GlobeNewswire Inc | Nov 3, 2020 06:30AM EST

November 03, 2020

MALVERN, Pa., Nov. 03, 2020 (GLOBE NEWSWIRE) -- Vishay Precision Group, Inc. (NYSE: VPG), a leading producer of precision sensors and sensor-based systems, today announced its results for its fiscal 2020 third quarter ended September26, 2020.

Third Quarter Highlights:

-- Revenues of $67.5 million increased 0.2% from a year ago. -- Gross profit margin, on both an as-reported and adjusted* basis, was 40.5% as compared to 38.3% reported a year ago. -- Operating margin was 12.0% as compared to 9.2% reported a year ago. -- Adjusted operating margin* was 11.7%, as compared to 10.0% reported a year ago. -- Diluted earnings per share of $0.41 as compared to $0.33 reported a year ago. -- Adjusted diluted earnings per share* of $0.40, as compared to $0.37 reported a year ago. -- Cash from operating activities was $6.1 million with adjusted free cash flow* of $1.4 million.

Ziv Shoshani, Chief Executive Officer of VPG, commented, "Our third-quarter sales reflected sequential growth across all three of our reporting segments and was driven by ongoing strength in our advanced sensors products. Our Force Sensors operation in India, which had been impacted by COVID-related constraints, is now operating at full capacity. Orders in the third quarter grew sequentially driven primarily by strength in our consumer-related markets, and the partial recovery in some of our other end-markets which continue to face headwinds from the pandemic."

Mr. Shoshani said: "I am pleased with our financial performance for the third quarter, as we achieved solid margins, grew our earnings per share and continued to generate strong cash from operations. This performance reflects both the short-term cost controls we have in place as well as the cost-savings initiatives we have implemented across the business over the past few years."

Third Quarter and Nine Month Financial Trends:

The Company's third fiscal quarter 2020 net earnings attributable to VPG stockholders were $5.6 million, or $0.41 per diluted share, compared to $4.5 million, or $0.33 per diluted share, in the third fiscal quarter of 2019. Foreign currency exchange rates for the third quarter of 2020 increased net income by $0.2 million, or $0.01 per diluted share, relative to the prior year period.

In the nine fiscal months ended September 26, 2020 net earnings attributable to VPG stockholders were $10.7 million, or $0.78 per diluted share, compared to $18.3 million, or $1.35 per diluted share, in the nine fiscal months ended September28, 2019. Foreign currency exchange rates for the nine fiscal months ended September 26, 2020 decreased net income by $0.5 million, or $0.04 per diluted share, relative to the prior year period.

The third fiscal quarter 2020 adjusted net earnings* attributable to VPG stockholders were $5.5 million, or $0.40 per diluted share, compared to $5.0 million, or $0.37 per diluted share in the third fiscal quarter of 2019.

In the nine fiscal months ended September 26, 2020 adjusted net earnings* attributable to VPG stockholders were $12.0 million, or $0.88 per diluted share, compared to $19.4 million, or $1.43 per diluted share in the nine fiscal months ended September28, 2019.

Segments

Foil Technology Products segment revenues increased 2.5% to $32.9 million in the third fiscal quarter of 2020, up from $32.1 million in the third fiscal quarter of 2019; sequentially, revenue increased 3.5% compared to $31.8 million in the second quarter of 2020. The year-over-year and sequential increases in revenues were primarily attributable to an increase in our advanced sensors product line primarily in our consumer-related markets and an increase in our Pacific Instruments product line in the avionics, military and space market, which partially offset a decrease in precision resistor sales in the test and measurement market.

Gross profit margin for the Foil Technology Products segment was 41.1% (or, 41.6% adjusted to exclude the impact of COVID-19) for the third fiscal quarter of 2020, an increase compared to 37.3% in the third fiscal quarter of 2019, and a decrease compared to 41.8% (or, 41.7% adjusted to exclude the impact of COVID-19) in the second fiscal quarter of 2020. The year-over-year increase in adjusted gross profit margin was primarily due to manufacturing efficiencies and cost controls. Sequentially, adjusted gross profit margin was comparable to the second quarter.

Force Sensors segment revenues decreased 14.5% to $13.9 million in the third fiscal quarter of 2020, compared to $16.2 million in the third fiscal quarter of 2019, reflecting the impact of the COVID-19 pandemic on our India facility. Sequentially, revenue increased 55.5% compared to $8.9 million in the second quarter of 2020 as a result of COVID-19 mitigation restrictions being lifted as of July 1, 2020 by the Indian government and the subsequent ramping up of production without limitations at our India operations during the third quarter of 2020. The sequential revenue increase reflected higher sales in the industrial weighing and our other markets.

Gross profit margin for the Force Sensors segment was 30.5% (or, 31.2% adjusted to exclude the impact of COVID-19) for the third fiscal quarter of 2020, which was an increase compared to 30.4% in the third fiscal quarter of 2019, and 11.6% (or, 19.6% adjusted to exclude the impact of COVID-19) in the second fiscal quarter of 2020. The year-over-year increase in adjusted gross profit margin was primarily due to cost controls and a positive impact of foreign exchange, partially offset by lower volume due to the COVID-19 impacts mentioned above and a reduction in export grants. Sequentially, adjusted gross profit margin increased primarily due to higher volume.

Weighing and Control Systems segment revenues increased 8.8% year-over-year to $20.8 million in the third fiscal quarter of 2020, up from $19.1 million in the third fiscal quarter of 2019. Sequentially, revenue increased 12.5% from $18.4 million in the second fiscal quarter of 2020. The year-over-year increase in revenues was primarily attributable to the additional revenues of Dynamic Systems Inc. ("DSI") acquired in November 2019, which was partially offset by lower volume of our onboard weighing products for the transportation market and lower KELK steel-related sales. The sequential increase in revenue was primarily attributable to the DSI product line and an increase in sales of our onboard weighing products for the transportation market, which was partially offset by lower KELK steel-related sales.

The third fiscal quarter 2020 gross profit margin for the Weighing and Control Systems segment was 46.2% (or, 44.9% adjusted to exclude the purchasing accounting adjustments related to the DSI acquisition and the impact of COVID-19), compared to 46.6% from the third fiscal quarter of 2019, and 47.6% (or, 47.3% adjusted to exclude the purchase accounting adjustments related to the DSI acquisition and the impact of COVID-19) in the second fiscal quarter of 2020. The year-over-year decrease in adjusted gross profit margin was mostly due to unfavorable product mix, partially offset by higher volume. The sequential decrease in adjusted gross profit margin was due to unfavorable product mix and a reduction in inventory, partially offset by higher volume.

Impacts From the Global COVID-19 Pandemic:

As the COVID-19 pandemic began to unfold around the world, the Company took measures to protect its employees and customers. Those measures included suspending business travel, enabling certain employees to work from home, implementing workplace distancing, and adjusting work shifts to minimize employees contact with other employees. While the majority of the Companys operations were able to operate despite the impacts from the COVID-19 pandemic, the Companys Force Sensors manufacturing facility in India had operated at partial capacity as a result of government-mandated restrictions. In the third quarter of 2020, these restrictions reduced Force Sensors revenue by approximately $2.5 million and Force Sensors operating income by approximately $1.0 million due to the lower volume. For the first nine months of 2020, these restrictions impacted Force Sensors revenue in aggregate by approximately $10 million from pre-COVID runrate levels and reduced its operating income by approximately $4 million due to the lower revenue. The Company received approval from the Indian government to operate its facility without limitation on July 1, 2020, and as of the end of the third quarter the facility was operating at full capacity.

As of November 3, 2020, all of the Companys facilities are operating without limitations with the Company implementing COVID-19 best practices with respect to working conditions and enabling some employees to work remotely where possible. Nonetheless, given the impacts to date and the ongoing uncertainty concerning the magnitude of the impact and duration of the COVID-19 pandemic, the ongoing economic disruption may continue to adversely affect the Companys business and financial results.

Near-Term OutlookDespite the ongoing uncertainties and economic impacts of the global pandemic, we expect net revenues to grow sequentially and be in the range of $69 million to $75 million for the fourth fiscal quarter of 2020, at constant third fiscal quarter 2020 exchange rates, concluded Mr. Shoshani.

*Use of Non-GAAP Financial Information

We define adjusted gross profit margin" as gross profit margin before purchase accounting adjustments related to the DSI acquisition and the impacts of COVID-19 costs. We define "adjusted operating margin" as operating margin before purchase accounting adjustments, COVID-19 costs, restructuring costs, and executive severance costs. We define "adjusted net earnings and "adjusted net earnings per share" as net earnings attributable to VPG stockholders before purchase accounting adjustments, COVID-19 costs, restructuring costs, executive severance costs, and associated tax effects. "Adjusted free cash flow" for the third fiscal quarter of 2020 is defined as the amount of cash generated from operating activities ($6.1 million), in excess of our capital expenditures ($4.8 million), net of proceeds, if any, from the sale of assets ($0.1 million). Management believes that these non-GAAP measures are useful to investors because each presents what management views as our core operating performance 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. These reconciling items are indicated on the accompanying reconciliation schedules and are more fully described in VPGs financial statements presented in our Annual Report on Form 10-K and its Quarterly Reports on Forms 10-Q.

Conference Call and Webcast

A conference call will be held today (November 3) at 10:00 a.m. ET (9:00 a.m. CT). To access the conference call, interested parties may call 1-888-317-6003 or internationally 1-412-317-6061 and use passcode 4268514, or log on to the investor relations page of the VPG website at www.vpgsensors.com. A replay will be available approximately one hour after the completion of the call by calling toll-free 1-877-344-7529 or internationally 1-412-317-0088 and by using the passcode 10148294. The replay will also be available on the investor relations page of the VPG website at www.vpgsensors.com for a limited time.

About VPG

Vishay Precision Group, Inc. (VPG) is an internationally recognized designer, manufacturer and marketer of: components based on its resistive foil technology; sensors; and sensor-based measurement systems specializing in the growing markets of stress, force, weight, pressure, and current measurements. VPG is a market leader of foil technology products, providing ongoing technology innovations in precision foil resistors and foil strain gages, which are the foundation of the company's force sensors products and its weighing and control systems. The product portfolio consists of a variety of well-established brand names recognized for precision and quality in the marketplace. To learn more, visit VPG at www.vpgsensors.com.

Forward-Looking Statements

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 DSI); 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 Companys 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 Companys 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, 2019 and Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 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.

VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Operations(Unaudited - In thousands, except per share amounts) Fiscal quarter ended September 26, September 28, 2020 2019Net revenues $ 67,525 $ 67,421 Costs of products sold 40,176 41,631 Gross profit 27,349 25,790 Gross profit margin 40.5 % 38.3 % Selling, general, and administrative expenses 19,144 19,057 Executive severance costs ? ? Restructuring costs 84 547 Operating income 8,121 6,186 Operating margin 12.0 % 9.2 % Other income (expense): Interest expense (309 ) (324 )Other (39 ) 547 Other income (expense) (348 ) 223 Income before taxes 7,773 6,409 Income tax expense 2,109 1,879 Net earnings 5,664 4,530 Less: net earnings attributable to 66 21 noncontrolling interestsNet earnings attributable to VPG stockholders $ 5,598 $ 4,509 Basic earnings per share attributable to VPG $ 0.41 $ 0.33 stockholdersDiluted earnings per share attributable to VPG $ 0.41 $ 0.33 stockholders Weighted average shares outstanding - basic 13,575 13,523 Weighted average shares outstanding - diluted 13,637 13,607

VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Operations(Unaudited - In thousands, except per share amounts) Nine fiscal months ended September 26, September 28, 2020 2019Net revenues $ 194,367 $ 214,816 Costs of products sold 118,843 127,366 Gross profit 75,524 87,450 Gross profit margin 38.9 % 40.7 % Selling, general, and administrative expenses 58,075 59,401 Executive severance costs ? 611 Restructuring costs 713 547 Operating income 16,736 26,891 Operating margin 8.6 % 12.5 % Other income (expense): Interest expense (1,037 ) (1,071 )Other (629 ) (385 )Other income (expense) (1,666 ) (1,456 ) Income before taxes 15,070 25,435 Income tax expense 4,367 6,999 Net earnings 10,703 18,436 Less: net earnings attributable to 34 119 noncontrolling interestsNet earnings attributable to VPG stockholders $ 10,669 $ 18,317 Basic earnings per share attributable to VPG $ 0.79 $ 1.36 stockholdersDiluted earnings per share attributable to VPG $ 0.78 $ 1.35 stockholders Weighted average shares outstanding - basic 13,562 13,512 Weighted average shares outstanding - diluted 13,611 13,588

VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) September 26, 2020 December 31, 2019 (Unaudited) Assets Current assets: Cash and cash equivalents $ 89,795 $ 86,910 Accounts receivable, net 44,966 43,198 Inventories: Raw materials 22,770 21,701 Work in process 24,627 23,128 Finished goods 19,062 22,066 Inventories, net 66,459 66,895 Prepaid expenses and other current 15,613 15,558 assetsTotal current assets 216,833 212,561 Property and equipment, at cost: Land 4,217 4,243 Buildings and improvements 64,586 52,708 Machinery and equipment 113,519 111,492 Software 9,718 9,384 Construction in progress 2,261 2,485 Accumulated depreciation (125,583 ) (119,042 )Property and equipment, net 68,718 61,270 Goodwill 34,724 35,018 Intangible assets, net 32,170 34,198 Operating lease right-of-use assets 21,846 8,691 Other assets 18,415 18,675 Total assets $ 392,706 $ 370,413

VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) September 26, December 31, 2020 2019 (Unaudited) Liabilities and equity Current liabilities: Trade accounts payable $ 9,108 $ 8,869 Payroll and related expenses 15,945 16,312 Other accrued expenses 16,482 16,126 Income taxes 1,153 261 Current portion of operating lease 4,179 2,827 liabilitiesCurrent portion of long-term debt 52 44,516 Total current liabilities 46,919 88,911 Long-term debt, less current portion 40,604 17 Deferred income taxes 3,477 3,478 Operating lease liabilities 18,385 5,811 Other liabilities 14,894 14,775 Accrued pension and other postretirement 15,883 15,669 costsTotal liabilities 140,162 128,661 Commitments and contingencies Equity: Common stock 1,317 1,312 Class B convertible common stock 103 103 Treasury stock (8,765 ) (8,765 )Capital in excess of par value 197,514 197,125 Retained earnings 99,957 89,288 Accumulated other comprehensive loss (37,742 ) (37,703 )Total Vishay Precision Group, Inc. 252,384 241,360 stockholders' equityNoncontrolling interests 160 392 Total equity 252,544 241,752 Total liabilities and equity $ 392,706 $ 370,413

VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Cash Flows (Unaudited - In thousands) Nine Fiscal Months Ended September September 26, 2020 28, 2019Operating activities Net earnings $ 10,703 $ 18,436 Adjustments to reconcile net earnings to net cash provided by operating activities:Depreciation and amortization 9,334 8,639 Loss from extinguishment of debt 30 ? Gain on sale of property and equipment (140 ) (100 )Reclassification of foreign currency translation ? (827 )adjustment related to disposal of subsidiaryShare-based compensation expense 1,137 1,592 Inventory write-offs for obsolescence 1,873 1,937 Deferred income taxes 127 605 Other 364 (2 )Net changes in operating assets and liabilities: Accounts receivable, net (1,541 ) 8,348 Inventories, net (1,214 ) (4,138 )Prepaid expenses and other current assets (75 ) (5,788 )Trade accounts payable 605 (1,353 )Other current liabilities 1,631 (2,727 )Net cash provided by operating activities 22,834 24,622 Investing activities Capital expenditures (15,815 ) (8,621 )Proceeds from sale of property and equipment 423 265 Adjustment to purchase price of a business 156 ? Net cash used in investing activities (15,236 ) (8,356 ) Financing activities Principal payments on long-term debt (3,459 ) (3,461 )Debt issuance costs (402 ) ? Purchase of noncontrolling interest (253 ) ? Contributions from (distributions to) noncontrolling 35 (45 )interestsPayments of employee taxes on certain share-based (813 ) (854 )arrangementsNet cash used in financing activities (4,892 ) (4,360 )Effect of exchange rate changes on cash and cash 179 (766 )equivalentsIncrease in cash and cash equivalents 2,885 11,140 Cash and cash equivalents at beginning of period 86,910 90,159 Cash and cash equivalents at end of period $ 89,795 $ 101,299 Supplemental disclosure of investing transactions: Capital expenditures purchased $ (15,395 ) $ (7,383 )Capital expenditures accrued but not yet paid $ 762 $ 613 Supplemental disclosure of financing transactions: Non-cash extinguishment of long-term debt facility $ (7,020 ) $ ? (see Note 7)Non-cash refinancing of revolving facility (see Note $ 7,020 $ ? 7)

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) Net Earnings Diluted Earnings Gross Profit Operating Income Attributable to VPG Per share StockholdersThree months September September September September September September September Septemberended 26, 2020 28, 2019 26, 2020 28, 2019 26, 2020 28, 2019 26, 2020 28, 2019As reported - $ 27,349 $ 25,790 $ 8,121 $ 6,186 $ 5,598 $ 4,509 $ 0.41 $ 0.33 GAAPAs reported - 40.5 % 38.3 % 12.0 % 9.2 % GAAP MarginsAcquisitionpurchase 4 ? 4 ? 4 ? ? ? accountingadjustmentsCOVID-19 (22 ) (320 ) (320 ) (0.03 ) impactExecutiveSeverance ? ? ? ? ? costsRestructuring ? 84 547 84 547 0.01 0.04 costsLess: Taxeffect ofreconciling ? ? (84 ) 80 (0.01 ) ? items anddiscrete taxitemsAs Adjusted - $ 27,331 $ 25,790 $ 7,889 $ 6,733 $ 5,450 $ 4,976 $ 0.40 $ 0.37 Non GAAPAs Adjusted -Non GAAP 40.5 % 38.3 % 11.7 % 10.0 % Margins Net Earnings Diluted Earnings Gross Profit Operating Income Attributable to VPG Per share StockholdersNine fiscal September September September September September September September Septembermonths ended 26, 2020 28, 2019 26, 2020 28, 2019 26, 2020 28, 2019 26, 2020 28, 2019As reported - $ 75,524 $ 87,450 $ 16,736 $ 26,891 $ 10,669 $ 18,317 $ 0.78 $ 1.35 GAAPAs reported - 38.9 % 40.7 % 8.6 % 12.5 % GAAP MarginsAcquisitionpurchase 560 ? 560 ? 560 ? 0.04 ? accountingadjustmentsCOVID-19 536 123 123 0.01 impactExecutiveSeverance ? ? 611 611 ? 0.04 costsRestructuring ? ? 713 547 713 547 0.05 0.04 costsLess: Taxeffect ofreconciling ? ? ? ? 59 80 ? ? items anddiscrete taxitemsAs Adjusted - $ 76,620 $ 87,450 $ 18,132 $ 28,049 $ 12,006 $ 19,395 0.88 $ 1.43 Non GAAPAs Adjusted -Non GAAP 39.4 % 40.7 % 9.3 % 13.1 % Margins

VISHAY PRECISION GROUP, INC. Reconciliation of Adjusted Gross Profit by segment(Unaudited - In thousands) Fiscal quarter ended September 26, September 28, June 27, 2020 2019 2020Foil Technology Products As reported - GAAP $ 13,515 $ 11,970 $ 13,286 As reported - GAAP Margins 41.1 % 37.3 % 41.8 %COVID-19 impact 159 ? (39 )As Adjusted - Non GAAP $ 13,674 $ 11,970 $ 13,247 As Adjusted - Non GAAP Margins 41.6 % 37.3 % 41.7 % Force Sensors As reported - GAAP $ 4,235 $ 4,932 $ 1,038 As reported - GAAP Margins 30.5 % 30.4 % 11.6 %COVID-19 impact 94 ? 706 As Adjusted - Non GAAP $ 4,329 $ 4,932 $ 1,744 As Adjusted - Non GAAP Margins 31.2 % 30.4 % 19.6 % Weighing and Control Systems As reported - GAAP $ 9,599 $ 8,888 $ 8,786 As reported - GAAP Margins 46.2 % 46.6 % 47.6 %Acquisition purchase accounting 4 ? 41 adjustmentsCOVID-19 impact (275 ) ? (109 )As Adjusted - Non GAAP $ 9,328 $ 8,888 $ 8,718 As Adjusted - Non GAAP Margins 44.9 % 46.6 % 47.3 %

Contact:Steve CantorVishay Precision Group, Inc.781-222-3516steve.cantor@vpgsensors.com