Document

The Sensors segment revenue of $40.3 million in the second fiscal quarter of 2022 increased 29.2% from $31.2 million in the second fiscal quarter of 2021; sequentially, revenue increased 6.7% compared to $37.8 million in the first quarter of 2022. The year-over-year increase in revenues was primarily attributable to higher sales of precision resistors in the Test and Measurements market and higher revenue of our advanced sensors products primarily in Other markets (mainly for consumer and medical applications) and in our General Industrial markets for energy applications. Sequentially, the increase in revenues reflected revenue growth in our sales of precision resistors in the Test and Measurement market, partially offset by a decrease in revenues for precision resistors in the Avionics, Military and Space market.

Gross profit margin for the Sensors segment was 44.3% for the second fiscal quarter of 2022. Gross profit margin increased compared to 38.9% (or 42.9% adjusted to exclude the impact of $1.3 million of advanced sensors facility start-up costs and COVID-19-related costs) in the second fiscal quarter of 2021, and increased compared to 37.8% (or 38.6% adjusted to exclude the impact of $0.3 million of advanced sensors facility start-up costs and COVID-19 related costs) in the first fiscal quarter of 2022. The year-over-year increase in adjusted gross profit margin* was primarily due to higher volume partially offset by unfavorable foreign exchange rates, wage increases, and labor inefficiencies due to the hiring of new personnel. Sequentially, the higher adjusted gross profit margin* was primarily due to higher volume and labor efficiencies.

The Weighing Solutions segment revenue of $28.5 million in the second fiscal quarter of 2022 decreased 10.2% compared to $31.7 million in the second fiscal quarter of 2021 and was 13.1% lower than $32.8 million in the first quarter of 2022. The year-over-year and sequential decreases in revenues were primarily attributable to a decrease in revenue related to force sensor products to our OEM customers in our Other markets and lower sales of onboard weighing products to the Transportation market.

Gross profit margin for the Weighing Solutions segment was 33.7% for the second fiscal quarter of 2022, which was a decrease compared to 37.2% (or 37.6% adjusted to exclude the impact of COVID-19) in the second fiscal quarter of 2021, and a decrease compared to 36.9% in the first fiscal quarter of 2022. The year-over-year decrease in adjusted gross profit margin* was primarily due to lower volume, unfavorable foreign exchange rates, and unfavorable product mix. The sequential decrease in adjusted gross profit margin* was primarily due to lower volume and an unfavorable product mix.

The Measurement Systems segment revenue of $19.9 million in the second fiscal quarter of 2022 increased 59.2% year-over-year from $12.5 million in the second fiscal quarter of 2021 and was 15.9% higher than $17.1 million in the first fiscal quarter of 2022. The year-over-year increase in revenue was primarily attributable to the addition of revenue from Diversified Technical Systems, Inc. ("DTS"), which was acquired on June 1, 2021, and higher revenue of our KELK and Dynamic Systems, Inc. ("DSI") steel-related businesses. Sequentially, the increase in revenue was primarily due to the higher revenue of KELK and DSI products to the Steel market.

Gross profit margin for the Measurement Systems segment was 49.9% (or 53.3% adjusted to exclude the $0.7 million of purchase accounting adjustments related to the DTS acquisition), compared to 47.1% (or 52.5% adjusted to exclude the purchase accounting adjustment related to the DTS acquisition and the impact of COVID-19 of $0.7 million), in the second fiscal quarter of 2021, and 51.8% (or 54.1% adjusted to exclude the $0.4 million of purchase accounting adjustments related to the DTS acquisition) in the first fiscal quarter of 2022. The year-over-year increase in adjusted gross profit margin* was mainly due to higher revenue, partially offset by an unfavorable foreign exchange rate and a full quarter of costs for DTS compared to one month in the prior year period. Adjusted gross profit margin* sequentially reflected higher volume which was offset by unfavorable product mix and a reduction in inventory.

We define “adjusted gross profit margin" as gross profit margin before purchase accounting adjustments related to the DTS and DSI acquisitions, start-up costs related to our new advanced sensors facility, and COVID-19 costs. We define "adjusted operating margin" as operating margin before purchase accounting adjustments related to the DTS and DSI acquisitions, acquisition costs related to the DTS acquisition, start-up costs related to our new advanced sensors facility, COVID-19 costs, impairment of goodwill and indefinite-lived intangibles, and restructuring costs. We define "adjusted net earnings” and "adjusted diluted net earnings per share" as net earnings attributable to VPG stockholders before purchase accounting adjustments related to the DTS and DSI acquisitions, acquisition costs related to the DTS acquisition, start-up costs related to our new advanced sensors facility, COVID-19 costs, impairment of goodwill and indefinite-lived intangibles, restructuring costs, foreign exchange gains and losses, and associated tax effects. We define "EBITDA" as earnings before interest, taxes, depreciation, and amortization. We define "Adjusted EBITDA" as earnings before interest, taxes, depreciation, and amortization before purchase accounting adjustments related to the DTS and DSI acquisitions, acquisition costs related to the DTS acquisition, start-up costs related to our new advanced sensors facility, COVID-19 costs, impairment of goodwill and indefinite-lived intangibles, restructuring costs, foreign exchange gains and losses, and associated tax effects. "Adjusted free cash flow" for the second fiscal quarter of 2022 is defined as the amount of cash generated from operating activities ($9.0 million), in excess of our capital expenditures ($4.5 million), net of proceeds, if any, from the sale of assets ($0.4 million).

Management believes that these non-GAAP measures are useful to investors because each presents what management views as our core operating results for the relevant period. The adjustments to the 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. These reconciling items are indicated on the accompanying reconciliation schedules and are more fully described in VPG’s financial statements presented in our Annual Report on Form 10-K and our Quarterly Reports on Forms 10-Q.

A conference call will be held on Tuesday, August 9, 2022 at 9:00 a.m. ET (8:00 a.m. CT). To access the conference call, interested parties may call 1-844-200-6205 or internationally +1-929-526-1599 and use passcode 289177, or log on to the investor relations page of the VPG website at ir.vpgsensors.com. A replay will be available approximately one hour after the completion of the call by calling toll-free 1-866-813-9403 or internationally +1-929-458-6194 and by using passcode 615215. The replay will also be available on the “Events” page of investor relations section of the VPG website at ir.vpgsensors.com.

From time to time, information provided by us, including, but not limited to, statements in this press release, or other statements made by or on our behalf, may contain or constitute "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; impact of inflation, global labor and supply chain challenges; difficulties or delays in identifying, negotiating and completing acquisitions and integrating acquired 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; our compliance with applicable laws, such as export control laws, and related governmental investigations; 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; our 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; our ability to execute our new corporate strategy and business continuity, operational and budget plans; 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, 2021. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.


VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)

	Fiscal quarter ended
	July 2, 2022			July 3, 2021
Net revenues	$	88,618		$	75,339
Costs of products sold	51,284			45,541
Gross profit	37,334			29,798
Gross profit margin	42.1		%	39.6		%

Selling, general, and administrative expenses	25,879			22,453
Acquisition costs	—			1,198
Impairment of goodwill and indefinite-lived intangibles	—			1,223

Restructuring costs	904			—
Operating income	10,551			4,924
Operating margin	11.9		%	6.5		%

Other income (expense):
Interest expense	(428)			(273)
Other	3,344			(326)
Other income (expense)	2,916			(599)

Income before taxes	13,467			4,325

Income tax expense	2,587			262

Net earnings	10,880			4,063
Less: net earnings attributable to noncontrolling interests	125			143
Net earnings attributable to VPG stockholders	$	10,755		$	3,920

Basic earnings per share attributable to VPG stockholders	$	0.79		$	0.29
Diluted earnings per share attributable to VPG stockholders	$	0.79		$	0.29

Weighted average shares outstanding - basic	13,648			13,618
Weighted average shares outstanding - diluted	13,692			13,646


VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)

	Six fiscal months ended
	July 2, 2022			July 3, 2021
Net revenues	$	176,283		$	145,928
Costs of products sold	103,699			87,508
Gross profit	72,584			58,420
Gross profit margin	41.2		%	40.0		%

Selling, general, and administrative expenses	52,553			44,636
Acquisition costs	—			1,198
Impairment of goodwill and indefinite-lived intangibles	—			1,223

Restructuring costs	1,165			—
Operating income	18,866			11,363
Operating margin	10.7		%	7.8		%

Other income (expense):
Interest expense	(757)			(578)
Other	3,783			247
Other income (expense)	3,026			(331)

Income before taxes	21,892			11,032

Income tax expense	4,328			2,026

Net earnings	17,564			9,006
Less: net earnings attributable to noncontrolling interests	453			125
Net earnings attributable to VPG stockholders	$	17,111		$	8,881

Basic earnings per share attributable to VPG stockholders	$	1.25		$	0.65
Diluted earnings per share attributable to VPG stockholders	$	1.25		$	0.65

Weighted average shares outstanding - basic	13,643			13,605
Weighted average shares outstanding - diluted	13,684			13,638


VISHAY PRECISION GROUP, INC.
Consolidated Condensed Balance Sheets
(In thousands)
	July 2, 2022		December 31, 2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	79,429	$	84,335
Accounts receivable, net	58,674		58,265
Inventories:
Raw materials	29,484		25,464
Work in process	28,126		23,851
Finished goods	26,728		27,112
Inventories, net	84,338		76,427


Prepaid expenses and other current assets	15,228		15,916

Total current assets	237,669		234,943

Property and equipment:
Land	4,119		4,241
Buildings and improvements	68,339		68,778
Machinery and equipment	122,388		122,202
Software	9,303		8,871
Construction in progress	8,305		7,747
Accumulated depreciation	(130,506)		(130,619)
Property and equipment, net	81,948		81,220

Goodwill	45,872		45,830
Intangible assets, net	50,426		52,437
Operating lease right-of-use assets	25,783		27,764
Other assets	16,680		19,695
Total assets	$	458,378	$	461,889


VISHAY PRECISION GROUP, INC.
Consolidated Condensed Balance Sheets
(In thousands)
	July 2, 2022		December 31, 2021
	(Unaudited)
Liabilities and equity
Current liabilities:
Trade accounts payable	$	13,172	$	14,876
Payroll and related expenses	17,872		23,772
Other accrued expenses	23,562		17,596
Income taxes	478		3,774
Current portion of operating lease liabilities	4,343		4,610

Total current liabilities	59,427		64,628

Long-term debt, less current portion	60,758		60,714
Deferred income taxes	6,096		5,848
Operating lease liabilities	21,749		25,140
Other liabilities	14,157		16,264
Accrued pension and other postretirement costs	10,841		12,253
Total liabilities	173,028		184,847

Commitments and contingencies

Equity:
Common stock	1,325		1,322
Class B convertible common stock	103		103
Treasury stock	(8,765)		(8,765)
Capital in excess of par value	199,749		199,151
Retained earnings	137,407		120,296
Accumulated other comprehensive loss	(44,581)		(35,008)
Total Vishay Precision Group, Inc. stockholders' equity	285,238		277,099
Noncontrolling interests	112		(57)
Total equity	285,350		277,042
Total liabilities and equity	$	458,378	$	461,889


VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)

	Six Fiscal Months Ended
	July 2, 2022		July 3, 2021
Operating activities
Net earnings	$	17,564	$	9,006
Adjustments to reconcile net earnings to net cash provided by operating activities:
Impairment of goodwill and indefinite-lived intangibles	—		1,223
Depreciation and amortization	7,622		7,108

Loss (gain) on sale of property and equipment	(178)		44
Reclassification of foreign currency translation adjustment related to disposal of subsidiary	191		—
Share-based compensation expense	1,024		942
Inventory write-offs for obsolescence	866		1,135
Deferred income taxes	1,116		(1,110)
Other	(3,485)		(1,820)
Net changes in operating assets and liabilities:
Accounts receivable, net	(3,434)		(776)
Inventories, net	(10,739)		(7,744)
Prepaid expenses and other current assets	254		314
Trade accounts payable	14		1,715
Other current liabilities	(2,059)		2,341
Net cash provided by operating activities	8,756		12,378

Investing activities
Capital expenditures	(8,815)		(8,309)
Proceeds from sale of property and equipment	380		16

Purchase of business, net of cash acquired	—		(47,216)
Net cash used in investing activities	(8,435)		(55,509)

Financing activities

Principal payments on long-term debt	—		(18)

Proceeds from revolving facility	—		20,000



Distributions to noncontrolling interests	(284)		(167)
Payments of employee taxes on certain share-based arrangements	(435)		(846)
Net cash (used in) provided by financing activities	(719)		18,969
Effect of exchange rate changes on cash and cash equivalents	(4,508)		(820)
Decrease in cash and cash equivalents	(4,906)		(24,982)

Cash and cash equivalents at beginning of period	84,335		98,438
Cash and cash equivalents at end of period	$	79,429	$	73,456

Supplemental disclosure of investing transactions:
Capital expenditures purchased	$	(8,432)	$	(6,353)
Capital expenditures accrued but not yet paid	$	2,684	$	606


VISHAY PRECISION GROUP, INC.
Reconciliation of Consolidated Adjusted Gross Profit, Operating Income, Net Earnings Attributable to VPG Stockholders and Diluted Earnings Per Share
(Unaudited - In thousands)

	Gross Profit						Operating Income						Net Earnings Attributable to VPG Stockholders				Diluted Earnings Per share
Three months ended	July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021			July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
As reported - GAAP	$	37,334		$	29,798		$	10,551		$	4,924		$	10,755	$	3,920	$	0.79	$	0.29
As reported - GAAP Margins	42.1		%	39.6		%	11.9		%	6.5		%
Acquisition purchase accounting adjustments	679			919			679			919			679		919		0.05		0.07
Acquisition costs				—			—			1,198			—		1,198		—		0.09
COVID-19 impact	—			(26)			—			(242)			—		(242)		—		(0.02)
Start-up costs	—			1,159			—			1,159			—		1,159		—		0.08
Impairment of goodwill and indefinite-lived intangibles				—			—			1,223			—		1,223		—		0.09
Restructuring costs				—			904			—			904		—		0.07		—
Foreign exchange (gain)/loss				—						—			(3,380)		174		(0.25)		0.01
Less: Tax effect of reconciling items and discrete tax items				—						—			(377)		1,639		(0.02)		0.12
As Adjusted - Non GAAP	$	38,013		$	31,850		$	12,134		$	9,181		$	9,335	$	6,712	$	0.68	$	0.49
As Adjusted - Non GAAP Margins	42.9		%	42.3		%	13.7		%	12.2		%


VISHAY PRECISION GROUP, INC.
Reconciliation of Consolidated Adjusted Gross Profit, Operating Income, Net Earnings Attributable to VPG Stockholders and Diluted Earnings Per Share
(Unaudited - In thousands)


	Gross Profit						Operating Income						Net Earnings Attributable to VPG Stockholders				Diluted Earnings Per share
Six fiscal months ended	July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021			July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
As reported - GAAP	$	72,584		$	58,420		$	18,866		$	11,363		$	17,111	$	8,881	$	1.25	$	0.65
As reported - GAAP Margins	41.2		%	40.0		%	10.7		%	7.8		%
Acquisition purchase accounting adjustments	1,050			930			1,050			930			1,050		930		0.08		0.07
Acquisition costs				—			—			1,198			—		1,198		—		0.09
COVID-19 impact	138			(177)			138			(685)			138		(685)		0.01		(0.05)
Start-up costs	150			1,288			150			1,288			150		1,288		0.01		0.09
Impairment of goodwill and indefinite-lived intangibles	—			—			—			1,223			—		1,223		—		0.09
Restructuring costs							1,165			—			1,165		—		0.09		—
Foreign exchange (gain)/loss													(3,934)		(561)		(0.29)		(0.04)
Less: Tax effect of reconciling items and discrete tax items													(302)		1,406		(0.02)		0.10
As Adjusted - Non GAAP	$	73,922		$	60,461		$	21,369		$	15,317		$	15,982	$	10,868	1.17		$	0.80
As Adjusted - Non GAAP Margins	41.9		%	41.4		%	12.1		%	10.5		%


VISHAY PRECISION GROUP, INC.
Reconciliation of Adjusted Gross Profit by segment
(Unaudited - In thousands)

	Fiscal quarter ended
	July 2, 2022			July 3, 2021			April 2, 2022
Sensors
As reported - GAAP	$	17,831		$	12,120		$	14,286
As reported - GAAP Margins	44.3		%	38.9		%	37.8		%


COVID-19 impact	—			94			121
Start-up costs	$	—		$	1,159		$	150
As Adjusted - Non GAAP	$	17,831		$	13,373		$	14,557
As Adjusted - Non GAAP Margins	44.3		%	42.9		%	38.6		%

Weighing Solutions
As reported - GAAP	$	9,585		$	11,791		$	12,079
As reported - GAAP Margins	33.7		%	37.2		%	36.9		%


COVID-19 impact	—			127			—

As Adjusted - Non GAAP	$	9,585		$	11,918		$	12,079
As Adjusted - Non GAAP Margins	33.7		%	37.6		%	36.9		%

Measurement Systems
As reported - GAAP	$	9,918		$	5,887		$	8,885
As reported - GAAP Margins	49.9		%	47.1		%	51.8		%
Acquisition purchase accounting adjustments	679			919			371

COVID-19 impact	—			(247)			17

As Adjusted - Non GAAP	$	10,597		$	6,559		$	9,273
As Adjusted - Non GAAP Margins	53.3		%	52.5		%	54.1		%


VISHAY PRECISION GROUP, INC.
Reconciliation of Adjusted EBITDA
(Unaudited - In thousands)
	Fiscal quarter ended
	July 2, 2022			July 3, 2021			April 2, 2022
Net earnings attributable to VPG stockholders	$	10,755		$	3,920		$	6,356
Interest Expense	428			273			329
Income tax expense	2,587			262			1,741
Depreciation	2,832			2,829			2,853
Amortization	967			757			970
EBITDA	17,569			$	8,041		$	12,249
EBITDA MARGIN	19.8		%	10.7		%	14.0		%
Impairment of goodwill and indefinite-lived intangibles	—			1,223			—
Acquisition purchase accounting adjustments	679			919			371
Acquisition costs	—			1,198			—
Restructuring costs	904			—			261
COVID-19 impact	—			(242)			138
Start-up costs	—			1,159			150
Foreign exchange (gain)/loss	(3,380)			174			(554)
ADJUSTED EBITDA	$	15,772		$	12,472		$	12,615
ADJUSTED EBITDA MARGIN	17.8		%	16.6		%	14.4		%