Vishay Intertechnology, Inc. — Form 10-Q summary
Reporting period: Fiscal quarter ended October 1, 2011, and nine fiscal months ended October 1, 2011. Amounts below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise. Vishay manufactures discrete semiconductors and passive electronic components for global markets.
Key financial results
| Metric | Q3 2011 | Q3 2010 | Nine months 2011 | Nine months 2010 |
|---|---|---|---|---|
| Revenue | $637.6 | $694.4 | $2,042.6 | $2,036.5 |
| Gross profit / margin | $167.5 / 26.3% | $218.4 / 31.5% | $594.3 / 29.1% | $596.0 / 29.3% |
| Operating income / margin | $75.3 / 11.8% | $130.9 / 18.9% | $313.0 / 15.3% | $297.4 / 14.6% |
| Net earnings attributable to Vishay stockholders | $50.5 | $89.8 | $207.9 | $211.9 |
| Diluted EPS | $0.31 | $0.47 | $1.22 | $1.10 |
- Cash flow: Nine-month operating cash flow was $287.8, down from $339.1. Capital expenditures were $89.7, versus $80.1; operating cash flow less capital expenditures was approximately $198.1.
- Liquidity: Cash and equivalents were $705.1 and short-term investments $329.9 at October 1, 2011, compared with cash of $897.3 and no short-term investments at year-end 2010. Current assets were $1,973.6 and current liabilities $503.8; the reported current ratio was 3.9.
- Debt: Reported carrying value of long-term debt was $423.4, including $180.0 drawn on the credit facility. Total contractual principal debt was $700.0, excluding convertible-debt discounts. Management’s net cash and short-term investments measure was $611.5, using debt at carrying value. The company reported leverage and interest-coverage covenant ratios of 0.99 and 28.99, respectively, and compliance with covenants.
Changes versus comparable periods
- Q3 revenue fell 8.2% year over year and approximately 10.2% from Q2 2011. Management attributed the decline chiefly to weaker demand and lower volume; Q3 book-to-bill was 0.67, backlog fell to $655.2, and inventory turnover declined to 3.99.
- Q3 gross margin contracted to 26.3% from 31.5%, and operating margin to 11.8% from 18.9%. Management cited reduced volume and higher metal prices as pressures on gross margin. Average selling prices fell 1.1% sequentially.
- Q3 net earnings attributable to Vishay stockholders declined 43.8% year over year. For the nine-month period, revenue was nearly flat and attributable net earnings were lower, while diluted EPS increased from $1.10 to $1.22, aided in part by fewer weighted-average shares following repurchases.
- Comparisons are affected by the July 2010 spin-off of Vishay Precision Group (VPG): 2010 nine-month results include $101.1 of VPG revenue, while 2011 results do not. Excluding VPG, 2010 nine-month gross margin was 28.9%, versus 29.1% in 2011.
- MOSFETs was particularly weak: Q3 revenue fell 27.5% year over year and segment operating margin declined to 13.1% from 29.6%. Resistors & Inductors was comparatively resilient, with revenue down 0.9% year over year.
Outlook, notable items and risks
- Management forecast Q4 2011 revenue of $555–$595 million, with a mainly volume-driven gross-margin decline. It expected further revenue weakness as distributors adjusted orders and inventory.
- Management planned approximately $175 million of 2011 capital spending, focused on selected technology and capacity projects, and expected lower capital spending in 2012. It cited uncertain global economic conditions and warned that demand recovery could stall or reverse.
- On September 28, Vishay acquired Huntington Electric’s resistor businesses for approximately $19.3 million. The preliminary purchase allocation included $9.5 million of goodwill; the acquisition did not materially affect Q3 consolidated results.
- Vishay issued $150 million of 2.25% convertible debentures due 2041 and used the proceeds, together with cash, to repurchase 8.62 million shares for $150 million. The credit-facility amendment permits up to $300 million of additional repurchases subject to leverage, interest-coverage, and liquidity conditions.
- One-time and executive-related items included a $10.0 million tax expense from an Israeli tax-rate change, $3.9 million of accelerated compensation expense following the Executive Chairman’s death, and $1.9 million related to the former CFO’s resignation. The founder’s estate is entitled to annual payments of $10 million through 2014; the related compensation expense had been recorded previously.
- Substantially all cash and short-term investments were held outside the U.S. Management expected foreign cash to remain invested abroad; repatriation could trigger additional taxes. Other disclosed risks include economic and end-market weakness, currency movements, acquisition execution, cost-control challenges, and concentrated Class B voting control.
Important facts for investors to verify
- Whether demand, backlog, distributor orders, and book-to-bill stabilized after Q3, and whether Q4 revenue fell within management’s stated range.
- How margins respond to lower volumes, metal costs, and pricing pressure, especially in MOSFETs and Capacitors.
- The final purchase-price allocation and operating contribution of the Huntington Electric businesses.
- Cash availability and tax consequences of potential repatriation, alongside the distinction between debt carrying value and contractual principal obligations.
- Whether share repurchases meet the credit-facility conditions and how convertible debt, dilution, executive payments, and voting control affect shareholder outcomes.