UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| |
For the quarterly period ended | September 30, 2017☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 3, 2021 ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission File Number1-34679
VISHAY PRECISION GROUP, INC.
(Exact name of registrant as specified in its charter)
|
| | | | | | | | | | | | | |
| Delaware | | 27-0986328 | |
| (State or Other Jurisdiction of Incorporation) | | (I.R.S. Employer Identification Number) | |
| | |
| 3 Great Valley Parkway, Suite 150 | | | |
| Malvern, PA, 19355 | | 484-321-5300 | |
| (Address of Principal Executive Offices) (Zip Code) | | (Registrant’s Telephone Number, including area code) | |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common stock, $0.10 par value | VPG | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. ý Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
| | | | | | | | | | | | | | |
Large accelerated filer | ¨ | | Accelerated filer | ý |
Non-accelerated filer | ¨ | | Smaller reporting company | ☐ |
| |
Large accelerated filer ¨
| Accelerated filer ý Emerging growth company | ☐ |
Non-accelerated filer ¨ (Do not check if smaller reporting company)
| Smaller reporting company ¨
|
| Emerging growth company ¨
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨☐ Yes ý No
As of November 8, 2017,August 10, 2021, the registrant had 12,266,40712,602,755 shares of its common stock and 1,025,1581,022,887 shares of its Class B convertible common stock outstanding.
VISHAY PRECISION GROUP, INC.
FORM 10-Q
September 30, 2017July 3, 2021
CONTENTS
| | | | | | | | |
| | Page Number |
| | |
| | |
| | Number
| |
PART I. | FINANCIAL INFORMATION | |
| | |
Item 1. | Financial Statements | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Exhibits | | |
| | |
| SIGNATURES | | |
PART I - FINANCIAL INFORMATION
Item 1.FINANCIAL STATEMENTS
| | | | | | | | | | | |
VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) |
| July 3, 2021 | | December 31, 2020 |
| (Unaudited) | | |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 73,456 | | | $ | 98,438 | |
Accounts receivable, net | 51,818 | | | 45,339 | |
Inventories: | | | |
Raw materials | 25,858 | | | 21,894 | |
Work in process | 27,560 | | | 21,534 | |
Finished goods | 24,060 | | | 18,920 | |
Inventories, net | 77,478 | | | 62,348 | |
| | | |
| | | |
Prepaid expenses and other current assets | 15,698 | | | 15,761 | |
| | | |
Total current assets | 218,450 | | | 221,886 | |
| | | |
Property and equipment: | | | |
Land | 4,269 | | | 4,282 | |
Buildings and improvements | 68,118 | | | 67,581 | |
Machinery and equipment | 118,543 | | | 115,717 | |
Software | 9,431 | | | 10,026 | |
Construction in progress | 3,807 | | | 6,341 | |
Accumulated depreciation | (127,611) | | | (128,931) | |
Property and equipment, net | 76,557 | | | 75,016 | |
| | | |
Goodwill | 45,732 | | | 31,105 | |
Intangible assets, net | 54,474 | | | 32,039 | |
Operating lease right-of-use assets | 25,451 | | | 21,788 | |
Other assets | 19,633 | | | 20,053 | |
Total assets | $ | 440,297 | | | $ | 401,887 | |
| | | |
Continues on the following page.
-3-
VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) |
| | | | | | | |
| September 30, 2017 |
| December 31, 2016 |
| (Unaudited) |
| |
Assets | |
| |
Current assets: | |
| |
Cash and cash equivalents | $ | 69,891 |
|
| $ | 58,452 |
|
Accounts receivable, net | 43,037 |
|
| 34,270 |
|
Inventories: | |
| |
Raw materials | 16,487 |
|
| 15,647 |
|
Work in process | 22,215 |
|
| 21,115 |
|
Finished goods | 20,561 |
|
| 19,559 |
|
Inventories, net | 59,263 |
|
| 56,321 |
|
| |
| |
Prepaid expenses and other current assets | 9,923 |
|
| 6,831 |
|
Total current assets | 182,114 |
|
| 155,874 |
|
| |
| |
Property and equipment, at cost: | |
| |
Land | 3,428 |
|
| 3,344 |
|
Buildings and improvements | 49,491 |
|
| 48,454 |
|
Machinery and equipment | 92,521 |
|
| 89,080 |
|
Software | 7,787 |
|
| 7,441 |
|
Construction in progress | 2,338 |
|
| 4,340 |
|
Accumulated depreciation | (101,964 | ) |
| (97,374 | ) |
Property and equipment, net | 53,601 |
|
| 55,285 |
|
| |
| |
Goodwill | 19,228 |
|
| 18,717 |
|
| |
| |
Intangible assets, net | 21,025 |
|
| 21,585 |
|
| |
| |
Other assets | 19,751 |
|
| 19,049 |
|
Total assets | $ | 295,719 |
| | $ | 270,510 |
|
| | | |
| | | | | | | | | | | |
VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) |
| July 3, 2021 | | December 31, 2020 |
Liabilities and equity | | | |
Current liabilities: | | | |
Trade accounts payable | $ | 11,061 | | | $ | 10,487 | |
Payroll and related expenses | 16,818 | | | 17,595 | |
Other accrued expenses | 18,138 | | | 13,843 | |
Income taxes | 969 | | | 1,593 | |
Current portion of operating lease liabilities | 4,445 | | | 4,011 | |
Current portion of long-term debt | 0 | | | 18 | |
Total current liabilities | 51,431 | | | 47,547 | |
| | | |
Long-term debt, less current portion | 60,670 | | | 40,626 | |
Deferred income taxes | 8,345 | | | 3,403 | |
Operating lease liabilities | 22,346 | | | 19,504 | |
Other liabilities | 15,747 | | | 16,263 | |
Accrued pension and other postretirement costs | 15,840 | | | 16,687 | |
Total liabilities | 174,379 | | | 144,030 | |
| | | |
Commitments and contingencies | 0 | | 0 |
| | | |
Equity: | | | |
Common stock | 1,322 | | | 1,317 | |
Class B convertible common stock | 103 | | | 103 | |
Treasury stock | (8,765) | | | (8,765) | |
Capital in excess of par value | 197,856 | | | 197,764 | |
Retained earnings | 108,956 | | | 100,075 | |
Accumulated other comprehensive loss | (33,546) | | | (32,671) | |
Total Vishay Precision Group, Inc. stockholders' equity | 265,926 | | | 257,823 | |
Noncontrolling interests | (8) | | | 34 | |
Total equity | 265,918 | | | 257,857 | |
Total liabilities and equity | $ | 440,297 | | | $ | 401,887 | |
See accompanying notes.
-4-
VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (continued) (In thousands) |
| | | | | | | |
| September 30, 2017 |
| December 31, 2016 |
| (Unaudited) |
| |
Liabilities and equity | |
| |
Current liabilities: | |
| |
Trade accounts payable | $ | 9,673 |
|
| $ | 8,264 |
|
Payroll and related expenses | 14,992 |
|
| 11,978 |
|
Other accrued expenses | 15,615 |
|
| 13,285 |
|
Income taxes | 3,193 |
|
| 772 |
|
Current portion of long-term debt | 2,965 |
|
| 2,623 |
|
Total current liabilities | 46,438 |
|
| 36,922 |
|
| |
| |
Long-term debt, less current portion | 30,017 |
|
| 33,529 |
|
Deferred income taxes | 809 |
|
| 735 |
|
Other liabilities | 13,793 |
|
| 13,054 |
|
Accrued pension and other postretirement costs | 15,161 |
|
| 14,713 |
|
Total liabilities | 106,218 |
|
| 98,953 |
|
| |
| |
Commitments and contingencies |
|
|
|
| |
| |
Equity: | |
| |
Common stock | 1,288 |
|
| 1,278 |
|
Class B convertible common stock | 103 |
|
| 103 |
|
Treasury stock | (8,765 | ) | | (8,765 | ) |
Capital in excess of par value | 192,364 |
|
| 190,373 |
|
Retained earnings | 38,600 |
|
| 28,731 |
|
Accumulated other comprehensive loss | (34,278 | ) |
| (40,337 | ) |
Total Vishay Precision Group, Inc. stockholders' equity | 189,312 |
|
| 171,383 |
|
Noncontrolling interests | 189 |
|
| 174 |
|
Total equity | 189,501 |
|
| 171,557 |
|
Total liabilities and equity | $ | 295,719 |
|
| $ | 270,510 |
|
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)
| | | | | | | | | | | |
| Fiscal quarter ended |
| July 3, 2021 | | June 27, 2020 |
Net revenues | $ | 75,339 | | | $ | 59,146 | |
Costs of products sold | 45,541 | | | 36,036 | |
Gross profit | 29,798 | | | 23,110 | |
| | | |
Selling, general, and administrative expenses | 22,453 | | | 18,640 | |
Acquisition costs | 1,198 | | | 0 | |
Impairment of goodwill and indefinite-lived intangibles | 1,223 | | | 0 | |
| | | |
Restructuring costs | 0 | | | 499 | |
Operating income | 4,924 | | | 3,971 | |
| | | |
Other income (expense): | | | |
Interest expense | (273) | | | (267) | |
Other | (326) | | | (1,273) | |
Other income (expense) | (599) | | | (1,540) | |
| | | |
Income before taxes | 4,325 | | | 2,431 | |
| | | |
Income tax expense | 262 | | | 684 | |
| | | |
Net earnings | 4,063 | | | 1,747 | |
Less: net earnings (loss) attributable to noncontrolling interests | 143 | | | (12) | |
Net earnings attributable to VPG stockholders | $ | 3,920 | | | $ | 1,759 | |
| | | |
Basic earnings per share attributable to VPG stockholders | $ | 0.29 | | | $ | 0.13 | |
Diluted earnings per share attributable to VPG stockholders | $ | 0.29 | | | $ | 0.13 | |
| | | |
Weighted average shares outstanding - basic | 13,618 | | | 13,571 | |
Weighted average shares outstanding - diluted | 13,646 | | | 13,609 | |
See accompanying notes.
-5-
|
| | | | | | | |
| Fiscal quarter ended |
| September 30, 2017 | | October 1, 2016 |
Net revenues | $ | 62,805 |
| | $ | 54,490 |
|
Costs of products sold | 38,538 |
| | 34,225 |
|
Gross profit | 24,267 |
| | 20,265 |
|
| | | |
Selling, general, and administrative expenses | 18,525 |
| | 16,917 |
|
Restructuring costs | 423 |
| | 709 |
|
Operating income | 5,319 |
| | 2,639 |
|
| | | |
Other income (expense): | | | |
Interest expense | (472 | ) | | (377 | ) |
Other | 1,717 |
| | (44 | ) |
Other income (expense) - net | 1,245 |
| | (421 | ) |
| | | |
Income before taxes | 6,564 |
| | 2,218 |
|
| | | |
Income tax expense | 2,239 |
| | 1,135 |
|
| | | |
Net earnings | 4,325 |
| | 1,083 |
|
Less: net earnings attributable to noncontrolling interests | 70 |
| | 32 |
|
Net earnings attributable to VPG stockholders | $ | 4,255 |
| | $ | 1,051 |
|
| | | |
Basic earnings per share attributable to VPG stockholders | $ | 0.32 |
| | $ | 0.08 |
|
Diluted earnings per share attributable to VPG stockholders | $ | 0.32 |
| | $ | 0.08 |
|
| | | |
Weighted average shares outstanding - basic | 13,291 |
| | 13,192 |
|
Weighted average shares outstanding - diluted | 13,470 |
| | 13,422 |
|
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)
| | | | | | | | | | | |
| Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 |
Net revenues | $ | 145,928 | | | $ | 126,842 | |
Costs of products sold | 87,508 | | | 78,667 | |
Gross profit | 58,420 | | | 48,175 | |
| | | |
Selling, general, and administrative expenses | 44,636 | | | 38,931 | |
Acquisition costs | 1,198 | | | 0 | |
Impairment of goodwill and indefinite-lived intangibles | 1,223 | | | 0 | |
| | | |
Restructuring costs | 0 | | | 629 | |
Operating income | 11,363 | | | 8,615 | |
Other income (expense): | | | |
Interest expense | (578) | | | (728) | |
Other | 247 | | | (590) | |
Other income (expense) | (331) | | | (1,318) | |
| | | |
Income before taxes | 11,032 | | | 7,297 | |
| | | |
Income tax expense | 2,026 | | | 2,258 | |
| | | |
Net earnings | 9,006 | | | 5,039 | |
Less: net earnings (loss) attributable to noncontrolling interests | 125 | | | (32) | |
Net earnings attributable to VPG stockholders | $ | 8,881 | | | $ | 5,071 | |
| | | |
Basic earnings per share attributable to VPG stockholders | $ | 0.65 | | | $ | 0.37 | |
| | | |
Diluted earnings per share attributable to VPG stockholders | $ | 0.65 | | | $ | 0.37 | |
| | | |
Weighted average shares outstanding - basic | 13,605 | | | 13,556 | |
| | | |
Weighted average shares outstanding - diluted | 13,638 | | | 13,598 | |
See accompanying notes.
-6-
|
| | | | | | | |
| Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 |
Net revenues | $ | 184,911 |
| | $ | 169,115 |
|
Costs of products sold | 113,368 |
| | 107,580 |
|
Gross profit | 71,543 |
| | 61,535 |
|
| | | |
Selling, general, and administrative expenses | 55,551 |
| | 53,409 |
|
Acquisition costs | — |
| | 414 |
|
Restructuring costs | 1,292 |
| | 2,395 |
|
Operating income | 14,700 |
| | 5,317 |
|
Other income (expense): | | | |
Interest expense | (1,392 | ) | | (1,076 | ) |
Other | 1,034 |
| | 351 |
|
Other income (expense) - net | (358 | ) | | (725 | ) |
| | | |
Income before taxes | 14,342 |
| | 4,592 |
|
| | | |
Income tax expense | 4,398 |
| | 1,164 |
|
| | | |
Net earnings | 9,944 |
| | 3,428 |
|
Less: net earnings attributable to noncontrolling interests | 75 |
| | 29 |
|
Net earnings attributable to VPG stockholders | $ | 9,869 |
| | $ | 3,399 |
|
| | | |
Basic earnings per share attributable to VPG stockholders | $ | 0.74 |
| | $ | 0.26 |
|
| | | |
Diluted earnings per share attributable to VPG stockholders | $ | 0.73 |
| | $ | 0.25 |
|
| | | |
Weighted average shares outstanding - basic | 13,253 |
| | 13,185 |
|
| | | |
Weighted average shares outstanding - diluted | 13,452 |
| | 13,409 |
|
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Comprehensive Income (Loss)
(Unaudited - In thousands)
| | | | | | | | | | | |
| Fiscal quarter ended |
| July 3, 2021 | | June 27, 2020 |
Net earnings | $ | 4,063 | | | $ | 1,747 | |
| | | |
Other comprehensive income (loss): | | | |
Foreign currency translation adjustment | 607 | | | 3,271 | |
Pension and other postretirement actuarial items, net of tax | 109 | | | (152) | |
Other comprehensive income | 716 | | | 3,119 | |
| | | |
Comprehensive income | 4,779 | | | 4,866 | |
| | | |
Less: comprehensive income (loss) attributable to noncontrolling interests | 143 | | | (12) | |
| | | |
Comprehensive income attributable to VPG stockholders | $ | 4,636 | | | $ | 4,878 | |
See accompanying notes.
-7-
|
| | | | | | | |
| Fiscal quarter ended |
| September 30, 2017 | | October 1, 2016 |
Net earnings | $ | 4,325 |
| | $ | 1,083 |
|
| | | |
Other comprehensive income (loss): | | | |
Foreign currency translation adjustment | 2,285 |
| | (496 | ) |
Pension and other postretirement actuarial items, net of tax | (29 | ) | | 130 |
|
Other comprehensive income (loss) | 2,256 |
| | (366 | ) |
| | | |
Total comprehensive income | 6,581 |
| | 717 |
|
| | | |
Less: comprehensive income attributable to noncontrolling interests | 70 |
| | 32 |
|
| | | |
Comprehensive income attributable to VPG stockholders | $ | 6,511 |
| | $ | 685 |
|
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Comprehensive Income (Loss)
(Unaudited - In thousands)
| | | | | | | | | | | |
| Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 |
Net earnings | $ | 9,006 | | | $ | 5,039 | |
| | | |
Other comprehensive income (loss): | | | |
Foreign currency translation adjustment | (1,193) | | | (2,070) | |
Pension and other postretirement actuarial items, net of tax | 318 | | | (311) | |
Other comprehensive loss | (875) | | | (2,381) | |
| | | |
Comprehensive income | 8,131 | | | 2,658 | |
| | | |
Less: comprehensive income (loss) attributable to noncontrolling interests | 125 | | | (32) | |
| | | |
Comprehensive income attributable to VPG stockholders | $ | 8,006 | | | $ | 2,690 | |
See accompanying notes.
-8-
|
| | | | | | | |
| Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 |
Net earnings | $ | 9,944 |
| | $ | 3,428 |
|
| | | |
Other comprehensive income (loss): | | | |
Foreign currency translation adjustment | 6,119 |
| | 167 |
|
Pension and other postretirement actuarial items, net of tax | (60 | ) | | 503 |
|
Other comprehensive income | 6,059 |
| | 670 |
|
| | | |
Comprehensive income | 16,003 |
| | 4,098 |
|
| | | |
Less: comprehensive income attributable to noncontrolling interests | 75 |
| | 29 |
|
| | | |
Comprehensive income attributable to VPG stockholders | $ | 15,928 |
| | $ | 4,069 |
|
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
| | | | | | | | | | | |
| Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 |
Operating activities | | | |
Net earnings | $ | 9,006 | | | $ | 5,039 | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | |
Impairment of goodwill and indefinite-lived intangibles | 1,223 | | | 0 | |
Depreciation and amortization | 7,108 | | | 6,312 | |
Loss from extinguishment of debt | — | | | 30 | |
Loss (gain) on sale of property and equipment | 44 | | | (143) | |
| | | |
Share-based compensation expense | 942 | | | 757 | |
Inventory write-offs for obsolescence | 1,135 | | | 1,302 | |
Deferred income taxes | (1,110) | | | (146) | |
Other | (1,820) | | | 25 | |
Net changes in operating assets and liabilities: | | | |
Accounts receivable, net | (776) | | | 2,077 | |
Inventories, net | (7,744) | | | (1,383) | |
Prepaid expenses and other current assets | 314 | | | (632) | |
Trade accounts payable | 1,715 | | | 1,228 | |
Other current liabilities | 2,341 | | | 2,229 | |
Net cash provided by operating activities | 12,378 | | | 16,695 | |
| | | |
Investing activities | | | |
Capital expenditures | (8,309) | | | (11,018) | |
Proceeds from sale of property and equipment | 16 | | | 378 | |
| | | |
Purchase of business, net of cash acquired | (47,216) | | | 156 | |
Net cash used in investing activities | (55,509) | | | (10,484) | |
| | | |
Financing activities | | | |
| | | |
Principal payments on long-term debt | (18) | | | (3,418) | |
| | | |
Proceeds from revolving facility | 20,000 | | | 0 | |
| | | |
Debt issuance costs | 0 | | | (402) | |
Purchase of noncontrolling interest | 0 | | | (253) | |
(Distributions to) contributions from noncontrolling interests | (167) | | | 117 | |
Payments of employee taxes on certain share-based arrangements | (846) | | | (813) | |
Net cash provided by (used in) financing activities | 18,969 | | | (4,769) | |
Effect of exchange rate changes on cash and cash equivalents | (820) | | | (1,155) | |
(Decrease) increase in cash and cash equivalents | (24,982) | | | 287 | |
Cash and cash equivalents at beginning of period | 98,438 | | | 86,910 | |
Cash and cash equivalents at end of period | $ | 73,456 | | | $ | 87,197 | |
| | | |
Supplemental disclosure of investing transactions: | | | |
Capital expenditures purchased | $ | (6,353) | | | $ | (10,290) | |
Capital expenditures accrued but not yet paid | $ | 606 | | | $ | 455 | |
See accompanying notes.
-9-
|
| | | | | | | |
| Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 |
Operating activities | | | |
Net earnings | $ | 9,944 |
| | $ | 3,428 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: | | | |
Depreciation and amortization | 7,977 |
| | 8,416 |
|
Gain on disposal of property and equipment | (193 | ) | | (24 | ) |
Share-based compensation expense | 959 |
| | 465 |
|
Inventory write-offs for obsolescence | 1,662 |
| | 1,410 |
|
Deferred income taxes | 264 |
| | (1,537 | ) |
Other | (907 | ) | | (862 | ) |
Net changes in operating assets and liabilities: | | | |
Accounts receivable, net | (7,030 | ) | | 2,139 |
|
Inventories, net | (3,280 | ) | | (2,891 | ) |
Prepaid expenses and other current assets | (2,937 | ) | | (1,848 | ) |
Trade accounts payable | 1,176 |
| | 453 |
|
Other current liabilities | 7,166 |
| | (2,572 | ) |
Net cash provided by operating activities | 14,801 |
| | 6,577 |
|
| | | |
Investing activities | | | |
Capital expenditures | (4,366 | ) | | (6,266 | ) |
Proceeds from sale of property and equipment | 442 |
| | 316 |
|
Purchase of business | — |
| | (10,727 | ) |
Net cash used in investing activities | (3,924 | ) | | (16,677 | ) |
| | | |
Financing activities | | | |
Principal payments on long-term debt and capital leases | (1,971 | ) | | (1,599 | ) |
Proceeds from revolving facility | 27,000 |
| | 17,000 |
|
Payments on revolving facility | (27,000 | ) | | (12,000 | ) |
Distributions to noncontrolling interests | (60 | ) | | (12 | ) |
Payments of employee taxes on certain share-based arrangements | (303 | ) | | (85 | ) |
Net cash (used in) provided by financing activities | (2,334 | ) | | 3,304 |
|
Effect of exchange rate changes on cash and cash equivalents | 2,896 |
| | 288 |
|
Increase (decrease) in cash and cash equivalents | 11,439 |
| | (6,508 | ) |
| | | |
Cash and cash equivalents at beginning of period | 58,452 |
| | 62,641 |
|
Cash and cash equivalents at end of period | $ | 69,891 |
| | $ | 56,133 |
|
| | | |
Supplemental disclosure of non-cash financing transactions: | | | |
Conversion of exchangeable notes to common stock | $ | (1,303 | ) | | $ | — |
|
VISHAY PRECISION GROUP, INC.
Consolidated Condensed StatementStatements of Equity
(Unaudited - In thousands, except share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended July 3, 2021 |
| Common Stock | | Class B Convertible Common Stock | | Treasury Stock | | Capital in Excess of Par Value | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total VPG Inc. Stockholders' Equity | | Noncontrolling Interests | | Total Equity |
Balance at April 3, 2021 | $ | 1,320 | | | $ | 103 | | | $ | (8,765) | | | $ | 197,282 | | | $ | 105,036 | | | $ | (34,262) | | | $ | 260,714 | | | $ | (95) | | | $ | 260,619 | |
Net earnings | — | | | — | | | — | | | — | | | 3,920 | | | — | | | 3,920 | | | 143 | | | 4,063 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 716 | | | 716 | | | — | | | 716 | |
Share-based compensation expense | — | | | — | | | — | | | 576 | | | — | | | — | | | 576 | | | — | | | 576 | |
Restricted stock issuances ( 15,564 shares) | 2 | | | — | | | — | | | (2) | | | — | | | — | | | 0 | | | — | | | 0 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (56) | | | (56) | |
Balance at July 3, 2021 | $ | 1,322 | | | $ | 103 | | | $ | (8,765) | | | $ | 197,856 | | | $ | 108,956 | | | $ | (33,546) | | | $ | 265,926 | | | $ | (8) | | | $ | 265,918 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended June 27, 2020 |
| Common Stock | | Class B Convertible Common Stock | | Treasury Stock | | Capital in Excess of Par Value | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total VPG Inc. Stockholders' Equity | | Noncontrolling Interests | | Total Equity |
Balance at March 28, 2020 | $ | 1,316 | | | $ | 103 | | | $ | (8,765) | | | $ | 196,709 | | | $ | 92,600 | | | $ | (43,203) | | | $ | 238,760 | | | $ | 347 | | | $ | 239,107 | |
Net earnings | — | | | — | | | — | | | — | | | 1,759 | | | — | | | 1,759 | | | (12) | | | 1,747 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | 3,119 | | | 3,119 | | | — | | | 3,119 | |
Share-based compensation expense | — | | | — | | | — | | | 378 | | | — | | | — | | | 378 | | | — | | | 378 | |
Restricted stock issuances (8,244 shares) | 1 | | | — | | | — | | | (1) | | | — | | | — | | | 0 | | | — | | | 0 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Purchase of noncontrolling interest | — | | | — | | | — | | | 48 | | | — | | | — | | | 48 | | | (301) | | | (253) | |
Contribution from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 142 | | | 142 | |
Balance at June 27, 2020 | $ | 1,317 | | | $ | 103 | | | $ | (8,765) | | | $ | 197,134 | | | $ | 94,359 | | | $ | (40,084) | | | $ | 244,064 | | | $ | 176 | | | $ | 244,240 | |
See accompanying notes.
-10-
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Class B Convertible Common Stock | | Treasury Stock | | Capital in Excess of Par Value | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total VPG, Inc. Stockholders' Equity | | Noncontrolling Interests | | Total Equity |
Balance at December 31, 2016 | $ | 1,278 |
| | $ | 103 |
| | $ | (8,765 | ) | | $ | 190,373 |
| | $ | 28,731 |
| | $ | (40,337 | ) | | $ | 171,383 |
| | $ | 174 |
| | $ | 171,557 |
|
Net earnings | — |
| | — |
| | — |
| | — |
| | 9,869 |
| | — |
| | 9,869 |
| | 75 |
| | 9,944 |
|
Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 6,059 |
| | 6,059 |
| | — |
| | 6,059 |
|
Share-based compensation expense | — |
| | — |
| | — |
| | 959 |
| | — |
| | — |
| | 959 |
| | — |
| | 959 |
|
Restricted stock issuances (41,322 shares) | 4 |
| | — |
| | — |
| | (265 | ) | | — |
| | — |
| | (261 | ) | | — |
| | (261 | ) |
Common stock issuance from conversion of exchangeable notes (57,729 shares) | 6 |
| | — |
| | — |
| | 1,297 |
| | — |
| | — |
| | 1,303 |
| | — |
| | 1,303 |
|
Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (60 | ) | | (60 | ) |
Balance at September 30, 2017 | $ | 1,288 |
| | $ | 103 |
| | $ | (8,765 | ) | | $ | 192,364 |
| | $ | 38,600 |
| | $ | (34,278 | ) | | $ | 189,312 |
| | $ | 189 |
| | $ | 189,501 |
|
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Equity
(Unaudited - In thousands, except share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Fiscal Months Ended July 3, 2021 |
| Common Stock | | Class B Convertible Common Stock | | Treasury Stock | | Capital in Excess of Par Value | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total VPG, Inc. Stockholders' Equity | | Noncontrolling Interests | | Total Equity |
Balance at December 31, 2020 | $ | 1,317 | | | $ | 103 | | | $ | (8,765) | | | $ | 197,764 | | | $ | 100,075 | | | $ | (32,671) | | | $ | 257,823 | | | $ | 34 | | | $ | 257,857 | |
Net earnings | — | | | — | | | — | | | — | | | 8,881 | | | — | | | 8,881 | | | 125 | | | 9,006 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (875) | | | (875) | | | — | | | (875) | |
Share-based compensation expense | — | | | — | | | — | | | 942 | | | — | | | — | | | 942 | | | — | | | 942 | |
Restricted stock issuances (50,316 shares) | 5 | | | — | | | — | | | (850) | | | — | | | — | | | (845) | | | — | | | (845) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (167) | | | (167) | |
Balance at July 3, 2021 | $ | 1,322 | | | $ | 103 | | | $ | (8,765) | | | $ | 197,856 | | | $ | 108,956 | | | $ | (33,546) | | | $ | 265,926 | | | $ | (8) | | | $ | 265,918 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Fiscal Months Ended June 27, 2020 |
| Common Stock | | Class B Convertible Common Stock | | Treasury Stock | | Capital in Excess of Par Value | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total VPG, Inc. Stockholders' Equity | | Noncontrolling Interests | | Total Equity |
Balance at December 31, 2019 | $ | 1,312 | | | $ | 103 | | | $ | (8,765) | | | $ | 197,125 | | | $ | 89,288 | | | $ | (37,703) | | | $ | 241,360 | | | $ | 392 | | | $ | 241,752 | |
Net earnings | — | | | — | | | — | | | — | | | 5,071 | | | — | | | 5,071 | | | (32) | | | 5,039 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (2,381) | | | (2,381) | | | — | | | (2,381) | |
Share-based compensation expense | — | | | — | | | — | | | 757 | | | — | | | — | | | 757 | | | — | | | 757 | |
Restricted stock issuances (52,433 shares) | 5 | | | — | | | — | | | (796) | | | — | | | — | | | (791) | | | — | | | (791) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Purchase of noncontrolling interest | — | | | — | | | — | | | 48 | | | — | | | — | | | 48 | | | (301) | | | (253) | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 117 | | | 117 | |
Balance at June 27, 2020 | $ | 1,317 | | | $ | 103 | | | $ | (8,765) | | | $ | 197,134 | | | $ | 94,359 | | | $ | (40,084) | | | $ | 244,064 | | | $ | 176 | | | $ | 244,240 | |
See accompanying notes.
-11-
Vishay Precision Group, Inc.
Notes to Unaudited Consolidated Condensed Financial Statements
Note 1 – Basis of Presentation
Background
Vishay Precision Group, Inc. (“VPG” or the “Company”) is an internationally recognized designer, manufacturer and marketer of sensors, and sensor-based measurement systems, as well as specialty resistors and strain gages based upon the Company's proprietary technology. The Company provides precision products and solutions, many of which are “designed-in” by its customers, specializing in the growing markets of stress, force, weight, pressure, and current measurements.
Interim Financial Statements
These unaudited consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial statements and therefore do not include all information and footnotes necessary for the presentation of financial position, results of operations, and cash flows required by accounting principles generally accepted in the United States for complete financial statements. The information furnished reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair summary of the financial position, results of operations, and cash flows for the interim periods presented. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of December 31, 20162020 and 20152019 and for each of the three years in the period ended December 31, 2016,2020, included in VPG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2020, filed with the SEC on March 16, 2017.11, 2021. The results of operations for the fiscal quarter ended September 30, 2017July 3, 2021 are not necessarily indicative of the results to be expected for the full year. VPG reports interim financial information for 13-week periods beginning on a Sunday and ending on a Saturday, except for the first quarter, which always begins on January 1, and the fourth quarter, which always ends on December 31. The four fiscal quarters in 20172021 and 20162020 end on the following dates:
| | | | | | | | | | | |
| 2021 | | 2020 |
Quarter 1 | April 3, | | March 28, |
Quarter 2 | July 3, | | June 27, |
Quarter 3 | October 2, | | September 26, |
Quarter 4 | December 31, | | December 31, |
|
| | | |
| 2017 | | 2016 |
Quarter 1 | April 1, | | April 2, |
Quarter 2 | July 1, | | July 2, |
Quarter 3 | September 30, | | October 1, |
Quarter 4 | December 31, | | December 31, |
RecentRecently Adopted Accounting Pronouncements
In May 2017,December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, “Scope of Modification Accounting”ASU 2019-12, "Simplifying the Accounting for Income Taxes". This ASU clarifies which changesamends Accounting Standards Codification ("ASC") 740 by removing certain exceptions to the terms or conditions of a share-based payment award will require modification accounting. The amendments in this ASU are effective for interimgeneral principles, clarifying and annual reporting periods beginning after December 15, 2017 and early adoption is permitted. The Company is evaluating the new standard to determine the impact on the Company’s consolidated condensed financial statements.
In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”.amending existing guidance. This ASU requires the service cost component of net periodic benefit cost to be presented in the same income statement line item as other employee compensation costs. All other components of the net periodic benefit cost will be presented outside of operating income. The amendments in this ASU are effective for interim and annual reporting periods beginning after December 15, 2017 and early adoption is permitted. The ASU will result in the reclassification of non-service costs components from Cost of products sold and Selling, general and administrative expenses to Other income (expense) - other. For the year ended December 31, 2016, the Company estimates the new standard would have increased Operating income by approximately $0.5 million with an offsetting increase in Other income (expense).
In January 2017, the FASB issued ASU No. 2017‑04, “Simplifying the Test for Goodwill Impairment.” This ASU eliminates the requirement to calculate the implied fair value of goodwill (second step) to measure a goodwill impairment charge. Under the guidance an impairment charge will be measured based on the excess of the reporting unit’s carrying amount over its fair value (first step). The amendments in this ASU are effective for interim and annual reporting periods beginning after December 15, 2019 and early adoption is permitted. The Company is evaluating the new standard to determine the impact on the Company’s consolidated condensed financial statements.
Note 1 – Basis of Presentation (continued)
In January 2017, FASB issued ASU No. 2017‑01, “Clarifying the Definition of a Business.” This ASU provides a more robust framework to determine when a set of assets and activities constitutes a business. The amendments in this ASU are effective for interim and annual reporting periods beginning after December 15, 2017 and will be applied prospectively to any transactions occurring within the period of adoption and early adoption is permitted. The Company is evaluating the new standard to determine the impact on the Company’s consolidated condensed financial statements.
In August 2016, the FASB issued ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” This ASU is intended to clarify the presentation of certain cash receipts and payments within the statement of cash flows. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The Company is evaluating the new standard to determine the impact on the Company’s consolidated condensed financial statements.
In March 2016, the FASB issued ASU No. 2016-09,"Improvements to Employee Share-Based Payment Accounting." This ASU simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company prospectively adopted this ASU effective January 1, 2017. For the fiscal quarter and nine fiscal months ended September 30, 2017, the tax benefit within income tax expense for the tax effect of share-based payment transactions was not material. Prior to adoption, this amount would have been recorded as a component of Capital in excess of par value. The Company elected to change its accounting policy to recognize forfeitures as they occur. As a result of this change, there was no cumulative-effect adjustment to retained earnings. For the fiscal quarter and nine fiscal months ended September 30, 2017, the Company excluded excess tax benefits from the assumed proceeds available to repurchase shares in the computation of its diluted earnings per share and the related increase in the Company’s diluted weighted average commons shares outstanding was not significant.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” a comprehensive new lease standard that amends various aspects of existing accounting guidance for leases. The core principle of this ASU will require lessees to present the assets and liabilities that arise from leases on their balance sheets. The ASU is effective for public companies for annual periods beginning after December 15, 2018,fiscal years, and interim periods within those fiscal years. Early adoption is permitted.years, beginning after December 15, 2020. The Company is evaluating the newadopted this standard to determine the impact on the Company’s consolidated condensed financial statements.
In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory (Topic 330),"which simplifies the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary coursefirst quarter of business, less reasonably predictable costs2021. The adoption of completion, disposal and transportation. The Company prospectively adopted this ASU effective January 1, 2017 and the adoption did not have a significant impact onour financial statements or the Company’s consolidated condensed financial statements.related disclosures.
In May 2014, the FASB issued ASU No. 2014-09, "
Note 2 – Revenues
Revenue from Contracts with Customers," and modified the standard thereafter. Recognition
The objective of the ASU is to establish a single comprehensive model for entities to use in accounting forfollowing table disaggregates net revenue arisingby geographic region from contracts with customers based on net revenues generated by subsidiaries within that geographic location (in thousands):
Note 2 – Revenues (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended July 3, 2021 | | Fiscal quarter ended June 27, 2020 |
| Foil Technology Products | | Force Sensors | | Weighing and Control Systems | | Total | | Foil Technology Products | | Force Sensors | | Weighing and Control Systems | | Total |
United States | $ | 11,003 | | | $ | 8,017 | | | $ | 10,574 | | | $ | 29,594 | | | $ | 10,789 | | | $ | 4,113 | | | $ | 6,009 | | | $ | 20,911 | |
United Kingdom | 1,102 | | | 514 | | | 3,681 | | | 5,297 | | | 587 | | | 1,711 | | | 1,723 | | | 4,021 | |
Other Europe | 6,604 | | | 5,018 | | | 5,204 | | | 16,826 | | | 6,973 | | | 1,434 | | | 3,430 | | | 11,837 | |
Israel | 5,284 | | | 261 | | | 0 | | | 5,545 | | | 5,691 | | | 93 | | | 0 | | | 5,784 | |
Asia | 9,315 | | | 3,406 | | | 2,012 | | | 14,733 | | | 7,745 | | | 1,565 | | | 1,859 | | | 11,169 | |
Canada | 0 | | | 0 | | | 3,344 | | | 3,344 | | | 0 | | | 0 | | | 5,424 | | | 5,424 | |
Total | $ | 33,308 | | | $ | 17,216 | | | $ | 24,815 | | | $ | 75,339 | | | $ | 31,785 | | | $ | 8,916 | | | $ | 18,445 | | | $ | 59,146 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Six Fiscal Months Ended July 3, 2021 | | Six Fiscal Months Ended June 27, 2020 |
| Foil Technology Products | | Force Sensors | | Weighing and Control Systems | | Total | | Foil Technology Products | | Force Sensors | | Weighing and Control Systems | | Total |
United States | $ | 21,482 | | | $ | 15,788 | | | $ | 18,241 | | | $ | 55,511 | | | $ | 22,723 | | | $ | 12,505 | | | $ | 14,898 | | | $ | 50,126 | |
United Kingdom | 2,000 | | | 1,081 | | | 7,694 | | | 10,775 | | | 1,537 | | | 3,691 | | | 5,435 | | | 10,663 | |
Other Europe | 13,870 | | | 10,493 | | | 9,765 | | | 34,128 | | | 14,686 | | | 3,808 | | | 7,174 | | | 25,668 | |
Israel | 11,725 | | | 391 | | | 0 | | | 12,116 | | | 8,646 | | | 190 | | | 0 | | | 8,836 | |
Asia | 16,942 | | | 6,396 | | | 3,613 | | | 26,951 | | | 14,670 | | | 3,417 | | | 3,530 | | | 21,617 | |
Canada | 0 | | | 0 | | | 6,447 | | | 6,447 | | | 0 | | | 0 | | | 9,932 | | | 9,932 | |
Total | $ | 66,019 | | | $ | 34,149 | | | $ | 45,760 | | | $ | 145,928 | | | $ | 62,262 | | | $ | 23,611 | | | $ | 40,969 | | | $ | 126,842 | |
The following table disaggregates net revenue from contracts with customers by market sector (in thousands). | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Test & Measurement | $ | 16,279 | | | $ | 14,027 | | | $ | 30,695 | | | $ | 28,372 | |
Avionics, Military & Space | 5,872 | | | 6,727 | | | 11,902 | | | 12,887 | |
Transportation | 11,930 | | | 5,188 | | | 21,484 | | | 13,432 | |
Other Markets | 17,489 | | | 12,192 | | | 35,034 | | | 25,320 | |
Industrial Weighing | 12,042 | | | 8,583 | | | 24,047 | | | 21,050 | |
General Industrial | 4,173 | | | 3,623 | | | 8,255 | | | 7,662 | |
Steel | 7,554 | | | 8,806 | | | 14,511 | | | 18,119 | |
Total | $ | 75,339 | | | $ | 59,146 | | | $ | 145,928 | | | $ | 126,842 | |
Contract Assets & Liabilities
Contract assets are established when revenues are recognized prior to a contractual payment due from the customer. When a payment becomes due based on the contract terms, the Company will supersede most current revenue recognition guidance. The basisreduce the contract asset and record a receivable. Contract liabilities are deferred revenues that are recorded when cash payments are received or due in advance of our performance obligations. Our payment terms vary by the type and location of the guidanceproducts offered. The term between invoicing and when payment is that an entity should recognize revenue to depict the transfer of promised goods or services to customers due is not significant.
The outstanding contract assets and liability accounts were as follows (in anthousands):
Note 2 – Revenues (continued)
| | | | | | | | | | | |
| Contract Asset | | Contract Liability |
| Unbilled Revenue | | Accrued Customer Advances |
Balance at December 31, 2020 | $ | 3,605 | | | $ | 2,873 | |
Balance at July 3, 2021 | 4,656 | | | 4,525 | |
(Decrease)/increase | $ | 1,051 | | | $ | 1,652 | |
The amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.
The ASU will affect the timing of certain revenue related transactions primarily resulting in earlier recognition of revenue for contracts related to our steel products. The Company expects to adoptrecognized during the ASU effective January 1, 2018 on a modified retrospective basis through a cumulative adjustment to equity. Upon adoption ofsix fiscal months ended July 3, 2021 that was included in the ASU, thecontract liability balance at December 31, 2020 was$2.4 million.
Practical Expedients
The Company does not expectdisclose the cumulative adjustment to equity tovalue of unsatisfied performance obligations for contracts that have a material impactduration of one year or less and for contracts that are substantially complete. The Company treats shipping and handling activities as fulfillment costs.
Note 3 - Acquisition
On June 1, 2021, VPG completed the acquisition of California-based Diversified Technical Systems, Inc. (“DTS”), a manufacturer of data acquisition systems and sensors for product safety and testing, for a purchase price of $47.2 million, subject to customary adjustments. The Company used cash on hand and borrowings under its revolving credit facility to fund the purchase price under the purchase agreement. DTS reports into the Company's Weighing and Control Systems segment. The following table summarizes the provisional fair values assigned to the assets and liabilities of DTS as of June 1, 2021 (in thousands):
| | | | | |
| June 1, 2021 |
Working capital | $ | 12,999 | |
Property and equipment | 1,209 | |
Deferred income tax liability | (6,274) | |
| |
Intangible assets: | |
Acquired technology | 13,167 | |
Customer relationships | 8,135 | |
Trade names | 2,393 | |
Total intangible assets | 23,695 | |
Fair value of acquired identifiable assets | 31,629 | |
Purchase price | $ | 47,216 | |
Goodwill | $ | 15,587 | |
The Company utilizes certain valuations and studies to determine the fair value of the tangible and intangible assets acquired. These valuations and studies are currently being analyzed and have yet to be finalized. Accordingly, the assets and liabilities assumed are subject to adjustment once the detailed analysis is completed. The provisional estimated weighted average useful lives for the acquired technology and customer relationships are 15 years. Trade names are treated as indefinite-lived intangible assets. None of the goodwill associated with DTS will be deductible for income tax purposes.
The Company recorded acquisition costs associated with this transaction as follows (in thousands):
| | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | | | July 3, 2021 |
Legal fees | $ | 341 | | | | | $ | 341 | |
Appraisal fees | 18 | | | | | 18 | |
Other (investment banker and insurance costs) | 839 | | | | | 839 | |
| $ | 1,198 | | | | | $ | 1,198 | |
Note 3 - Acquisition (continued)
Included in the results of the operations of the Company, starting on June 1, 2021, are net revenues of $3.0 million and a net loss of $0.2 million from DTS for the fiscal quarter and six fiscal months ended July 3, 2021. DTS results include amortization of the inventory step-up of $0.9 million and amortization of intangible assets of $0.1 million.
Following is the supplemental consolidated financial statements. results for the Company on an unaudited pro forma basis, as if the DTS acquisition had been consummated on January 1, 2020:
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended | | Fiscal quarter ended | | Six fiscal months ended |
| June 27, 2020 | | June 27, 2020 | | July 3, 2021 | | July 3, 2021 |
Pro forma net revenues | $ | 64,907 | | | $ | 139,158 | | | 80,243 | | | 159,164 | |
| | | | | | | |
Pro forma net earnings attributable to VPG stockholders | $ | 1,629 | | | $ | 3,658 | | | 6,741 | | | 13,411 | |
| | | | | | | |
Pro forma basic earnings per share attributable to VPG stockholders | $ | 0.12 | | | $ | 0.27 | | | $ | 0.50 | | | $ | 0.99 | |
Pro forma diluted earnings per share attributable to VPG stockholders | $ | 0.12 | | | $ | 0.27 | | | $ | 0.49 | | | $ | 0.98 | |
Note 4 – Goodwill and Other Intangible Assets
The estimate is subject to change based onCompany tests the contracts outstandinggoodwill in each of its goodwill reporting units for impairment at least annually, as of the effective datefirst day of it's fourth quarter, and whenever events or changes in circumstances occur indicating that a possible impairment may have been incurred. Due to updated financial projections, the Company performed a quantitative impairment test for the instrumentation reporting unit during the second quarter of 2021. In estimating the fair value of our instrumentation reporting unit the Company used the income approach.
The results of the ASU.quantitative impairment test for the instrumentation reporting unit's goodwill and indefinite-lived trade name indicated an impairment, and in the second quarter of 2021, the Company recognized a non-cash impairment loss of $1.1 million in goodwill and $0.1 million to the indefinite-lived trade name. The Company will continue to monitorimpairment was driven mainly by changes in forecasted projections including a slower growth rate in revenues. After considering the overall impact of the adoptionimpairment charges, the carrying amount of this ASU will have on the consolidated resultsgoodwill and indefinite-lived trade names as of operations, financial position, cash flowsJuly 3, 2021 was $0.0 million and financial statement disclosures to facilitate adoption by January 1, 2018.$0.3 million, respectively.
Note 2 – Goodwill
The change in the carrying amount of goodwill by segment is as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | Weighing and Control Systems Segment | | Foil Technology Products Segment |
| | | KELK Acquisition | | DSI Acquisition | | DTS Acquisition | | Stress-Tek Acquisition | | Pacific Acquisition |
Balance at December 31, 2020 | $ | 31,105 | | | $ | 6,726 | | | $ | 16,942 | | | | | $ | 6,311 | | | $ | 1,126 | |
Goodwill acquired | 15,587 | | | | | | | 15,587 | | | | | |
Impairment charges | (1,126) | | | | | | | | | | | (1,126) | |
Foreign currency translation adjustment | 166 | | | 180 | | | (14) | | | | | — | | | — | |
| | | | | | | | | | | |
Balance at July 3, 2021 | $ | 45,732 | | | $ | 6,906 | | | $ | 16,928 | | | $ | 15,587 | | | $ | 6,311 | | | $ | 0 | |
Note 4 – Goodwill and Other Intangible Assets (continued)
Intangible assets were as follows (in thousands):
| | | | | | | | | | | |
| July 3, 2021 | | December 31, 2020 |
Intangible assets subject to amortization | | | |
(Definite-lived): | | | |
Patents and acquired technology | $ | 33,069 | | | $ | 19,804 | |
Customer relationships | 34,393 | | | 26,061 | |
Trade names | 1,697 | | | 1,747 | |
Non-competition agreements | 11,646 | | | 12,259 | |
| 80,805 | | | 59,871 | |
Accumulated amortization: | | | |
Patents and acquired technology | (6,552) | | | (5,895) | |
Customer relationships | (14,191) | | | (13,363) | |
Trade names | (1,697) | | | (1,747) | |
Non-competition agreements | (11,639) | | | (12,250) | |
| (34,079) | | | (33,255) | |
Net intangible assets subject to amortization | $ | 46,726 | | | $ | 26,616 | |
| | | |
Intangible assets not subject to amortization | | | |
(Indefinite-lived): | | | |
Trade names | 7,748 | | | 5,423 | |
| | | |
| $ | 54,474 | | | $ | 32,039 | |
|
| | | | | | | | | | | | | | | |
| Total | | Weighing and Control Systems Segment | | Foil Technology Products Segment |
| | | KELK Acquisition | | Stress-Tek Acquisition | | Pacific Acquisition |
Balance at December 31, 2016 | $ | 18,717 |
| | $ | 6,364 |
| | $ | 6,311 |
| | $ | 6,042 |
|
Foreign currency translation adjustment | 511 |
| | 511 |
| | — |
| | — |
|
Balance at September 30, 2017 | $ | 19,228 |
| | $ | 6,875 |
| | $ | 6,311 |
| | $ | 6,042 |
|
The increase in net intangible assets from December 31, 2020 is due to the acquisition of DTS on June 1, 2021. The Company has preliminarily allocated $21.3 million of the purchase price to definite-lived intangible assets and $2.4 million to indefinite-lived intangible assets.
Amortization expense for the fiscal quarter and six fiscal months ended July 3, 2021 was $0.7 million and $1.4 million, respectively. The DTS intangible assets accounted for $0.1 million of amortization expense for the fiscal quarter and six fiscal months ended July 3, 2021.
Estimated annual amortization expense for the full year of 2021 and each of the next four years, is as follows ( in thousands): | | | | | |
2021 | $ | 3,280 | |
2022 | 3,871 | |
2023 | 3,763 | |
2024 | 3,728 | |
2025 | 3,728 | |
Note 35 – Restructuring Costs
Restructuring costs represent the cost reduction programs initiated by the Company. Restructuring costs are expensed during the period in which the Company determines it will incur those costs and all requirements for accrual are met. Because these costs are recorded based upon estimates, actual expenditures for the restructuring activities may differ from the initially recorded costs. If the initial estimates are too low or too high, the Company could be required to either record additional expense in future periods or to reverse part of the previously recorded charges.Leases
The Company primarily leases office and manufacturing facilities in addition to vehicles, which have remaining terms of less than one year to eleven years. The Company has no finance leases.
Leases recorded aggregate restructuring costson the balance sheet consist of $0.4the following (in thousands):
Note 5 - Leases (continued)
| | | | | | | | | | | | | | | | | | |
Leases | | | | July 3, 2021 | | December 31, 2020 |
Assets | | | | | | |
Operating lease right of use asset | | | | $ | 25,451 | | | $ | 21,788 | |
| | | | | | |
Liabilities | | | | | | |
Operating lease - current | | | | $ | 4,445 | | | $ | 4,011 | |
Operating lease - non-current | | | | $ | 22,346 | | | $ | 19,504 | |
Other information related to lease term and discount rate is as follows:
| | | | | |
| July 3, 2021 |
Operating leases weighted average remaining lease term (in years) | 8.49 years |
Operating leases weighted average discount rate | 3.36 | % |
The components of lease expense are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six Fiscal Months Ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Operating lease cost | $ | 1,258 | | | $ | 1,139 | | | $ | 2,439 | | | $ | 2,013 | |
Short-term lease cost | 35 | | | 34 | | | 68 | | | 57 | |
Sublease income | (19) | | | 0 | | | (28) | | | 0 | |
Total net lease cost | $ | 1,274 | | | $ | 1,173 | | | $ | 2,479 | | | $ | 2,070 | |
Right of use assets obtained in exchange for new operating lease liability during 2021 were $5.9 million. The Company paid $2.4 million and $0.7$1.7 million duringfor its operating leases for each of the fiscal quarters ended September 30, 2017 and October 1, 2016, respectively, and $1.3 million and $2.4 million during the ninesix fiscal months ended September 30, 2017July 3, 2021 and October 1, 2016, respectively.June 27, 2020, which are included in operating cash flows on the consolidated condensed statements of cash flows.
Restructuring costs consist mainly
Undiscounted maturities of employee termination costs and facility closure costs, which were incurred in connection with various cost reduction programs. The restructuring expenses recorded for the nine fiscal months ended September 30, 2017, represent additional costs related to the previously announced cost reduction programs. During the nine fiscal months ended October 1, 2016, the Company recorded $1.6 million related to cost reduction plans initiated at locations in Europe, the United States, and Canada, $0.4 million related to the closure of our Costa Rica facility, and $0.4 million related to the November 2015 global cost reduction plan.
The following table summarizes recent activity related to all restructuring programs. The accrued restructuring liability balanceoperating lease payments as of September 30, 2017 and December 31, 2016, respectively, is included in other accrued expenses in the accompanying consolidated condensed balance sheets July 3, 2021 are summarized as follows (in thousands):
| | | | | |
2021 (excluding the six months ended July 3, 2021) | $ | 2,596 | |
2022 | 4,500 | |
2023 | 3,968 | |
2024 | 3,555 | |
2025 | 3,083 | |
Thereafter | 12,894 | |
Total future minimum lease payments | $ | 30,596 | |
Less: amount representing interest | (3,805) | |
Present value of future minimum lease payments | $ | 26,791 | |
|
| | | |
Balance at December 31, 2016 | $ | 1,333 |
|
Restructuring costs in 2017 | 1,292 |
|
Cash payments | (2,070 | ) |
Foreign currency translation | 1 |
|
Balance at September 30, 2017 | $ | 556 |
|
Note 46 – Income Taxes
VPG calculates the tax provision for interim periods using an estimated annual effective tax rate methodology based on projected full-year pre-tax earnings among the taxing jurisdictions in which we operate with adjustments for discrete items. The effective tax rate for the fiscal quarter ended September 30, 2017July 3, 2021 was 34.1%6.1% compared to 51.2%28.1% for the fiscal quarter ended October 1, 2016. TheJune 27, 2020, and the effective tax rate for the ninesix fiscal months ended September 30, 2017July 3, 2021 was 30.7%18.4% compared to 25.3%30.9% for the ninesix fiscal months ended October 1, 2016.June 27, 2020. The tax rate for both periods presented in the current fiscal quarter2021 is lower than the prior year fiscal quarterperiods primarily because of higher earnings subjectdue to tax in the current fiscal quarter which reduced the impact of losses on which no tax benefit is provided. The current year nine fiscal month tax rate is higher than the prior year nine fiscal month tax rate primarily because of a tax benefit recorded last year related to the release of a valuation allowance in connection with the acquisition of Pacific. This difference is partially offset by a 2017DTS, which enabled the Company to reduce its valuation allowance against deferred tax assets, tax rate changes in certain foreign currency benefit from a foreign subsidiary with U.S. dollars as its functional currency.jurisdictions, and changes in the mix of worldwide income.
The Company and its subsidiaries are subject to income taxes imposed by the U.S., various states, and the foreign jurisdictions in which we operate. Each jurisdiction establishes rules that set forth the United States. and numerous foreign jurisdictions. Significant judgment is required in evaluatingyears which are subject to examination by its tax authorities. While the Company’sCompany believes the tax positions and determiningtaken on its tax returns for each jurisdiction are supportable, they
Note 6 - Income Taxes (continued)
may still be challenged by the provision for income taxes. Duringjurisdiction's tax authorities. In anticipation of such challenges, the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. VPG establishesCompany has established reserves for tax-related uncertaintiesuncertainties. These liabilities are based on estimatesthe Company’s best estimate of whether, and the extentpotential tax exposures in each respective jurisdiction. It may take a number of years for a final tax liability in a jurisdiction to which, additional taxes will be due. These reserves are established when VPG believes that certain positions mightdetermined, particularly in the event of an audit. If an uncertain matter is determined favorably, there could be challenged despite its belief that the tax return positions
Note 4 – Income Taxes (continued)
are supportable. VPG adjusts these reserves in light of changing facts and circumstances and the provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate. Penalties and tax-related interest expense are reported as a component of income tax expense. The Company anticipates a reduction in the liability for unrecognizedCompany’s tax benefits between $0.1 million to $0.3 million within twelve months of the balance sheet date due toexpense. An unfavorable determination could increase tax expense and could require a cash paymentspayment, including interest and the potential for the expiration of statutes of limitation in certain jurisdictions.penalties.
Note 57 – Long-Term Debt
Long-term debt consists of the following (in thousands):
| | | | | | | | | | | |
| July 3, 2021 | | December 31, 2020 |
2020 Credit Agreement - Revolving Facility | $ | 61,000 | | | $ | 41,000 | |
| | | |
| | | |
| | | |
| | | |
| | | |
Other debt | 0 | | | 18 | |
Deferred financing costs | (330) | | | (374) | |
Total long-term debt | 60,670 | | | 40,644 | |
Less: current portion | 0 | | | 18 | |
Long-term debt, less current portion | $ | 60,670 | | | $ | 40,626 | |
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
2015 Credit Agreement - Revolving Facility | $ | 9,000 |
| | $ | 9,000 |
|
2015 Credit Agreement - U.S. Closing Date Term Facility | 3,780 |
| | 4,128 |
|
2015 Credit Agreement - U.S. Delayed Draw Term Facility | 9,240 |
| | 10,092 |
|
2015 Credit Agreement - Canadian Term Facility | 8,105 |
| | 8,780 |
|
Exchangeable Unsecured Notes, due 2102 | 2,794 |
| | 4,097 |
|
Other debt | 432 |
| | 509 |
|
Deferred financing costs | (369 | ) | | (454 | ) |
Total long-term debt | 32,982 |
| | 36,152 |
|
Less: current portion | 2,965 |
| | 2,623 |
|
Long-term debt, less current portion | $ | 30,017 |
| | $ | 33,529 |
|
Exchangeable Unsecured Notes, due 2102
Effective May 12, 2017, a holder of the Company's exchangeable notes exercised its option to exchange approximately $1.3 million principal amount of the notes for 57,729 shares of VPG common stock at a contractual put/call rate of $22.57. Following this transaction, VPG has outstanding exchangeable unsecured notes with a principal amount of approximately $2.8 million, which are exchangeable for an aggregate of 123,808 shares of VPG common stock.
Note 68 – Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss), net of tax, consist of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | | Pension and Other Postretirement Actuarial Items | | Total |
Balance at January 1, 2021 | $ | (25,591) | | | $ | (7,080) | | | $ | (32,671) | |
Other comprehensive loss before reclassifications | (1,193) | | | 0 | | | (1,193) | |
Amounts reclassified from accumulated other comprehensive income (loss) | 0 | | | 318 | | | 318 | |
Balance at July 3, 2021 | $ | (26,784) | | | $ | (6,762) | | | $ | (33,546) | |
|
| | | | | | | | | | | |
| Foreign Currency Translation Adjustment | | Pension and Other Postretirement Actuarial Items | | Total |
Balance at January 1, 2017 | $ | (33,192 | ) | | $ | (7,145 | ) | | $ | (40,337 | ) |
Other comprehensive income before reclassifications | 6,119 |
| | — |
| | 6,119 |
|
Amounts reclassified from accumulated other comprehensive income (loss) | — |
| | (60 | ) | | (60 | ) |
Balance at September 30, 2017 | $ | (27,073 | ) | | $ | (7,205 | ) | | $ | (34,278 | ) |
Note 6 – Accumulated Other Comprehensive Income (Loss) (continued)
| | | | | | | | | | Foreign Currency Translation Adjustment | | Pension and Other Postretirement Actuarial Items | | Total |
| Foreign Currency Translation Adjustment | | Pension and Other Postretirement Actuarial Items | | Total | |
Balance at January 1, 2016 | $ | (28,704 | ) | | $ | (4,417 | ) | | $ | (33,121 | ) | |
Balance at January 1, 2020 | | Balance at January 1, 2020 | $ | (30,761) | | | $ | (6,942) | | | $ | (37,703) | |
Other comprehensive loss before reclassifications | 167 |
| | — |
| | 167 |
| Other comprehensive loss before reclassifications | (2,070) | | | 0 | | | (2,070) | |
Amounts reclassified from accumulated other comprehensive income (loss) | — |
| | 503 |
| | 503 |
| Amounts reclassified from accumulated other comprehensive income (loss) | 0 | | | (311) | | | (311) | |
Balance at October 1, 2016 | $ | (28,537 | ) | | $ | (3,914 | ) | | $ | (32,451 | ) | |
Balance at June 27, 2020 | | Balance at June 27, 2020 | $ | (32,831) | | | $ | (7,253) | | | $ | (40,084) | |
Reclassifications of pension and other postretirement actuarial items out of accumulated other comprehensive income (loss) are included in the computation of net periodic benefit cost (see Note 7)9).
Note 9 – Pension and Other Postretirement Benefits
Employees of VPG participate in various defined benefit pension and other postretirement benefit ("OPEB") plans. The following table sets forth the components of the net periodic benefit cost for the Company's defined benefit pension and OPEB plans (in thousands):
Note 9 - Pension and Other Postretirement Benefits ( continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended July 3, 2021 | | Fiscal quarter ended June 27, 2020 |
| Pension Plans | | OPEB Plans | | Pension Plans | | OPEB Plans |
Net service cost | $ | 96 | | | $ | 9 | | | $ | 99 | | | $ | 31 | |
Interest cost | 103 | | | 17 | | | 127 | | | 33 | |
Expected return on plan assets | (97) | | | 0 | | | (109) | | | 0 | |
Amortization of actuarial losses | 102 | | | 5 | | | 76 | | | 34 | |
Net periodic benefit cost | $ | 204 | | | $ | 31 | | | $ | 193 | | | $ | 98 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| Six fiscal months ended July 3, 2021 | | Six fiscal months ended June 27, 2020 |
| Pension Plans | | OPEB Plans | | Pension Plans | | OPEB Plans |
Net service cost | $ | 193 | | | $ | 18 | | | $ | 198 | | | $ | 62 | |
Interest cost | 206 | | | 34 | | | 256 | | | 66 | |
Expected return on plan assets | (194) | | | 0 | | | (220) | | | 0 | |
Amortization of actuarial losses | 204 | | | 10 | | | 153 | | | 68 | |
Net periodic benefit cost | $ | 409 | | | $ | 62 | | | $ | 387 | | | $ | 196 | |
Note 7 – Pension and Other Postretirement Benefits
Employees of VPG participate in various defined benefit pension and other postretirement benefit ("OPEB") plans.
The following table sets forth the components of the net periodic benefit cost for the Company's defined benefit pension and OPEB plans (in thousands):
|
| | | | | | | | | | | | | | | |
| Fiscal quarter ended September 30, 2017 | | Fiscal quarter ended October 1, 2016 |
| Pension Plans | | OPEB Plans | | Pension Plans | | OPEB Plans |
Net service cost | $ | 119 |
| | $ | 28 |
| | $ | 101 |
| | $ | 25 |
|
Interest cost | 167 |
| | 35 |
| | 192 |
| | 33 |
|
Expected return on plan assets | (133 | ) | | — |
| | (153 | ) | | — |
|
Amortization of actuarial losses | 114 |
| | 28 |
| | 48 |
| | 19 |
|
Net periodic benefit cost | $ | 267 |
| | $ | 91 |
| | $ | 188 |
| | $ | 77 |
|
|
| | | | | | | | | | | | | | | |
| Nine fiscal months ended September 30, 2017 | | Nine fiscal months ended October 1, 2016 |
| Pension Plans | | OPEB Plans | | Pension Plans | | OPEB Plans |
Net service cost | $ | 355 |
| | $ | 84 |
| | $ | 307 |
| | $ | 75 |
|
Interest cost | 495 |
| | 105 |
| | 602 |
| | 97 |
|
Expected return on plan assets | (395 | ) | | — |
| | (486 | ) | | — |
|
Amortization of actuarial losses | 338 |
| | 84 |
| | 151 |
| | 57 |
|
Net periodic benefit cost | $ | 793 |
| | $ | 273 |
| | $ | 574 |
| | $ | 229 |
|
Note 810 – Share-Based Compensation
The Amended and Restated Vishay Precision Group, Inc. 2010 Stock Incentive Program (as amended and restated, the “Plan”) permits the issuance of up to 1,000,000 shares of common stock. At September 30, 2017,July 3, 2021, the Company had reserved 256,730320,654 shares of common stock for future grants of equity awards (restricted stock, unrestricted stock, restricted stock units ("RSUs"), or stock options) pursuant to the Plan. If any outstanding awards are forfeited by the holder or canceled by the Company, the underlying shares would be available for re-grant to others.
On February 9, 2017,March 4, 2021 and in accordance with their respective employment agreements, VPG’s three current3 executive officers were granted annual equity awards in the form of RSUs, of which 75%50% are performance-based. The awards were comprised of 53,913 RSUs, as determined using the average of the closing stock prices of the Company's common stock for the last five trading days immediately preceding January 1, 2017 and have an aggregate target grant-date fair value of $0.9 million. Twenty-five$1.7 million and were comprised of 52,486 RSUs. NaN percent of these awards will vest on January 1, 2020,2024, subject to the executives’ continued employment. The performance-based portion of the RSUs will also vest on January 1, 2020,2024, subject to the executives' continued employment and the satisfaction
Note 8 – Share-Based Compensation (continued)
of certain performance objectives relating to three-year cumulative “free cash”“adjusted free cash flow” and net"net earnings goals,goals", each weighted equally, and the executives' continued employment.equally.
On March 23, 2017,8, 2021, certain non-executive VPG employees were granted annual equity awards in the form of RSUs,RSUs. Certain employees received awards, of which 75% are performance-based and certain employees received awards of which 50% are performance-based. The awards have an aggregate grant-date fair value of $0.4$0.6 million and were comprised of 23,92117,793 RSUs. Twenty-five percentThe non-performance portion of these awards (NaN percent for certain employees and 50 percent for certain employees) will vest on January 1, 20202024 subject to the employees' continued employment. The performance-based portion of the RSUs will also vest on January 1, 2020,2024, subject to the employees' continued employment and the satisfaction of certain performance objectives relating to three-year cumulative earnings and cash flow goals, and the employees' continued employment.each weighted equally.
On May 25,27, 2021 and in accordance with the Company's 2017 Non-Employee Director Compensation Plan, the Board of Directors approved the issuance of an aggregate of 15,4959,936 RSUs to the independent board members of the Board of Directors and to the non-executive Chairman of the Board of Directors. The awards have an aggregate grant-date fair value of $0.3 million and will vest on the earlier of the next2022 Annual Stockholders meetingMeeting or May 25, 2018,27, 2022, subject to the directors' continued service on the Board of Directors.
On July 26, 2017, the BoardVesting of Directors approved the issuance of an aggregate of 5,176 RSUsequity awards is subject to newly appointed board members of the Board of Directors. These awards represented a pro-rated portion of the annual equity grant made to non-executive directors pursuant to the Plan. The aggregate grant-date fair value of this award was $0.1 million and will vest on the earlier of the next Annual Stockholders meeting or May 25, 2018.acceleration under certain circumstances.
Note 10 - Share-Based Compensation (continued)
The amount of compensation cost related to share-based payment transactions is measured based on the grant-date fair value of the equity instruments issued. VPG determines compensation cost for RSUs based on the grant-date fair value of the underlying common stock. The Company recognizes compensation cost for RSUs that are expected to vest and for which performance criteria are expected to be met. The following table summarizes share-based compensation expense recognized (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Restricted stock units | $ | 576 | | | $ | 378 | | | $ | 942 | | | $ | 757 | |
| | | | | | | |
Note 11 – Segment Information
|
| | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | | September 30, 2017 | | October 1, 2016 |
Restricted stock units | $ | 467 |
| | $ | (83 | ) | | $ | 959 |
| | $ | 465 |
|
VPG reports in 3 product segments: the Foil Technology Products segment, the Force Sensors segment, and the Weighing and Control Systems segment. The Foil Technology Products reporting segment is comprised of the foil resistor and strain gage operating segments. The Force Sensors reporting segment is comprised of transducers, load cells, and modules. The Weighing and Control Systems reporting segment is comprised of complete systems which include load cells and instrumentation for weighing, force control and force measurement for a variety of uses such as process control on-board weighing applications.
During theVPG evaluates reporting segment performance based on multiple performance measures including third quarter of 2017, the Company recorded an increase to share-based compensation expense of $0.2 million based upon a determination that achievementparty net revenues, gross profits and operating income, exclusive of certain items. Management believes that evaluating segment performance, objectives associatedexcluding items such as restructuring costs, executive severance costs, and other items is meaningful because it provides insight with awards granted respect to the intrinsic operating results of VPG. The following table sets forth reporting segment information (in 2015thousands):
Note 11 - Segment Information (continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Net revenues: | | | | | | | |
Foil Technology Products | $ | 33,308 | | | $ | 31,785 | | | $ | 66,019 | | | $ | 62,262 | |
Force Sensors | 17,216 | | | 8,916 | | | 34,149 | | | 23,611 | |
Weighing and Control Systems | 24,815 | | | 18,445 | | | 45,760 | | | 40,969 | |
Total | $ | 75,339 | | | $ | 59,146 | | | $ | 145,928 | | | $ | 126,842 | |
| | | | | | | |
Gross profit: | | | | | | | |
Foil Technology Products | $ | 12,942 | | | $ | 13,286 | | | $ | 25,981 | | | $ | 24,487 | |
Force Sensors | 5,969 | | | 1,038 | | | 12,008 | | | 4,610 | |
Weighing and Control Systems | 10,887 | | | 8,786 | | | 20,431 | | | 19,078 | |
Total | $ | 29,798 | | | $ | 23,110 | | | $ | 58,420 | | | $ | 48,175 | |
| | | | | | | |
Reconciliation of segment operating income to consolidated results: | | | | | | | |
Foil Technology Products | $ | 7,219 | | | $ | 8,070 | | | $ | 14,052 | | | $ | 13,454 | |
Force Sensors | 3,474 | | | (1,013) | | | 6,977 | | | 191 | |
Weighing and Control Systems | 4,595 | | | 4,019 | | | 8,419 | | | 8,687 | |
Unallocated G&A expenses | (7,943) | | | (6,606) | | | (15,664) | | | (13,088) | |
Acquisition costs | (1,198) | | | 0 | | | (1,198) | | | 0 | |
Impairment of goodwill and indefinite-lived intangibles | (1,223) | | | 0 | | | (1,223) | | | 0 | |
| | | | | | | |
Restructuring costs | 0 | | | (499) | | | 0 | | | (629) | |
Operating income | $ | 4,924 | | | $ | 3,971 | | | $ | 11,363 | | | $ | 8,615 | |
| | | | | | | |
Acquisition costs: | | | | | | | |
| | | | | | | |
| | | | | | | |
Weighing and Control Systems | (1,198) | | | 0 | | | (1,198) | | | 0 | |
| $ | (1,198) | | | $ | 0 | | | $ | (1,198) | | | $ | 0 | |
| | | | | | | |
Impairment of goodwill and indefinite-lived intangibles: | | | | | | | |
Foil Technology Products | $ | (1,223) | | | $ | 0 | | | $ | (1,223) | | | $ | 0 | |
| | | | | | | |
| | | | | | | |
| $ | (1,223) | | | $ | 0 | | | $ | (1,223) | | | $ | 0 | |
| | | | | | | |
Restructuring costs: | | | | | | | |
Foil Technology Products | $ | 0 | | | $ | (341) | | | $ | 0 | | | $ | (443) | |
Force Sensors | $ | 0 | | | $ | (80) | | | $ | 0 | | | $ | (108) | |
| | | | | | | |
Corporate/Other | 0 | | | (78) | | | 0 | | | (78) | |
| $ | 0 | | | $ | (499) | | | $ | 0 | | | $ | (629) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Products are transferred between segments on a basis intended to executives and certain other employees were likely to be met. Share based compensation expense related to these performance objectives had been reduced reflect, as nearly as practicable, the market value of the products. The table below summarizes intersegment sales (in prior years.thousands):
Note 11 - Segment Information (continued)
During the third quarter of 2016, it was determined that certain performance objectives associated with awards granted in 2014, 2015 and 2016, to executives and certain other employees were not likely to be fully met. As a result, share-based compensation expense of $0.5 million was reversed based on anticipated performance levels at that time. | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Foil Technology Products to Force Sensors and Weighing and Control Systems | $ | 959 | | | $ | 868 | | | $ | 1,920 | | | $ | 1,592 | |
| | | | | | | |
Weighing and Control Systems to Foil Technology Products and Force Sensors | $ | 150 | | | $ | 124 | | | $ | 264 | | | $ | 211 | |
Note 9 – Segment Information
VPG reports in three product segments: the Foil Technology Products segment, the Force Sensors segment, and the Weighing and Control Systems segment. The Foil Technology Products reporting segment is comprised of the foil resistor and strain gage operating segments. The Force Sensors reporting segment is comprised of transducers, load cells and modules. The Weighing and Control Systems reporting segment is comprised of instruments, complete systems for process control, and on-board weighing applications.
VPG evaluates reporting segment performance based on multiple performance measures including revenues, gross profits and operating income, exclusive of certain items. Management believes that evaluating segment performance, excluding items such as restructuring costs, acquisition costs, and other items is meaningful because it provides insight with respect to the intrinsic operating results of VPG. The following table sets forth reporting segment information (in thousands):
Note 9 – Segment Information (continued)
|
| | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | | September 30, 2017 | | October 1, 2016 |
Net third-party revenues: | | | | | | | |
Foil Technology Products | $ | 29,315 |
| | $ | 23,852 |
| | $ | 86,385 |
| | $ | 75,530 |
|
Force Sensors | 16,596 |
| | 15,231 |
| | 47,720 |
| | 45,465 |
|
Weighing and Control Systems | 16,894 |
| | 15,407 |
| | 50,806 |
| | 48,120 |
|
Total | $ | 62,805 |
| | $ | 54,490 |
| | $ | 184,911 |
| | $ | 169,115 |
|
| | | | | | | |
Gross profit: | | | | | | | |
Foil Technology Products | $ | 12,235 |
| | $ | 8,639 |
| | $ | 36,009 |
| | $ | 29,092 |
|
Force Sensors | 4,746 |
| | 4,716 |
| | 12,964 |
| | 11,903 |
|
Weighing and Control Systems | 7,286 |
| | 6,910 |
| | 22,570 |
| | 20,540 |
|
Total | $ | 24,267 |
| | $ | 20,265 |
| | $ | 71,543 |
| | $ | 61,535 |
|
| | | | | | | |
Reconciliation of segment operating income to consolidated results: | | | | | | | |
Foil Technology Products | $ | 6,894 |
| | $ | 3,894 |
| | $ | 19,811 |
| | $ | 14,839 |
|
Force Sensors | 2,564 |
| | 2,865 |
| | 6,242 |
| | 5,481 |
|
Weighing and Control Systems | 2,992 |
| | 2,997 |
| | 9,691 |
| | 7,114 |
|
Unallocated G&A expenses | (6,708 | ) | | (6,408 | ) | | (19,752 | ) | | (19,308 | ) |
Acquisition costs | — |
| | — |
| | — |
| | (414 | ) |
Restructuring costs | (423 | ) | | (709 | ) | | (1,292 | ) | | (2,395 | ) |
Consolidated condensed operating income | $ | 5,319 |
| | $ | 2,639 |
| | $ | 14,700 |
| | $ | 5,317 |
|
| | | | | | | |
Acquisition costs: | | | | | | | |
Foil Technology Products | $ | — |
| | $ | — |
| | $ | — |
| | $ | (391 | ) |
Weighing and Control Systems | — |
| | — |
| | — |
| | (23 | ) |
| $ | — |
| | $ | — |
| | $ | — |
| | $ | (414 | ) |
| | | | | | | |
Restructuring costs: | | | | | | | |
Foil Technology Products | $ | 53 |
| | $ | (416 | ) | | $ | (85 | ) | | $ | (1,134 | ) |
Force Sensors | (142 | ) | | (78 | ) | | (404 | ) | | (379 | ) |
Weighing and Control Systems | (79 | ) | | (192 | ) | | (366 | ) | | (724 | ) |
Corporate/Other | (255 | ) | | (23 | ) | | (437 | ) | | (158 | ) |
| $ | (423 | ) | | $ | (709 | ) | | $ | (1,292 | ) | | $ | (2,395 | ) |
Products are transferred between segments on a basis intended to reflect, as nearly as practicable, the market value of the products. Intersegment sales from the Foil Technology Products segment to the Force Sensors segment and Weighing and Control Systems segment were $0.5 million and $0.8 million during the fiscal quarters ended September 30, 2017 and October 1, 2016, respectively and $1.8 million and $1.9 million during the nine fiscal months ended September 30, 2017 and October 1, 2016, respectively. Intersegment sales from the Force Sensors segment to the Foil Technology Products segment and Weighing and Control Systems segment were $0.3 million and $0.5 million during the fiscal quarters ended September 30, 2017 and October 1, 2016, respectively, and $1.0 million and $1.5 million during the nine fiscal months ended September 30, 2017 and October 1, 2016, respectively. Intersegment sales from the Weighing and Control Systems segment to the Force Sensors segment were $0.4 million and $0.2 million, during the fiscal quarters ended September 30, 2017 and October 1, 2016, respectively, and $0.7 million and $0.7 million during the nine fiscal months ended September 30, 2017 and October 1, 2016, respectively.
Note 1012 – Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share attributable to VPG stockholders (in thousands, except earnings per share):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Numerator: | | | | | | | |
Numerator for basic earnings per share: | | | | | | | |
Net earnings attributable to VPG stockholders | $ | 3,920 | | | $ | 1,759 | | | $ | 8,881 | | | $ | 5,071 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Denominator: | | | | | | | |
Denominator for basic earnings per share: | | | | | | | |
Weighted average shares | 13,618 | | | 13,571 | | | 13,605 | | | 13,556 | |
| | | | | | | |
Effect of dilutive securities: | | | | | | | |
| | | | | | | |
| | | | | | | |
Restricted stock units | 28 | | | 38 | | | 33 | | | 42 | |
Dilutive potential common shares | 28 | | | 38 | | | 33 | | | 42 | |
| | | | | | | |
Denominator for diluted earnings per share: | | | | | | | |
Adjusted weighted average shares | 13,646 | | | 13,609 | | | 13,638 | | | 13,598 | |
| | | | | | | |
Basic earnings per share attributable to VPG stockholders | $ | 0.29 | | | $ | 0.13 | | | $ | 0.65 | | | $ | 0.37 | |
| | | | | | | |
Diluted earnings per share attributable to VPG stockholders | $ | 0.29 | | | $ | 0.13 | | | $ | 0.65 | | | $ | 0.37 | |
|
| | | | | | | | | | | | | | | |
| Fiscal quarter ended |
| Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | | September 30, 2017 | | October 1, 2016 |
Numerator: | | | |
| | | |
Numerator for basic earnings per share: | | | |
| | | |
Net earnings attributable to VPG stockholders | $ | 4,255 |
| | $ | 1,051 |
|
| $ | 9,869 |
| | $ | 3,399 |
|
| | | |
| | | |
Adjustment to the numerator for net earnings: | | | |
| | | |
Interest savings assuming conversion of dilutive exchangeable notes, net of tax | 6 |
| | 4 |
|
| 18 |
| | 12 |
|
| | | |
| | | |
Numerator for diluted earnings per share: | | | |
| | | |
Net earnings attributable to VPG stockholders | $ | 4,261 |
| | $ | 1,055 |
|
| $ | 9,887 |
| | $ | 3,411 |
|
| | | |
| | | |
Denominator: | | | |
| | | |
Denominator for basic earnings per share: | | | |
| | | |
Weighted average shares | 13,291 |
| | 13,192 |
|
| 13,253 |
| | 13,185 |
|
| | | |
| | | |
Effect of dilutive securities: | | | |
| | | |
Exchangeable notes | 124 |
| | 181 |
|
| 152 |
| | 181 |
|
Restricted stock units | 55 |
| | 49 |
|
| 47 |
| | 43 |
|
Dilutive potential common shares | 179 |
| | 230 |
|
| 199 |
| | 224 |
|
| | | |
| | | |
Denominator for diluted earnings per share: | | | |
| | | |
Adjusted weighted average shares | 13,470 |
| | 13,422 |
|
| 13,452 |
| | 13,409 |
|
| | | |
| | | |
Basic earnings per share attributable to VPG stockholders | $ | 0.32 |
| | $ | 0.08 |
|
| $ | 0.74 |
| | $ | 0.26 |
|
| | | |
| | | |
Diluted earnings per share attributable to VPG stockholders | $ | 0.32 |
| | $ | 0.08 |
|
| $ | 0.73 |
| | $ | 0.25 |
|
Diluted earnings per share forNote 13 – Additional Financial Statement Information
Other Income (Expense) Other
The caption “Other” on the periods presented do not reflectconsolidated condensed statements of operations consists of the following weighted average potential common shares, as the effect would be antidilutive (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Foreign exchange (loss) gain | $ | (174) | | | $ | (1,185) | | | $ | 561 | | | $ | (285) | |
Interest income | 20 | | | 109 | | | 65 | | | 176 | |
Pension expense | (143) | | | (164) | | | (280) | | | (323) | |
Other | (29) | | | (33) | | | (99) | | | (158) | |
| $ | (326) | | | $ | (1,273) | | | $ | 247 | | | $ | (590) | |
Foreign currency exchange gains and losses represent the impact of changes in foreign currency exchange rates. For the fiscal quarter ended July 3, 2021, the change in foreign exchange gains and losses during the period, as compared to the prior year period, is largely due to exposure to currency fluctuations with the Canadian dollar, Japanese yen, the Israeli shekel and the British pound.
For the six fiscal months ended July 3, 2021, the change in foreign exchange gains and losses during the period as compared to the prior year period is largely due to exposure to currency fluctuations with the Canadian dollar, the Israeli shekel, the Japanese yen, the euro and the British pound
|
| | | | | | | | | | |
| Fiscal quarter ended | Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | September 30, 2017 | | October 1, 2016 |
Weighted average employee stock options | — |
| | 18 |
| — |
| | 18 |
|
Note 11 – Additional Financial Statement Information
The caption “other” on the consolidated condensed statements of operations consists of the following (in thousands):
|
| | | | | | | | | | | | | | |
| Fiscal quarter ended | Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | September 30, 2017 | | October 1, 2016 |
Foreign exchange gain (loss) | $ | 169 |
| | $ | (59 | ) | $ | (463 | ) | | $ | 436 |
|
Interest income | 47 |
| | 42 |
| 103 |
| | 145 |
|
Other | 1,501 |
| | (27 | ) | 1,394 |
| | (230 | ) |
| $ | 1,717 |
| | $ | (44 | ) | $ | 1,034 |
| | $ | 351 |
|
Included within Other, for the fiscal quarter ended September 30, 2017, is net proceeds of $1.5 million related to a lease termination payment at the Company's Tianjin, People's Republic of China location. The relocation of operations in Tianjin has been completed and the majority of the expenses associated with the move have been incurred.
Note 1214 – Fair Value Measurements
Accounting Standards Codification (“ASC”)ASC Topic 820, Fair Value Measurement, establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the Company’s own assumptions.
An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis (in thousands): | | | | | | | | | | | | Fair value measurements at reporting date using: |
| |
| | Fair value measurements at reporting date using: | | Total Fair Value | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs |
| | Total Fair Value | | Level 1 Inputs | | Level 2 Inputs | | Level 3 Inputs | |
September 30, 2017 | | | | | | | | | |
July 3, 2021 | | July 3, 2021 | | | | | | | | |
Assets | | | | | | | | | Assets | |
Assets held in rabbi trusts | | $ | 4,899 |
| | $ | 378 |
| | $ | 4,521 |
| | $ | — |
| Assets held in rabbi trusts | | $ | 5,995 | | | $ | 80 | | | $ | 5,915 | | | $ | 0 | |
| | | | | | | | | |
December 31, 2016 | | | | | | | | | |
December 31, 2020 | | December 31, 2020 | |
Assets | | | | | | | | | Assets | |
Assets held in rabbi trusts | | $ | 4,772 |
| | $ | 537 |
| | $ | 4,235 |
| | $ | — |
| Assets held in rabbi trusts | | $ | 5,601 | | | $ | 61 | | | $ | 5,540 | | | $ | 0 | |
The Company maintains non-qualified trusts, referred to as “rabbi” trusts, to fund payments under deferred compensation and non-qualified pension plans. Rabbi trust assets consist primarily of marketable securities, classified as available-for-sale money market funds at September 30, 2017July 3, 2021 and December 31, 2016,2020, and company-owned life insurance assets. The marketable securities held
Note 14 - Fair Value Measurements (continued)
in the rabbi trusts are valued using quoted market prices on the last business day of the period. The company-owned life insurance assets are valued in consultation with the Company’s insurance brokers using the value of underlying assets of the insurance contracts. The fair value measurement of the marketable securities held in the rabbi trust is considered a Level 1 measurement and the measurement of the company-owned life insurance assets is considered a Level 2 measurement within the fair value hierarchy.
The fair value of the long-term debt, excluding capitalized deferred financing costs, at September 30, 2017July 3, 2021 and December 31, 2016 is approximately $33.8 million and $36.0 million, respectively, compared to2020 approximates its carrying value excluding capitalized deferred financing costs, of $33.0 million and $36.2 million, respectively. The Company estimatesas the fair value of its long-termrevolving debt usingis reset on a combination of quotedmonthly basis based on current market prices for similar financing arrangements and expected future payments discounted at risk-adjusted rates.rates, plus a base rate as specified in the debt agreement. The fair value of long-term debt is considered a Level 2 measurement within the fair value hierarchy. The Company’s
Note 12 – Fair Value Measurements (continued)
financial instruments include cash and cash equivalents, whoseaccounts receivable, short-term notes payable, and accounts payable. The carrying amounts for these financial instruments reported in the consolidated condensed balance sheets approximate their fair values.
Note 15 – Restructuring Costs
Restructuring costs reflect the cost reduction programs implemented by the Company. Restructuring costs are expensed during the period in which the Company determines it will incur those costs and all requirements for accrual are met. Because these costs are recorded based upon estimates, actual expenditures for the restructuring activities may differ from the initially recorded costs. If the initial estimates are too low or too high, the Company could be required to either record additional expense in future periods or to reverse part of the previously recorded charges.
The Company recorded $0.0 million and $0.5 million of restructuring costs during the fiscal quarter ended July 3, 2021 and June 27, 2020, respectively and $0.0 million and $0.6 million of restructuring costs during the six fiscal months ended July 3, 2021 and June 27, 2020, respectively. Restructuring costs were comprised primarily of employee terminations costs, including severance and statutory retirement allowances, and were incurred in connections with various cost reduction programs.
The following table summarizes recent activity related to all restructuring programs. The accrued restructuring liability balance as of July 3, 2021 and December 31, 2020, respectively, is included in Other accrued expenses in the accompanying consolidated condensed balance sheets (in thousands):
| | | | | |
| |
| |
| |
| |
Balance at December 31, 2020 | $ | 63 | |
| |
| |
Cash payments | (51) | |
| |
Balance at July 3, 2021 | $ | 12 | |
Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
VPG is an internationally recognized designer, manufacturer and marketer of sensors, and sensor-based measurement systems, as well as specialty resistors and strain gages based upon our proprietary technology. We provide precision products and solutions, many of which are “designed-in” by our customers, specializing in the growing markets of stress, force, weight, pressure, and current measurements. A significant portion of our products and solutions are primarily based upon our proprietary foil technology and are produced as part of our vertically integrated structure. We believe this strategy results in higher quality, more cost effective and focused solutions for our customers. Our products are marketed under a variety of brand names that we believe are characterized as having a very high level of precision and quality. Our global operations enable us to produce a wide variety of products in strategically effective geographic locations that also optimize our resources for specific technologies, sensors, assemblies, and systems.
The Company also has a long heritage of innovation in precision foil resistors, foil strain gages, and sensors that convert mechanical inputs into an electronic signal for display, processing, interpretation, or control by our instrumentation and systems products. Our advanced sensor product line continues this heritage by offering high-quality foil strain gages produced in a proprietary, highly automated environment. Precision sensors are essential to the accurate measurement, resolution and display of force, weight, pressure, torque, tilt, motion, or acceleration, especially in the legal-for-trade, commercial, and industrial marketplaces. This expertise served as a foundation for our expansion into strain gage instrumentation, load cells, transducers, weighing modules, and complete systems for process control and on-board weighing. Although our products are typically used in the industrial market, we believe our advanced sensors may find application outside the industrial market.have been used in a consumer electronics product and are being evaluated for other non-industrial applications.
The precision sensor market is integral to the development of intelligent products across a wide variety of end markets upon which we focus, including medical, agricultural, transportation, industrial, avionics, military, and space applications. We believe that as original equipment manufacturers (“OEMs”) continue a drive to make products “smarter,” they will integrate more sensors and related systems into their solutions to link the mechanical/physical world with digital control and/or response. We believe this offers a substantial growth opportunity for our products and expertise.
Impact of COVID-19 on Our Business
As of August 10, 2021, all of the Company’s facilities are open and operational. The Company is continuing to maintain COVID-19 best practices it believes are warranted with respect to working conditions. Nonetheless, given the ongoing uncertainty concerning the magnitude and duration of the COVID-19 pandemic around the world, any ongoing economic disruption may adversely affect the Company’s business and financial results.
Overview of Financial Results
VPG reports in three product segments: the Foil Technology Products segment, the Force Sensors segment, and the Weighing and Control Systems segment. The Foil Technology Products reporting segment is comprised of the foil resistor and strain gage operating segments. The Force Sensors reporting segment is comprised of transducers, load cells, and modules. The Weighing and Control Systems reporting segment is comprised of instruments, complete systems which include load cells and instrumentation for weighing, force control and force measurement for a variety of uses such as process control and on-board weighing applications. On June 1, 2021, we completed the acquisition of California-based Diversified Technical Systems, Inc. (“DTS”), a manufacturer of data acquisition systems and sensors for product safety and testing. DTS reports into the Company's Weighing and Control Systems segment.
Net revenues for the fiscal quarter ended September 30, 2017July 3, 2021 were $62.8$75.3 million versus $54.5$59.1 million for the comparable prior year period. Net earnings attributable to VPG stockholders for the fiscal quarter ended September 30, 2017July 3, 2021 were $4.3$3.9 million, or $0.32$0.29 per diluted share, versus $1.1$1.8 million, or $0.08$0.13 per diluted share, for the comparable prior year period.
Net revenues for the ninesix fiscal months ended September 30, 2017July 3, 2021 were $184.9$145.9 million versus $169.1$126.8 million for the comparable prior year period. Net earnings attributable to VPG stockholders for the ninesix fiscal months ended September 30, 2017July 3, 2021 were $9.9$8.9 million, or $0.73$0.65 per diluted share, versus $3.4$5.1 million, or $0.25$0.37 per diluted share, for the comparable prior year period.
The results of operations for the fiscal quartersquarter ended September 30, 2017July 3, 2021 and October 1, 2016June 27, 2020 include items affecting comparability as listed in the reconciliations below. The reconciliations below include certain financial measures which are not recognized in accordance with U.S. generally accepted accounting principles ("GAAP"), including adjusted gross profit,profits, adjusted gross profit margin, adjusted operating income, adjusted operating income margin, adjusted net earnings, and adjusted net earnings per diluted share.share, EBITDA and adjusted EBITDA. These non-GAAP measures should not be viewed as an alternative to GAAP measures of
performance. Non-GAAP measures such as adjusted gross profit,profits, adjusted gross profit margin, adjusted operating income, adjusted operating margin, adjusted net earnings, and adjusted net earnings per diluted share, EBITDA and adjusted EBITDA do not have uniform definitions. These measures, as calculated by VPG, may not be comparable to similarly titled measures used by other companies. Management believes that these non-GAAP measures are meaningfuluseful to investors because they provide insight with respecteach presents what management views as our core operating performance for the relevant period. The adjustments to intrinsicthe applicable GAAP measures relate to occurrences or events that are outside of our core operations, and management believes that the use of these non-GAAP measures provides a consistent basis to evaluate our operating profitability and performance trends across comparable periods. In addition, the Company has historically provided these or similar non-GAAP measures and understands that some investors and financial analysts find this information helpful in analyzing the Company’s performance and in comparing the Company’s financial performance to that of its peer companies and competitors. Management believes that the Company’s non-GAAP measures are regarded as supplemental to its GAAP financial results. The reconciling items presented below represent significant charges or credits which are importantBeginning in the fourth quarter of 2020, the Company determined to understanding our intrinsic operations.include the impact of foreign currency exchange rates on its assets and liabilities in certain of its non-GAAP measures for its current and comparative periods.
The items affecting comparability are (in thousands, except per share amounts): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Gross Profit | | Operating Income | | Net Earnings Attributable to VPG Stockholders | | Diluted Earnings Per share |
Three months ended | July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
As reported - GAAP | $ | 29,798 | | | $ | 23,110 | | | $ | 4,924 | | | $ | 3,971 | | | $ | 3,920 | | | $ | 1,759 | | | $ | 0.29 | | | $ | 0.13 | |
As reported - GAAP Margins | 39.6 | % | | 39.1 | % | | 6.5 | % | | 6.7 | % | | | | | | | | |
Acquisition purchase accounting adjustments (a) | 919 | | | 41 | | | 919 | | | 41 | | | 919 | | | 41 | | | 0.07 | | | — | |
Acquisition costs (b) | | | — | | | 1,198 | | | — | | | 1,198 | | | — | | | 0.09 | | | — | |
COVID-19 impact (b) | (26) | | | 558 | | | (242) | | | 443 | | | (242) | | | 443 | | | (0.02) | | | 0.03 | |
Start-up costs (c) | 1,159 | | | — | | | 1,159 | | | — | | | 1,159 | | | — | | | 0.08 | | | — | |
Impairment of goodwill and indefinite-lived intangibles | | | — | | | 1,223 | | | — | | | 1,223 | | | — | | | 0.09 | | | — | |
Restructuring costs | | | — | | | — | | | 499 | | | — | | | 499 | | | — | | | 0.04 | |
Foreign exchange (gain)/loss (d) | | | — | | | | | — | | | 174 | | | 1,185 | | | 0.01 | | | 0.09 | |
Less: Tax effect of reconciling items and discrete tax items | | | — | | | | | — | | | 1,639 | | | 340 | | | 0.12 | | | 0.02 | |
As Adjusted - Non GAAP | $ | 31,850 | | | $ | 23,709 | | | $ | 9,181 | | | $ | 4,954 | | | $ | 6,712 | | | $ | 3,587 | | | $ | 0.49 | | | $ | 0.27 | |
As Adjusted - Non GAAP Margins | 42.3 | % | | 40.1 | % | | 12.2 | % | | 8.4 | % | | | | | | | | |
|
| | | | | | | | | | | | | | |
| Fiscal quarter ended | Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | September 30, 2017 | | October 1, 2016 |
Gross profit | $ | 24,267 |
| | $ | 20,265 |
| $ | 71,543 |
| | $ | 61,535 |
|
Gross profit margin | 38.6 | % | | 37.2 | % | 38.7 | % | | 36.4 | % |
| | | | | | |
Reconciling items affecting gross profit margin | | | | | | |
Acquisition purchase accounting adjustments (a) | 42 |
| | 46 |
| 42 |
| | 537 |
|
| | | | | | |
Adjusted gross profit | $ | 24,309 |
| | $ | 20,311 |
| $ | 71,585 |
| | $ | 62,072 |
|
Adjusted gross profit margin | 38.7 | % | | 37.3 | % | 38.7 | % | | 36.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Gross Profit | | Operating Income | | Net Earnings Attributable to VPG Stockholders | | Diluted Earnings Per share |
Six fiscal months ended | July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
As reported - GAAP | 58,420 | | | 48,175 | | | 11,363 | | | 8,615 | | | $ | 8,881 | | | $ | 5,071 | | | $ | 0.65 | | | $ | 0.37 | |
As reported - GAAP Margins | 40.0 | % | | 38.0 | % | | 7.8 | % | | 6.8 | % | | | | | | | | |
Acquisition purchase accounting adjustments (a) | 930 | | | 556 | | | 930 | | | 556 | | | 930 | | | 556 | | | 0.07 | | | 0.04 | |
Acquisition costs (b) | | | — | | | 1,198 | | | — | | | 1,198 | | | — | | | 0.09 | | | — | |
COVID-19 impact (b) | (177) | | | 558 | | | (685) | | | 443 | | | (685) | | | 443 | | | (0.05) | | | 0.03 | |
Start-up costs (c) | 1,288 | | | — | | | 1,288 | | | — | | | 1,288 | | | — | | | 0.09 | | | — | |
Impairment of goodwill and indefinite-lived intangibles | — | | | — | | | 1,223 | | | — | | | 1,223 | | | — | | | 0.09 | | | — | |
Restructuring costs | | | | | — | | | 629 | | | — | | | 629 | | | — | | | 0.05 | |
Foreign exchange (gain)/loss (d) | | | | | | | | | (561) | | | 285 | | | (0.04) | | | 0.02 | |
Less: Tax effect of reconciling items and discrete tax items | | | | | | | | | 1,406 | | | 147 | | | 0.10 | | | 0.01 | |
As Adjusted - Non GAAP | $ | 60,461 | | | $ | 49,289 | | | $ | 15,317 | | | $ | 10,243 | | | $ | 10,868 | | | $ | 6,837 | | | $ | 0.80 | | | $ | 0.50 | |
As Adjusted - Non GAAP Margins | 41.4 | % | | 38.9 | % | | 10.5 | % | | 8.1 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Net earnings attributable to VPG stockholders | $ | 3,920 | | | $ | 1,759 | | | $ | 8,881 | | | $ | 5,071 | |
Interest Expense | 273 | | | 267 | | | 578 | | | 728 | |
Income tax expense | 262 | | | 684 | | | 2,026 | | | 2,258 | |
Depreciation | 2,829 | | | 2,509 | | | 5,736 | | | 5,080 | |
Amortization | 757 | | | 604 | | | 1,372 | | | 1,232 | |
EBITDA | 8,041 | | | $ | 5,823 | | | 18,593 | | | $ | 14,369 | |
EBITDA MARGIN | 10.7 | % | | 9.8 | % | | 12.7 | % | | 11.3 | % |
Impairment of goodwill and indefinite-lived intangibles | 1,223 | | | — | | | 1,223 | | | — | |
Acquisition purchase accounting adjustments (a) | 919 | | | 41 | | | 930 | | | 556 | |
Acquisition costs | 1,198 | | | — | | | $ | 1,198 | | | $ | — | |
Restructuring costs | — | | | 499 | | | — | | | 629 | |
COVID-19 impact (b) | (242) | | | 443 | | | (685) | | | 443 | |
Start-up costs (c) | 1,159 | | | — | | | 1,288 | | | — | |
Foreign exchange (gain)/loss (d) | 174 | | | 1,185 | | | (561) | | | 285 | |
ADJUSTED EBITDA | $ | 12,472 | | | $ | 7,991 | | | $ | 21,986 | | | $ | 16,282 | |
ADJUSTED EBITDA MARGIN | 16.6 | % | | 13.5 | % | | 15.1 | % | | 12.8 | % |
|
| | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | | September 30, 2017 | | October 1, 2016 |
Operating income | $ | 5,319 |
| | $ | 2,639 |
| | $ | 14,700 |
| | $ | 5,317 |
|
Operating margin | 8.5 | % | | 4.8 | % | | 7.9 | % | | 3.1 | % |
| | | | | | | |
Reconciling items affecting operating margin | | | | | | | |
Acquisition purchase accounting adjustments (a) | 42 |
| | 46 |
| | 42 |
| | 537 |
|
Acquisition costs | — |
| | — |
| | — |
| | 414 |
|
Strategic alternative evaluation costs (b) | — |
| | 1,079 |
| | — |
| | 1,079 |
|
Restructuring costs | 423 |
| | 709 |
| | 1,292 |
| | 2,395 |
|
|
| |
| |
| |
|
Adjusted operating income | $ | 5,784 |
| | $ | 4,473 |
| | $ | 16,034 |
| | $ | 9,742 |
|
Adjusted operating margin | 9.2 | % | | 8.2 | % | | 8.7 | % | | 5.8 | % |
|
| | | | | | | | | | | | | | |
| Fiscal quarter ended | Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | September 30, 2017 | | October 1, 2016 |
Net earnings attributable to VPG stockholders | $ | 4,255 |
| | $ | 1,051 |
| $ | 9,869 |
| | $ | 3,399 |
|
| | | | | | |
Reconciling items affecting operating margin | | | | | | |
Acquisition purchase accounting adjustments (a) | 42 |
| | 46 |
| 42 |
| | 537 |
|
Acquisition costs | — |
| | — |
| — |
| | 414 |
|
Strategic alternative evaluation costs (b) | — |
| | 1,079 |
| — |
| | 1,079 |
|
Restructuring costs | 423 |
| | 709 |
| 1,292 |
| | 2,395 |
|
Reconciling items affecting other income/expense |
|
|
|
|
|
|
Net proceeds from lease termination (c) | (1,544 | ) |
| — |
| (1,544 | ) |
| — |
|
Less reconciling items affecting income tax expense | | | | | | |
Tax effect of reconciling items and discrete tax items | (394 | ) | | 27 |
| (339 | ) | | 1,317 |
|
Adjusted net earnings attributable to VPG stockholders | $ | 3,570 |
| | $ | 2,858 |
| $ | 9,998 |
| | $ | 6,507 |
|
| | | | | | |
Adjusted net earnings per diluted share | $ | 0.27 |
| | $ | 0.21 |
| $ | 0.74 |
| | $ | 0.49 |
|
| | | | | | |
Weighted average shares outstanding - diluted | 13,470 |
| | 13,422 |
| 13,452 |
| | 13,409 |
|
(a) Acquisition purchase accounting adjustments recorded in connection with the acquisition of Stress-Tek and Pacific include fair market value adjustments associated with inventory.inventory recorded as a component of costs of products sold.
| |
(b) | The Company incurred costs associated with the Company's evaluation of strategic alternatives. The evaluation process did not result in the adoption of any particular strategic alternative other that the Company's continued execution of its business plan. |
(b) COVID-19 impact is the net impact to the Company of costs incurred as a result of the COVID-19 pandemic, net of government subsidies received.
(c) Net proceeds relatedStart-up costs in 2021 are associated with the ramp up of our new manufacturing facility in Israel.
(d) Impact of foreign currency exchange rates on assets and liabilities. Note that impacts in prior year have been added to a lease termination payment at the Company's Tianjin, Peoples' Republic of China location.this table.
Financial Metrics
We utilize several financial measures and metrics to evaluate performance and assess the future direction of our business. These key financial measures and metrics include net revenues, gross profit margin, end-of-period backlog, book-to-bill ratio, and inventory turnover.
Gross profit margin is computed as gross profit as a percentage of net revenues. Gross profit is generally net revenues less costs of products sold, but could also include certain other period costs. Gross profit margin is a function of net revenues, but also reflects our cost-cutting programs and our ability to contain fixed costs.
End-of-period backlog is one indicator of potential future sales. We include in our backlog only open orders that have been released by the customer for shipment in the next twelve months. If demand falls below customers’ forecasts, or if customers do not control their inventory effectively, they may cancel or reschedule the shipments that are included in our backlog, in many instances without the payment of any penalty. Therefore, backlog is not necessarily indicative of the results expected for future periods.
Another important indicator of demand in our industry is the book-to-bill ratio, which is the ratio of the amount of product ordered during a period compared with the amount of product shipped during that period. A book-to-bill ratio that is greater than one indicates that revenues may increase in future periods. Conversely, a book-to-bill ratio that is less than one is an indicator of lower demand and may foretell declining sales. The book-to-bill ratio is also impacted by the timing of orders, particularly from our project-based product lines.
We focus on inventory turnover as a measure of how well we manage our inventory. We define inventory turnover for a financial reporting period as our costs of products sold for the four fiscal quarters ending on the last day of the reporting period divided by our average inventory (computed using each quarter-end balance) for this same period. A higher level of inventory turnover reflects more efficient use of our capital.
The quarter-to-quarter trends in these financial metrics can also be an important indicator of the likely direction of our business. The following tables show net revenues, gross profit margin, end-of-period backlog, book-to-bill ratio, and inventory turnover for our business as a whole and by segment during the five quarters beginning with the thirdsecond quarter of 20162020 through the thirdsecond quarter of 2017 2021 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2nd Quarter | | 3rd Quarter | | 4th Quarter | | 1st Quarter | | 2nd Quarter |
| 2020 | | 2020 | | 2020 | | 2021 | | 2021 |
Net revenues | $ | 59,146 | | | $ | 67,525 | | | $ | 75,445 | | | $ | 70,589 | | | $ | 75,339 | |
| | | | | | | | | |
Gross profit margin | 39.1 | % | | 40.5 | % | | 38.1 | % | | 40.5 | % | | 39.6 | % |
| | | | | | | | | |
End-of-period backlog | $ | 92,900 | | | $ | 90,800 | | | $ | 87,600 | | | $ | 100,700 | | | $ | 130,900 | |
| | | | | | | | | |
Book-to-bill ratio | 0.95 | | | 0.95 | | | 0.93 | | | 1.21 | | | 1.40 | |
| | | | | | | | | |
Inventory turnover | 2.20 | | | 2.38 | | | 2.86 | | | 2.67 | | | 2.64 | |
|
| | | | | | | | | | | | | | | | | | | |
| 3rd Quarter | | 4th Quarter | | 1st Quarter | | 2nd Quarter | | 3rd Quarter |
| 2016 | | 2016 | | 2017 | | 2017 | | 2017 |
Net revenues | $ | 54,490 |
| | $ | 55,814 |
| | $ | 59,787 |
| | $ | 62,319 |
| | $ | 62,805 |
|
| | | | | | | | | |
Gross profit margin | 37.2 | % | | 38.1 | % | | 37.7 | % | | 39.7 | % | | 38.6 | % |
| | | | | | | | | |
End-of-period backlog | $ | 50,300 |
| | $ | 56,800 |
| | $ | 61,400 |
| | $ | 67,500 |
| | $ | 76,200 |
|
| | | | | | | | | |
Book-to-bill ratio | 0.98 |
| | 1.16 |
| | 1.06 |
| | 1.08 |
| | 1.12 |
|
| | | | | | | | | |
Inventory turnover | 2.36 |
| | 2.41 |
| | 2.64 |
| | 2.64 |
| | 2.64 |
|
| | | 3rd Quarter | | 4th Quarter | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | | 1st Quarter | | 2nd Quarter |
| 2016 | | 2016 | | 2017 | | 2017 | | 2017 | | 2020 | | 2020 | | 2020 | | 2021 | | 2021 |
Foil Technology Products | | | | | | | | | | Foil Technology Products | | | | | | | | | |
Net revenues | $ | 23,852 |
| | $ | 25,412 |
| | $ | 27,764 |
| | $ | 29,306 |
| | $ | 29,315 |
| Net revenues | $ | 31,785 | | | $ | 32,906 | | | $ | 36,477 | | | $ | 32,711 | | | $ | 33,308 | |
Gross profit margin | 36.2 | % | | 40.6 | % | | 41.4 | % | | 41.9 | % | | 41.7 | % | Gross profit margin | 41.8 | % | | 41.1 | % | | 38.4 | % | | 39.9 | % | | 38.9 | % |
End-of-period backlog | $ | 23,600 |
| | $ | 28,800 |
| | $ | 31,100 |
| | $ | 34,300 |
| | $ | 35,500 |
| End-of-period backlog | $ | 47,500 | | | $ | 48,500 | | | $ | 43,700 | | | $ | 48,400 | | | $ | 60,600 | |
Book-to-bill ratio | 0.99 |
| | 1.26 |
| | 1.06 |
| | 1.09 |
| | 1.03 |
| Book-to-bill ratio | 0.85 | | | 1.01 | | | 0.84 | | | 1.19 | | | 1.37 | |
Inventory turnover | 2.57 |
| | 2.57 |
| | 2.80 |
| | 2.90 |
| | 2.88 |
| Inventory turnover | 2.58 | | | 2.63 | | | 3.05 | | | 2.72 | | | 2.67 | |
| | | | | | | | | | |
Force Sensors | | | | | | | | | | Force Sensors | |
Net revenues | $ | 15,231 |
| | $ | 14,769 |
| | $ | 15,468 |
| | $ | 15,656 |
| | $ | 16,596 |
| Net revenues | $ | 8,916 | | | $ | 13,862 | | | $ | 16,251 | | | $ | 16,933 | | | $ | 17,216 | |
Gross profit margin | 31.0 | % | | 25.3 | % | | 23.9 | % | | 28.9 | % | | 28.6 | % | Gross profit margin | 11.6 | % | | 30.5 | % | | 29.1 | % | | 35.7 | % | | 34.7 | % |
End-of-period backlog | $ | 12,000 |
| | $ | 13,000 |
| | $ | 14,100 |
| | $ | 14,100 |
| | $ | 18,300 |
| End-of-period backlog | $ | 22,300 | | | $ | 21,300 | | | $ | 24,700 | | | $ | 26,800 | | | $ | 30,700 | |
Book-to-bill ratio | 1.02 |
| | 1.08 |
| | 1.06 |
| | 0.99 |
| | 1.25 |
| Book-to-bill ratio | 1.58 | | | 0.90 | | | 1.18 | | | 1.14 | | | 1.23 | |
Inventory turnover | 1.84 |
| | 1.93 |
| | 2.11 |
| | 1.97 |
| | 2.02 |
| Inventory turnover | 2.02 | | | 2.28 | | | 2.74 | | | 2.72 | | | 2.57 | |
| | | | | | | | | | |
Weighing and Control Systems | | | | | | | | | | Weighing and Control Systems | |
Net revenues | $ | 15,407 |
| | $ | 15,633 |
| | $ | 16,555 |
| | $ | 17,357 |
| | $ | 16,894 |
| Net revenues | $ | 18,445 | | | $ | 20,757 | | | $ | 22,717 | | | $ | 20,945 | | | $ | 24,815 | |
Gross profit margin | 44.9 | % | | 46.5 | % | | 44.3 | % | | 45.8 | % | | 43.1 | % | Gross profit margin | 47.6 | % | | 46.2 | % | | 44.0 | % | | 45.6 | % | | 43.9 | % |
End-of-period backlog | $ | 14,700 |
| | $ | 15,000 |
| | $ | 16,200 |
| | $ | 19,100 |
| | $ | 22,400 |
| End-of-period backlog | $ | 23,100 | | | $ | 21,000 | | | $ | 19,200 | | | $ | 25,500 | | | $ | 39,600 | |
Book-to-bill ratio | 0.92 |
| | 1.05 |
| | 1.06 |
| | 1.14 |
| | 1.15 |
| Book-to-bill ratio | 0.82 | | | 0.88 | | | 0.88 | | | 1.30 | | | 1.56 | |
Inventory turnover | 2.98 |
| | 3.08 |
| | 3.36 |
| | 3.52 |
| | 3.41 |
| Inventory turnover | 1.81 | | | 2.13 | | | 2.67 | | | 2.54 | | | 2.64 | |
Net revenues for the third quarter of 2017 increased 0.8% from the second quarter of 2017 and 15.3%2021 increased 6.7% from the thirdfirst quarter of 2016,2021 mainly due to increased volume in all threeof the Company's reporting segments. Net revenues increased 27.4% from the second quarter of 2020 with increased volume primarily from the Force Sensors reporting segment and the Weighing and Control Systems segment. The increase in the Weighing and Control Systems reporting segment was aided by the addition of revenues from the acquisition of DTS.
Net revenues in the Foil Technology Products reporting segment were flatincreased 1.8% compared to the first quarter of 2021 and increased 4.8% from the second quarter of 2017 and increased 22.9% from2020. Sequentially, the third quarterincrease in revenue was primarily driven by higher sales of 2016. Sequentially, declines in volumeprecision foil resistors in the test and measurementmeasurements market, sector in Asia and the Americas, were completelypartially offset by positive foreign currency impacts. Comparedlower revenue to the third quarter of 2016, net revenues increased due to higherAvionics, Military and Space market. In addition, the sequential increase in revenue related to precision resistors productsin our Pacific Instrument product line in the testAvionics, Military and measurementSpace market sector in all regions, higher revenues fromwas partially offset by lower revenue of advanced sensors productsin our other markets. The year-over-year increase in revenue was primarily attributable to an increase in our advanced sensors product line, primarily in our general industrial market and an increase in our Pacific Instrument product line in the force measurements market sector in Asia,Avionics, Military and higher revenues from Pacific products in the avionics, military and space market sector in the Americas.
Space market.
Net revenues in the Force Sensors reporting segment increased 6.0%1.7% from the first quarter of 2021 and increased 93.1% from the second quarter of 2017, mainly2020. The sequential increase was primarily due to higher volume with OEM customersrevenue in our Other markets, mainly in consumer and construction. The year-over-year increase primarily reflected operational limitations in the force measurement market and distribution customers for the precision weighing market in the Americas, along with positive foreign currency impacts. Net revenues increased 9.0%second fiscal quarter of 2020 from the third quarter of 2016, mainly due to higher volume with OEM customersCOVID pandemic at our facility in the precision weighing end market in Europe.India.
Net revenues in the Weighing and Control Systems reporting segment decreased (2.7)%increased 18.5% from the first quarter of 2021 and increased 34.5% from the second quarter of 2017 and increased 9.7% from the third quarter of 2016. Sequentially, the lower2020. The sequential increase in net revenues arewas primarily relateddue to a decrease in our steel business revenues in Asiathe acquisition of DTS and higher revenue of process weighing solutions and KELK products.The year-over-year increase in revenue was primarily attributable to the Americas,addition of revenue for DTS, higher revenue of our onboard weighing products for the transportation market, higher revenue of our process weighing solutions for the industrial market, and higher revenue of our Dynamic Systems, Inc. ("DSI") products for the steel market, which was partially offset by positive foreign currency impacts. Compared to the third quarterlower revenue of 2016, strong revenues from our on-board weighing products in Europe and the Americas were primarily responsible for the improvement in net revenues.KELK steel-related products.
Overall gross profit margin in the thirdsecond quarter of 20172021 decreased (1.1)%0.9% as compared to the first quarter of 2021 and increased 0.5% from the second quarter of 2020.
Sequentially, all reporting segments contributed to the decrease in the gross profit margin. The Foil Technology Products reporting segment gross profit margins decreased sequentially due to the impact of charges related to start-up costs in our new advanced sensors facility and the impact of COVID-19, which were partially offset by manufacturing efficiencies, an increase
in inventory and higher volume. The Force Sensors reporting segment gross profit margin decreased sequentially due to unfavorable foreign exchange rates, partially offset by increases in inventory and volume. In the Weighing and Control Systems reporting segment, the decrease in gross profit margin compared to the prior sequential quarter was due to the impact of charges related to the purchase accounting adjustment from the DTS acquisition and the impact of COVID-19, which were partially offset by the addition of DTS.
Compared to the second quarter of 2020, the Foil Technology Products reporting segment had a lower gross profit margin. Impacts from charges related to start-up costs in our new advanced sensors facility and the impact of COVID-19 were partially offset by higher volume and favorable product mix. The Force Sensors reporting segment increase in gross profit margin as compared to 2020 was primarily due to higher revenue and an increase in inventory. In the Weighing and Control Systems segment, the decrease in gross profit margin as compared to the second quarter of 2017 and increased 1.4% from the third quarter of 2016.
Sequentially, all of our reporting segments contributed to the lower gross profit margin, where an increase in overall revenues and positive foreign currency impacts were offset by higher manufacturing costs. The Weighing and Control Systems segment2020 was responsible for the largest portion of the decline, mainly due to the lower volume in steel business revenues.
Comparedimpact of charges related to purchase accounting adjustments from the third quarterDTS acquisition and the impact of 2016, the Foil Technology Products segment had a higher gross profit margin due to higher volume and manufacturing efficiencies. This improvement wasCOVID-19, along with an unfavorable product mix, which were partially offset by a lower gross profit margin in the Force Sensors segment due to manufacturing inefficiencies related to increased production at our facility in Indiaaddition of DTS and negative foreign currency impacts and a lower gross profit margin in the Weighing and Control Systems segment due to product mix.favorable exchange rates.
Optimize Core Competence
The Company’s core competency and key value proposition is providing customers with proprietary foil technology products and precision measurement sensors and sensor-based systems. Our foil technology resistors and strain gages are recognized as global market leading products that provide high precision and high stability over extreme temperature ranges, and long life. Our force sensor products and our weighing and control systems products are also certified to meet some of the highest levels of precision measurements of force, weight, pressure, torque, tilt, motion, and acceleration. We continue to optimize all aspects of our development, manufacturing and sales processes, including by increasing our technical sales efforts; continuing to innovate in product performance and design; and refining our manufacturing processes.processes
Our foil technology research group developed innovations that enhance the capability and performance of our strain gages, while simultaneously reducing their size and power consumption as part of our advanced sensors product line. We believe this newunique foil technology will create new markets as customers “design in” these next generation products in existing and new applications. Our development engineering team is also responsible for creating new processes to further automate manufacturing, and improve productivity and quality. Our advanced sensors manufacturing technology also offers us the capability to produce high-quality foil strain gages in a highly automated environment, which we expect to resultbelieve results in reduced manufacturing and lead times, improved quality and increased margins. The implementationAs a sign of this innovative manufacturing technology was the basisour commitment to these businesses, we signed a long-term lease for a significant portionstate of the restructuringart facility which has been constructed in Israel. Our administrative personnel have moved to the new facility, and we have begun the transition of our advanced sensors business to that facility and we expect to complete the transition to the new facility in the third quarter of 2021.
Our design, research, and product development teams, in partnership with our marketing teams, drive our efforts we undertookto bring innovations to market. We intend to leverage our insights into customer demand to continually develop and roll out new, innovative products within our existing lines and to modify our existing core products in 2015ways that make them more appealing, addressing changing customer needs and 2016.industry trends in terms of form, fit, and function.
We also seek to achieve significant production cost savings through the transfer, expansion, and expansionconstruction of manufacturing operations in countries such as India, China, and Israel, where we can benefit from lower labor costs, improved efficiencies, or available tax and other government-sponsored incentives. For example in 20162019, we relocated a significant portionincurred restructuring expense related to closing and downsizing of facilities as part of the manufacturing transitions of our force sensor products to facilities in India and China, which marked key milestones in our ongoing strategic initiatives to align and consolidate our manufacturing from leased locations with higher labor cost to the owned facility we built in India. We closed a facility in Costa Rica and consolidated its functions with existing operations where significant efficiencies were available. This consolidation of operations is part of our global restructuring and cost reduction program announced in November 2015 and substantially completed in 2016.footprint.
Acquisition Strategy
We expect to continue to make strategic acquisitions where opportunities present themselves to grow our segments. Historically, our growth and acquisition strategy has been largely focused on vertical product integration, using our foil strain gages in our force sensor products, and incorporating those products into our weighing and control systems. The acquisitions of Stress-Tek and KELK, each of which employemploys our foil strain gages to manufacture load cells for theirits systems, continuecontinued this strategy. Additionally, the KELK acquisition resulted in the acquisition of certain optical sensor technology. The Pacific Instruments acquisition significantly broadened our existing data acquisition offerings and opened new markets for us. AlongThe acquisition of DSI expanded our position in the steel market. On June 1, 2021, we completed the acquisition of California-based Diversified Technical Systems, Inc., a manufacturer of data acquisition systems and sensors for product safety and testing, DTS is an established niched-market leader with a strong brand in automotive, avionics, military and defense markets. DTS adds complementary technology to our recent success in microelectromechanicalplatform and brings unique engineering capabilities, centered on miniaturized data acquisition and systems ("MEMS")integration with sensor technology for on-board weighing, wecritical testing applications. We expect to expand our expertise, and our acquisition focus, outside our traditional vertical approach to other precision sensor solutions in the fields of
measurement of force, weight, pressure, torque, tilt, motion, and acceleration. We believe acquired businesses will benefit from improvements we implement to reduce redundant functions and from our current global manufacturing and distribution footprint.
Research and Development
Research and development will continue to play a key role in our efforts to introduce innovative products to generate new sales and to improve profitability. We expect to continue to expand our position as a leading supplier of precision foil technology products. We believe our R&D efforts should provide us with a variety of opportunities to leverage technology, products, and our manufacturing base in order to ultimately improve our financial performance.
Cost Management
To be successful, we believe we must seek new strategies for controlling operating costs. Through automation in our plants, we believe we can optimize our capital and labor resources in production, inventory management, quality control, and warehousing. We are in the process of moving some manufacturing from higher-cost countries to lower-cost countries and consolidating to fewermore cost effective locations. This may enable us to become more efficient and cost competitive, and also maintain tighter controls overof the operation.
Production transfers, facility consolidations, and other long-term cost-cutting measures require us to initially incur significant severance and other exit costs. We have begun to realizeare realizing the benefits of our restructuring through lower labor costs and other operating expenses, and expect to continue reaping these benefits in future periods. However, these programs to improve our profitability also involve certain risks which could materially impact our future operating results, as further detailed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 16, 2017.
The Company recorded restructuring costs of $0.4 million and $1.3 million during the fiscal quarter and nine fiscal months ended September 30, 2017, respectively. Restructuring costs consist mainly of employee termination costs, including severance and statutory retirement allowances, and facility closure costs, and were incurred in connection with various cost reduction programs.11, 2021.
We are evaluating plans to further reduce our costs by consolidating additional manufacturing operations. These plans may require us to incur restructuring and severance costs in future periods. While streamlining and reducing fixed overhead, we are exercising caution so that we will not negatively impact our customer service or our ability to further develop products and processes.
Goodwill
We test the goodwill in each of our reporting units for impairment at least annually, and whenever events or changes in circumstances occur indicating that a possible impairment may have been incurred. Determining whether to test goodwill for impairment, and the application of goodwill impairmenttests, require significant managementjudgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigninggoodwillto reporting units, and determining the fair value of each reporting unit. Changes in these estimates could materially affect the determination of fair value for each reporting unit. A slowdown or deferral of orders for a business, with which we have goodwill associated, could impact our valuation of that goodwill.
Foreign Currency
We are exposed to foreign currency exchange rate risks, particularly due to transactions in currencies other than the functional currencies of certain subsidiaries. U.S. GAAP requires that entities identify the “functional currency” of each of their subsidiaries and measure all elements of the financial statements in that functional currency. A subsidiary’s functional currency is the currency of the primary economic environment in which it operates. In cases where a subsidiary is relatively self-contained within a particular country, the local currency is generally deemed to be the functional currency. However, a foreign subsidiary that is a direct and integral component or extension of the parent company’s operations generally would have the parent company’s currency as its functional currency. We have subsidiaries that fall into each of these categories.
Foreign Subsidiaries which use the Local Currency as the Functional Currency
Our operations in Europe, Canada, and certain locations in Asia primarily generate and expend cash using local currencies, and accordingly, these subsidiaries utilize the local currency as their functional currency. For those subsidiaries where the local currency is the functional currency, assets and liabilities in the consolidated condensed balance sheets have been translated at the rate of exchange as of the balance sheet date. Translation adjustments do not impact the results of operations and are reported as a separate component of equity.
For those subsidiaries where the local currency is the functional currency, revenues and expenses are translated at the average exchange rate for the period. While the translation of revenues and expenses into U.S. dollars does not directly impact the consolidated condensed statement of operations, the translation effectively increases or decreases the U.S. dollar equivalent of revenues generated and expenses incurred in those foreign currencies.
Foreign Subsidiaries which use the U.S. Dollar as the Functional Currency
Our operations in Israel and certain locations in Asia primarily generate cash in U.S. dollars, and accordingly, these subsidiaries utilize the U.S. dollar as their functional currency. For those foreign subsidiaries where the U.S. dollar is the functional currency, all foreign currency financial statement amounts are remeasured into U.S. dollars. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in the results of operations. While these subsidiaries transact most business in U.S. dollars, they may have significant costs, particularly related to payroll, which are incurred in the local currency.currency and significant lease assets and liabilities.
Effects of Foreign Exchange Rate on Operations
For the fiscal quarter ended September 30, 2017,July 3, 2021, exchange rates increased net revenues by $0.6 million, and costs of products sold and selling, general, and administrative expenses by $1.5 million, when compared to the comparable prior year period. For the fiscal nine months ended September 30, 2017, exchange rates reduced net revenues by $1.9$2.8 million, and increased costs of products sold and selling, general, and administrative expenses by $0.3$3.5 million, when compared to the comparable prior year period.
For the six fiscal months ended July 3, 2021, exchange rates increased net revenues by $4.9 million, and increased costs of products sold and selling, general, and administrative expenses by $5.8 million, when compared to the comparable prior year period.
Off-Balance Sheet Arrangements
As of September 30, 2017July 3, 2021 and December 31, 2016,2020, we did not have any off-balance sheet arrangements.
Results of Operations
Statement of operations’ captions as a percentage of net revenues and the effective tax rates were as follows:
| |
| Fiscal quarter ended | | Nine fiscal months ended | | Fiscal quarter ended | | Six fiscal months ended |
| September 30, 2017 | | October 1, 2016 | | September 30, 2017 | | October 1, 2016 | | July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Costs of products sold | 61.4 | % | | 62.8 | % | | 61.3 | % | | 63.6 | % | Costs of products sold | 60.4 | % | | 60.9 | % | | 60.0 | % | | 62.0 | % |
Gross profit | 38.6 | % | | 37.2 | % | | 38.7 | % | | 36.4 | % | Gross profit | 39.6 | % | | 39.1 | % | | 40.0 | % | | 38.0 | % |
Selling, general, and administrative expenses | 29.5 | % | | 31.0 | % | | 30.0 | % | | 31.6 | % | Selling, general, and administrative expenses | 29.8 | % | | 31.5 | % | | 30.6 | % | | 30.7 | % |
Operating income | 8.5 | % | | 4.8 | % | | 7.9 | % | | 3.1 | % | Operating income | 6.5 | % | | 6.7 | % | | 7.8 | % | | 6.8 | % |
Income before taxes | 10.5 | % | | 4.1 | % | | 7.8 | % | | 2.7 | % | Income before taxes | 5.7 | % | | 4.1 | % | | 7.6 | % | | 5.8 | % |
Net earnings | 6.9 | % | | 2.0 | % | | 5.4 | % | | 2.0 | % | Net earnings | 5.4 | % | | 3.0 | % | | 6.2 | % | | 4.0 | % |
Net earnings attributable to VPG stockholders | 6.8 | % | | 1.9 | % | | 5.3 | % | | 2.0 | % | Net earnings attributable to VPG stockholders | 5.2 | % | | 3.0 | % | | 6.1 | % | | 4.0 | % |
| | | | | | | | |
Effective tax rate | 34.1 | % | | 51.2 | % | | 30.7 | % | | 25.3 | % | Effective tax rate | 6.1 | % | | 28.1 | % | | 18.4 | % | | 30.9 | % |
Net Revenues
Net revenues were as follows (dollars in thousands):
| | | Fiscal quarter ended | Nine fiscal months ended | | Fiscal quarter ended | | Six fiscal months ended |
| September 30, 2017 | | October 1, 2016 | September 30, 2017 | | October 1, 2016 | | July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Net revenues | $ | 62,805 |
| | $ | 54,490 |
| $ | 184,911 |
| | $ | 169,115 |
| Net revenues | $ | 75,339 | | | $ | 59,146 | | | $ | 145,928 | | | $ | 126,842 | |
Change versus comparable prior year period | $ | 8,315 |
| |
| $ | 15,796 |
| |
| Change versus comparable prior year period | $ | 16,193 | | | $ | 19,086 | | |
Percentage change versus prior year period | 15.3 | % | |
| 9.3 | % | |
| Percentage change versus prior year period | 27.4 | % | | 15.0 | % | |
Changes in net revenues were attributable to the following:
| | | vs. prior year quarter | vs. prior year- to-date | | vs. prior year quarter | | vs. prior year- to-date |
Change attributable to: |
| Change attributable to: | | | |
Change in volume | 14.6 | % | 10.2 | % | Change in volume | 16.8 | % | | 8.5 | % |
Change in average selling prices | (0.4 | )% | (0.3 | )% | Change in average selling prices | (0.1) | % | | (0.1) | % |
Foreign currency effects | 1.1 | % | (1.3 | )% | Foreign currency effects | 5.6 | % | | 4.2 | % |
Acquisitions | — |
| 0.7 | % | Acquisitions | 5.1 | % | | 2.4 | % |
| Net change | 15.3 | % | 9.3 | % | Net change | 27.4 | % | | 15.0 | % |
During the fiscal quarter ended September 30, 2017,July 3, 2021, net revenues increased 15.3%27.4% as compared to the comparable prior year period, due towith increased volume primarily from the Force Sensors reporting segment and the Weighing and Control Systems segment. The increase in all threethe Weighing and Control Systems reporting segments. segment was aided by the addition of revenues from the acquisition of DTS.
During thesix fiscal nine months ended September 30, 2017,July 3, 2021, net revenues increased 9.3%15.0%, as compared to the comparable prior year period. Volume increases from all threeperiod, mainly due to increased volume in the Foil Technology and Force Sensors reporting segmentssegment, and addedthe addition of revenues from the acquisition of Pacific, which was acquiredDTS on April 6, 2016, contributed to this improvement.
June 1, 2021.
Gross Profit Margin
Gross profit as a percentage of net revenues was as follows:
|
| | | | | | | | | | |
| Fiscal quarter ended | Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | September 30, 2017 | | October 1, 2016 |
Gross profit margin | 38.6 | % | | 37.2 | % | 38.7 | % | | 36.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Gross profit margin | 39.6 | % | | 39.1 | % | | 40.0 | % | | 38.0 | % |
The gross profit margin for the fiscal quarter ended September 30, 2017July 3, 2021 increased 1.4%0.5% as compared to the comparable prior year period. The Foil Technology Products segment hadperiod with higher gross profit margins due to higher volume and manufacturing efficiencies. This improvement was partially offset by lower gross profit margin in the Force Sensors reporting segment due to manufacturing inefficiencies related to increased production at our facility in India andbeing offset by lower gross profit margin in the Foil Technology and Weighing and ControlControls Systems segment due to product mix.reporting segments.
The gross profit margin for the ninesix fiscal months ended September 30, 2017July 3, 2021 increased 2.3%2% as compared to the comparable prior year period, mainly due to volume improvementsfrom higher gross profit margins in allthe Force Sensors reporting segments.segment.
Segments
Analysis of revenues and gross profit margins for each of our reportable segments is provided below.
Foil Technology Products
Net revenues of the Foil Technology Products segment were as follows (dollars in thousands):
| | | Fiscal quarter ended | | Nine fiscal months ended | | Fiscal quarter ended | | Six fiscal months ended |
| September 30, 2017 | | October 1, 2016 | | September 30, 2017 | | October 1, 2016 | | July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Net revenues | $ | 29,315 |
| | $ | 23,852 |
| | $ | 86,385 |
| | $ | 75,530 |
| Net revenues | $ | 33,308 | | | $ | 31,785 | | | $ | 66,019 | | | $ | 62,262 | |
Change versus comparable prior year period | $ | 5,463 |
| | | | $ | 10,855 |
| | | Change versus comparable prior year period | $ | 1,523 | | | $ | 3,757 | | |
Percentage change versus prior year period | 22.9 | % | | | | 14.4 | % | | | Percentage change versus prior year period | 4.8 | % | | 6.0 | % | |
Changes in Foil Technology Products segment net revenues were attributable to the following:
| | | vs. prior year quarter | vs. prior year- to-date | | vs. prior year quarter | | vs. prior year- to-date |
Change attributable to: | | Change attributable to: | | | |
Change in volume | 23.1 | % | 14.0 | % | Change in volume | 1.8 | % | | 3.3 | % |
Change in average selling prices | (0.3 | )% | (0.2 | )% | Change in average selling prices | 0.6 | % | | 0.5 | % |
Foreign currency effects | 0.1 | % | (0.9 | )% | Foreign currency effects | 2.4 | % | | 2.2 | % |
Acquisitions | — |
| 1.5 | % | |
| Net change | 22.9 | % | 14.4 | % | Net change | 4.8 | % | | 6.0 | % |
Net revenues increased 22.9%4.8% for the fiscal quarter ended September 30, 2017,July 3, 2021, as compared to the comparable prior year period dueperiod. The year-over-year increase in revenue was primarily attributable to higher revenue related to precision resistors productsan increase in our advanced sensors product line, primarily in our general industrial market and an increase in our Pacific Instrument product line in the testAvionics, Military and measurement market sector in all regions, higher revenues from advanced sensors products in the force measurements market sector in Asia, and higher revenues from Pacific products in the avionics, military and space market sector in the Americas.Space market.
Net revenues increased 14.4%6.0% for the ninesix fiscal months ended September 30, 2017,July 3, 2021, as compared to the comparable prior year period dueperiod. Increases in net revenues are primarily attributable to higher volume from precision resistor OEM customersour advanced sensors product line in theother markets, test and measurement market sector in Asiamarkets, and Europe, higher revenues from advanced sensors products in the force measurements market sector in Asia, and additional revenues from the acquisition of Pacific. This improvement was slightly offset by negative foreign currency impacts relating to the British pound and the Japanese yen.general industrial markets.
Gross profit as a percentage of net revenues for the Foil Technology Products segment was as follows:
|
| | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | | September 30, 2017 | | October 1, 2016 |
Gross profit margin | 41.7 | % | | 36.2 | % | | 41.7 | % | | 38.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Gross profit margin | 38.9 | % | | 41.8 | % | | 39.4 | % | | 39.3 | % |
The gross profit margin increaseddecreased 2.9% for the fiscal quarter ended September 30, 2017,July 3, 2021, when compared to the comparable prior year period dueperiod. Impacts from charges related to start-up costs in our new advanced sensors facility and the impact of COVID-19 were partially offset by higher volume and manufacturing efficiencies, partially offset by negative foreign currency impacts. favorable product mix.
The gross profit margin increased 0.1% for the ninesix fiscal months ended September 30, 2017, whenJuly 3, 2021 as compared to the comparable prior year period dueperiod. Impacts from charges related to start-up costs in our new advanced sensors facility and the impact COVIID-19 completely offset the higher volume and labor efficiencies partially offset by negative foreign currency impacts and higher fixed manufacturing costs.favorable product mix.
Force Sensors
Net revenues of the Force Sensors segment were as follows (dollars in thousands):
| | | Fiscal quarter ended | | Nine fiscal months ended | | Fiscal quarter ended | | Six fiscal months ended |
| September 30, 2017 | | October 1, 2016 | | September 30, 2017 | | October 1, 2016 | | July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Net revenues | $ | 16,596 |
| | $ | 15,231 |
| | $ | 47,720 |
| | $ | 45,465 |
| Net revenues | $ | 17,216 | | | $ | 8,916 | | | $ | 34,149 | | | $ | 23,611 | |
Change versus comparable prior year period | $ | 1,365 |
| | | | $ | 2,255 |
| | | Change versus comparable prior year period | $ | 8,300 | | | $ | 10,538 | | |
Percentage change versus prior year period | 9.0 | % | | | | 5.0 | % | | | Percentage change versus prior year period | 93.1 | % | | 44.6 | % | |
Changes in Force Sensors segment net revenues were attributable to the following:
| | | vs. prior year quarter | | vs. prior year- to-date | | vs. prior year quarter | | vs. prior year- to-date |
Change attributable to: | | | | Change attributable to: | | | |
Change in volume | 8.9 | % | | 6.7 | % | Change in volume | 88.5 | % | | 41.9 | % |
Change in average selling prices | (1.2 | )% | | (1.0 | )% | Change in average selling prices | (1.7) | % | | (1.5) | % |
Foreign currency effects | 1.3 | % | | (0.7 | )% | Foreign currency effects | 6.3 | % | | 4.2 | % |
| Net change | 9.0 | % | | 5.0 | % | Net change | 93.1 | % | | 44.6 | % |
Net revenues increased 9.0%93.1% for the fiscal quarter ended September 30, 2017,July 3, 2021, and 44.6% for the six fiscal months ended July 3, 2021 as compared to the comparable prior year period, mainly due to higher volume with OEM customersperiods. The year-over-year increase primarily reflected operational limitations in the precision weighing end marketsecond fiscal quarter of 2020 from the COVID pandemic at our facility in Europe and positive foreign currency impacts relating mainly to the Euro.
Net revenues increased 5.0% for the nine fiscal months ended September 30, 2017, as compared to the comparable prior year period, mainly due to higher volume, partially offset by negative foreign currency impacts relating to the British pound.India.
Gross profit as a percentage of net revenues for the Force Sensors segment was as follows:
|
| | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | | September 30, 2017 | | October 1, 2016 |
Gross profit margin | 28.6 | % | | 31.0 | % | | 27.2 | % | | 26.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Gross profit margin | 34.7 | % | | 11.6 | % | | 35.2 | % | | 19.5 | % |
The gross profit margin for the fiscal quarter ended September 30, 2017 decreasedJuly 3, 2021 increased 23.1% as compared to the comparable prior year period asprimarily due to higher volume was offset by manufacturing inefficiencies related to increased production at our facilityrevenue and an increase in India, and negative foreign currency impacts. inventory.
The gross profit margin for the ninesix fiscal months ended September 30, 2017July 3, 2021 increased from15.7% as compared to the comparable prior year period mainlyprimarily due to higher volumerevenue and cost savings measures, including headcount reductions from plant closures and relocations.an increase in inventory.
Weighing and Control Systems
Net revenues of the Weighing and Control Systems segment were as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Net revenues | $ | 24,815 | | | $ | 18,445 | | | $ | 45,760 | | | $ | 40,969 | |
Change versus comparable prior year period | $ | 6,370 | | | | | $ | 4,791 | | | |
Percentage change versus prior year period | 34.5 | % | | | | 11.7 | % | | |
|
| | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | | September 30, 2017 | | October 1, 2016 |
Net revenues | $ | 16,894 |
| | $ | 15,407 |
| | $ | 50,806 |
| | $ | 48,120 |
|
Change versus comparable prior year period | $ | 1,487 |
| | | | $ | 2,686 |
| | |
Percentage change versus prior year period | 9.7 | % | | | | 5.6 | % | | |
Changes in Weighing and Control Systems segment net revenues were attributable to the following:
| | | vs. prior year quarter | vs. prior year- to-date | | vs. prior year quarter | | vs. prior year- to-date |
Change attributable to: | | Change attributable to: | | | |
Change in volume | 7.4 | % | 7.6 | % | Change in volume | 7.9 | % | | (1.8) | % |
Change in average selling prices | 0.2 | % | 0.3 | % | Change in average selling prices | 0.6 | % | | 0.3 | % |
Foreign currency effects | 2.1 | % | (2.3 | )% | Foreign currency effects | 9.7 | % | | 6.6 | % |
Acquisitions | | Acquisitions | 16.3 | % | | 6.6 | % |
| Net change | 9.7 | % | 5.6 | % | Net change | 34.5 | % | | 11.7 | % |
Net revenues increased 9.7%34.5% for the fiscal quarter ended September 30, 2017,July 3, 2021 as compared to the comparable prior year period. Strong revenues fromThe year-over-year increase in revenue was primarily attributable to the addition of revenue for DTS, higher revenue of our on-boardonboard weighing products in Europe and the Americas were primarily responsible for the improvement in net revenues along with positive foreign currency impacts, mainly related totransportation market, higher revenue of our process weighing solutions for the Canadian dollarindustrial market, and higher revenue of our Dynamic Systems, Inc. ("DSI") products for the Euro.steel market, which was partially offset by lower revenue of KELK steel-related products.
Net revenues increased 5.6%11.7% for the ninesix fiscal months ended September 30, 2017,July 3, 2021 as compared to the comparable prior year period primarily due mainly to improvements in the steel business in Asia. This increase was partially offset by negativeaddition of revenue for DTS and favorable foreign currency impacts, mainly related to the British pound and the Swedish krona.effects.
Gross profit as a percentage of net revenues for the Weighing and Control Systems segment were as follows:
|
| | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| September 30, 2017 | | October 1, 2016 | | September 30, 2017 | | October 1, 2016 |
Gross profit margin | 43.1 | % | | 44.9 | % | | 44.4 | % | | 42.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Gross profit margin | 43.9 | % | | 47.6 | % | | 44.6 | % | | 46.6 | % |
The gross profit margin for the fiscal quarter ended September 30, 2017July 3, 2021 of 43.9% decreased 1.7% comparedfrom the second quarter of 2020 due to the comparable prior year period, mainly dueimpacts of charges related to purchase accounting adjustments from the DTS acquisitions and the impact of COVID-19, along with an unfavorable product mix, as improved revenueswhich were generated from lower margin products.partially offset by the addition of DTS and favorable exchange rates.
The gross profit margin for the ninesix fiscal months ended September 30, 2017 increased 1.5% compared to July 3, 2021 of 44.6%, decreased from the comparable prior year period primarily due to higherthe impacts of charges related to purchase accounting adjustments from the DTS acquisitions, lower volume from our steel business.and unfavorable product mix, which were partially offset by the addition of DTS and favorable exchange rate impacts.
Selling, General, and Administrative Expenses
Selling, general, and administrative (“SG&A”) expenses are summarized as follows (dollars in thousands):
| | | Fiscal quarter ended | Nine fiscal months ended | | Fiscal quarter ended | | Six fiscal months ended |
| September 30, 2017 | | October 1, 2016 | September 30, 2017 | | October 1, 2016 | | July 3, 2021 | | June 27, 2020 | | July 3, 2021 | | June 27, 2020 |
Total SG&A expenses | $ | 18,525 |
| | $ | 16,917 |
| $ | 55,551 |
| | $ | 53,409 |
| Total SG&A expenses | $ | 22,453 | | | $ | 18,640 | | | $ | 44,636 | | | $ | 38,931 | |
| | | | | | |
as a percentage of net revenues | 29.5 | % | | 31.0 | % | 30.0 | % | | 31.6 | % | |
As a percentage of net revenues | | As a percentage of net revenues | 29.8 | % | | 31.5 | % | | 30.6 | % | | 30.7 | % |
SG&A expenses for the fiscal quarter and six fiscal months ended September 30, 2017 were higherJuly 3, 2021 increased compared to the comparable prior year period mainly dueperiods with additional SG&A expenses related to higher personnel costs including wage increases, bonus adjustments and incentive compensation. Additionally SGAforeign currency impacts and SG&A expenses forfrom the acquisition of DTS.
Impairment of Goodwill and Indefinite-lived Intangible Assets
For the fiscal quarter ended October 1, 2016 included $1.1 million of strategic evaluation costs. SG&A expenses for the nineand six fiscal months ended September 30, 2017 were higher compared toJuly 3, 2021, as a result of our interim impairment test, we recorded a $1.2 million pre-tax, non-cash impairment charge which reduced the comparable prior year period mainly due to higher personnelcarrying value of our goodwill and indefinite-lived intangible assets. See Note 4 for further discussion.
Acquisition Costs
Acquisition costs including wage increases, bonus adjustments and incentive compensation and additional SG&A expenses of $0.6 million associated with the operationsacquisition of Pacific, which was acquired on April 6, 2016. Additionally SGA expenses for the fiscal nine fiscal months ended October 1, 2016 included $1.1 million of strategic evaluation costs.
Acquisition Costs
In connection with the acquisitions of Stress-Tek and Pacific, we recorded acquisition costs of $0.4 million DTS were as follows (in our consolidated condensed financial statements in the nine fiscal months ended October 1, 2016. No acquisition costs were incurred in the fiscal quarter or nine fiscal months ended September 30, 2017.thousands): | | | | | | | | | | | | | |
| Fiscal quarter ended | | Six fiscal months ended |
| July 3, 2021 | | | | July 3, 2021 |
Legal fees | $ | 341 | | | | | $ | 341 | |
Appraisal fees | 18 | | | | | 18 | |
Other (investment banker and insurance costs) | 839 | | | | | 839 | |
| $ | 1,198 | | | | | $ | 1,198 | |
Restructuring Costs
Restructuring costs representreflect the cost reduction programs initiatedimplemented by the Company. Restructuring costs are expensed during the period in which the Company determines it will incur those costs and all requirements for accrual are met. Because these costs are recorded based upon estimates, actual expenditures for the restructuring activities may differ from the initially recorded costs. If the initial estimates are too low or too high, the Company could be required to either record additional expense in future periods or to reverse part of the previously recorded charges.
The Company recorded $0.0 million and $0.5 million of restructuring costs during the fiscal quarter ended July 3, 2021 and June 27, 2020, respectively, and $0.0 million and $0.6 million of restructuring costs during the six fiscal months ended July 3, 2021 and June 27, 2020, respectively. Restructuring costs consist mainlywere comprised primarily of employee terminationterminations costs, including severance and facility closure costs, whichstatutory retirement allowances, and were incurred in connectionconnections with various cost reduction programs. The restructuring expenses of $0.4 million and $1.3 million recorded for the fiscal quarter and nine fiscal months ended September 30, 2017, respectively, represent additional costs related to the previously announced cost reduction programs. During the nine fiscal months ended October 1, 2016, the Company recorded $1.6 million related to cost reduction plans initiated at locations in Europe, the U.S., and Canada, $0.4 million related to the closure of our Costa Rica facility, and $0.4 million related to the November 2015 global cost reduction plan.
Other Income (Expense)
Interest expense for the fiscal quarter and nine fiscal months ended September 30, 2017July 3, 2021 was higher thanflat when compared with interest expense in the comparable prior year periods,period. The impact of increased borrowings on the Company's revolving credit facility in conjunction with the acquisition of DTS were offset by more favorable borrowing rates in 2021. Interest expense for the six fiscal months ended July 3, 2021 was lower when compared with the comparable prior year period mainly due to higher debt associated with funding the acquisition of Pacific, which was completed on April 6, 2016.more favorable borrowing rates in 2021.
The following table analyzes the components of the line “Other” on the consolidated condensed statements of operations (in thousands):
| | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | |
| July 3, 2021 | | June 27, 2020 | | Change |
Foreign exchange loss | $ | (174) | | | $ | (1,185) | | | $ | 1,011 | |
| | | | | |
Interest income | 20 | | | 109 | | | (89) | |
Pension expense | (143) | | | (164) | | | 21 | |
Other | (29) | | | (33) | | | 4 | |
| $ | (326) | | | $ | (1,273) | | | $ | 947 | |
|
| | | | | | | | | | | |
| Fiscal quarter ended | | |
| September 30, 2017 | | October 1, 2016 | | Change |
Foreign exchange (loss) gain | $ | 169 |
| | $ | (59 | ) | | $ | 228 |
|
Interest income | 47 |
| | 42 |
| | 5 |
|
Other | 1,501 |
| | (27 | ) | | 1,528 |
|
| $ | 1,717 |
| | $ | (44 | ) | | $ | 1,761 |
|
| | | Nine fiscal months ended | | | | Six fiscal months ended | |
| September 30, 2017 | | October 1, 2016 | | Change | | July 3, 2021 | | June 27, 2020 | | Change |
Foreign exchange (loss) gain | $ | (463 | ) | | $ | 436 |
| | $ | (899 | ) | |
Foreign exchange gain (loss) | | Foreign exchange gain (loss) | $ | 561 | | | $ | (285) | | | $ | 846 | |
Interest income | 103 |
| | 145 |
| | (42 | ) | Interest income | 65 | | | 176 | | | (111) | |
Pension expense | | Pension expense | (280) | | | (323) | | | 43 | |
Other | 1,394 |
| | (230 | ) | | 1,624 |
| Other | (99) | | | (158) | | | 59 | |
| $ | 1,034 |
| | $ | 351 |
| | $ | 683 |
| | $ | 247 | | | $ | (590) | | | $ | 837 | |
Foreign currency exchange gains and losses represent the impact of changes in foreign currency exchange rates. For the fiscal quarter ended September 30, 2017,July 3, 2021, the change in foreign exchange gains and losses during the period, as compared to the prior year period, is largely due to exposure to currency fluctuations with the Canadian dollar, Japanese yen, the Israeli shekel and the British pound, the Euro and the Canadian dollar. pound.
For the ninesix fiscal months ended September 30, 2017,July 3, 2021, the change in foreign exchange gains and losses during the period as compared to the prior year period is largely due to exposure to currency fluctuations with the Canadian dollar, the Israeli shekel, the British pound,Japanese yen, the euro and the Canadian dollar. A substantial portion of the Canadian dollar currency fluctuation is due to the U.S. dollar denominated term facility maintained by our Canadian subsidiary.
Included in Other, for the fiscal quarter ended September 30, 2017 is net proceeds of $1.5 million related to a lease termination payment at the Tianjin, People's Republic of China location. The relocation of operations in Tianjin has been completed and the majority of the expenses associated with the move have been incurred.
British pound
Income Taxes
VPG calculates the tax provision for interim periods using an estimated annual effective tax rate methodology based on projected full-year pre-tax earnings among the taxing jurisdictions in which we operate with adjustments for discrete items. The effective tax rate for the fiscal quarter ended September 30, 2017July 3, 2021 was 34.1%6.1% compared to 51.2%28.1% for the fiscal quarter ended October 1, 2016. TheJune 27, 2020 and the effective tax rate for the ninesix fiscal months ended September 30, 2017July 3, 2021 was 30.7%18.4% compared to 25.3%30.9% for the ninesix fiscal months ended October 1, 2016.June 27, 2020. The tax rate for both periods presented in the current fiscal quarter2021 is lower than the prior year fiscal quarterperiods primarily because of higher earnings subjectdue to tax in the current fiscal quarter which reduced the impact of losses on which no tax benefit is provided. The current year nine fiscal month tax rate is higher than the prior year nine fiscal month tax rate primarily because of a tax benefit recorded last year related to the release of a valuation allowance in connection with the acquisition of Pacific. This difference is partially offset by a 2017 foreign currency benefit from a foreign subsidiary with US dollars asDTS, which enabled the Company to reduce its functional currency.
We evaluate our deferred income taxes quarterly to determine if valuation allowances are required or should be adjusted. We consider whether valuation allowances should be establishedallowance against deferred tax assets, tax rate changes in certain foreign jurisdictions, and changes in the mix of worldwide income.
The Company and its subsidiaries are subject to income taxes imposed by the U.S., various states, and the foreign jurisdictions in which we operate. Each jurisdiction establishes rules that set forth the years which are subject to examination by its tax authorities. While the Company believes the tax positions taken on its tax returns for each jurisdiction are supportable, they may still be challenged by the jurisdiction's tax authorities. In anticipation of such challenges, the Company has established reserves for tax-related uncertainties. These liabilities are based on all available evidence, both positive and negative, usingthe Company’s best estimate of the potential tax exposures in each respective jurisdiction. It may take a “more likely than not” standard. This assessment considers, among other matters, the nature, frequency and severitynumber of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, and our abilityyears for a final tax liability in a jurisdiction to identify feasible tax planning strategies. Deferred tax assets may not be recognized in jurisdictions where there is a history of cumulative losses, where there is no taxable incomedetermined, particularly in the carryback period, whereevent of an audit. If an uncertain matter is determined favorably, there is insufficient evidence to support future earnings and where there is no other positive evidence, such as the likely reversal of taxable temporary differences, that would resultcould be a reduction in the utilization of deferredCompany’s tax assets.
expense. An unfavorable determination could increase tax expense and could require a cash payment, including interest and penalties.
Financial Condition, Liquidity, and Capital Resources
We believe that our current cash and cash equivalents, credit facilities and projected cash from operations will be sufficient to meet our liquidity needs for at least the next 12 months.
In December 2015,March, 2020, we entered into a secondthird amended and restated credit agreement. The terms of our credit agreement provide for the following facilities: (1) a secured revolving facility of $30.0$75.0 million, (which maywith a sublimit of $10.0 million which can be increased by a maximumused for letters of $15.0 million at our request, subject to termscredit for the account of the credit agreement),Company or its subsidiaries that are parties to the Credit Agreement, the proceeds of which canmay be used for working capital and general corporate purposes, withpurposes. The aggregate principal amount of the 2020 Revolving Facility may be increased by a sublimitmaximum of $10.0$25.0 million for lettersupon the request of credit; (2) a secured closing date term facilitythe Company, subject to the terms of $4.5 million for the Company; (3) a secured delayed draw term facility of $11.0 million for the Company; and (4) a secured term facility of $9.5 million for Vishay Precision Group Canada ULC ("VPG Canada"), our Canadian subsidiary.2020 Credit Agreement. The credit agreement2020 Credit Agreement terminates on December 30, 2020. The term loans are being repaid in quarterly installments.March 20, 2025.
According to our credit agreement, borrowingsInterest payable on amounts borrowed under all facilities bear interestthe 2020 Revolving Facility is based upon, at either, upon ourthe Company’s option, (1) a base rate which is the greater ofgreatest of: the agent’sAgent’s prime rate, the Federal Funds rate, or a LIBOR floor (the “Base Rate”), or (2) LIBOR or CDOR plus a specified margin. An interest margin of 0.25% or (2) LIBOR plus, dependingis added to Base Rate loans. Depending upon ourthe Company’s leverage ratio, an interest rate margin ranging from 2.00%1.50% to 3.00%. We are also2.75% per annum is added to the applicable LIBOR or CDOR rate to determine the interest payable on the Libor or CDOR loans. The Company is required to pay a quarterly fee of 0.30%0.25% per annum to 0.50%0.40% per annum on the unused portion of the secured revolving facility,2020 Revolving Facility, which is determined based on ourthe Company’s leverage ratio each quarter. Additional customary fees apply with respect to letters of credit.
The obligations of VPG and the guarantorsCompany under our credit agreementthe 2020 Credit Agreement are secured by substantially all the assets (excluding real estate) of VPG, and by pledges of stock in certain domestic and foreign subsidiaries, as well as guarantees by substantially all of ourthe Company’s domestic subsidiariessubsidiaries. The obligations of the Company and the guarantors under the 2020 Credit Agreement are secured by substantially all the assets (excluding real estate) of the Company and such guarantors. The VPG Canada term facility is secured by substantially all2020 Credit Agreement restricts the assets of VPG Canada, and by a secured guarantee of VPG and our domestic subsidiaries. The credit agreement restricts usCompany from paying cash dividends and requires usthe Company to comply with other customary covenants, representations, and warranties, including the maintenance of specific financial ratios. The financial maintenance covenants include a tangible net worth ratio, a leverageinterest coverage ratio and a fixed charges coverageleverage ratio. We were in compliance with these covenants at September 30, 2017.July 3, 2021. If we arethe Company is not in compliance with any of these covenant restrictions, the credit agreementfacility could be terminated by the lenders, and all amounts outstanding pursuant to the credit agreementfacility could become immediately payable.
During the second quarter of 2017, a holder of the Company's exchangeable notes exercised its option to exchange approximately $1.3 million principal amount of the notes for 57,729 shares of VPG common stock at a contractual put/call rate of $22.57. At July 1, 2017, we have outstanding exchangeable unsecured notes with a principal amount of approximately $2.8 million, which are exchangeable for an aggregate of 123,808 shares of VPG common stock. The maturity date of these notes is December 13, 2102.
Our other long-term debt is not significant and consists of zero percent interest rate debt held by our Japanese subsidiary of approximately $0.4 million at September 30, 2017 and $0.5 million at December 31, 2016.
Due to our strong product portfolio and market position, our business has historically generated operatingsignificant cash flow. For the ninesix fiscal months ended September 30, 2017,July 3, 2021, cash provided by operating activities was $14.8 million. This is$12.4 million compared to $16.7 million in the comparable prior year period. Our net of $2.1 million of restructuring payments made during the nine month period. Cash provided by operatingcash used in investing activities for the ninesix fiscal months ended October 1, 2016July 3, 2021 was $6.6 million.higher compared to the prior year period mainly due to the acquisition of DTS. Our net cash provided by financing activities for the six fiscal months ended July 3, 2021 was higher compared to prior year mainly due to the borrowings on the 2020 credit facility for the acquisition of DTS.
As of September 30, 2017, ourAdjusted free cash flow generated during the six fiscal months ended July 3, 2021, was $10.9$4.1 million. We refer to the amount of cash provided by operating activities ($14.812.4 million) in excess of our capital expenditures ($4.48.3 million) and net of proceeds from the sale of assets ($0.50.0 million) as “free“adjusted free cash flow.” a measure which management uses to evaluate our ability to fund acquisitions and repay debt. Free cash is also used as a metric for certain of our performance-based equity compensation awards.
The following table summarizes the components of net cash (debt) at September 30, 2017July 3, 2021 and December 31, 2016 2020 (in thousands):
| |
| September 30, 2017 | | December 31, 2016 | | July 3, 2021 | | December 31, 2020 |
Cash and cash equivalents | $ | 69,891 |
| | $ | 58,452 |
| Cash and cash equivalents | $ | 73,456 | | | $ | 98,438 | |
| | | | |
Third-party debt, including current and long-term: | | | | Third-party debt, including current and long-term: | |
Term loans | 21,125 |
| | 23,000 |
| |
| Revolving debt | 9,000 |
| | 9,000 |
| Revolving debt | 61,000 | | | 41,000 | |
Third-party debt held by Japanese subsidiary | 432 |
| | 509 |
| Third-party debt held by Japanese subsidiary | — | | | 18 | |
Exchangeable notes, due 2102 | 2,794 |
| | 4,097 |
| |
| Deferred financing costs | (369 | ) | | (454 | ) | Deferred financing costs | (330) | | | (374) | |
Total third-party debt | 32,982 |
| | 36,152 |
| Total third-party debt | 60,670 | | | 40,644 | |
Net cash | $ | 36,909 |
| | $ | 22,300 |
| Net cash | $ | 12,786 | | | $ | 57,794 | |
Measurements such as “free cash”“adjusted free cash flow” and “net cash (debt)”cash" do not have uniform definitions and are not recognized in accordance with U.S. GAAP. Such measures should not be viewed as alternatives to U.S. GAAP measures of performance or liquidity. However, management believes that “free cash”“adjusted free cash flow” is a meaningful measure of our ability to fund acquisitions, and repay debt, as well as to measure performance under certain of our equity compensation awards. In addition, management believes that an analysis of “net cash (debt)”cash” assists investors in understanding aspects of our cash and debt management. These measures, as calculated by us, may not be comparable to similarly titled measures used by other companies.
Approximately 94%87% and 83%90% of our cash and cash equivalents balance at September 30, 2017July 3, 2021 and December 31, 2016,2020, respectively, was held by our non-U.S. subsidiaries. If cash is repatriated to the United States, we could be subject to additional U.S. income taxes, state income taxes, incremental foreign income taxes, and withholding taxes payable to various foreign countries.
See the following table for the percentage of cash and cash equivalents, by region, at September 30, 2017July 3, 2021 and December 31, 2016:2020:
| | | | | | | | | | | |
| July 3, 2021 | | December 31, 2020 |
Israel | 18 | % | | 26 | % |
Asia | 25 | % | | 18 | % |
Europe | 21 | % | | 16 | % |
United States | 13 | % | | 10 | % |
United Kingdom | 16 | % | | 18 | % |
Canada | 7 | % | | 12 | % |
| 100 | % | | 100 | % |
|
| | | | | |
| September 30, 2017 | | December 31, 2016 |
Israel | 19 | % | | 16 | % |
Asia | 30 | % | | 27 | % |
Europe | 21 | % | | 19 | % |
United States | 6 | % | | 17 | % |
United Kingdom | 13 | % | | 12 | % |
Canada | 11 | % | | 9 | % |
| 100 | % | | 100 | % |
We earn a significant amount of our operating income outside the United States, the majority of which is deemed to be indefinitely reinvested in the foreign jurisdictions. As a result, as discussed above, a significant portion of our cash and short-term investments are held by foreign subsidiaries. The Company will continue to evaluate its cash needs, however we currently do not intend, nor do we foresee a need, to repatriate funds in excess of what is already planned. The Company will evaluate the possibility of repatriating future cash provided such repatriation can be accomplished in a tax efficient manner. In addition, we expect existing domestic cash, short-term investments, and cash flows from operations to continue to be sufficient to fund our domestic operating activities and cash commitments for investing and financing activities, such as debt repayment and capital expenditures, for at least the next 12 months and thereafter for the foreseeable future.If we should require more capital in the United States than is generated by our domestic operations, for example, to fund significant discretionary activities, such as business acquisitions, we could elect to repatriate future earnings from foreign jurisdictions or raise capital in the United States through debt or equity issuances. These alternatives could result in higher tax expense, increased interest expense, or dilution of our earnings. We consider the majority of the undistributed earnings of our foreign subsidiaries, as of July 3, 2021, to be indefinitely reinvested.
Our financial condition as of September 30, 2017July 3, 2021 remains strong, with a current ratio (current assets to current liabilities) of 3.94.2 to 1.0, as compared to a ratio of 4.24.7 to 1.0 at December 31, 2016.2020.
Cash paid for property and equipment for the ninesix fiscal months ended September 30, 2017July 3, 2021 was $4.4$8.3 million compared to $6.3$11.0 million in the comparable prior year period. Capital expenditures for the nine fiscal months ended September 30, 2017 are comprised of projects related to the normal maintenance of the business.
Safe Harbor Statement
From time to time, information provided by us, including but not limited to statements in this report, or other statements made by or on our behalf, may contain "forward-looking" information within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks, uncertainties, and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those anticipated.
Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, expected, estimated, or projected. Among the factors that could cause actual results to materially differ include: general business and economic conditions; difficulties or delays in identifying, negotiating and completing acquisitions and integrating acquired
companies (including the acquisitions of Stress-Tek and Pacific Instruments); companies; the inability to realize anticipated synergies and expansion possibilities; difficulties in new product development; changes in competition and technology in the markets that we serve and the mix of our products required to address these changes; changes in foreign currency exchange rates; political, economic, health (including the COVID-19 pandemic) and military instability in the countries in which we operate; difficulties in implementing our cost reduction strategies, such as underutilization of production facilities, labor unrest or legal challenges to our lay-off or termination plans, operation of redundant facilities due to difficulties in transferring production to achieve efficiencies; significant developments from the recent and potential changes in tariffs and trade regulation; our efforts and efforts by governmental authorities to mitigate the COVID-19 pandemic, such as travel bans, shelter-in-place orders and business closures and the related impact on resource allocations, manufacturing and supply chains; the Company’s status as a “critical”, “essential” or “life-sustaining” business in light of COVID-19 business closure laws, orders and guidance being challenged by a governmental body or other applicable authority; the Company’s ability to execute its business continuity, operational and budget plans in light of the COVID-19 pandemic; and other factors affecting our operations, markets, products, services, and prices that are set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2020. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the market risks previously disclosed in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2020, filed with the SEC on March 16, 2017.11, 2021.
Item 4.CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are: (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our CEO and CFO, believes that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must consider the benefits of controls relative to their costs. Inherent limitations within a control system include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. While the design of any system of controls is to provide reasonable assurance of the effectiveness of disclosure controls, such design is also based in part upon certain assumptions about the likelihood of future events, and such assumptions, while reasonable, may not take into account all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and may not be prevented or detected.
Changes in Internal Control over Financial Reporting
During our last fiscal quarter ended September 30, 2017,July 3, 2021, there was no change in our internal control over financial reporting that materially affected, or is reasonablyreasonable likely to materially affect, internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS
None.
Item 1A.RISK FACTORS
In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2020, filed with the SEC on March 16, 2017. The risks described11, 2021. There have been no material changes in reported risk factors from the information reported in our Annual Report on Form 10-K are notfor the only risks that we face. Additional risks not presently known to us, or that we do not currently consider significant, may also have an adverse effect on us. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.fiscal year ended December 31, 2020.
Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
Item 3.DEFAULTS UPON SENIOR SECURITIES
None.
Item 4.MINE SAFETY DISCLOSURES
Not applicable.
Item 5.OTHER INFORMATION
Not applicable.
Item 6.EXHIBITS
|
| | | | | | | |
31.110.1 | | Stock Purchase Agreement, dated June 1, 2021, by and among Vishay Precision Group, Inc., Diversified Technical Systems, Inc., the sellers identified therein, the guarantors identified therein, and Timothy J. Kippen, not individually but solely in its capacity as the representative of the Sellers and Guarantors (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 1, 2021 and incorporated herein by reference). |
31.1 | | |
31.2 | | |
32.1 | | |
32.2 | | |
101 | | Interactive Data File (Quarterly Report on Form 10-Q, for the quarterly period ended September 30, 2017,July 3, 2021, furnished in XBRL (eXtensible Business Reporting Language). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | |
| |
| VISHAY PRECISION GROUP, INC. |
| |
| /s/ William M. Clancy |
| William M. Clancy |
| Executive Vice President and Chief Financial Officer |
| (as a duly authorized officer and principal financial and accounting officer) |
Date: August 10, 2021
Date: November 8, 2017