the
electronics industry by low utilization of manufacturing and distribution capacity in the passive segment.
The property and equipment of an acquired company are expected to be eliminated or substantially reduced
and are valued accordingly. The result for acquisitions in the passive segment is recognition of a
substantial amount of goodwill.
No acquisitions were made during the year ended December 31, 2003.
Year ended December 31, 2002
In January 2002, the Company acquired the transducer and strain gage businesses of Sensortronics, Inc.
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 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 is engaged in the production and sale of load cells
used in digital scales by the weighing industry. The purchase price was approximately $21 million in cash.
Additionally, Vishay is paying Tedea a $1 million consulting fee over a three-year period and repaid a
$9 million loan of Tedea to Tedea-Huntleigh. Tedea-Huntleigh operates two plants in Israel, in Netanya
and Carmiel, where it employs approximately 350 people, as well as a number of facilities outside Israel.
Tedea-Huntleigh also has load cell operations in the People(cid:146)s 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.
F-14
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
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 People(cid:146)s Republic of China, and California. The purchase price of $13.5 million in cash has
been allocated with resulting goodwill of $4,711,000. Results of operations are included in the passives
segment beginning October 1, 2002.
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. The acquisition of BCcomponents, and the recognition of substantial
goodwill in the acquisition, were consistent with the general principles described above that guide the
Company(cid:146)s acquisition activity and their application in particular to acquisitions in the passive component
segment.
Vishay acquired the outstanding shares of BCcomponents in exchange for ten-year warrants to acquire
7,000,000 shares of Vishay common stock at an exercise price of $20.00 per share and ten-year warrants to
acquire 1,823,529 shares of Vishay common stock at an exercise price of $30.30 per share. The fair value
of the warrants ($39,462,000) was determined using the Black-Scholes option-pricing model. Significant
assumptions used included an expected dividend yield of 0%, a risk-free interest rate of 3%, an expected
volatility of 66%, and an expected life of five years.
In the transaction, outstanding obligations of BCcomponents, including indebtedness and transaction fees
and expenses, in the amount of approximately $224 million were paid ($191 million) or assumed ($33
million). Also, $105 million in principal amount of BCcomponents(cid:146) mezzanine indebtedness and certain
other securities of BCcomponents were exchanged for $105 million principal amount of floating rate
unsecured loan notes of Vishay due 2102. The Vishay notes bear interest at LIBOR plus 1.5% through
December 31, 2006 and at LIBOR thereafter. The interest rate 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 (in thousands):
Cash consideration
Warrants issued
Acquisition costs
Total purchase price
$
$
191,000
39,462
3,000
233,462
F-15
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
Under purchase accounting, the total purchase price is allocated to assets acquired and liabilities assumed
based on their estimated fair values. At December 31, 2002, the purchase price allocation was preliminary,
pending the completion of asset appraisals and negotiations with labor councils regarding planned
restructuring. These matters were resolved in 2003, resulting in an increase in goodwill of $66,347,000.
The purchase price allocation is now final. The purchase price was allocated to the acquired assets and
liabilities based on fair values as follows (in thousands):
Current assets
Property and equipment
Other assets
Tradenames
Completed technology
Current liabilities
Long-term debt
Other noncurrent liabilities
Goodwill
Total purchase price
$
$
91,859
68,762
3,054
23,000
19,000
(118,425)
(126,328)
(29,860)
302,400
233,462
In connection with the BCcomponents acquisition, the Company recorded restructuring liabilities of
$47,794,000 under an exit plan that management began to formulate prior to the acquisition date.
Approximately $45,855,000 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. This liability is recorded in other accrued expenses and is expected to be paid by June 30,
2004. Future adjustments to decrease the restructuring liabilities would increase goodwill. A rollforward
of the activity related to these restructuring liabilities is as follows (in thousands, except number of
employees):
Balance at December 31, 2002
Utilized
Foreign currency translation
Change in estimate
Balance at December 31, 2003
Severance
Costs
$ 45,855
(30,018)
5,153
(1,328)
$ 19,662
Other
$
1,939
(1,939)
(cid:150)
(cid:150)
$ (cid:150)
Number of
Employees
Terminated
780
(624)
(cid:150)
(13)
143
Total
$ 47,794
(31,957)
5,153
(1,328)
$ 19,662
F-16
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
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 (IRDCs). Under the terms of the agreement, the Company purchased
Infineon(cid:146)s U.S. development, marketing, and distribution activities located in the San Jose, California
headquarters and a manufacturing facility located in Malaysia. 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, and
a second payment of $38 million was made on December 31, 2001 to acquire the facility in Malaysia. The
results of operations of Infineon(cid:146)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 (in thousands):
Current assets
Property and equipment
Completed technology
Other assets
Current liabilities
Goodwill
Total purchase price
$
$
28,121
27,575
8,000
226
(14,200)
66,351
116,073
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 valued the stock issued using 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, or approximately
$499,818,000. The Company assumed General Semiconductor options that became exercisable for
approximately 4.3 million shares of Vishay common stock, with a fair value of $48 million. The fair value
of the options was determined using the Black-Scholes option-pricing model. 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 amount of 5.75% convertible notes, of which $1.5 million principal amount was repurchased by
the Company in January 2002. The remaining principal amount was repurchased by the Company in
September 2003. See Note 6. The notes were 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.
F-17
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
The final purchase allocation is as follows (in thousands):
Current assets
Property and equipment
Other assets
Noncompete agreements
Tradenames
Completed technology
Purchased in-process technology
Current liabilities
Long-term debt
Other non-current liabilities
Goodwill
Total purchase price
$
$
153,115
184,524
7,896
5,604
35,000
37,000
16,000
(188,410)
(255,502)
(111,290)
670,909
554,846
In connection with the General Semiconductor acquisition, the Company recorded restructuring liabilities
of $94,643,000 under 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, the Czech Republic, and the People(cid:146)s Republic of China. 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 Company(cid:146)s goal under the plan is
to achieve significant production cost savings through the transfer and expansion of manufacturing
operations to regions such as Israel, the Czech Republic, and the People(cid:146)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 recorded in other accrued expenses and is expected to be paid
by June 30, 2004. Future adjustments to decrease the restructuring liabilities would increase goodwill.
A rollforward of the activity in these restructuring liabilities is as follows (in thousands, except number of
employees):
Balance at January 1, 2002
Utilized
Changes in estimate
Balance at December 31, 2002
Utilized
Foreign currency translation
Changes in estimate
Balance at December 31, 2003
Severance
Costs
$ 88,242
(52,118)
(7,900)
$ 28,224
(6,563)
504
(271)
$ 21,894
Other
$
$
$
6,401
(1,249)
(cid:150)
5,152
(2,641)
(cid:150)
(cid:150)
2,511
Number of
Employees
Terminated
1,460
(426)
(147)
887
(118)
(cid:150)
(cid:150)
769
Total
$ 94,643
(53,367)
(7,900)
$ 33,376
(9,204)
504
(271)
$ 24,405
F-18
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
The change in the estimate of restructuring liabilities for the acquisition of General Semiconductor in 2002
resulted from a decision not to downsize one of General Semiconductor(cid:146)s European facilities. At the time
that the Company formulated its exit plan, it did not anticipate the robust demand experienced in 2002 for
the active components manufactured by that facility. Accordingly, the Company did not terminate the 147
employees whose positions it had originally expected to eliminate. The Company reduced restructuring
liabilities (and goodwill) by $7,900,000, the amount of the anticipated termination costs for these
employees that had been included in the purchase allocation. The remaining liability is expected to be paid
in 2004.
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 (in thousands):
Current assets
Property and equipment
Current liabilities
Long-term debt
Goodwill
Total purchase price
$
$
11,033
6,347
(3,555)
(857)
31,684
44,652
The BLH, Tansitor, Celtron, Nobel, Tedea-Huntleigh, Sensortronics, Mallory and Infineon acquisitions
were funded with cash on hand and borrowings under Vishay(cid:146)s revolving credit facility.
F-19
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
2. Acquisitions (continued)
Had all of the acquisitions previously described been made at the beginning of the respective periods, the
Company(cid:146)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
(127,379)
$
2,415,651
(82,166)
Basic and diluted loss per share
(0.80)
(0.52)
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 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 pretax restructuring
charges of $88,846,000 recorded by General Semiconductor and BCcomponents 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.
F-20
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
3. Goodwill and Other Intangible Assets
As discussed in Note 1, the Company adopted SFAS No. 142 on January 1, 2002. The Company(cid:146)s net
earnings and earnings per share adjusted to exclude goodwill amortization for the year prior to adoption
were as follows:
Year ended
December 31
2001
Reported net earnings
Add back: Goodwill amortization, net of tax
Adjusted net earnings
$
513
10,414
$ 10,927
Basic earnings per share:
Reported net earnings
Goodwill amortization, net of tax
Adjusted net earnings
Diluted earnings per share:
Reported net earnings
Goodwill amortization, net of tax
Adjusted net earnings
$
0.00
0.08
$ 0.08
$
0.00
0.08
$ 0.08
The changes in the carrying amounts of goodwill by segment for the years ended December 31, 2003 and
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 allocation adjustments
Currency translation adjustments
Balance at December 31, 2002
(cid:150)
(8,332)
5,158
861,201
Purchase price allocation adjustments
Currency translation adjustments
Balance at December 31, 2003
(cid:150)
22,191
883,392
$
$
276,606
830
4,241
495,092
66,347
21,883
583,322
276,606
(7,502)
9,399
1,356,293
66,347
44,074
$ 1,466,714
Passives segment goodwill is allocated to the Other Passives and Measurements Group reporting units for
SFAS No. 142 evaluation purposes. Goodwill allocated to the Other Passives reporting unit at December
31, 2003 is $541,909,000. Goodwill allocated to the Measurements Group reporting unit at December 31,
2003 is $41,413,000.
F-21
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
3. Goodwill and Other Intangible Assets (continued)
Other intangible assets were as follows:
Intangible Assets Subject to Amortization (Definite Lived)
Patents and acquired technology
Noncompete agreements
$
Accumulated amortization
Patents and acquired technology
Noncompete agreements
Net Intangible Assets Subject to Amortization
Intangible Assets Not Subject to Amortization (Indefinite Lived)
Tradenames
December 31
2003
2002
(In thousands)
$
79,715
7,604
87,319
(15,330)
(6,383)
(21,713)
65,606
67,000
7,604
74,604
(5,184)
(3,003)
(8,187)
66,417
63,349
56,000
$
128,955
$
122,417
Amortization expense was $13,029,000, $7,171,000, and $1,017,000, for the years ended December 31,
2003, 2002, and 2001, respectively. Estimated annual amortization expense for each of the next five years
is as follows: 2004 (cid:150) $9,291,000; 2005 (cid:150) $8,869,000; 2006 (cid:150) $8,469,000; 2007 (cid:150) $8,469,000; and 2008 (cid:150)
$8,469,000.
F-22
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Restructuring and Severance Costs
Restructuring and severance costs reflect the cost reduction programs currently being implemented by the
Company. These include the closing of facilities and the termination of employees. Severance costs also
include executive severance and charges for the fair value of stock options of certain former employees
which were modified such that they did not expire at termination. Restructuring costs are expensed during
the period in which the Company determines it will incur those costs and all requirements of accrual are
met. Effective January 1, 2003, restructuring costs are accounted for under SFAS No. 146, Accounting for
Costs Associated with Exit or Disposal Activities. This statement requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is incurred. Because these 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, the Company could be required
either to record additional expenses in future periods or to reverse part of the previously recorded charges.
Year Ended December 31, 2003
The Company recorded restructuring and severance costs of $29,560,000 for the year ended December 31,
2003. Restructuring of European and Asian operations included $23,007,000 of employee termination costs
covering 546 technical, production, administrative and support employees located in Germany, France,
Hungary, Portugal, the United Kingdom, Austria and the Far East. The remaining $6,553,000 of
restructuring and severance costs relates to termination costs of $5,539,000 for 162 technical, production,
administrative and support employees located in the United States, and $1,014,000 for asset write-downs.
The restructuring and severance costs were incurred as part of the cost reduction programs currently being
implemented by the Company. Activity related to these costs for the year ended December 31, 2003 is as
follows (in thousands, except number of employees):
Severance
Costs
Asset
Impairment
Number of
Employees
Terminated
Restructuring and severance costs
Utilized
Foreign currency translation
Balance at December 31, 2003
$
$
28,546
(14,195)
1,623
15,974
$
$
1,014
(1,014)
(cid:150)
(cid:150)
708
(653)
(cid:150)
55
Total
$
$
29,560
(15,209)
1,623
15,974
Substantially all of the remaining restructuring liability, currently shown in other accrued expenses, is
expected to be paid by December 31, 2004.
F-23
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Restructuring and Severance Costs (continued)
Year ended December 31, 2002
Restructuring and severance costs were $30,970,000 for the year ended December 31, 2002. Restructuring
of European and Israeli operations included $10,698,000 of employee termination costs covering
approximately 778 technical, production, administrative and support employees located in the Czech
Republic, France, Hungary, Israel, Portugal, and Austria. In the United States, $7,909,000 of restructuring
and severance costs related to termination costs for approximately 660 technical, production, administrative
and support employees. The remaining $12,363,000 of restructuring and severance costs related to the
noncash write-down of building and equipment that are no longer in use. The restructuring and severance
costs were 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):
Severance
Costs
Asset
Impairment
Number of
Employees
Terminated
Restructuring and severance costs
Utilized
Balance at December 31, 2002
Utilized
Foreign currency effect
Balance at December 31, 2003
$
$
18,607
(6,420)
12,187
(10,030)
661
2,818
$
$
12,363
(12,363)
(cid:150)
(cid:150)
(cid:150)
(cid:150)
1,438
(783)
655
(639)
(cid:150)
16
Total
$
$
30,970
(18,783)
12,187
(10,030)
661
2,818
The remaining $2,818,000 of severance costs, currently shown in other accrued expenses, is expected to be
paid by March 31, 2004.
Year ended December 31, 2001
Restructuring and severance costs were $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 write-down of buildings and equipment that are
no longer in use. In the United States, $13,870,000 of restructuring and severance costs related to
termination costs for approximately 1,885 technical, production, administrative and support employees.
The remaining $18,783,000 of restructuring and severance costs related to the noncash write-down of
buildings and equipment that are no longer in use.
F-24
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
4. Restructuring and Severance Costs (continued)
Activity related to these costs is as follows (in thousands, except number of employees):
Number of
Employees
Terminated
Asset
Impairment
Severance
Costs
Restructuring and severance costs
Utilized
Balance at December 31, 2001
Utilized
Changes in estimate
Balance at December 31, 2002
Utilized
Changes in estimate
Balance at December 31, 2003
5. Income Taxes
$
40,934
(18,114)
22,820
(19,865)
(1,391)
1,564
(1,586)
22
(cid:150)
$
$
20,974
(20,974)
(cid:150)
(cid:150)
(cid:150)
(cid:150)
(cid:150)
(cid:150)
(cid:150)
$
5,663
(4,913)
750
(612)
(cid:150)
138
(50)
(88)
(cid:150)
Total
$
61,908
(39,088)
22,820
(19,865)
(1,391)
1,564
(1,586)
22
(cid:150)
$
Earnings (loss) before income taxes and minority interest consists of the following components:
Domestic
Foreign
2003
Year ended December 31
2002
(In thousands)
2001
$
$
(20,119)
66,545
46,426
$
(59,882)
(40,163)
$ (100,045)
$
$
(55,598)
65,701
10,103
Significant components of income taxes are as follows:
Current:
U.S.
Foreign
State
Deferred:
U.S.
Foreign
State
2003
Year ended December 31
2002
(In thousands)
$
$
(1,389)
4,977
2,141
5,729
(8,640)
12,767
1,672
5,799
11,528
$
(41,991)
6,111
776
(35,104)
30,590
(16,152)
3,766
18,204
(16,900)
$
$
$
2001
6,194
9,197
641
16,032
(12,392)
4,031
(1,976)
(10,337)
5,695
F-25
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(cid:146)s deferred tax assets and liabilities are as follows:
Deferred tax assets:
Pension and other retiree obligations
Net operating loss carryforwards
Tax credit carryforwards
Other accruals and reserves
Total deferred tax assets
Less valuation allowance
Deferred tax liabilities:
Tax over book depreciation
Intangible assets not subject to amortization
Other (cid:150) net
Total deferred tax liabilities
Net deferred tax assets
December 31
2003
2002
(In thousands)
$
48,229
178,029
19,204
69,873
315,335
(107,388)
207,947
92,094
24,503
31,487
148,084
59,863
$
$
47,710
112,770
11,766
68,792
241,038
(63,192)
177,846
87,483
24,454
30,359
142,296
35,550
$
A reconciliation of income tax expense at the U.S. federal statutory income tax rate to actual income tax
provision (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
2003
Year ended December 31
2002
(In thousands)
2001
$
16,249
$
(35,016)
$
3,536
3,319
(7,816)
(cid:150)
(224)
11,528
$
2,540
11,090
(cid:150)
4,486
(16,900)
$
(382)
(4,894)
5,600
1,835
5,695
$
F-26
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
5.
Income Taxes (continued)
At December 31, 2003, the Company had the following significant net operating loss carryforwards for tax
purposes (in thousands):
Austria
Belgium
Czech Republic
France
Germany
Israel
Netherlands
Portugal
United States
Expires
No expiration
No expiration
2005 (cid:150) 2010
No expiration
No expiration
No expiration
No expiration
2005 (cid:150) 2009
2021 (cid:150) 2023
$ 7,086
115,969
1,508
13,697
99,417
57,692
86,333
4,303
160,824
Approximately $30,274,000 of the German carryforward resulted from the Company(cid:146)s acquisition of
Roederstein in 1993 and approximately $159,459,000 of the carryforwards in Austria, Belgium, and the
Netherlands resulted from the Company(cid:146)s acquisition of BCcomponents in 2002.
In total, valuation allowances of $96,061,000 and $58,126,000 have been recorded at December 31, 2003
and 2002, respectively, for deferred tax assets related to foreign net operating loss carryforwards. Of this,
$55,790,000 and $54,441,000, as of December 31, 2003 and 2002, respectively, are valuation allowances,
recorded through goodwill, for the acquired net operating losses. If tax benefits are recognized in the future
for utilization of these acquired net operating losses, the benefits of such loss utilization will be recorded as
a reduction to goodwill. In 2003 and 2002, tax benefits recognized through reductions of the valuation
allowance recorded through goodwill were $0 and $491,000, respectively.
At December 31, 2003, the Company had the following tax credit carryforwards available (in thousands):
Federal Alternative Minimum Tax
California Investment Credit
California Research Credit
$13,831
3,961
4,210
Expires
No expiration
2004 (cid:150) 2010
No expiration
At December 31, 2003, no provision had been made for U.S. federal and state income taxes on
approximately $941,286,000 of foreign earnings, which are expected to be reinvested outside of the United
States 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, net of amounts refunded, were a net refund of $31,626,000 for the year ended December
31, 2003, and net payments of $2,910,000 and $72,953,000, for the years ended December 31, 2002 and
2001, respectively.
The Company(cid:146)s U.S. income tax returns for the years ended 1999 through 2000 are presently under
examination by the Internal Revenue Service. Management believes that potential tax assessment plus
related interest and penalties, if any, have been sufficiently provided for in the financial statements.
F-27
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
6. Long-Term Debt
Long-term debt consists of the following:
Multicurrency revolving credit loans
Convertible subordinated notes, LYONs, due 2021
Convertible unsecured notes, BCcomponents, due 2102
Convertible subordinated notes, GSI, due 2006
Convertible subordinated notes, due 2023
Other debt and capital lease obligations
Less current portion
Convertible subordinated notes, due 2023
December 31
2003
2002
(In thousands)
$
(cid:150)
229,206
105,000
(cid:150)
500,000
3,682
837,888
1,282
$ 836,606
$ 111,000
317,830
105,000
169,347
(cid:150)
21,689
724,866
18,550
$ 706,316
On August 6, 2003, the Company sold $450 million aggregate principal amount of 3-5/8% convertible
subordinated notes due 2023 and granted the initial purchasers an option to purchase, within 30 days of the
date of the offering memorandum relating to the notes, an additional $50 million of the notes. This option
was exercised, and the additional $50 million of notes was issued on September 3, 2003. The notes pay
interest semiannually.
Holders may convert the notes into Vishay common stock prior to the close of business on August 1, 2023
if (1) the sale price of Vishay common stock reaches 130% of the conversion price for a specified period;
(2) the trading price of the notes falls below 98% of the average last reported sales price of Vishay common
stock multiplied by the conversion rate for a specified period; (3) the notes have been called for
redemption; (4) the credit ratings assigned to the notes are lowered by two or more levels from their initial
ratings; or (5) specified corporate transactions occur. None of these conditions had occurred as of
December 31, 2003. The conversion price of $21.28 is equivalent to a conversion rate of 46.9925 shares
per $1,000 principal amount of notes.
The notes are subordinated in right of payment to all of the Company(cid:146)s existing and future senior
indebtedness and are effectively subordinated to all existing and future liabilities of its subsidiaries. The
notes will be redeemable at the Company(cid:146)s option beginning August 1, 2010 at a redemption price equal to
100% of the principal amount plus accrued and unpaid interest, if any. Holders of the notes will have the
right to require the Company to repurchase all or some of their notes at a purchase price equal to 100% of
their principal amount of the notes, plus accrued and unpaid interest, if any, on August 1, 2008, August 1,
2010, August 1, 2013, and August 1, 2018. In addition, holders of the notes will have the right to require
the Company to repurchase all or some of their notes upon the occurrence of certain events constituting a
fundamental change. On any required repurchase, the Company may choose to pay the purchase price in
cash or shares of Vishay common stock or any combination of cash and Vishay common stock. The
proceeds of the offering of the notes were used to repay other outstanding debt, as well as for general
corporate purposes.
The early extinguishment of a portion of the Liquid Yield Option(cid:153) Notes (LYONs) and the General
Semiconductor convertible subordinated notes, described below, resulted in a pretax loss of $9,910,000 in
2003, which included a premium on redemption of approximately $7.3 million and the write-off of deferred
financing costs of approximately $2.6 million.
F-28
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
6. Long-Term Debt (continued)
Revolving Credit Facility
In July 2003, Vishay agreed with the lenders under its secured revolving credit facility to an amendment
and restatement of the agreement governing the facility. The maximum availability under the facility, in
light of the Company(cid:146)s anticipated liquidity needs, was changed from $500 million to $400 million, and the
final maturity of the facility was extended from June 2005 to May 2007. The restatement decreases the
Company(cid:146)s minimum tangible net worth requirement to $850 million plus 50% of net income (without
offset for losses) and 75% of net proceeds of equity offerings from July 1, 2003, eliminates the covenant on
minimum earnings before interest and tax, permits securitization of up to $200 million of non-U.S.
accounts receivable, allows for the release of all collateral (other than subsidiary stock and pledges by the
Company and its subsidiaries of intercompany notes) under certain circumstances and creates an event of
default upon the occurrence of a fundamental change as defined under the Company(cid:146)s convertible
subordinated notes due 2023. The Company used approximately $130 million of the proceeds of the
offering of the convertible subordinated notes to repay amounts outstanding under the revolving credit
facility.
Interest on the revolving credit facility is payable at prime or other variable interest rate options. The
Company is required to pay facility fees. As of December 31, 2003 and 2002, the Company had $0 and
$111,000,000, respectively, outstanding under the revolving credit facility (interest rate of 3.03% at
December 31, 2002, or 5.77% after giving effect to interest rate swaps). Letters of credit totaling
$6,105,000 and $30,633,000 were issued under the revolving credit facility at December 31, 2003 and
2002, respectively. At December 31, 2003, $393,895,000 was available under the credit facility.
Borrowings under the revolving credit facility are secured by pledges of stock in certain significant
subsidiaries and certain guarantees by significant subsidiaries. The subsidiaries would be required to
perform under the guarantees in the event that the Company failed to make principal or interest payments
under the revolving credit facility. If any subsidiary were to borrow under the credit facility, the Company
would provide a similar guarantee with respect to the subsidiary. The revolving 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.
Liquid Yield Option(cid:153) Notes, due 2021
On June 4, 2001, the Company completed a private placement of $550,000,000 face amount Liquid Yield
Option(cid:153) 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.
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(cid:146)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.
F-29
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
6. Long-Term Debt (continued)
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, June 4, 2006, June 4, 2011, and June 4, 2016, at various prices set forth in the notes. The
Company may choose to pay the purchase price in cash, Vishay 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. If these notes are put to the Company in 2004, the Company expects to be
able to utilize its revolving credit facility or stock to finance the transaction, and accordingly, the notes are
classified as long-term on the consolidated balance sheet.
The Company used approximately $97.4 million of the proceeds of the 2003 offering of the convertible
subordinated notes to fund the purchase of approximately $97.0 million accreted principal amount ($165.0
million face amount) of its LYONs.
Convertible unsecured notes, BCcomponents, due 2102
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(cid:146) 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(cid:146)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(cid:146)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.
Convertible subordinated notes, GSI, due 2006
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 was payable semiannually on June 15 and December 15 of each year. As a
consequence of the Company(cid:146)s acquisition of General Semiconductor, the convertible notes became
convertible into approximately 6.2 million shares of the Company(cid:146)s common stock. The convertible notes
were redeemable at the Company(cid:146)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.
F-30
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
6. Long-Term Debt (continued)
The Company used approximately $176.6 million of the proceeds of the 2003 offering of convertible
subordinated notes (exclusive of accrued interest of approximately $2.3 million) to fund the redemption of
all of the outstanding convertible subordinated notes due 2006 of its General Semiconductor subsidiary.
These notes were redeemed at a price of 103.286% of their principal amount, plus accrued but unpaid
interest to the date of redemption.
Aggregate annual maturities of long-term debt, based on the terms stated in the respective debt agreements,
are as follows: 2004 (cid:150) $1,282,000; 2005 (cid:150) $1,212,000; 2006 (cid:150) $357,000; 2007 (cid:150) $542,000; 2008 (cid:150)
$291,000; and thereafter (cid:150) $834,204,000. As described above, LYONs with an aggregate accreted
principal amount of $229,206,000, due by their terms in 2021, may be put to the Company in 2004 at an
aggregate price of approximately $235,000,000.
At December 31, 2003, the Company had committed and uncommitted short-term credit lines with various
U.S. and foreign banks aggregating approximately $69 million, of which approximately $51 million was
unused. The weighted average interest rate on short-term borrowings outstanding as of December 31, 2003
and 2002 was 5.1% and 2.8%, respectively.
Interest paid was $30,760,000, $17,977,000, and $15,685,000, for the years ended December 31, 2003,
2002, and 2001, respectively.
F-31
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
7. Stockholders(cid:146) Equity
The Company(cid:146)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.
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, 2003, 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, 2003, 305,126 shares were available for
issuance under stock plans.
At December 31, 2003, 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
Exchangeable unsecured notes, BCcomponents
Convertible subordinated notes, LYONs
Convertible subordinated notes, due 2023
Class B common stock
305,126
8,768,000
1,143,000
8,823,529
6,176,471
6,802,000
23,496,250
15,382,296
70,896,672
F-32
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
8. Other Income (Expense)
Other income (expense) consists of the following:
Foreign exchange (losses) gains
Gain (loss) on interest rate swaps
Interest income
Dividend income
(Losses) gains on disposal of property and
equipment
Other
2003
Year ended December 31
2002
(In thousands)
2001
$
$
(5,235)
3,783
7,228
96
(2,521)
(1,062)
2,289
$
$
(777)
(115)
7,952
100
(296)
1,800
8,664
$
611
(3,668)
15,092
(cid:150)
1,472
(806)
$ 12,701
On February 13, 2002, a fire occurred at the Company(cid:146)s Electro-Films, Inc. (EFI) facility located in
Providence, Rhode Island causing a production stoppage of the product line there. The Company received
insurance proceeds based on its costs to replace the assets, which were in excess of the book value of the
assets at the time of the fire. This insurance claim has been resolved, and the Company recognized a gain
of $33,906,000 in 2003.
As described in Note 6, on August 6, 2003, the Company issued 3-5/8% convertible subordinated notes due
2023. The proceeds of the offering were utilized to redeem a portion of the outstanding LYONs and all of
the General Semiconductor notes, which resulted in a pretax loss of $9,910,000 in 2003.
See Note 14 for a description of the interest rate swap agreements.
9. Other Accrued Expenses
Other accrued expenses consist of the following (in thousands):
Restructuring
Sales returns and allowances
Accrued loss on tantalum purchase commitment (cid:150) current portion
Other
2003
2002
$
62,859
47,914
31,675
145,984
$ 288,432
$
$
95,127
39,803
25,334
143,345
303,609
F-33
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
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, 2003
Pension liability adjustment
Currency translation adjustment
Derivative financial instruments:
Loss on derivative financial
instruments
Reclassification adjustment for
gain realized in 2003
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
Beginning
Balance
Before-Tax
Amount
Tax
Benefit
(Expense)
(In thousands)
Net-of-Tax
Amount
Ending
Balance
$ (36,924)
(51,729)
$
2,911
111,369
$
3,727
(cid:150)
$
6,638
111,369
$ (30,286)
59,640
(2,462)
(1,321)
(cid:150)
(1,321)
(3,783)
(cid:150)
$ (91,115)
3,783
$ 116,742
(cid:150)
3,727
3,783
$ 120,469
3,783
$ 29,354
$
$ (13,694)
(116,072)
$ (35,562)
64,343
$ 12,332
(cid:150)
$ (23,230) $ (36,924)
(51,729)
64,343
(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)
(cid:150)
$ (113,571)
(1,019)
$ (21,938)
$
$
4,724
(cid:150)
$
(8,557) $ (13,694)
(116,072)
(7,638)
374
5,098
(645)
(645)
$ (16,840) $(130,411)
F-34
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits
U.S. Pension 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 U.S. pension plan of BLH is included beginning on July 31, 2002.
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 medical
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.
Obligations and Funded Status (U.S. Plans)
Pension Benefits
2003
2002
Other Benefits
2003
2002
(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Employee contributions
Actuarial losses (gains)
Plan amendments
Benefits paid
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
Plan participants(cid:146) contributions
Benefits paid
Acquisitions
Fair value of plan assets at end of year
Funded status
Unrecognized net actuarial loss
Unrecognized transition (asset) obligation
Unamortized prior service cost
Net amount recognized
$ 212,909
3,394
14,057
1,641
9,689
(cid:150)
(15,249)
(cid:150)
$ 226,441
$ 147,296
30,149
28,081
1,641
(15,249)
(cid:150)
$ 191,918
$ (34,523)
51,391
(cid:150)
243
$ 17,111
$ 193,273
3,433
13,598
1,680
11,141
(cid:150)
(16,090)
5,874
$ 212,909
$ 165,186
(11,224)
4,226
1,680
(16,090)
3,518
$ 147,296
$ (65,613)
60,957
(101)
(cid:150)
$
(4,757)
$ 21,999
247
1,358
(cid:150)
(1,225)
(cid:150)
(1,201)
(cid:150)
$ 21,178
$ 20,286
279
1,465
(cid:150)
1,909
(410)
(1,530)
(cid:150)
$ 21,999
$ (21,178)
131
1,734
134
$ (19,179)
$ (21,999)
1,237
1,934
182
$ (18,646)
F-35
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits (continued)
Amounts recognized in the consolidated
balance sheets for U.S. plans consist of:
Intangible asset
Accrued benefit liability
Accumulated other comprehensive loss
Net amount recognized
Pension Benefits
2003
2002
Other Benefits
2003
2002
(In thousands)
$
243
(24,743)
41,611
$ 17,111
$
$
(cid:150)
(53,439)
48,682
(4,757)
$
(cid:150)
(19,179)
$
(cid:150)
(18,646)
(cid:150)
(cid:150)
$ (19,179)
$ (18,646)
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the U.S.
pension plans with accumulated and projected benefit obligations in excess of plan assets were
$226,441,000, $216,661,000, and $191,918,000, respectively, as of December 31, 2003 and $212,909,000,
$200,634,000, and $147,296,000, respectively, as of December 31, 2002.
On December 8, 2003, the President of the United States signed the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (the (cid:147)Act(cid:148)). Among the provisions of the Act is a provision
granting a subsidy to sponsors of retirement medical plans with prescription drug coverage when the
benefit is at least actuarially equivalent to the Medicare Part D benefit. In accordance with FASB Staff
Position No. FAS 106-1, measures of the benefit obligation and net periodic postretirement benefit cost do
not reflect the effects of the Act on the plan. Specific authoritative accounting guidance on the accounting
for the federal subsidy is pending and that guidance, when issued, could require companies, including
Vishay, to change previously reported information.
Components of Net Periodic Benefit Cost (U.S. Plans)
Annual service cost
Less employee
contributions
Net service cost
Interest cost
Expected return on plan
assets
Amortization of prior
service cost
Amortization of transition
obligation
Amortization of losses
Net periodic benefit cost
Pension Benefits
2002
2003
2001
2003
(In thousands)
Other Benefits
2002
2001
$ 5,035
$ 5,424
$ 5,388
$
247
$
279
$
240
1,641
3,394
14,057
1,991
3,433
13,598
2,296
3,092
9,023
(12,521)
(14,227)
(10,048)
32
(cid:150)
6
(cid:150)
247
1,358
(cid:150)
47
(cid:150)
279
1,466
(cid:150)
47
(cid:150)
240
678
(cid:150)
93
(1)
4,285
$ 9,246
(201)
1,474
$ 4,077
311
514
$ 2,898
193
(cid:150)
$ 1,845
194
(cid:150)
$ 1,986
194
(cid:150)
$ 1,205
F-36
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits (continued)
Weighted-average assumptions used to determine benefit obligations (U.S. Plans)
at December 31:
Discount rate
Rate of compensation increase
Pension Benefits
Other Benefits
2003
6.25%
4.00%
2002
6.75%
4.50%-6.50%
2003
6.25%
2002
6.75%
Weighted-average assumptions used to determine net cost (U.S. Plans)
for years ended December 31:
Discount rate
Expected return on plan assets
Rate of compensation increase
Pension Benefits
Other Benefits
2003
6.75%
2002
7.25%
2003
6.75%
2002
7.25%
8.50%-8.75% 8.50%-9.50%
4.50%-6.50% 4.50%-6.50%
The plans(cid:146) expected return on assets is based on management(cid:146)s expectations of long-term average rates of
return to be achieved by the underlying investment portfolios. In establishing this assumption, management
considers historical and expected returns for the asset classes in which the plans are invested, advice from
pension consultants and investment advisors, and current economic and capital market conditions.
Plan Assets (U.S. Plans)
Asset Category
Equity funds
Fixed income funds
Cash and cash equivalents
Total
Percentage of Plan Assets
2003
2002
65%
30%
5%
100%
55%
45%
(cid:150)
100%
The investment mix between equity securities and fixed income securities is based upon achieving a
desired return, balancing higher return, more volatile equity securities, and lower return, less volatile fixed
income securities. The Company(cid:146)s domestic defined benefit plans are invested in diversified portfolios of
public-market equity and fixed income securities. Investment allocations are made across a range of
markets, industry sectors, capitalization sizes, and, in the case of fixed income securities, maturities and
credit quality. The plans do not invest in securities of Vishay or its subsidiaries.
Cash Flows (U.S. Plans)
The Company expects to contribute approximately $10 million to its U.S. pension plans in 2004.
Defined Contribution Plans Matching
Many of the Company(cid:146)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(cid:146)s matching expense for the plans
was $3,401,000, $2,990,000, and $3,182,000, for the years ended December 31, 2003, 2002, and 2001,
respectively.
F-37
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
11. Pensions and Other Postretirement Benefits (continued)
Foreign Pension Plans
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
following table sets forth a reconciliation of the benefit obligation, plan assets, and accrued benefit cost
related to the foreign defined benefit 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.
Obligations and Funded Status (Foreign Plans)
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial losses (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 losses (gains)
Unrecognized transition asset
Unamortized prior service cost
Net amount recognized
2003
2002
(In thousands)
$ 119,173
834
6,945
8,067
(6,794)
24,534
(163)
(cid:150)
$ 152,596
$
$
14,645
415
6,747
(6,794)
3,546
18,559
$ (134,037)
8,118
(cid:150)
(cid:150)
$ (125,919)
$
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)
(3)
21
$ (105,146)
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 for foreign pension plans 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
Components of Net Periodic Benefit Cost (Foreign Plans)
2003
2002
(In thousands)
$ (137,320)
11,401
$ (125,919)
$ (110,427)
5,281
$ (105,146)
4.00% (cid:150) 5.50% 6.00% (cid:150) 6.25%
2.60% (cid:150) 3.00%
2.00% (cid:150) 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
2003
2002
(In thousands)
2001
$
$
834
6,945
(461)
23
(4)
(163)
(95)
7,079
$
$
525
5,630
(489)
(cid:150)
(3)
(1,336)
(94)
4,233
$
$
391
5,301
(444)
36
(3)
(cid:150)
97
5,378
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 $152,596,000, $150,487,000, and $18,559,000, respectively, as of December 31, 2003,
and $119,173,000, $118,646,000, and $14,645,000, respectively, as of December 31, 2002.
F-39
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
12. Stock Options
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(cid:146)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, 2003, 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
Number 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 July 20, 2003
1,114,000
27,000
25.13
13.46 (cid:150)
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 July 20,
2013
On May 18, 2000, the stockholders of the Company approved an increase in the number of shares available
for grant under Vishay(cid:146)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, 2003, options to purchase
462,000 shares had been exercised under this plan.
On November 2, 2001, Vishay acquired General Semiconductor, which 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, 2003, options to purchase 446,000 shares had
been exercised under this plan.
F-40
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
12. Stock Options (continued)
The following table summarizes the Company(cid:146)s stock option activity (number of options in thousands):
2003
2002
2001
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
Cancelled
Acquisition of General
Semiconductor
Outstanding at end of year
9,231
12
(356)
(119)
(cid:150)
8,768
$ 16.07
14.00
13.30
17.10
(cid:150)
$ 16.17
9,569
15
(261)
(92)
(cid:150)
9,231
$ 15.97
17.75
12.12
17.14
(cid:150)
$ 16.07
5,646
(cid:150)
(86)
(273)
4,282
9,569
$ 14.29
(cid:150)
9.99
17.82
18.10
$ 15.97
Exercisable at end of year
7,725
$ 15.85
7,626
$ 15.79
7,358
$ 15.74
Available for future grants
1,143
1,036
958
The following table summarizes information concerning stock options outstanding and exercisable at
December 31, 2003 (number of options in thousands):
Options Outstanding
Range of
Exercise Prices
Number of
Options
Weighted
Average
Remaining
Contractual
Life
Weighted
Average
Exercise Price
Options Exercisable
Weighted
Average
Exercise Price
Number of
Options
$2.64
$5.60
$10.89 (cid:150) $12.53
$12.54 (cid:150) $13.61
$14.40 (cid:150) $14.99
$15.33
$15.43 (cid:150) $16.41
$16.52 (cid:150) $20.86
$21.43 (cid:150) $25.07
$25.13 (cid:150) $34.52
Total
3
882
1,289
1,214
26
974
1,220
1,343
585
1,232
8,768
0.57
4.76
4.39
4.52
7.15
5.77
6.82
4.92
2.26
6.49
$ 2.64
5.60
11.76
13.32
14.69
15.33
16.03
18.98
22.43
25.96
$ 16.17
3
699
1,289
1,209
15
638
1,220
1,339
582
731
7,725
$ 2.64
5.60
11.76
13.32
14.85
15.33
16.03
18.98
22.42
26.26
$ 15.85
F-41
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
13. Commitments and Contingencies
Total rental expense under operating leases was $34,621,000, $27,652,000, and $22,994,000, for the years
ended December 31, 2003, 2002, and 2001, respectively.
Future minimum lease payments for operating leases with initial or remaining noncancelable lease terms in
excess of one year are as follows: 2004 (cid:150) $24,106,000; 2005 (cid:150) $17,961,000; 2006 (cid:150) $14,818,000; 2007 (cid:150)
$12,735,000; 2008 (cid:150) $2,039,000; and thereafter (cid:150) $3,591,000.
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(cid:146)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(cid:146)s
financial condition.
The Company has engaged environmental consultants and attorneys to assist management in evaluating
potential liabilities related to environmental matters. Management assesses the input from these
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 (cid:147)potentially responsible party.(cid:148) Such assessments
include the Company(cid:146)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.
As part of the acquisition of General Semiconductor by Vishay on November 2, 2001, the Company
assumed ongoing environmental matters. The Company has accrued $18,700,000 as of December 31, 2003
for environmental matters relating to ongoing environmental matters at its General Semiconductor
subsidiary, which it acquired in November 2001. This accrual does not include potential liability in
connection with litigation relating to a former facility of General Semiconductor in Hicksville, New York,
as to which the Company does not believe it is currently able to reasonably estimate the amount of any
potential liability. As part of the acquisition of BCcomponents in 2002, the Company has recorded
environmental liabilities of $8,400,000. The Company has also accrued approximately $5,600,000 at
December 31, 2003 for other environmental matters, primarily at its Vitramon subsidiary in the United
States. The liabilities recorded for these matters total $32,700,000, of which $9,200,000 is included in
other accrued liabilities on the consolidated balance sheet, and $23,500,000 is included in other non-current
liabilities on the consolidated balance sheet.
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(cid:146)s consolidated
financial position, results of operations, or cash flows beyond the amounts previously provided for in the
consolidated financial statements. The Company(cid:146)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
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.
F-42
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
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(cid:146)s large number of customers and their dispersion across many countries and industries. At
December 31, 2003 and 2002, the Company had no significant concentrations of credit risk.
Interest Rate Swap Agreements
In August 1998, the Company entered into six interest rate swap agreements, with a total notional amount
of $300,000,000 to manage interest rate risk related to its multicurrency revolving line of credit. These
interest rate swap agreements 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.
As of December 31, 2002, five of these six agreements had been terminated. The final agreement expired
in 2003. At December 31, 2002 and 2001, the Company paid a weighted average fixed rate of 5.77%, and
received a weighted average variable rate of 1.40%, and 1.93%, respectively. The fair value of the interest
rate swap agreements, based on current market rates, approximated a net payable of $3,309,000 at
December 31, 2002. During the year ended December 31, 2003, the Company had a pretax gain of
$3,783,000 related to the expiration of the final swap agreement. During the years ended December 31,
2002 and 2001, the Company recorded pretax losses of $115,000 and $3,668,000, respectively, relating to
interest rate swap agreements that were ineffective hedges. See Note 8.
Cash and Cash Equivalents, Accounts Receivable, Notes Payable, and Long-Term Debt
The carrying amounts of cash and cash equivalents, accounts receivable, and notes payable reported in the
consolidated balance sheets approximate their fair values. The fair value of the long-term debt is
approximately $1,084,000,000, as compared to its carrying value of $837,888,000. The fair value of long-
term debt was estimated based on trading prices and market prices of debt with similar terms and features.
F-43
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
15. Current Vulnerability Due to Certain Concentrations
Market Concentrations
A material portion of the Company(cid:146)s revenues is derived from the worldwide communications and
computer markets. These markets have historically experienced wide variations in demand for end
products. If demand for these end products should decrease, the producers thereof could reduce their
purchases of the Company(cid:146)s products, which could have a material adverse effect on the Company(cid:146)s results
of operations and financial position.
Sources of Supply
Although most materials incorporated in the Company(cid:146)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(cid:146)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(cid:146)s consolidated
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(cid:146)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(cid:146)s net earnings.
Vishay is a major consumer of the world(cid:146)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. The market prices
for tantalum also decreased significantly during 2002 and 2003. As a result, Vishay recorded, in costs of
products sold, write-downs of $5,406,000, $25,700,000, and $52,000,000, respectively, to reduce tantalum
inventories on hand to market value during the years ended December 31, 2003, 2002, and 2001,
respectively. The net book value of tantalum inventories was $95,432,000 and $49,609,000 at
December 31, 2003 and 2002, respectively. Amounts in excess of a one-year supply are included in non-
current assets. At December 31, 2003, other assets included $28,724,000 of tantalum inventories in excess
of quantities expected to be used within one year. The Company also recorded losses on future purchase
commitments for tantalum of $11,392,000 and $106,000,000 for the years ended December 31, 2003 and
2002, respectively. Vishay(cid:146)s purchase commitments were entered into at a time when market demand for
tantalum capacitors was high and tantalum powder was in short supply. As a result of purchases during
2003, the accrual for these purchase commitments decreased by approximately $28,000,000. The balance
of the purchase commitment liability at December 31, 2003 and 2002 was approximately $89,400,000 and
$106,000,000, respectively. The purchase commitment liability expected to be utilized within one year of
$31,675,000 and $25,334,000 at December 31, 2003 and 2002, respectively, is recorded in other accrued
expenses on the consolidated balance sheets. The remaining purchase commitment liability is recorded in
other liabilities on the consolidated balance sheets. 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.
F-44
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
15. Current Vulnerability Due to Certain Concentrations (continued)
The Company is obligated to make purchases of tantalum of approximately $103,800,000 in 2004;
$116,600,000 in 2005, and $60,100,000 in 2006. The Company purchased $107,906,000, $53,280,000, and
$23,395,000, under these contracts during the years ended December 31, 2003, 2002, and 2001,
respectively. As long as Vishay is in compliance with its purchase obligations under the Cabot contracts,
its minimum purchase commitments will not increase. If Vishay were to default under its commitments,
then the minimum requirements would revert to the quantities specified in the contracts prior to their
modification in July 2002, and increase to $147,600,000 in 2004, $149,300,000 in 2005, and $81,300,000
in 2006. Vishay believes that the likelihood that it would default on its obligations under the contracts is
remote.
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 has fluctuated in the range of approximately $148 to $1,090 per troy ounce during the last three
years. As of December 31, 2003, the price of palladium was approximately $195 per troy ounce. During
the years ended December 31, 2003, 2002, and 2001, respectively, the Company recorded in costs of
products sold write-downs of $1,585,000, $1,700,000, and $18,000,000, respectively, to reduce palladium
inventories on hand to market value. The net book value of palladium inventories was $4,384,000 and
$5,644,000 at December 31, 2003 and 2002, 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(cid:146)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(cid:146)s
ability to increase production, particularly during periods of growing demand for Vishay(cid:146)s products.
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(cid:146)s lower wage rates, highly skilled labor force, government-sponsored grants, and various tax
abatement programs. Israeli incentive programs have contributed substantially to the growth and
profitability of the Company. The Company might be materially and adversely affected if these incentive
programs were no longer available to the Company or if events were to occur in the Middle East that
materially interfered with the Company(cid:146)s operations in Israel.
F-45
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
16. 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 certain items.
Management believes that evaluating segment performance excluding items such as restructuring,
inventory write-downs, losses on purchase commitments, losses on early extinguishment of debt, gains on
insurance proceeds, write-offs of in-process research and development, and other charges is meaningful
because its provides insight with respect to ongoing operating results.
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
BCcomponents as of December 31, 2002, 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 optoelectronic infrared components business as of
December 31, 2001, General Semiconductor as of November 2, 2001, and Infineon U.S. optoelectronic
infrared components business as of July 27, 2001. 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 and equipment, and certain other assets.
Business segment information
2003
2002
(In thousands)
2001
Net sales:
Passives
Actives
Operating income (loss):
Passives
Actives
Corporate
Restructuring and severance costs
Purchased research and development
Loss on long-term purchase commitments
Amortization of goodwill
Restructuring and severance costs:
Passives
Actives
$
$
$
$
$
$
1,104,856
1,065,741
2,170,597
6,776
114,498
(22,350)
(29,560)
(cid:150)
(11,392)
(cid:150)
57,972
$
$
$
$
$
$
767,246
1,055,567
1,822,813
(61,317)
139,140
(20,801)
(30,970)
(cid:150)
(106,000)
(cid:150)
$
(79,948)
$
1,010,634
644,712
1,655,346
60,137
65,181
(21,970)
(61,908)
(16,000)
(cid:150)
(11,190)
14,250
26,288
3,272
29,560
$
$
30,049
921
30,970
$
$
57,498
4,410
61,908
F-46
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
16. Business Segment and Geographic Area Data (continued)
Depreciation expense:
Passives
Actives
Corporate
Interest expense:
Passives
Actives
Corporate
Income tax provision (benefit):
Passives
Actives
Corporate
Total assets:
Passives
Actives
Corporate
Capital expenditures:
Passives
Actives
Corporate
2003
2002
(In thousands)
2001
$
$
$
$
$
$
$
$
$
$
90,133
85,821
4,752
180,706
2,977
7,452
27,402
37,831
6,422
15,133
(10,027)
11,528
2,170,105
2,280,737
121,671
4,572,513
53,500
72,051
1,084
126,635
$
$
$
$
$
$
$
$
$
$
80,084
87,609
4,481
172,174
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
$
$
$
$
$
$
$
$
83,735
61,238
4,252
149,225
680
1,988
14,180
16,848
(2,912)
11,862
(3,255)
5,695
91,028
68,463
3,002
162,493
F-47
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 and equipment based on physical location:
Geographic area information
Net sales:
United States
Germany
Asia Pacific
France
Israel
Other
Property and equipment (cid:150) net:
United States
Germany
Israel
Asia Pacific
France
Other
2003
2002
(In thousands)
2001
$
$
638,326
452,839
315,550
85,046
32,646
130,939
1,655,346
$
$
$
$
444,952
534,019
595,241
156,124
130,852
309,409
2,170,597
255,928
152,722
312,632
278,109
38,200
182,204
1,219,795
$
$
$
$
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
F-48
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
17. Earnings (Loss) per Share
Basic earnings (loss) per share is computed using the weighted average number of common shares
outstanding during the periods presented. Diluted earnings (loss) 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(cid:146)s 1997 and 1998 stock option plans (see Note 12), stock options
assumed in the acquisition of General Semiconductor (see Notes 2 and 12), and other potentially dilutive
securities.
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 earnings (loss) per share (cid:150)
net earnings (loss)
Denominator
Denominator for basic earnings (loss) per
share (cid:150) weighted average shares outstanding
Effect of dilutive securities:
Employee stock options
Other
Dilutive potential common shares
2003
Year ended December 31
2002
2001
$
26,842
$
(92,614)
$
513
159,631
159,413
141,171
729
83
812
(cid:150)
(cid:150)
(cid:150)
1,201
142
1,343
Denominator for diluted earnings (loss) per
share (cid:150) adjusted weighted average shares
160,443
159,413
142,514
Basic earnings (loss) per share
Diluted earnings (loss) per share
$
$
0.17
0.17
$
$
(0.58)
(0.58)
$
$
0.00
0.00
F-49
Vishay Intertechnology, Inc.
Notes to Consolidated Financial Statements (continued)
17. Earnings (Loss) per Share (continued)
Diluted earnings per share do not reflect the following, as the effect would be antidilutive for the periods
presented:
(cid:120)(cid:3) Assumed conversion of the Company(cid:146)s LYONs, due 2021. At December 31, 2002 and 2001, these
notes were convertible into 9,717,730 shares of the Company(cid:146)s common stock. As described in Note
6, the Company repurchased some of these notes during 2003. At December 31, 2003, the outstanding
notes are convertible into approximately 6,802,000 shares of the Company(cid:146)s common stock.
(cid:120)(cid:3) Assumed conversion of the convertible subordinated notes of General Semiconductor, acquired
November 2, 2001. At December 31, 2002 and 2001, these notes were convertible into 6,191,161
shares of the Company(cid:146)s common stock. As described in Note 6, these notes were fully redeemed on
September 10, 2003.
(cid:120)(cid:3) Assumed exchange of the convertible notes of Vishay from the December 13, 2002 acquisition of
BCcomponents, for the years ended December 31, 2003 and 2002. These notes are exchangeable for
6,176,471 shares of the Company(cid:146)s common stock.
(cid:120)(cid:3) Weighted average outstanding warrants of 7,074,000 and 435,000, for the years ended December 31,
2003 and 2002, respectively. The warrants were issued on December 13, 2002 in connection with the
acquisition of BCcomponents.
(cid:120)(cid:3) Weighted average outstanding stock options for the years ended December 31, 2003, 2002, and 2001,
to purchase 5,663,000 shares, 9,231,000 shares, and 1,164,000 shares, respectively, of common stock.
(cid:120)(cid:3) Assumed conversion of the Company(cid:146)s 3-5/8% convertible subordinated notes, due 2023. As
described in Note 6, the Company issued subordinated notes in the third quarter of 2003, which are
convertible into 23,496,250 shares of common stock upon the occurrence of certain events.
18. Related Party Transactions
On December 12, 2002, the Company(cid:146)s Board of Directors passed resolutions to terminate the stock
purchase programs for corporate officers and key employees (together the (cid:147)Plan(cid:148)) 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 write-down 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 was recorded in selling, general, and administrative expense in 2002.
F-50
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9
1
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C O R P O R AT E I N F O R M AT I O N
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
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
Executive Vice President
Ziv Shoshani
Executive Vice President, Resistor Group
William J. Spires
Vice President, Secretary
William M. Clancy
Vice President
Assistant Secretary
Steven Klausner
Vice President
Assistant Treasurer
ANNUAL MEETING
May 12, 2004 at 10:30 a.m.
Four Seasons Hotel
South Ballroom
Lobby Level
One Logan Square
Philadelphia, PA 19103
Dr. Felix Zandman
Chairman of the Board
Chief Executive Officer
Vishay Intertechnology, Inc.
Marc Zandman
Vice Chairman of the Board
Group Vice President, Measurements Group
President, Vishay Israel Ltd.
Vishay Intertechnology, Inc.
Philippe Gazeau
Investor
Zvi Grinfas
Investor
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.
HONORARY CHAIRMAN OF
THE BOARD
Alfred P. Slaner
(Deceased March 14, 1996)
Independent Auditors
Ernst & Young LLP
Philadelphia, PA
Transfer Agent and Registrar
American Stock Transfer & Trust Company
40 Wall St., 46th Floor
New York, NY 10055
Phone: 800-937-5449
Stock Exchange Listings
New York Stock Exchange
Symbol: VSH
Midwest Stock Exchange
Chicago Board of Options Exchange
Investor Relations Contact
Robert A. Freece
Executive Vice President
Vishay Intertechnology, Inc.
Phone: 610-644-1300
QUARTERLY REPORT MAILINGS
Shareholders owning Vishay stock indirect-
ly (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 Annual Report on
Form 10-K for the year ended December
31, 2003, filed with the Securities and
Exchange Commission, is included in this
report and may also be obtained by share-
holders 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.
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 2004 Vishay Intertechnology, Inc.
® Registered Trademarks of Vishay Intertechnology, Inc., and Siliconix incorporated
All rights reserved.