Transcript Corporate Presentation

CORPORATE PRESENTATION
GROWTH PLAN
February 2014
 VISHAY TODAY
 GROWTH DRIVERS
 ORGANIC GROWTH
 GROWTH PLAN
NOTES ON FORWARD-LOOKING STATEMENTS
Comments in this presentation other than statements of historical fact may constitute forward-looking statements. Words such as “believe,” “estimate,”
“will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “project,” “intend,” “could,” “should” or other similar words or expressions often identify forward-looking statements.
Such statements are based on current expectations only, and are subject to certain risks, uncertainties and assumptions, many of which are beyond our control. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements may vary materially from those anticipated, estimated or projected.
Factors that could cause actual results to materially differ are described in our filings with the U.S. Securities and Exchange Commission, including our annual reports on Form 10-K and quarterly
reports on Form 10-Q, specifically in the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors .”
The Company undertakes no obligation to update any forward-looking statements.
NON-GAAP FINANCIAL MEASURES
Management uses measures which are not recognized in accordance with U.S. generally accepted accounting principles (“GAAP”) to evaluate its business, and may refer to such measures in this
presentation. These measures are considered “non-GAAP financial measures” under the U.S. Securities and Exchange Commission rules. These non-GAAP financial measures are intended to
supplement our GAAP measures of performance and liquidity. These non-GAAP measures may include: adjusted net earnings, adjusted gross margin, adjusted operating margin, adjusted earnings
per share, free cash, cash available to enhance stockholder value, EBITDA, breakeven point, contribution margin, and various measures and metrics “excluding VPG”.
“Adjusted net earnings” is net earnings (loss) determined in accordance with GAAP, adjusted for various items that Management believes are not indicative of the intrinsic operating performance
of the Company, such as restructuring and severance costs, asset write-downs, impairment of goodwill, and other significant charges or credits that are important to understanding our intrinsic
operations. The measurement is used by Management to evaluate our performance, and also is a key performance metric for executive compensation. Reconciling items to arrive at adjusted net
earnings are more fully described in the Company’s annual report on Form 10-K and its quarterly reports on Forms 10-Q.
“Adjusted gross margin” is gross margin determined in accordance with GAAP (net revenue less costs of products sold and certain other period costs), adjusted to exclude items that
Management believes are not indicative of the intrinsic operating performance of the Company, such as losses on purchase commitments and unusual inventory write-downs. It may be expressed
in dollars or as a percentage of net revenue. The measurement is used by Management to evaluate the performance of our business segments, as well as the business as a whole. Reconciling
items to arrive at adjusted gross margin are also considered in the calculation of adjusted operating margin and adjusted net earnings. Such reconciling items are more fully described in the
Company’s annual report on Form 10-K and its quarterly reports on Forms 10-Q.
“Adjusted operating margin” is operating income determined in accordance with GAAP, adjusted for items that Management believes are not indicative of the intrinsic operating performance of
the Company. It may be expressed in dollars or as a percentage of net revenue. The measurement is used by Management to evaluate our performance. Reconciling items to arrive at adjusted
gross margin are also considered in the calculation of adjusted operating margin; and reconciling items to arrive at adjusted operating margin are also considered in the calculation of adjusted net
earnings. Such reconciling items are more fully described in the Company’s annual report on Form 10-K and its quarterly reports on Forms 10-Q.
“Adjusted earnings per share” is “adjusted net earnings” divided by the weighted average diluted shares outstanding for a period, adjusted for the effect of reconciling items, if applicable, on the
diluted weighted average shares outstanding. For example, some potential common shares which are anti-dilutive to the computation of GAAP earnings per share may be dilutive after considering
reconciling items.
“Free cash” is cash generated from operations in excess of our capital expenditure needs and net of proceeds from the sale of assets. Management uses this measure to evaluate our ability to
fund acquisitions, repay debt, and otherwise enhance stockholder value through stock buy-backs or dividends.
“Cash available to enhance stockholder value” is “free cash” less cash paid for acquisitions (including acquisition-related restructuring) and less debt principal payments. While internal growth
and targeted acquisitions also enhance stockholder value through the generation of “free cash”, Management uses this measure to evaluate our ability to fund further enhancements to stockholder
value, such as stock buy-backs or dividends.
“EBITDA” is earnings before interest income and expense, provision for income taxes, depreciation expense, and amortization expense. Management believes that EBITDA provides additional
information with respect to a company’s performance and ability to meet its future capital expenditures and working capital requirements, particularly when evaluating acquisition targets.
“Breakeven point” represents the quantity of output where total revenues and total operating costs are equal (in other words, where the operating income is zero). Management uses this
measurement in evaluating our cost structure.
“Contribution margin,” sometimes referred to as “variable margin,” is calculated as net revenue less costs that vary with respect to quantity produced (or another output-related driver). It may be
expressed in dollars or as a percentage of net revenue. Management uses this measure to determine the amount of profit to be expected for any increase in revenues in excess of the break-even
point.
Measurements “excluding VPG” reflect the historical businesses which are still part of Vishay today. The Company spun-off VPG on July 6, 2010. While VPG does not qualify as a “discontinued
operation” under GAAP, Management believes that certain evaluations “excluding VPG” are meaningful, particularly when evaluating growth and other performance metrics. Historical VPG data is
reported as a separate operating segment in Vishay’s annual report on Form 10-K and its quarterly reports on Forms 10-Q during the periods it was included in Vishay’s consolidated financial
statements: This discrete data is the basis to calculate any measurements “excluding VPG”.
These measures do not have uniform definitions and accordingly, these measures, as calculated by Vishay, may not be comparable to similarly titled measures used by other companies. Such
measures should not be viewed as alternatives to GAAP measures of performance or liquidity. However, Management believes such measures are meaningful to an evaluation of our business, as
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described above.
DRIVE STOCKHOLDER VALUE
 Intensified organic growth.
 Targeted acquisitions.
 Regular cash dividend program.
 Opportunistic stock buy-backs.
While maintaining prudent capital structure.
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VISHAY TODAY
 Broad and competitive product and technology portfolio:
Solution provider and valuable partner for customers.
 Broad market penetration
 Wide range of end markets.
 Balanced geographic manufacturing footprint.
 Right mix of sales channels.
 Contribution margin of 45% plus.
 Reliable generation of “free cash.”
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VISHAY TODAY
BALANCED PRODUCT PORTFOLIO
MOSFETS
19%
CAPACITORS
19%
DIODES
23%
RESISTORS
INDUCTORS
29%
INFRARED
OPTO
10%
48% PASSIVES - 52% SEMICONDUCTORS
VISHAY SALES 2013
5
VISHAY TODAY
BROADEST LINE OF DISCRETE SEMICONDUCTORS
AND PASSIVE COMPONENTS
Source: Company estimates
= Major Position = Minor Position
6
VISHAY TODAY
BROAD MARKET PENETRATION
COMPUTING
13%
CONSUMER
8%
AUTOMOTIVE
21%
MEDICAL
4%
MILITARY/AERO
6%
POWER
SUPPLIES
8%
ASIA
38%
TELECOM
11%
INDUSTRIAL
29%
DISTRIBUTION*
54%
END MARKETS
AMERICAS
25%
EUROPE
37%
GEOGRAPHY
EMS
7%
VISHAY SALES 2013
OEM
39%
* Distribution includes Logistics
Service Providers with 5%
SALES CHANNELS
7
VISHAY TODAY
BROAD CUSTOMER BASE
NO SINGLE OEM CUSTOMER REPRESENTS OVER 7% OF SALES
OEM
EMS
DISTRIBUTION
8
VISHAY TODAY
REVENUE
MILLIONS
$4,500
REVENUE AND OPERATING MARGIN1
OM
MILLIONS
$450
$4,000
$400
$3,500
$350
$3,000
$300
$2,500
$250
$2,000
$200
$1,500
$150
$1,000
$100
$500
$50
$0
$0
03
04
05
06
07
08
OPERATING MARGIN
09
10
11
12
13
REVENUE
1) Excl. VPG spin-off.
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VISHAY TODAY
CONTRIBUTIVE MARGIN1
%
%
60
60
55
55
50
50
45
45
40
40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
03
04
05
06
07
08
09
1) Excl. VPG spin-off.
10
11
12
13
0
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VISHAY TODAY
RECONCILIATION OF GAAP TO ADJUSTED1
in millions USD
2013 2012
2011
2010
2009
2008
2007
2006 2005 2004 2003
Reconciling items affecting gross margin:
Loss on purchase commitments, Ta write-downs
6
16
Product quality claims
(1)
17
18
3
Reconciling items affecting operating margin:
Restructuring and severance costs
2331
4
Asset write-downs
Executive compensation charges
(2)
36
57
15
38
27
46
29
1
5
4
7
11
27
1
446
Settlement agreement gain
(28)
Executive employment agreement charge
58
Impairment of goodwill and indefinite-lived
intangibles
1,629
Terminated tender offer expenses
4
Contract termination charge
19
Siliconix transaction-related charges
4
Purchased in-process R&D
10
Environmental remediation
Gain on sale of building
2
4
(12)
(5)
(3)
1) Excl. VPG spin-off.
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VISHAY TODAY
STRONG GENERATION OF FREE CASH
$450
$450
$400
$400
$350
$350
$300
$300
$250
$250
$200
$200
$150
$150
$100
$100
$50
$50
$0
$0
03
04
05
06
07
08
09
10
11
12
13
PROCEEDS FROM SALE OF PROPERTY AND EQUIPMENT
CASH FLOWS FROM OPERATIONS LESS CAPITAL EXPENDITURES
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VISHAY TODAY
ENHANCING STOCKHOLDER VALUE:
STOCK BUY BACKS
Three stock buy-backs for 44.3 million shares total,
a 24% reduction of shares out prior to the repurchases.
Total shares out on 31-Dec-13 were 147.3 million.
Repurchases:
 13.9 million shares in May 2012 for $150 million.

8.6 million shares in May 2011 for $150 million.
 21.7 million shares in November 2010 for $275 million.
 All financed with 2.25% coupon, 30-year convertibles.
More efficient than repatriation of non-US cash.
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VISHAY TODAY
ENHANCING STOCKHOLDER VALUE:
CASH DIVIDEND
Initiation of Company’s quarterly cash dividend program:
 First ever cash dividend declared 3-Feb-14
 $0.06 payable on March 27, 2014 to stockholders
of record as of March 3, 2014.
 Future payments subject to Board approval.
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VISHAY TODAY
RESTRUCTURING PROGRAMS Q1 2016
Four separate programs:
 Total cash costs approx. $32 million.
 Total savings approx. $36 million per year.
Approx. half in variable and half in fixed costs.
 All implemented by Q1 2016.
No impact on Growth Plan.
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VISHAY TODAY
RESTRUCTURING PROGRAMS DETAIL
 MOSFETs manufacturing project.

Cash cost approx. $16 million.

Savings approx. $23 million per year at current volume.

Fully implemented by Q1 2016.
 Voluntary separation / early retirement program.

Cash cost approx. $13 million.

Savings approx. $10 million per year.

Finalized approx. June 30, 2014
 Diodes manufacturing projects

Cash cost approx. $3 million

Savings approx. $3 million per year.

Fully implemented during 2014.
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OUR MARKETS
 Discrete electronic components—a growth market:
 4-6% average/year in value.
 8-10% average/year in units.
 New macroeconomic growth drivers:
 Connectivity.
 Mobility.
 Sustainability.
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GROWTH DRIVERS
CONNECTIVITY
ULTRABOOKS: THIN CLIENT COMPUTER



High efficiency
Compact size
Competitive
performance and price
Slew rate controlled
load switches
Power Metal Strip®
current sense resistors
Thin Film chip resistors
Analog switches;
multiplexers
MOSFETs:
MicroFoot ®; PowerPAK ®
Pulse capacitors
TMBS® diodes
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GROWTH DRIVERS
CONNECTIVITY
WIRELESS CHARGING



High efficiency
Low profile
Durable construction
RX charging coils
Power Metal Strip®
current sense resistors
IHLP® power inductors
High CV tantalum capacitors
MOSFETs:
PowerPAIR®, SC-70
TMBS® diodes
microBUCK® regulators
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GROWTH DRIVERS
CONNECTIVITY
SOLID STATE DRIVE (SSD)




Low profile
High efficiency
Small solution size
High-power density
Power Metal Strip®
current sense resistors
Low-voltage MOSFET PowerPAK®
IHLP® power inductors
microBUCK®
regulator ICs
High CV tantalum capacitors
High-power resistor chips
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GROWTH DRIVERS
CONNECTIVITY
MOBILE PAYMENT SYSTEMS - NFC


High efficiency
Small size
Low-voltage MOSFETs
High CV tantalum capacitors
TMBS® diodes
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GROWTH DRIVERS
MOBILITY
PROXIMITY AND GESTURE RECOGNITION



Low Profile
Integrated solution
Digital and analog output
IR bulk emitter
Proximity and ambient light
sensors
IR receiver
Photo PIN diodes
Pulse capacitors
IRDA transceiver
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GROWTH DRIVERS
MOBILITY
48V BOARDNET IMPLEMENTATION



High-voltage capabilities
Transient resistant
High-power and current density
MOSFETs:
PowerPAK® 8x8L
Filter film capacitors
MKT 1820
Power Metal Strip®
4-Terminal current sense resistors
Surface mount PAR®
Transient Voltage Suppressors (TVS)
Planar transformers
IHLP® power inductors
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GROWTH DRIVERS
SUSTAINABILITY
EFFICIENT MOTOR-DRIVES




High-voltage capabilities
Transient resistant
High-power and current density
Long-life
MOSFETs
PowerPAK® 8x8L
IGBT / MOSFET / DIODES
modules
DC-Link and filter film capacitors
MKT 1820, MKP1848
Discharge, chopper and
braking resistors
Power Metal Strip®
4 -Terminal current sense resistors
Surface Mount PAR®
transient voltage suppressors
Bipolar SCR / diodes
modules
IHLP® power inductors
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GROWTH DRIVERS
SUSTAINABILITY
ENERGY EXPLORATION




High temperature operation
Long life
High reliability
Safety approvals
XMAP / XLMAP
inverter modules
Wet tantalum
capacitors
Power Schottky
bypass diodes
High-temperature
molded tantalum capacitors
Electro-pyrotechnic initiator
Thin film chip resistors
Thin Film chip resistors
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INTENSIFIED ORGANIC GROWTH
 Accelerate development of new products and technologies.
 Improve market penetration.
 Expand manufacturing capacities.
 Increase technical resources.
 Develop markets for specialty products in Asia.
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INTENSIFIED ORGANIC GROWTH
ACCELERATED DEVELOPMENT OF NEW PRODUCTS:
SEMICONDUCTORS

MOSFETs:
•
•
•
High-voltage (next generations of Super Junction).
Mid-voltage (ThunderFET®) dual trench technology.
Low-voltage (TrenchFET® ) split gate technology in n-channel and p-channel.

Next generations of DrMOS, smart load switches, microBUCK®,
integrated current sensing, etc.



Power modules ̶ IGBTs, Diodes, MOSFETs, SCRs.
New ultrafast diodes and TVS products.
Further expand our eSMP™ package ranges.

Extend integration of optosensors to more “intelligent” circuits:
•
• Encoders for printers.
• High-power infrared arrays.
• Proximity sensors with ambient light sensors.
Wide-body optocouplers.
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INTENSIFIED ORGANIC GROWTH
ACCELERATED DEVELOPMENT OF NEW PRODUCTS:
PASSIVE COMPONENTS

Specialty power inductors (IHLP®):
•
•
Miniature IHLP 1212 series. High-current IHLP 8787 series.
Coupled inductors and dual inductors.

Planar transformers.




High-power current sense resistors (Power Metal Strip®) / battery shunts.
Continued expansion of specialty resistors (high-precision, high-temp.,
wide-terminal, …).
High-power resistors, including water cooled.
Specialties like thermo fuses and igniters based on resistor technologies.




Heavy-duty film capacitors ̶ improved reliability / performance.
Broad range of RF multilayer ceramic chip capacitors.
Automotive and medical tantalum capacitors (MicroTan®).
High-vibration SuperTan® wet tantalum capacitors (T16 series).
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INTENSIFIED ORGANIC GROWTH
IMPROVE MARKET PENETRATION BY
CAPACITY EXPANSION
Get ahead of demand curve for Vishay’s most successful,
leading products:

High-voltage Super Junction and low voltage MOSFETs.

Trench, high-voltage and fast-recovery diodes.

SMD couplers and optoelectronic sensors.

High-current power inductors and specialty custom magnetics.

Power resistors, current sensors incl. battery shunts.

Thin film resistors for professional and precision applications.

Power capacitors.
CapEx to remain < $170 M per year.
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INTENSIFIED ORGANIC GROWTH
IMPROVE MARKET PENETRATION BY
INCREASING TECHNICAL RESOURCES
Increase design-ins by expanding Vishay’s technical
resources for providing solutions to customers:
 Divisional engineering (products and processes).
 Field application engineering (FAEs).
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INTENSIFIED ORGANIC GROWTH
IMPROVE MARKET PENETRATION BY
DEVELOPING MARKETS FOR SPECIALTIES IN ASIA
Expanded technical sales presence in growing markets
for specialty products in Asia with focus on China by
Leveraging Vishay’s strength in Europe and the
Americas in the following sectors:
 Energy (HVAC, wind and solar, oil field).
 Consumer (white goods, power, wireless).
 Transportation (automotive, locomotive).
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GROWTH PLAN
GROWTH PLAN
 Increase EPS through accelerated internal growth and
targeted specialty product acquisitions.
 Concrete plan built from the bottom up and stated
financial targets looking ahead approx. five years.
 Focus remains on free cash flow and prudent financial
structure.
32
GROWTH PLAN
EXTERNAL ASSUMPTIONS
 Stable economic environment and FX rates.
 Historical ASP decline per year for Vishay’s products:
Passives
0% - 1%
Semis
3% - 4%
 Inflation rates for salaries and raw materials:
1.5% - 4.5% per location and function resp. raw
materials.
33
GROWTH PLAN
INTERNAL ASSUMPTIONS
Fixed cost increases per year in a normal growth
environment:
 R&D and engineering costs
6%.
 Selling costs
5%.
 G&A
3%.
 Plant fixed costs
3%.
 Depreciation
2%.
34
GROWTH PLAN
ACQUISITION ASSUMPTIONS
 Acquisitions of approx. $100M sales per year.
 Specialty businesses, likely in passive components.
 Growing like the market at a rate of approx. 4%.
 Above average contributive margin – low ASP decline.
 Synergies, mostly in SG&A, to be realized quickly.
 Restructuring costs: payback of 1 year.
 Cash payback incl. restructuring of ˂ 8 years.
 Accretive to earnings in less than 12 months.
35
GROWTH PLAN
TYPICAL ACQUISITION: FINANCIALS
$ in millions
PREYEAR 1
ACQUISTION
YEAR 4
REVENUES
100
100
112
GM
%
30
30
32
32
36
32
SG&A
20
10
11
AMORTIZATION OF INTANGIBLES
3
3
RESTRUCTURING
12
EBITDA
%
FREE CASH
Purchase price assumption: 7.5x EBITDA.
13
13
13
13
28
25
7
17
36
GROWTH PLAN
RECENT ACQUISITIONS OF
SPECIALTY PRODUCT BUSINESSES
Resistor businesses of Huntington Electric
High-power and high-current resistors, resistor assemblies for industrial applications
Acquisition price (net of cash) approx.
Business segment
Closing
$19 million
Resistors & Inductors
Sep-11
HiRel Systems
High-reliability transformers, inductors, coils, and power conversion products
Acquisition price (net of cash) approx.
Business segment
Closing
$86 million
Resistors & Inductors
Jan-12
MCB Industrie S.A.
Motion sensors for avionics, military, and space applications and power resistors for energy distribution,
traction, and industrial market sectors
Acquisition price (net of cash) approx.
$23 million
Business segment
Resistors & Inductors
Closing
Jun-13
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GROWTH PLAN
RESULTS OF GROWTH PLAN
NORMALIZED OVER SEVERAL YEARS
Normalized over several years and cycles and
assuming an only flat contribution margin of 45% plus,
the growth plan results in:
CAGR
 Revenues growth
8%.
 SG&A to increase at lower rate
6%.
 Operating and net income
10%.
 Strong free cash flow even after approx. $110 million
per year for acquisitions and restructuring of
acquisitions.
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IN SUMMARY
 Outgrow the market with CAGR of revenues of
approx. 8%.
 Increased internal growth.
 Targeted acquisitions.
 Strong generation of cash available to enhance
stockholder value.
 Maintain prudent capital structure.
39