Vishay Intertechnology, Inc. — 2022 Form 10-K
Business and period: Vishay manufactures discrete semiconductors and passive electronic components for automotive, industrial, computing, consumer, telecommunications, military, aerospace, and medical markets. This annual report covers the fiscal year ended December 31, 2022; fourth-quarter figures are included where disclosed.
Financial performance
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $3.497 billion | $3.240 billion |
| Gross profit / margin | $1.059 billion / 30.3% | $887.9 million / 27.4% |
| Operating income / margin | $615.5 million / 17.6% | $467.8 million / 14.4% |
| Net earnings attributable to Vishay stockholders | $428.8 million | $298.0 million |
| Diluted earnings per share | $2.98 | $2.05 |
| Cash from operating activities | $484.3 million | $457.1 million |
| Capital expenditures | $325.3 million | $218.4 million |
| Free cash (company-defined, non-GAAP) | $160.2 million | $240.0 million |
Revenue rose 7.9%, driven by volume growth of 4.3% and higher average selling prices of 7.2%, partly offset by a 4.0% adverse foreign-currency effect. Higher selling prices and volume lifted annual gross margin, although transportation, metals, materials, and other inflation pressures weighed on costs. Adjusted net earnings, a non-GAAP measure, were $454.2 million, or $3.16 per diluted share; reported results included material tax items.
Fourth quarter and segment trends
Fourth-quarter revenue was $855.3 million, up slightly from $843.1 million a year earlier but down from $924.8 million in the third quarter. Gross margin was 29.1% and operating margin 15.8%, versus 27.3% and 14.4%, respectively, in the prior-year quarter. Management attributed the sequential revenue decline chiefly to lower volume, including the end of a post-shutdown sales catch-up and the start of distributor inventory correction. The quarterly book-to-bill ratio was 0.94; backlog was $2.293 billion.
| 2022 segment revenue | Revenue | Change from 2021 |
|---|---|---|
| MOSFETs | $762.3 million | +14.1% |
| Diodes | $765.2 million | +7.9% |
| Optoelectronic Components | $296.4 million | -2.1% |
| Resistors | $832.8 million | +10.7% |
| Inductors | $331.1 million | -1.4% |
| Capacitors | $509.6 million | +7.9% |
Annual revenue increased in four of six segments. Optoelectronics and Inductors declined, reflecting lower volume and foreign-currency effects. Segment operating margins improved in most businesses, while Inductors’ margin eased.
Liquidity, debt, and capital allocation
- At year-end, cash and cash equivalents were $610.8 million and short-term investments were $305.3 million. Debt, net of deferred financing costs, was $500.9 million; the company reported net cash and short-term investments of $415.2 million.
- The $750 million revolving credit facility expires in June 2024; $707.1 million was available at year-end. The company reported compliance with covenants, with a 0.65-to-1 leverage ratio and 32.78-to-1 interest coverage ratio.
- Working-capital changes, higher capital spending, and repatriation-related cash taxes contributed to lower free cash year over year. Inventory rose to $618.9 million from $536.5 million.
- Under its policy to return at least 70% of free cash flow, net of scheduled long-term debt principal payments, Vishay paid $57.2 million in dividends and repurchased $83.0 million of stock in 2022.
Outlook, unusual items, and risks
- Management expects higher growth over the next few years, citing electrification, factory automation, electric vehicles, and 5G infrastructure. It forecast approximately $385 million of capital expenditures in 2023 and approximately $1.2 billion over three years, primarily for expansion outside China. No specific revenue or earnings guidance was provided.
- Management expected distributor inventory correction to continue through the first and second quarters of 2023. It also reported stable fourth-quarter selling prices after earlier broad price increases and said it was expanding capacity in key product lines.
- The 2022 effective tax rate was 27.5%. A $59.6 million tax expense followed the decision that substantially all accumulated German earnings were no longer indefinitely reinvested; tax benefits included $33.7 million from releasing a valuation allowance and $5.9 million from uncertain tax positions. These items affected reported earnings and access to overseas cash.
- Vishay acquired MaxPower Semiconductor for $50.0 million net of cash acquired and could owe up to $57.5 million in contingent payments tied to milestones and other conditions. The acquisition added silicon and silicon-carbide MOSFET technology.
- Risks include cyclical demand, order cancellations and distributor destocking, global supply-chain constraints, raw-material price volatility, foreign exchange, trade restrictions, and exposure to political or operating disruptions in countries where Vishay manufactures or holds cash. A two-month government-mandated shutdown affected China operations in 2022; related net costs were $7.2 million.
- Environmental remediation liabilities were $11.4 million. Two related CERCLA cases concerning a predecessor’s Hicksville, New York manufacturing operations remained pending; the company is contesting the claims. Management said the ultimate environmental costs are uncertain but did not expect these matters to materially affect consolidated results or financial position.
Most important facts for investors to verify
- Whether distributor inventory correction and a sub-1.0 book-to-bill ratio translated into weaker 2023 orders, revenue, and margins.
- Whether planned capital spending delivers capacity utilization, growth, and returns consistent with management’s outlook.
- The cash-flow effect and timing of German and Israeli earnings distributions, related withholding taxes, and remaining U.S. transition-tax installments.
- How much of adjusted earnings growth reflects recurring operating performance versus discrete tax benefits and charges.
- MaxPower’s contingent-payment exposure, technology and licensing milestones, and contribution to results.
- The filing reports audited financial statements with an unqualified opinion; management and the auditor also concluded internal control over financial reporting was effective at year-end.