Vishay Intertechnology, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2014. This annual report also presents unaudited fourth-quarter results. Vishay manufactures discrete semiconductors and passive electronic components for industrial, automotive, computing, consumer, telecommunications, and other markets.
Financial performance
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Net revenue | $2.493 billion | $2.371 billion |
| Gross profit / margin | $611.3 million / 24.5% | $567.3 million / 23.9% |
| Operating income / margin | $189.1 million / 7.6% | $197.7 million / 8.3% |
| Net earnings attributable to Vishay stockholders | $117.6 million | $123.0 million |
| Diluted EPS | $0.77 | $0.81 |
| Cash from operating activities | $297.0 million | $292.1 million |
- Revenue rose 5.2%, mainly from higher volume and acquisitions, partly offset by a 2.5% decline in average selling prices. Gross margin improved 0.6 percentage points; operating margin declined 0.7 points.
- Management’s non-GAAP adjusted net earnings were $141.3 million, or $0.92 per diluted share, versus $119.5 million, or $0.79, in 2013. These figures exclude identified comparability items and are not GAAP measures.
- Fourth-quarter revenue was $610.8 million, down from $638.2 million in Q3 2014 and $616.2 million in Q4 2013. Q4 gross margin was 23.5%; operating income was $43.2 million. Net earnings attributable to Vishay stockholders were $29.2 million and diluted EPS was $0.19.
- Q4 book-to-bill was 0.95 and backlog was $554.7 million, down from $598.0 million in Q3. Management cited weaker distributor demand, particularly in Asia, and estimated currency effects reduced Q4 revenue by $12 million sequentially. Orders showed possible signs of recovery, but no assurance was given.
Cash, debt, and liquidity
- At year-end, cash and cash equivalents were $592.2 million and short-term investments were $514.8 million, compared with total debt of $454.9 million. Management reported net cash and short-term investments of $652.0 million, down from $786.7 million a year earlier.
- Working capital was $1.470 billion; the current ratio was 4.2. The $640 million revolving credit facility had $432.4 million available and matures August 8, 2018. The company reported compliance with covenants, with a 1.89:1 leverage ratio and 13.22:1 interest coverage ratio.
- Capital expenditures were $157.0 million. Using the filing’s definition of free cash (operating cash flow less capital expenditures, plus asset-sale proceeds), the reported components imply approximately $143 million for 2014.
- Debt increased from $364.9 million in 2013, principally reflecting increased revolver borrowing, including $53 million borrowed in connection with the Capella acquisition. Most cash and short-term investments were held outside the U.S.
Material changes, outlook, and unusual items
- Vishay acquired Holy Stone Polytech for $20.6 million, net of cash acquired, and Capella, an optoelectronic sensor design company, for approximately $205 million. The acquisitions contributed 4.8% of 2014 revenue. Capella added $96.8 million of goodwill and $74.5 million of definite-lived intangible assets; expected annual amortization was approximately $10 million.
- 2014 included $20.9 million of restructuring and severance costs and a $15.6 million non-cash U.S. pension settlement charge. Management said these items, net of tax consequences, reduced EPS by $0.15. The pension transactions reduced the U.S. qualified plan obligation by approximately $59.4 million and were funded with plan assets.
- Cost-reduction programs are expected to deliver approximately $36 million of annual savings when fully implemented, at expected cash costs of approximately $32 million. Completion is expected before the end of Q1 2016. Management anticipated no other material restructuring in 2015, absent a sustained downturn.
- Management expected 2015 capital spending of approximately $170 million and dividend payments of approximately $35.4 million, subject to Board approval. The quarterly dividend initiated in 2014 was $0.06 per share. The filing provides no formal revenue or EPS guidance.
- Risks include cyclical demand, ongoing price pressure, dependence on distributors and concentrated end markets, limited-source and volatile raw materials, foreign exchange and overseas liquidity exposure, and execution and impairment risks associated with acquisitions. The filing also reports U.S. and Canadian purported capacitor antitrust class actions seeking injunctive relief and unspecified treble damages; Vishay said it would defend vigorously.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. Management reported disclosure controls and internal controls were effective at year-end.
Important facts for investors to verify
- Whether order trends, backlog, and distributor demand recovered after the Q4 2014 decline, particularly in Asia.
- Whether the restructuring programs achieve the stated savings and completion timeline, and how they affect MOSFET margins and capacity.
- Capella’s customer and foundry concentration, integration results, and the returns on acquisition-related goodwill and intangible assets.
- Cash repatriation needs and tax costs, debt repayment plans, covenant headroom, and the sustainability of dividends.
- Developments, potential exposure, and any financial provision relating to capacitor antitrust litigation and environmental remediation.