Vishay Intertechnology (VSH) Plans $35M of Cost Cuts

Vishay Intertechnology (NYSE: VSH) announced global cost reduction programs as part of its continuous efforts to improve efficiency and operating performance.

The programs include a plan to reduce selling, general, and administrative (“SG&A”) costs company-wide, and targeted streamlining and consolidation of production for certain product lines within its Capacitors and Resistors & Inductors segments. The programs in total are expected to lower costs by approximately $35 million annually (at current volumes) when fully implemented, at expected cash costs (primarily severance) of approximately $30 million. The implementation of these programs will not impact planned research and development activities, or the Company’s growth initiatives in Asian markets.

The Company expects to reduce SG&A costs by approximately $17 million annually. These SG&A cost reductions should be fully achieved by the end of 2016. The Company will first solicit volunteers to accept a voluntary separation / early retirement offer. The voluntary separation benefits vary by country and job classification, but generally offer a cash loyalty bonus. Additional involuntary terminations will likely be necessary to achieve the cost reduction targets.

The targeted plans to streamline and consolidate production of certain product lines are expected to decrease costs of products sold by approximately $18 million annually (at current volumes). These plans include the Zwolle, Netherlands aluminum capacitors facility closure announced on June 30. Except for the Zwolle facility, no other facility closures are currently expected pursuant to these programs. These production transfers will be completed in steps by the end of 2017. These newly announced programs do not alter or expand the MOSFETs Enhanced Competitiveness Program, announced in 2013 and currently being implemented by the Company.

Commenting on the cost reduction programs, Dr. Gerald Paul, Vishay’s President and Chief Executive Officer, said, “While results have been satisfactory given the business environment, recent revenues have been below our expected run-rate. We must align our cost structure to match this level of revenue. At the same time, we continue to invest in our technical capabilities to accelerate long-term growth.”

The Company’s estimates of the costs related to its cost reduction programs and anticipated annual savings represent its current best estimates. However, such estimates are preliminary and subject to change as the Company implements these programs.

Except for these programs, the Company does not anticipate any other material restructuring activities during the remainder of 2015 or 2016. However, a continued sluggish business environment for the electronics industry or a significant economic downturn may require the Company to implement additional restructuring initiatives.

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