UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 20211, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 1-34679
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 every Interactive Data File required to be submitted 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 such files. ý Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
| | | | | | | | | | | | | | |
Large accelerated filer | ¨ | | Accelerated filer | ý |
Non-accelerated filer | ¨ | | 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 12, 2021,8, 2022, the registrant had 12,603,22012,550,775 shares of its common stock and 1,022,887 shares of its Class B convertible common stock outstanding.
VISHAY PRECISION GROUP, INC.
FORM 10-Q
October 2, 20211, 2022
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
| VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) | VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) | VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) |
| | October 2, 2021 | | December 31, 2020 | | October 1, 2022 | | December 31, 2021 |
| | (Unaudited) | | | | (Unaudited) | | |
Assets | Assets | | Assets | |
Current assets: | Current assets: | | Current assets: | |
Cash and cash equivalents | Cash and cash equivalents | $ | 75,544 | | | $ | 98,438 | | Cash and cash equivalents | $ | 79,910 | | | $ | 84,335 | |
Accounts receivable, net | Accounts receivable, net | 53,711 | | | 45,339 | | Accounts receivable, net | 55,151 | | | 58,265 | |
Inventories: | Inventories: | | Inventories: | |
Raw materials | Raw materials | 26,071 | | | 21,894 | | Raw materials | 31,036 | | | 25,464 | |
Work in process | Work in process | 27,142 | | | 21,534 | | Work in process | 27,903 | | | 23,851 | |
Finished goods | Finished goods | 25,279 | | | 18,920 | | Finished goods | 26,384 | | | 27,112 | |
Inventories, net | Inventories, net | 78,492 | | | 62,348 | | Inventories, net | 85,323 | | | 76,427 | |
| | Prepaid expenses and other current assets | Prepaid expenses and other current assets | 19,463 | | | 15,761 | | Prepaid expenses and other current assets | 16,160 | | | 15,916 | |
| Total current assets | Total current assets | 227,210 | | | 221,886 | | Total current assets | 236,544 | | | 234,943 | |
| Property and equipment: | Property and equipment: | | Property and equipment: | |
Land | Land | 4,248 | | | 4,282 | | Land | 4,029 | | | 4,241 | |
Buildings and improvements | Buildings and improvements | 68,616 | | | 67,581 | | Buildings and improvements | 69,769 | | | 68,778 | |
Machinery and equipment | Machinery and equipment | 119,826 | | | 115,717 | | Machinery and equipment | 122,412 | | | 122,202 | |
Software | Software | 8,386 | | | 10,026 | | Software | 9,136 | | | 8,871 | |
Construction in progress | Construction in progress | 3,930 | | | 6,341 | | Construction in progress | 6,364 | | | 7,747 | |
Accumulated depreciation | Accumulated depreciation | (128,698) | | | (128,931) | | Accumulated depreciation | (129,225) | | | (130,619) | |
Property and equipment, net | Property and equipment, net | 76,308 | | | 75,016 | | Property and equipment, net | 82,485 | | | 81,220 | |
| Goodwill | Goodwill | 45,560 | | | 31,105 | | Goodwill | 45,460 | | | 45,830 | |
Intangible assets, net | Intangible assets, net | 53,327 | | | 32,039 | | Intangible assets, net | 49,081 | | | 52,437 | |
Operating lease right-of-use assets | Operating lease right-of-use assets | 27,405 | | | 21,788 | | Operating lease right-of-use assets | 24,737 | | | 27,764 | |
Other assets | Other assets | 20,113 | | | 20,053 | | Other assets | 15,890 | | | 19,695 | |
Total assets | Total assets | $ | 449,923 | | | $ | 401,887 | | Total assets | $ | 454,197 | | | $ | 461,889 | |
|
Continues on the following page.
-3-
| VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) | VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) | VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) |
| | October 2, 2021 | | December 31, 2020 | | October 1, 2022 | | December 31, 2021 |
Liabilities and equity | Liabilities and equity | | Liabilities and equity | (Unaudited) | |
Current liabilities: | Current liabilities: | | Current liabilities: | |
Trade accounts payable | Trade accounts payable | $ | 13,103 | | | $ | 10,487 | | Trade accounts payable | $ | 10,234 | | | $ | 14,876 | |
Payroll and related expenses | Payroll and related expenses | 17,867 | | | 17,595 | | Payroll and related expenses | 20,658 | | | 23,772 | |
Other accrued expenses | Other accrued expenses | 19,291 | | | 13,843 | | Other accrued expenses | 21,863 | | | 17,596 | |
Income taxes | Income taxes | 679 | | | 1,593 | | Income taxes | 818 | | | 3,774 | |
Current portion of operating lease liabilities | Current portion of operating lease liabilities | 4,415 | | | 4,011 | | Current portion of operating lease liabilities | 4,119 | | | 4,610 | |
Current portion of long-term debt | — | | | 18 | | |
| Total current liabilities | Total current liabilities | 55,355 | | | 47,547 | | Total current liabilities | 57,692 | | | 64,628 | |
| Long-term debt, less current portion | Long-term debt, less current portion | 60,692 | | | 40,626 | | Long-term debt, less current portion | 60,780 | | | 60,714 | |
Deferred income taxes | Deferred income taxes | 8,516 | | | 3,403 | | Deferred income taxes | 4,585 | | | 5,848 | |
Operating lease liabilities | Operating lease liabilities | 24,462 | | | 19,504 | | Operating lease liabilities | 20,422 | | | 25,140 | |
Other liabilities | Other liabilities | 15,962 | | | 16,263 | | Other liabilities | 13,959 | | | 16,264 | |
Accrued pension and other postretirement costs | Accrued pension and other postretirement costs | 15,270 | | | 16,687 | | Accrued pension and other postretirement costs | 10,259 | | | 12,253 | |
Total liabilities | Total liabilities | 180,257 | | | 144,030 | | Total liabilities | 167,697 | | | 184,847 | |
| Commitments and contingencies | Commitments and contingencies | 0 | | 0 | Commitments and contingencies | |
| Equity: | Equity: | | Equity: | |
Common stock | Common stock | 1,322 | | | 1,317 | | Common stock | 1,325 | | | 1,322 | |
Class B convertible common stock | Class B convertible common stock | 103 | | | 103 | | Class B convertible common stock | 103 | | | 103 | |
Treasury stock | Treasury stock | (8,765) | | | (8,765) | | Treasury stock | (9,826) | | | (8,765) | |
Capital in excess of par value | Capital in excess of par value | 198,235 | | | 197,764 | | Capital in excess of par value | 200,308 | | | 199,151 | |
Retained earnings | Retained earnings | 114,335 | | | 100,075 | | Retained earnings | 147,525 | | | 120,296 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (35,549) | | | (32,671) | | Accumulated other comprehensive loss | (52,995) | | | (35,008) | |
Total Vishay Precision Group, Inc. stockholders' equity | Total Vishay Precision Group, Inc. stockholders' equity | 269,681 | | | 257,823 | | Total Vishay Precision Group, Inc. stockholders' equity | 286,440 | | | 277,099 | |
Noncontrolling interests | Noncontrolling interests | (15) | | | 34 | | Noncontrolling interests | 60 | | | (57) | |
Total equity | Total equity | 269,666 | | | 257,857 | | Total equity | 286,500 | | | 277,042 | |
Total liabilities and equity | Total liabilities and equity | $ | 449,923 | | | $ | 401,887 | | Total liabilities and equity | $ | 454,197 | | | $ | 461,889 | |
See accompanying notes.
-4-
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)
| | | Fiscal quarter ended | | Fiscal quarter ended |
| | October 2, 2021 | | September 26, 2020 | | October 1, 2022 | | October 2, 2021 |
Net revenues | Net revenues | $ | 81,974 | | | $ | 67,525 | | Net revenues | $ | 90,057 | | | $ | 81,974 | |
Costs of products sold | Costs of products sold | 50,129 | | | 40,176 | | Costs of products sold | 52,737 | | | 50,129 | |
Gross profit | Gross profit | 31,845 | | | 27,349 | | Gross profit | 37,320 | | | 31,845 | |
| Selling, general, and administrative expenses | Selling, general, and administrative expenses | 24,580 | | | 19,144 | | Selling, general, and administrative expenses | 25,271 | | | 24,580 | |
| Restructuring costs | Restructuring costs | — | | | 84 | | Restructuring costs | 165 | | | — | |
Operating income | Operating income | 7,265 | | | 8,121 | | Operating income | 11,884 | | | 7,265 | |
| Other income (expense): | Other income (expense): | | Other income (expense): | |
Interest expense | Interest expense | (328) | | | (309) | | Interest expense | (636) | | | (328) | |
Other | Other | 174 | | | (39) | | Other | 1,223 | | | 174 | |
Other expense | (154) | | | (348) | | |
Other income (expense) | | Other income (expense) | 587 | | | (154) | |
| Income before taxes | Income before taxes | 7,111 | | | 7,773 | | Income before taxes | 12,471 | | | 7,111 | |
| Income tax expense | Income tax expense | 1,662 | | | 2,109 | | Income tax expense | 2,323 | | | 1,662 | |
| Net earnings | Net earnings | 5,449 | | | 5,664 | | Net earnings | 10,148 | | | 5,449 | |
Less: net earnings attributable to noncontrolling interests | Less: net earnings attributable to noncontrolling interests | 70 | | | 66 | | Less: net earnings attributable to noncontrolling interests | 30 | | | 70 | |
Net earnings attributable to VPG stockholders | Net earnings attributable to VPG stockholders | $ | 5,379 | | | $ | 5,598 | | Net earnings attributable to VPG stockholders | $ | 10,118 | | | $ | 5,379 | |
| Basic earnings per share attributable to VPG stockholders | Basic earnings per share attributable to VPG stockholders | $ | 0.39 | | | $ | 0.41 | | Basic earnings per share attributable to VPG stockholders | $ | 0.74 | | | $ | 0.39 | |
Diluted earnings per share attributable to VPG stockholders | Diluted earnings per share attributable to VPG stockholders | $ | 0.39 | | | $ | 0.41 | | Diluted earnings per share attributable to VPG stockholders | $ | 0.74 | | | $ | 0.39 | |
| Weighted average shares outstanding - basic | Weighted average shares outstanding - basic | 13,626 | | | 13,575 | | Weighted average shares outstanding - basic | 13,649 | | | 13,626 | |
Weighted average shares outstanding - diluted | Weighted average shares outstanding - diluted | 13,664 | | | 13,637 | | Weighted average shares outstanding - diluted | 13,708 | | | 13,664 | |
See accompanying notes.
-5-
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)
| | | Nine fiscal months ended | | Nine fiscal months ended |
| | October 2, 2021 | | September 26, 2020 | | October 1, 2022 | | October 2, 2021 |
Net revenues | Net revenues | $ | 227,902 | | | $ | 194,367 | | Net revenues | $ | 266,340 | | | $ | 227,902 | |
Costs of products sold | Costs of products sold | 137,637 | | | 118,843 | | Costs of products sold | 156,436 | | | 137,637 | |
Gross profit | Gross profit | 90,265 | | | 75,524 | | Gross profit | 109,904 | | | 90,265 | |
| Selling, general, and administrative expenses | Selling, general, and administrative expenses | 69,216 | | | 58,075 | | Selling, general, and administrative expenses | 77,824 | | | 69,216 | |
Acquisition costs | Acquisition costs | 1,198 | | | — | | Acquisition costs | — | | | 1,198 | |
Impairment of goodwill and indefinite-lived intangibles | Impairment of goodwill and indefinite-lived intangibles | 1,223 | | | — | | Impairment of goodwill and indefinite-lived intangibles | — | | | 1,223 | |
| Restructuring costs | Restructuring costs | — | | | 713 | | Restructuring costs | 1,330 | | | — | |
Operating income | Operating income | 18,628 | | | 16,736 | | Operating income | 30,750 | | | 18,628 | |
Other income (expense): | Other income (expense): | | Other income (expense): | |
Interest expense | Interest expense | (906) | | | (1,037) | | Interest expense | (1,393) | | | (906) | |
Other | Other | 421 | | | (629) | | Other | 5,006 | | | 421 | |
Other expense | (485) | | | (1,666) | | |
Other income (expense) | | Other income (expense) | 3,613 | | | (485) | |
| Income before taxes | Income before taxes | 18,143 | | | 15,070 | | Income before taxes | 34,363 | | | 18,143 | |
| Income tax expense | Income tax expense | 3,688 | | | 4,367 | | Income tax expense | 6,651 | | | 3,688 | |
| Net earnings | Net earnings | 14,455 | | | 10,703 | | Net earnings | 27,712 | | | 14,455 | |
Less: net earnings attributable to noncontrolling interests | Less: net earnings attributable to noncontrolling interests | 195 | | | 34 | | Less: net earnings attributable to noncontrolling interests | 483 | | | 195 | |
Net earnings attributable to VPG stockholders | Net earnings attributable to VPG stockholders | $ | 14,260 | | | $ | 10,669 | | Net earnings attributable to VPG stockholders | $ | 27,229 | | | $ | 14,260 | |
| Basic earnings per share attributable to VPG stockholders | Basic earnings per share attributable to VPG stockholders | $ | 1.05 | | | $ | 0.79 | | Basic earnings per share attributable to VPG stockholders | $ | 2.00 | | | $ | 1.05 | |
| Diluted earnings per share attributable to VPG stockholders | Diluted earnings per share attributable to VPG stockholders | $ | 1.04 | | | $ | 0.78 | | Diluted earnings per share attributable to VPG stockholders | $ | 1.99 | | | $ | 1.04 | |
| Weighted average shares outstanding - basic | Weighted average shares outstanding - basic | 13,612 | | | 13,562 | | Weighted average shares outstanding - basic | 13,645 | | | 13,612 | |
| Weighted average shares outstanding - diluted | Weighted average shares outstanding - diluted | 13,647 | | | 13,611 | | Weighted average shares outstanding - diluted | 13,692 | | | 13,647 | |
See accompanying notes.
-6-
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Comprehensive Income (Loss)
(Unaudited - In thousands)
| | | Fiscal quarter ended | | Fiscal quarter ended |
| | October 2, 2021 | | September 26, 2020 | | October 1, 2022 | | October 2, 2021 |
Net earnings | Net earnings | $ | 5,449 | | | $ | 5,664 | | Net earnings | $ | 10,148 | | | $ | 5,449 | |
| Other comprehensive income (loss): | | |
Other comprehensive income (loss), net of tax: | | Other comprehensive income (loss), net of tax: | |
Foreign currency translation adjustment | Foreign currency translation adjustment | (2,116) | | | 2,479 | | Foreign currency translation adjustment | (8,479) | | | (2,116) | |
Pension and other postretirement actuarial items, net of tax | 113 | | | (137) | | |
Other comprehensive (loss) income | (2,003) | | | 2,342 | | |
Pension and other postretirement actuarial items | | Pension and other postretirement actuarial items | 65 | | | 113 | |
Other comprehensive loss | | Other comprehensive loss | (8,414) | | | (2,003) | |
| Comprehensive income | Comprehensive income | 3,446 | | | 8,006 | | Comprehensive income | 1,734 | | | 3,446 | |
| Less: comprehensive income attributable to noncontrolling interests | Less: comprehensive income attributable to noncontrolling interests | 70 | | | 66 | | Less: comprehensive income attributable to noncontrolling interests | 30 | | | 70 | |
| Comprehensive income attributable to VPG stockholders | Comprehensive income attributable to VPG stockholders | $ | 3,376 | | | $ | 7,940 | | Comprehensive income attributable to VPG stockholders | $ | 1,704 | | | $ | 3,376 | |
See accompanying notes.
-7-
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Comprehensive Income (Loss)
(Unaudited - In thousands)
| | | Nine fiscal months ended | | Nine fiscal months ended |
| | October 2, 2021 | | September 26, 2020 | | October 1, 2022 | | October 2, 2021 |
Net earnings | Net earnings | $ | 14,455 | | | $ | 10,703 | | Net earnings | $ | 27,712 | | | $ | 14,455 | |
| Other comprehensive income (loss): | Other comprehensive income (loss): | | Other comprehensive income (loss): | |
Foreign currency translation adjustment | Foreign currency translation adjustment | (3,309) | | | 409 | | Foreign currency translation adjustment | (18,214) | | | (3,309) | |
Pension and other postretirement actuarial items, net of tax | Pension and other postretirement actuarial items, net of tax | 431 | | | (448) | | Pension and other postretirement actuarial items, net of tax | 227 | | | 431 | |
Other comprehensive loss | Other comprehensive loss | (2,878) | | | (39) | | Other comprehensive loss | (17,987) | | | (2,878) | |
| Comprehensive income | Comprehensive income | 11,577 | | | 10,664 | | Comprehensive income | 9,725 | | | 11,577 | |
| Less: comprehensive income attributable to noncontrolling interests | Less: comprehensive income attributable to noncontrolling interests | 195 | | | 34 | | Less: comprehensive income attributable to noncontrolling interests | 483 | | | 195 | |
| Comprehensive income attributable to VPG stockholders | Comprehensive income attributable to VPG stockholders | $ | 11,382 | | | $ | 10,630 | | Comprehensive income attributable to VPG stockholders | $ | 9,242 | | | $ | 11,382 | |
See accompanying notes.
-8-
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
| | | Nine fiscal months ended | | Nine fiscal months ended |
| | October 2, 2021 | | September 26, 2020 | | October 1, 2022 | | October 2, 2021 |
Operating activities | Operating activities | | | | Operating activities | | | |
Net earnings | Net earnings | $ | 14,455 | | | $ | 10,703 | | Net earnings | $ | 27,712 | | | $ | 14,455 | |
Adjustments to reconcile net earnings to net cash provided by operating activities: | Adjustments to reconcile net earnings to net cash provided by operating activities: | | Adjustments to reconcile net earnings to net cash provided by operating activities: | |
Impairment of goodwill and indefinite-lived intangibles | Impairment of goodwill and indefinite-lived intangibles | 1,223 | | | — | | Impairment of goodwill and indefinite-lived intangibles | — | | | 1,223 | |
Depreciation and amortization | Depreciation and amortization | 11,033 | | | 9,334 | | Depreciation and amortization | 11,519 | | | 11,033 | |
Loss from extinguishment of debt | — | | | 30 | | |
| Gain on sale of property and equipment | Gain on sale of property and equipment | (35) | | | (140) | | Gain on sale of property and equipment | (182) | | | (35) | |
| Reclassification of foreign currency translation adjustment related to disposal of subsidiary | | Reclassification of foreign currency translation adjustment related to disposal of subsidiary | 191 | | | — | |
Share-based compensation expense | Share-based compensation expense | 1,328 | | | 1,137 | | Share-based compensation expense | 1,583 | | | 1,328 | |
Inventory write-offs for obsolescence | Inventory write-offs for obsolescence | 1,613 | | | 1,873 | | Inventory write-offs for obsolescence | 1,451 | | | 1,613 | |
Deferred income taxes | Deferred income taxes | (1,412) | | | 127 | | Deferred income taxes | (72) | | | (1,412) | |
Other | Other | (2,022) | | | 364 | | Other | (4,319) | | | (2,022) | |
Net changes in operating assets and liabilities: | Net changes in operating assets and liabilities: | | Net changes in operating assets and liabilities: | |
Accounts receivable, net | Accounts receivable, net | (3,078) | | | (1,541) | | Accounts receivable, net | (2,077) | | | (3,078) | |
Inventories, net | Inventories, net | (9,624) | | | (1,214) | | Inventories, net | (14,151) | | | (9,624) | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | (3,591) | | | (75) | | Prepaid expenses and other current assets | (984) | | | (3,591) | |
Trade accounts payable | Trade accounts payable | 3,695 | | | 605 | | Trade accounts payable | (1,459) | | | 3,695 | |
Other current liabilities | Other current liabilities | 4,496 | | | 1,631 | | Other current liabilities | 1,303 | | | 4,496 | |
Net cash provided by operating activities | Net cash provided by operating activities | 18,081 | | | 22,834 | | Net cash provided by operating activities | 20,515 | | | 18,081 | |
| Investing activities | Investing activities | | Investing activities | |
Capital expenditures | Capital expenditures | (11,191) | | | (15,815) | | Capital expenditures | (15,545) | | | (11,191) | |
Proceeds from sale of property and equipment | Proceeds from sale of property and equipment | 181 | | | 423 | | Proceeds from sale of property and equipment | 397 | | | 181 | |
| Purchase of business, net of cash acquired | Purchase of business, net of cash acquired | (47,216) | | | 156 | | Purchase of business, net of cash acquired | — | | | (47,216) | |
Net cash used in investing activities | Net cash used in investing activities | (58,226) | | | (15,236) | | Net cash used in investing activities | (15,148) | | | (58,226) | |
| Financing activities | Financing activities | | Financing activities | |
| Principal payments on long-term debt | Principal payments on long-term debt | (18) | | | (3,459) | | Principal payments on long-term debt | — | | | (18) | |
| Proceeds from revolving facility | Proceeds from revolving facility | 20,000 | | | — | | Proceeds from revolving facility | — | | | 20,000 | |
| Debt issuance costs | — | | | (402) | | |
Purchase of noncontrolling interest | — | | | (253) | | |
(Distributions to) contributions from noncontrolling interests | (244) | | | 35 | | |
| Purchase of treasury stock | | Purchase of treasury stock | (1,061) | | | — | |
| Distributions to noncontrolling interests | | Distributions to noncontrolling interests | (366) | | | (244) | |
Payments of employee taxes on certain share-based arrangements | Payments of employee taxes on certain share-based arrangements | (853) | | | (813) | | Payments of employee taxes on certain share-based arrangements | (435) | | | (853) | |
Net cash provided by (used in) financing activities | 18,885 | | | (4,892) | | |
Net cash (used in) provided by financing activities | | Net cash (used in) provided by financing activities | (1,862) | | | 18,885 | |
Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | (1,634) | | | 179 | | Effect of exchange rate changes on cash and cash equivalents | (7,930) | | | (1,634) | |
(Decrease) increase in cash and cash equivalents | (22,894) | | | 2,885 | | |
Decrease in cash and cash equivalents | | Decrease in cash and cash equivalents | (4,425) | | | (22,894) | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | 98,438 | | | 86,910 | | Cash and cash equivalents at beginning of period | 84,335 | | | 98,438 | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $ | 75,544 | | | $ | 89,795 | | Cash and cash equivalents at end of period | $ | 79,910 | | | $ | 75,544 | |
| Supplemental disclosure of investing transactions: | Supplemental disclosure of investing transactions: | | Supplemental disclosure of investing transactions: | |
Capital expenditures purchased | Capital expenditures purchased | $ | (9,368) | | | $ | (15,395) | | Capital expenditures purchased | $ | (13,198) | | | $ | (9,368) | |
Capital expenditures accrued but not yet paid | Capital expenditures accrued but not yet paid | $ | 738 | | | $ | 762 | | Capital expenditures accrued but not yet paid | $ | 720 | | | $ | 738 | |
See accompanying notes.
-9-
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Equity
(Unaudited - In thousands, except share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended October 2, 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 July 3, 2021 | $ | 1,322 | | | $ | 103 | | | $ | (8,765) | | | $ | 197,856 | | | $ | 108,956 | | | $ | (33,546) | | | $ | 265,926 | | | $ | (8) | | | $ | 265,918 | |
Net earnings | — | | | — | | | — | | | — | | | 5,379 | | | — | | | 5,379 | | | 70 | | | 5,449 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | (2,003) | | | (2,003) | | | — | | | (2,003) | |
Share-based compensation expense | — | | | — | | | — | | | 386 | | | — | | | — | | | 386 | | | — | | | 386 | |
Restricted stock issuances ( 465 shares) | — | | | — | | | — | | | (7) | | | — | | | — | | | (7) | | | — | | | (7) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (77) | | | (77) | |
Balance at October 2, 2021 | $ | 1,322 | | | $ | 103 | | | $ | (8,765) | | | $ | 198,235 | | | $ | 114,335 | | | $ | (35,549) | | | $ | 269,681 | | | $ | (15) | | | $ | 269,666 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended October 1, 2022 |
| 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 July 2, 2022 | $ | 1,325 | | | $ | 103 | | | $ | (8,765) | | | $ | 199,749 | | | $ | 137,407 | | | $ | (44,581) | | | $ | 285,238 | | | $ | 112 | | | $ | 285,350 | |
Net earnings | — | | | — | | | — | | | — | | | 10,118 | | | — | | | 10,118 | | | 30 | | | 10,148 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (8,414) | | | (8,414) | | | — | | | (8,414) | |
Share-based compensation expense | — | | | — | | | — | | | 559 | | | — | | | — | | | 559 | | | — | | | 559 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Purchase of treasury stock. (32,601 shares) | — | | | — | | | (1,061) | | | — | | | — | | | — | | | (1,061) | | | — | | | (1,061) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (82) | | | (82) | |
Balance at October 1, 2022 | $ | 1,325 | | | $ | 103 | | | $ | (9,826) | | | $ | 200,308 | | | $ | 147,525 | | | $ | (52,995) | | | $ | 286,440 | | | $ | 60 | | | $ | 286,500 | |
| | | Fiscal quarter ended September 26, 2020 | | Fiscal quarter ended October 2, 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 | | 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 June 27, 2020 | $ | 1,317 | | | $ | 103 | | | $ | (8,765) | | | $ | 197,134 | | | $ | 94,359 | | | $ | (40,084) | | | $ | 244,064 | | | $ | 176 | | | $ | 244,240 | | |
Balance at July 3, 2021 | | Balance at July 3, 2021 | $ | 1,322 | | | $ | 103 | | | $ | (8,765) | | | $ | 197,856 | | | $ | 108,956 | | | $ | (33,546) | | | $ | 265,926 | | | $ | (8) | | | $ | 265,918 | |
Net earnings | Net earnings | — | | | — | | | — | | | — | | | 5,598 | | | — | | | 5,598 | | | 66 | | | 5,664 | | Net earnings | — | | | — | | | — | | | — | | | 5,379 | | | — | | | 5,379 | | | 70 | | | 5,449 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | 2,342 | | | 2,342 | | | — | | | 2,342 | | |
Other comprehensive income | | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | (2,003) | | | (2,003) | | | — | | | (2,003) | |
Share-based compensation expense | Share-based compensation expense | — | | | — | | | — | | | 380 | | | — | | | — | | | 380 | | | — | | | 380 | | Share-based compensation expense | — | | | — | | | — | | | 386 | | | — | | | — | | | 386 | | | — | | | 386 | |
| Restricted stock issuances (465 shares) | | Restricted stock issuances (465 shares) | — | | | — | | | — | | | (7) | | | — | | | — | | | (7) | | | — | | | (7) | |
| Distribution to noncontrolling interests | Distribution to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (82) | | | (82) | | Distribution to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (77) | | | (77) | |
Balance at September 26, 2020 | $ | 1,317 | | | $ | 103 | | | $ | (8,765) | | | $ | 197,514 | | | $ | 99,957 | | | $ | (37,742) | | | $ | 252,384 | | | $ | 160 | | | $ | 252,544 | | |
Balance at October 2, 2021 | | Balance at October 2, 2021 | $ | 1,322 | | | $ | 103 | | | $ | (8,765) | | | $ | 198,235 | | | $ | 114,335 | | | $ | (35,549) | | | $ | 269,681 | | | $ | (15) | | | $ | 269,666 | |
See accompanying notes.
-10-
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Equity
(Unaudited - In thousands, except share amounts)
| | | Nine Fiscal Months Ended October 2, 2021 | | Nine Fiscal Months Ended October 1, 2022 |
| | 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 | | 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 | | |
Balance at December 31, 2021 | | Balance at December 31, 2021 | $ | 1,322 | | | $ | 103 | | | $ | (8,765) | | | $ | 199,151 | | | $ | 120,296 | | | $ | (35,008) | | | $ | 277,099 | | | $ | (57) | | | $ | 277,042 | |
Net earnings | Net earnings | — | | | — | | | — | | | — | | | 14,260 | | | — | | | 14,260 | | | 195 | | | 14,455 | | Net earnings | — | | | — | | | — | | | — | | | 27,229 | | | — | | | 27,229 | | | 483 | | | 27,712 | |
Other comprehensive loss | Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (2,878) | | | (2,878) | | | — | | | (2,878) | | Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (17,987) | | | (17,987) | | | — | | | (17,987) | |
Share-based compensation expense | Share-based compensation expense | — | | | — | | | — | | | 1,328 | | | — | | | — | | | 1,328 | | | — | | | 1,328 | | Share-based compensation expense | — | | | — | | | — | | | 1,583 | | | — | | | — | | | 1,583 | | | — | | | 1,583 | |
Restricted stock issuances (50,781 shares) | 5 | | | — | | | — | | | (857) | | | — | | | — | | | (852) | | | — | | | (852) | | |
Restricted stock issuances (28,368 shares) | | Restricted stock issuances (28,368 shares) | 3 | | | — | | | — | | | (426) | | | — | | | — | | | (423) | | | — | | | (423) | |
| Purchase of treasury stock (32,601 shares) | | Purchase of treasury stock (32,601 shares) | — | | | — | | | (1,061) | | | — | | | — | | | — | | | (1,061) | | | — | | | (1,061) | |
| Distributions to noncontrolling interests | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (244) | | | (244) | | Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (366) | | | (366) | |
Balance at October 2, 2021 | $ | 1,322 | | | $ | 103 | | | $ | (8,765) | | | $ | 198,235 | | | $ | 114,335 | | | $ | (35,549) | | | $ | 269,681 | | | $ | (15) | | | $ | 269,666 | | |
Balance at October 1, 2022 | | Balance at October 1, 2022 | $ | 1,325 | | | $ | 103 | | | $ | (9,826) | | | $ | 200,308 | | | $ | 147,525 | | | $ | (52,995) | | | $ | 286,440 | | | $ | 60 | | | $ | 286,500 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Fiscal Months Ended September 26, 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 | — | | | — | | | — | | | — | | | 10,669 | | | — | | | 10,669 | | | 34 | | | 10,703 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (39) | | | (39) | | | — | | | (39) | |
Share-based compensation expense | — | | | — | | | — | | | 1,137 | | | — | | | — | | | 1,137 | | | — | | | 1,137 | |
Restricted stock issuances (52,433 shares) | 5 | | | — | | | — | | | (796) | | | — | | | — | | | (791) | | | — | | | (791) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Purchase of noncontrolling interest | — | | | — | | | — | | | 48 | | | — | | | — | | | 48 | | | (301) | | | (253) | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 35 | | | 35 | |
Balance at September 26, 2020 | $ | 1,317 | | | $ | 103 | | | $ | (8,765) | | | $ | 197,514 | | | $ | 99,957 | | | $ | (37,742) | | | $ | 252,384 | | | $ | 160 | | | $ | 252,544 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Fiscal Months Ended October 2, 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 | — | | | — | | | — | | | — | | | 14,260 | | | — | | | 14,260 | | | 195 | | | 14,455 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (2,878) | | | (2,878) | | | — | | | (2,878) | |
Share-based compensation expense | — | | | — | | | — | | | 1,328 | | | — | | | — | | | 1,328 | | | — | | | 1,328 | |
Restricted stock issuances (50,781 shares) | 5 | | | — | | | — | | | (857) | | | — | | | — | | | (852) | | | — | | | (852) | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Distribution to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (244) | | | (244) | |
Balance at October 2, 2021 | $ | 1,322 | | | $ | 103 | | | $ | (8,765) | | | $ | 198,235 | | | $ | 114,335 | | | $ | (35,549) | | | $ | 269,681 | | | $ | (15) | | | $ | 269,666 | |
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, manufacturera global, diversified company focused on precision measurement sensing technologies, including specialized sensors, weighing solutions, and marketermeasurement systems. Many of sensors, and sensor-basedour precision measurement systems, as well as specialty resistors and strain gages based upon the Company's proprietary technology. The Company provides precisionsensing products and solutions many of which are “designed-in” by itsour customers, specializing in theand address growing marketsapplications across a diverse array of stress, force, weight, pressure,industries and current measurements.markets. 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, and we employ an operationally diversified structure to manage our businesses.
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, 20202021 and 20192020 and for each of the three years in the period ended December 31, 2020,2021, included in VPG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020,2021, filed with the SEC on March 11, 2021.4, 2022. The results of operations for the fiscal quarter ended October 2, 20211, 2022 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 20212022 and 20202021 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, |
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update No. ASU 2019-12, "Simplifying the Accounting for Income Taxes". This ASU amends Accounting Standards Codification ("ASC") 740 by removing certain exceptions to the general principles, clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020. The Company adopted this standard in the first quarter of 2021. The adoption of this ASU did not impact our financial statements or the related disclosures. | | | | | | | | | | | |
| 2022 | | 2021 |
Quarter 1 | April 2, | | April 3, |
Quarter 2 | July 2, | | July 3, |
Quarter 3 | October 1, | | October 2, |
Quarter 4 | December 31, | | December 31, |
Note 2 – Revenues
Revenue Recognition
The following table disaggregates net revenue by 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 October 2, 2021 | | Fiscal quarter ended September 26, 2020 | | Fiscal quarter ended October 1, 2022 | | Fiscal quarter ended October 2, 2021 |
| | Foil Technology Products | | Force Sensors | | Weighing and Control Systems | | Total | | Foil Technology Products | | Force Sensors | | Weighing and Control Systems | | Total | | Sensors | | Weighing Solutions | | Measurement Systems | | Total | | Sensors | | Weighing Solutions | | Measurement Systems | | Total |
United States | United States | $ | 11,458 | | | $ | 8,183 | | | $ | 16,642 | | | $ | 36,283 | | | $ | 12,733 | | | $ | 6,974 | | | $ | 8,328 | | | $ | 28,035 | | United States | $ | 12,992 | | | $ | 14,671 | | | $ | 13,065 | | | $ | 40,728 | | | $ | 9,640 | | | $ | 12,729 | | | $ | 13,914 | | | $ | 36,283 | |
United Kingdom | United Kingdom | 875 | | | 606 | | | 3,760 | | | 5,241 | | | 778 | | | 2,321 | | | 2,633 | | | 5,732 | | United Kingdom | 752 | | | 4,090 | | | 55 | | | 4,897 | | | 746 | | | 4,366 | | | 129 | | | 5,241 | |
Other Europe | Other Europe | 6,185 | | | 5,563 | | | 5,191 | | | 16,939 | | | 7,660 | | | 2,357 | | | 3,441 | | | 13,458 | | Other Europe | 7,740 | | | 8,714 | | | 986 | | | 17,440 | | | 6,063 | | | 9,681 | | | 1,194 | | | 16,938 | |
Israel | Israel | 4,711 | | | 232 | | | — | | | 4,943 | | | 5,981 | | | 78 | | | — | | | 6,059 | | Israel | 7,447 | | | 101 | | | — | | | 7,548 | | | 4,711 | | | 232 | | | — | | | 4,943 | |
Asia | Asia | 9,561 | | | 3,120 | | | 2,481 | | | 15,162 | | | 5,754 | | | 2,132 | | | 2,471 | | | 10,357 | | Asia | 8,948 | | | 3,815 | | | 2,462 | | | 15,225 | | | 9,561 | | | 3,668 | | | 1,933 | | | 15,162 | |
Canada | Canada | — | | | — | | | 3,406 | | | 3,406 | | | — | | | — | | | 3,884 | | | 3,884 | | Canada | — | | | 8 | | | 4,211 | | | 4,219 | | | — | | | — | | | 3,407 | | | 3,407 | |
Total | Total | $ | 32,790 | | | $ | 17,704 | | | $ | 31,480 | | | $ | 81,974 | | | $ | 32,906 | | | $ | 13,862 | | | $ | 20,757 | | | $ | 67,525 | | Total | $ | 37,879 | | | $ | 31,399 | | | $ | 20,779 | | | $ | 90,057 | | | $ | 30,721 | | | $ | 30,676 | | | $ | 20,577 | | | $ | 81,974 | |
| | | | Nine Fiscal Months Ended October 2, 2021 | | Nine Fiscal Months Ended September 26, 2020 | | Nine Fiscal Months Ended October 1, 2022 | | Nine Fiscal Months Ended October 2, 2021 |
| | Foil Technology Products | | Force Sensors | | Weighing and Control Systems | | Total | | Foil Technology Products | | Force Sensors | | Weighing and Control Systems | | Total | | Sensors | | Weighing Solutions | | Measurement Systems | | Total | | Sensors | | Weighing Solutions | | Measurement Systems | | Total |
United States | United States | $ | 32,940 | | | $ | 23,971 | | | $ | 34,883 | | | $ | 91,794 | | | $ | 35,456 | | | $ | 19,479 | | | $ | 23,226 | | | $ | 78,161 | | United States | $ | 39,467 | | | $ | 41,212 | | | $ | 34,838 | | | $ | 115,517 | | | $ | 28,783 | | | $ | 38,241 | | | $ | 24,771 | | | $ | 91,795 | |
United Kingdom | United Kingdom | 2,875 | | | 1,687 | | | 11,454 | | | 16,016 | | | 2,315 | | | 6,012 | | | 8,068 | | | 16,395 | | United Kingdom | 2,562 | | | 12,283 | | | 514 | | | 15,359 | | | 2,350 | | | 13,141 | | | 525 | | | 16,016 | |
Other Europe | Other Europe | 20,055 | | | 16,056 | | | 14,956 | | | 51,067 | | | 22,346 | | | 6,165 | | | 10,615 | | | 39,126 | | Other Europe | 23,556 | | | 28,065 | | | 3,985 | | | 55,606 | | | 19,640 | | | 29,511 | | | 1,916 | | | 51,067 | |
Israel | Israel | 16,436 | | | 623 | | | — | | | 17,059 | | | 14,627 | | | 268 | | | — | | | 14,895 | | Israel | 22,828 | | | 401 | | | — | | | 23,229 | | | 16,436 | | | 623 | | | — | | | 17,059 | |
Asia | Asia | 26,503 | | | 9,516 | | | 6,094 | | | 42,113 | | | 20,424 | | | 5,549 | | | 6,001 | | | 31,974 | | Asia | 27,496 | | | 10,657 | | | 4,283 | | | 42,436 | | | 26,503 | | | 11,794 | | | 3,815 | | | 42,112 | |
Canada | Canada | — | | | — | | | 9,853 | | | 9,853 | | | — | | | — | | | 13,816 | | | 13,816 | | Canada | — | | | 8 | | | 14,185 | | | 14,193 | | | — | | | 9 | | | 9,844 | | | 9,853 | |
Total | Total | $ | 98,809 | | | $ | 51,853 | | | $ | 77,240 | | | $ | 227,902 | | | $ | 95,168 | | | $ | 37,473 | | | $ | 61,726 | | | $ | 194,367 | | Total | $ | 115,909 | | | $ | 92,626 | | | $ | 57,805 | | | $ | 266,340 | | | $ | 93,712 | | | $ | 93,319 | | | $ | 40,871 | | | $ | 227,902 | |
The following table disaggregates net revenue from contracts with customers by market sector (in thousands). | | | Fiscal quarter ended | | Nine fiscal months ended | | Fiscal quarter ended | | Nine fiscal months ended |
| | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 | | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Test & Measurement | Test & Measurement | $ | 15,883 | | | $ | 11,953 | | | $ | 46,578 | | | $ | 40,325 | | Test & Measurement | $ | 20,659 | | | $ | 15,883 | | | $ | 60,115 | | | $ | 46,578 | |
Avionics, Military & Space | Avionics, Military & Space | 7,542 | | | 9,225 | | | 19,444 | | | 22,112 | | Avionics, Military & Space | 6,523 | | | 7,542 | | | 21,563 | | | 19,444 | |
Transportation | Transportation | 13,668 | | | 7,138 | | | 35,152 | | | 20,570 | | Transportation | 13,912 | | | 13,668 | | | 41,061 | | | 35,152 | |
Other Markets | Other Markets | 17,453 | | | 15,350 | | | 52,487 | | | 40,670 | | Other Markets | 20,110 | | | 17,453 | | | 59,295 | | | 52,487 | |
Industrial Weighing | Industrial Weighing | 12,254 | | | 10,708 | | | 36,301 | | | 31,758 | | Industrial Weighing | 12,473 | | | 12,254 | | | 38,626 | | | 36,301 | |
General Industrial | General Industrial | 4,069 | | | 3,753 | | | 12,324 | | | 11,415 | | General Industrial | 4,981 | | | 4,069 | | | 16,172 | | | 12,324 | |
Steel | Steel | 11,105 | | | 9,398 | | | 25,616 | | | 27,517 | | Steel | 11,399 | | | 11,105 | | | 29,508 | | | 25,616 | |
| Total | Total | $ | 81,974 | | | $ | 67,525 | | | $ | 227,902 | | | $ | 194,367 | | Total | $ | 90,057 | | | $ | 81,974 | | | $ | 266,340 | | | $ | 227,902 | |
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 reduce 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 products offered. The term between invoicing and when payment is due is not significant.
The outstanding contract assets and liability accounts were as follows (in thousands):
Note 2 – Revenues (continued)
| | | | | | | | | | | |
| Contract Asset | | Contract Liability |
| Unbilled Revenue | | Accrued Customer Advances |
Balance at December 31, 2020 | $ | 3,605 | | | $ | 2,873 | |
Balance at October 2, 2021 | 6,113 | | | 6,018 | |
(Decrease)/increase | $ | 2,508 | | | $ | 3,145 | |
| | | | | | | | | | | |
| Contract Asset | | Contract Liability |
| Unbilled Revenue | | Accrued Customer Advances |
Balance at December 31, 2021 | $ | 3,570 | | | $ | 4,765 | |
Balance at October 1, 2022 | 3,621 | | | 8,867 | |
Increase | $ | 51 | | | $ | 4,102 | |
The amount of revenue recognized during the nine fiscal months ended October 2, 20211, 2022 that was included in the contract liability balance at December 31, 20202021 was $2.63.2 million.
Practical Expedients
The Company does not disclose the value of unsatisfied performance obligations for contracts that have a duration 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
Diversified Technical Systems, Inc.
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.million. 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 ControlMeasurement Systems segment. The following table summarizes the provisionalfinal fair values assigned to the assets and liabilities of DTS as of June 1, 2021 (in thousands):
| | | | | |
| June 1, 2021 |
Working capital | $ | 12,99912,494 | |
Property and equipment | 1,209 | |
Deferred income tax liability | (6,274)(6,215) | |
| |
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 | 31,62931,183 | |
Purchase price | $ | 47,216 | |
Goodwill | $ | 15,58716,033 | |
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 beis deductible for income tax purposes.
The Company recorded acquisition costs associated with this transaction as follows (of $1.2 million in thousands):the second quarter of 2021, which included legal fees, appraisal fees, investments banker fees and insurance costs.
| | | | | | | | | | | | | |
| Fiscal quarter ended
| | Nine fiscal months ended |
| October 2, 2021 | | | | October 2, 2021 |
Legal fees | $ | — | | | | | $ | 341 | |
Appraisal fees | — | | | | | 18 | |
Other (investment banker and insurance costs) | — | | | | | 839 | |
| $ | — | | | | | $ | 1,198 | |
Note 3 - Acquisition (continued)
Included in the results of the operations of the Company starting on Junefor the fiscal quarter ended October 1, 2021,2022, are net revenues of $7.6 million and $10.7$7.9 million from DTS and a net income of $0.2 million from DTS. DTS results include amortization of the inventory step-up of $0.3 million for the fiscal quarter ended October 1, 2022, and amortization of intangible assets of $0.4 million for the fiscal quarter ended October 1, 2022. Included in the results of the operations of the Company for the nine fiscal months ended October 2, 20211, 2022 are net revenues of $22.5 million from DTS and a net earningsloss of $0.3 million and $0.1 million for the fiscal quarter and nine fiscal months ended October 2, 2021.from DTS. DTS results include amortization of the inventory step-up of $1.3 million and $2.2amortization of intangible assets of $1.1 million for the fiscal quarter and nine fiscal months ended October 2, 2021, and amortization of intangible assets of $0.4 million and $0.5 million for the fiscal quarter and nine fiscal months ended October 2, 2021.1, 2022.
Following is the supplemental consolidated financial results for the Company on an unaudited pro forma basis, as if the DTS acquisition had been consummated on January 1, 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended | | Fiscal quarter ended | | Nine fiscal months ended |
| September 26, 2020 | | September 26, 2020 | | October 2, 2021 | | October 2, 2021 |
Pro forma net revenues | $ | 75,605 | | | $ | 235,316 | | | 81,974 | | | 241,138 | |
| | | | | | | |
Pro forma net earnings attributable to VPG stockholders | $ | 5,778 | | | $ | 18,173 | | | 5,737 | | | 19,148 | |
| | | | | | | |
Pro forma basic earnings per share attributable to VPG stockholders | $ | 0.43 | | | $ | 1.34 | | | $ | 0.42 | | | $ | 1.41 | |
Pro forma diluted earnings per share attributable to VPG stockholders | $ | 0.42 | | | $ | 1.34 | | | $ | 0.42 | | | $ | 1.40 | |
| | | | | | | | | | | |
| Nine fiscal months ended | | | | |
| October 2, 2021 | | | | |
Pro forma net revenues | $ | 241,138 | | | | | |
| | | | | |
Pro forma net earnings attributable to VPG stockholders | $ | 17,641 | | | | | |
| | | | | |
Pro forma basic earnings per share attributable to VPG stockholders | $ | 1.30 | | | | | |
Pro forma diluted earnings per share attributable to VPG stockholders | $ | 1.29 | | | | | |
Note 4 – Goodwill and Other Intangible Assets
The Company tests the goodwill in each of its goodwill reporting units for impairment at least annually, as of the first day of it'sits 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 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 impairment was driven mainly by changes in forecasted projections including a slower growth rate in revenues. After considering the impact of the impairment charges, the carrying amount of goodwill and indefinite-lived trade names as of October 2, 2021 was $0.0 million and $0.3 million, respectively.
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 | (6) | | | 17 | | | (23) | | | | | — | | | — | |
| | | | | | | | | | | |
Balance at October 2, 2021 | $ | 45,560 | | | $ | 6,743 | | | $ | 16,919 | | | $ | 15,587 | | | $ | 6,311 | | | $ | — | |
Note 4 – Goodwill and Other Intangible Assets (continued)
Intangible assets were as follows (in thousands):
| | | | | | | | | | | |
| October 2, 2021 | | December 31, 2020 |
Intangible assets subject to amortization | | | |
(Definite-lived): | | | |
Patents and acquired technology | $ | 32,938 | | | $ | 19,804 | |
Customer relationships | 34,117 | | | 26,061 | |
Trade names | 1,684 | | | 1,747 | |
Non-competition agreements | 11,576 | | | 12,259 | |
| 80,315 | | | 59,871 | |
Accumulated amortization: | | | |
Patents and acquired technology | (6,960) | | | (5,895) | |
Customer relationships | (14,497) | | | (13,363) | |
Trade names | (1,684) | | | (1,747) | |
Non-competition agreements | (11,569) | | | (12,250) | |
| (34,710) | | | (33,255) | |
Net intangible assets subject to amortization | $ | 45,605 | | | $ | 26,616 | |
| | | |
Intangible assets not subject to amortization | | | |
(Indefinite-lived): | | | |
Trade names | 7,722 | | | 5,423 | |
| | | |
| $ | 53,327 | | | $ | 32,039 | |
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 nine fiscal months ended October 2, 2021 was $1.0 million and $2.3 million, respectively. The DTS intangible assets accounted for $0.4 million and $0.5 million of amortization expense for the fiscal quarter and nine fiscal months ended October 2, 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | Measurement Systems | | Weighing Solutions | | |
| | | KELK Acquisition | | DSI Acquisition | | DTS Acquisition | | Stress-Tek Acquisition | | |
Balance at December 31, 2021 | $ | 45,830 | | | $ | 6,706 | | | $ | 16,910 | | | $ | 15,903 | | | $ | 6,311 | | | |
Adjustment to goodwill acquired | 130 | | | — | | | — | | | 130 | | | — | | | |
| | | | | | | | | | | |
Foreign currency translation adjustment | (500) | | | (446) | | | (54) | | | — | | | — | | | |
| | | | | | | | | | | |
Balance at October 1, 2022 | $ | 45,460 | | | $ | 6,260 | | | $ | 16,856 | | | $ | 16,033 | | | $ | 6,311 | | | |
Note 5 – Leases
The Company primarily leases office and manufacturing facilities in addition to vehicles, which have remaining terms of less than one year to elevenfourteen years. The Company has no finance leases.
Leases recorded on the balance sheet consist of the following (in thousands):
Note 5 - Leases (continued)
| Leases | Leases | | | | October 2, 2021 | | December 31, 2020 | Leases | | | | October 1, 2022 | | December 31, 2021 |
Assets | Assets | | | | | | Assets | | | | | |
Operating lease right of use asset | Operating lease right of use asset | | | | $ | 27,405 | | | $ | 21,788 | | Operating lease right of use asset | | | | $ | 24,737 | | | $ | 27,764 | |
| Liabilities | Liabilities | | | | Liabilities | | | |
Operating lease - current | Operating lease - current | | | | $ | 4,415 | | | $ | 4,011 | | Operating lease - current | | | | $ | 4,119 | | | $ | 4,610 | |
Operating lease - non-current | Operating lease - non-current | | | | $ | 24,462 | | | $ | 19,504 | | Operating lease - non-current | | | | $ | 20,422 | | | $ | 25,140 | |
Other information related to lease term and discount rate is as follows:
| | | | | |
| October 2, 20211, 2022 |
Operating leases weighted average remaining lease term (in years) | 8.747.94 years |
Operating leases weighted average discount rate | 3.173.12 | % |
The components of lease expense are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine Fiscal Months Ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Operating lease cost | $ | 1,407 | | | $ | 1,164 | | | $ | 3,847 | | | $ | 3,177 | |
Short-term lease cost | 30 | | | 31 | | | 98 | | | 88 | |
Sublease income | (78) | | | — | | | (106) | | | — | |
Total net lease cost | $ | 1,359 | | | $ | 1,195 | | | $ | 3,839 | | | $ | 3,265 | |
Note 5 - Leases (continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine Fiscal Months Ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Operating lease cost | $ | 1,267 | | | $ | 1,407 | | | $ | 3,876 | | | $ | 3,847 | |
Short-term lease cost | 30 | | | 30 | | | 72 | | | 98 | |
Sublease income | (104) | | | (78) | | | (321) | | | (106) | |
Total net lease cost | $ | 1,193 | | | $ | 1,359 | | | $ | 3,627 | | | $ | 3,839 | |
Right of use assets obtained in exchange for new operating lease liability during 20212022 were $9.1$0.7 million. The Company paid $3.8$3.9 million and $2.6$3.8 million for its operating leases for each of the nine fiscal months ended October 1, 2022 and October 2, 2021, and September 26, 2020, which are included in operating cash flows on the consolidated condensed statements of cash flows.
Undiscounted maturities of operating lease payments as of October 2, 20211, 2022 are summarized as follows (in thousands):
| 2021 (excluding the nine months ended October 2, 2021) | $ | 1,322 | | |
2022 | 4,718 | | |
2022 (excluding the nine months ended October 1, 2022) | | 2022 (excluding the nine months ended October 1, 2022) | $ | 1,172 | |
2023 | 2023 | 4,177 | | 2023 | 4,432 | |
2024 | 2024 | 3,738 | | 2024 | 3,809 | |
2025 | 2025 | 3,249 | | 2025 | 3,223 | |
2026 | | 2026 | 2,886 | |
Thereafter | Thereafter | 15,757 | | Thereafter | 12,123 | |
Total future minimum lease payments | Total future minimum lease payments | $ | 32,961 | | Total future minimum lease payments | $ | 27,645 | |
Less: amount representing interest | Less: amount representing interest | (4,084) | | Less: amount representing interest | (3,104) | |
Present value of future minimum lease payments | Present value of future minimum lease payments | $ | 28,877 | | Present value of future minimum lease payments | $ | 24,541 | |
Note 6 – 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 October 2, 20211, 2022 was 23.4%18.6% compared to 27.1%23.4% for the fiscal quarter ended September 26, 2020, and theOctober 2, 2021. The effective tax rate for the nine fiscal months ended October 2, 20211, 2022 was 20.3%19.4% compared to 29.0%20.3% for the nine fiscal months ended September 26, 2020. The tax rate for both periods presented in 2021 is lower than the prior year periods primarily due to the acquisition of DTS, which enabled the Company to reduce its valuation allowance against deferred tax assets, tax rate changes in certain foreign jurisdictions, and changes in the mix of worldwide income.October 2, 2021.
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
Note 6 - Income Taxes (continued)
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 the Company’s best estimate of the potential tax exposures in each respective jurisdiction. It may take a number of years for a final tax liability in a jurisdiction to be determined, particularly in the event of an audit. If an uncertain matter is determined favorably, there could be a reduction in the Company’s tax expense. An unfavorable determination could increase tax expense and could require a cash payment, including interest and penalties.
Note 7 – Long-Term Debt
Long-term debt consists of the following (in thousands):
| | | October 2, 2021 | | December 31, 2020 | | October 1, 2022 | | December 31, 2021 |
2020 Credit Agreement - Revolving Facility | 2020 Credit Agreement - Revolving Facility | $ | 61,000 | | | $ | 41,000 | | 2020 Credit Agreement - Revolving Facility | $ | 61,000 | | | $ | 61,000 | |
| Other debt | — | | | 18 | | |
| Deferred financing costs | Deferred financing costs | (308) | | | (374) | | Deferred financing costs | (220) | | | (286) | |
Total long-term debt | Total long-term debt | 60,692 | | | 40,644 | | Total long-term debt | $ | 60,780 | | | $ | 60,714 | |
Less: current portion | — | | | 18 | | |
Long-term debt, less current portion | $ | 60,692 | | | $ | 40,626 | | |
|
Note 8 – 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 | (3,309) | | | — | | | (3,309) | |
Amounts reclassified from accumulated other comprehensive income (loss) | — | | | 431 | | | 431 | |
Balance at October 2, 2021 | $ | (28,900) | | | $ | (6,649) | | | $ | (35,549) | |
| | | | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | | Pension and Other Postretirement Actuarial Items | | Total |
Balance at January 1, 2022 | $ | (30,276) | | | $ | (4,732) | | | $ | (35,008) | |
Other comprehensive loss before reclassifications | (18,405) | | | — | | | (18,405) | |
Amounts reclassified from accumulated other comprehensive income | 191 | | | 227 | | | 418 | |
Balance at October 1, 2022 | $ | (48,490) | | | $ | (4,505) | | | $ | (52,995) | |
| | | | | | | | | | | | | | | | | |
| Foreign Currency Translation Adjustment | | Pension and Other Postretirement Actuarial Items | | Total |
Balance at January 1, 2020 | $ | (30,761) | | | $ | (6,942) | | | $ | (37,703) | |
Other comprehensive loss before reclassifications | 409 | | | — | | | 409 | |
Amounts reclassified from accumulated other comprehensive income (loss) | — | | | (448) | | | (448) | |
Balance at September 26, 2020 | $ | (30,352) | | | $ | (7,390) | | | $ | (37,742) | |
| | | | | | | | | | | | | | | | | |
| 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 | (3,309) | | | — | | | (3,309) | |
Amounts reclassified from accumulated other comprehensive income | — | | | 431 | | | 431 | |
Balance at October 2, 2021 | $ | (28,900) | | | $ | (6,649) | | | $ | (35,549) | |
Reclassification of foreign currency translation adjustment for the loss on liquidation of subsidiaries is included in other income and expense other (see Note 13). 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 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 October 2, 2021 | | Fiscal quarter ended September 26, 2020 | | Fiscal quarter ended October 1, 2022 | | Fiscal quarter ended October 2, 2021 |
| | Pension Plans | | OPEB Plans | | Pension Plans | | OPEB Plans | | Pension Plans | | OPEB Plans | | Pension Plans | | OPEB Plans |
Net service cost | Net service cost | $ | 96 | | | $ | 9 | | | $ | 99 | | | $ | 31 | | Net service cost | $ | 79 | | | $ | 7 | | | $ | 96 | | | $ | 9 | |
Interest cost | Interest cost | 102 | | | 17 | | | 128 | | | 33 | | Interest cost | 117 | | | 17 | | | 102 | | | 17 | |
Expected return on plan assets | Expected return on plan assets | (97) | | | 0 | | (110) | | | — | | Expected return on plan assets | (116) | | | (97) | | | — | |
Amortization of actuarial losses | Amortization of actuarial losses | 102 | | | 5 | | | 77 | | | 34 | | Amortization of actuarial losses | 69 | | | 1 | | | 102 | | | 5 | |
Net periodic benefit cost | Net periodic benefit cost | $ | 203 | | | $ | 31 | | | $ | 194 | | | $ | 98 | | Net periodic benefit cost | $ | 149 | | | $ | 25 | | | $ | 203 | | | $ | 31 | |
| | | | Nine fiscal months ended October 2, 2021 | | Nine fiscal months ended September 26, 2020 | | Nine fiscal months ended October 1, 2022 | | Nine fiscal months ended October 2, 2021 |
| | Pension Plans | | OPEB Plans | | Pension Plans | | OPEB Plans | | Pension Plans | | OPEB Plans | | Pension Plans | | OPEB Plans |
Net service cost | Net service cost | $ | 289 | | | $ | 27 | | | $ | 297 | | | $ | 93 | | Net service cost | $ | 244 | | | $ | 21 | | | $ | 289 | | | $ | 27 | |
Interest cost | Interest cost | 308 | | | 51 | | | 384 | | | 99 | | Interest cost | 360 | | | 51 | | | 308 | | | 51 | |
Expected return on plan assets | Expected return on plan assets | (291) | | | — | | | (330) | | | — | | Expected return on plan assets | (358) | | | — | | | (291) | | | — | |
Amortization of actuarial losses | Amortization of actuarial losses | 306 | | | 15 | | | 230 | | | 102 | | Amortization of actuarial losses | 215 | | | 3 | | | 306 | | | 15 | |
Net periodic benefit cost | Net periodic benefit cost | $ | 612 | | | $ | 93 | | | $ | 581 | | | $ | 294 | | Net periodic benefit cost | $ | 461 | | | $ | 75 | | | $ | 612 | | | $ | 93 | |
Note 10 – Share-Based Compensation
The On May 26, 2022, the Company’s stockholders voted to approve the adoption of the Vishay Precision Group, Inc. 2022 Stock Incentive Plan (the "2022 plan"), which replaced the Amended and Restated Vishay Precision Group, Inc. 2010 Stock Incentive Program (as amended and restated, the “Plan”(the "previous plan"). The 2022 plan permits the issuance of up to 1,000,000608,000 shares of common stock.stock, which includes approximately 308,000 shares that were reserved for issuance under the previous plan and up to an additional 197,685 additional shares underlying awards outstanding under the previous plan. At October 2, 2021,1, 2022, the Company had reserved 328,418590,034 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.2022 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. If shares are withheld for payment of taxes, those shares do not become available for grant under the 2022 plan.
On March 4, 20213, 2022 and in accordance with their respective employment agreements, VPG’s 3three executive officers were granted annual equity awards in the form of RSUs, of which 50% are performance-based. The awards have an aggregate target grant-date fair value of $1.7$1.5 million and were comprised of 52,48647,831 RSUs. NaNFifty percent of these awards will vest on January 1, 2024,2025, subject to the executives’ continued employment. The performance-based portion of the RSUs will also vest on January 1, 2024,2025, subject to the executives' continued employment and the satisfaction of certain performance objectives relating to three-year cumulative “adjusted free cash flow” and "net earnings goals", each weighted equally.
On March 8, 2021,9, 2022, certain non-executive VPG employees were granted annual equity awards in the form of 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 $0.6$0.5 million and were comprised of 17,79316,324 RSUs. The non-performance portion of these awards (NaN(twenty-five percent for certain employees and 50fifty percent for certain employees) will vest on January 1, 20242025 subject to the employees' continued employment. The performance-based portion of the RSUs will also vest on January 1, 2024,2025, subject to the employees' continued employment and the satisfaction of certain performance objectives relating to three-year cumulative earnings and cash flow goals, each weighted equally.
On January 1, 2022 and in accordance with the Company's 2017 Non-Employee Director Compensation Plan (the "Director Plan"), the Board of Directors approved the issuance of an aggregate of 595 RSUs to the newly-appointed independent member of the Board of Directors. This award represented a pro-rated portion of the annual equity grant made to non-executive directors pursuant to the Director Plan. The aggregate grant-date fair value of this award is immaterial, and the award vested on May 27, 202126, 2022, the date of the 2022 Annual Stockholders Meeting.
Note 10 - Share-Based Compensation (continued)
On May 26, 2022 and in accordance with the Company's 2017 Non-Employee Director Compensation Plan, the Board of Directors approved the issuance of an aggregate of 9,93616,534 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$0.5 million and will vest on the earlier of the 20222023 Annual Stockholders Meeting or May 27, 2022,26, 2023, subject to the directors' continued service on the Board of Directors.
On July 1, 2022, a non-executive VPG employee was granted an annual equity award in the form of RSU's, of which 50% are performance-based. The award has an aggregate grant-date fair value of $0.04 million and was comprised of 1,432 RSU's. The non-performance portion of this award will vest on July 1, 2025, subject to the employees' continued employment. The performance-based portion of the RSUs will also vest on July 1, 2025, subject to the employees' continued employment and the satisfaction of certain performance objectives relating to three-year cumulative earnings and cash flow goals, each weighted equally.
Vesting of equity awards is subject to 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 | | Nine fiscal months ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Restricted stock units | $ | 386 | | | $ | 380 | | | $ | 1,328 | | | $ | 1,137 | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Restricted stock units | $ | 559 | | | $ | 386 | | | $ | 1,583 | | | $ | 1,328 | |
| | | | | | | |
Note 11 – Segment Information
VPG reports in 3three product segments: the Foil Technology ProductsSensors segment, the Force SensorsWeighing Solutions segment, and the Weighing and ControlMeasurement Systems segment. The Foil Technology ProductsSensors reporting segment is comprised of the foil resistor and strain gage operating segments. The Force Sensors reportingWeighing Solutions segment is comprised of transducers, load cells,specialized modules and modules.systems used to precisely measure weight, force torque, and pressure. The Weighing and ControlMeasurement Systems reporting segment is comprised of completehighly specialized systems which include load cellsfor steel production, materials development, and instrumentation for weighing, force control and force measurement for a varietysafety testing.
The chief operating decision maker ("CODM") is our chief executive officer. The CODM evaluates each operating segment's performance. The evaluation of uses such as process control on-board weighing applications.
VPG evaluates reporting segmentthe segment's performance is based on multiple performance measures including third party net revenues, gross profits, revenues, and operating income, exclusive of certain items. Management believes that evaluating segment performance, excluding items such as restructuring and severance costs, impairment of goodwill and indefinite-lived intangible assets, acquisition costs, and other items is meaningful because itthey relate to occurrences or events that are outside of our core operations, and management believes that the use of these measures provides insight with respecta consistent basis to the intrinsicevaluate our operating results of VPG. profitability and performance trends across comparable periods.
The following table sets forth reporting segment information. The reporting segment information reported for the fiscal quarter and nine fiscal months ended October 2, 2021 has been recast to reflect the new reporting segments adopted by the Company in the fourth quarter of 2021, as described in the consolidated financial statements as of December 31, 2021, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 4, 2022 (in thousands):
Note 11 - Segment Information (continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Net revenues: | | | | | | | |
Foil Technology Products | $ | 32,790 | | | $ | 32,906 | | | $ | 98,809 | | | $ | 95,168 | |
Force Sensors | 17,704 | | | 13,862 | | | 51,853 | | | 37,473 | |
Weighing and Control Systems | 31,480 | | | 20,757 | | | 77,240 | | | 61,726 | |
Total | $ | 81,974 | | | $ | 67,525 | | | $ | 227,902 | | | $ | 194,367 | |
| | | | | | | |
Gross profit: | | | | | | | |
Foil Technology Products | $ | 10,530 | | | $ | 13,515 | | | $ | 36,511 | | | $ | 38,002 | |
Force Sensors | 6,108 | | | 4,235 | | | 18,116 | | | 8,845 | |
Weighing and Control Systems | 15,207 | | | 9,599 | | | 35,638 | | | 28,677 | |
Total | $ | 31,845 | | | $ | 27,349 | | | $ | 90,265 | | | $ | 75,524 | |
| | | | | | | |
Reconciliation of segment operating income to consolidated results: | | | | | | | |
Foil Technology Products | $ | 5,087 | | | $ | 8,078 | | | $ | 19,138 | | | $ | 21,532 | |
Force Sensors | 3,511 | | | 2,010 | | | 10,489 | | | 2,201 | |
Weighing and Control Systems | 7,048 | | | 5,222 | | | 15,467 | | | 13,909 | |
Unallocated G&A expenses | (8,381) | | | (7,105) | | | (24,045) | | | (20,193) | |
Acquisition costs | — | | | — | | | (1,198) | | | — | |
Impairment of goodwill and indefinite-lived intangibles | — | | | — | | | (1,223) | | | — | |
| | | | | | | |
Restructuring costs | — | | | (84) | | | — | | | (713) | |
Operating income | $ | 7,265 | | | $ | 8,121 | | | $ | 18,628 | | | $ | 16,736 | |
| | | | | | | |
Acquisition costs: | | | | | | | |
| | | | | | | |
| | | | | | | |
Weighing and Control Systems | — | | | — | | | (1,198) | | | — | |
| $ | — | | | $ | — | | | $ | (1,198) | | | $ | — | |
| | | | | | | |
Impairment of goodwill and indefinite-lived intangibles: | | | | | | | |
Foil Technology Products | $ | — | | | $ | — | | | $ | (1,223) | | | $ | — | |
| | | | | | | |
| | | | | | | |
| $ | — | | | $ | — | | | $ | (1,223) | | | $ | — | |
| | | | | | | |
Restructuring costs: | | | | | | | |
Foil Technology Products | $ | — | | | $ | (23) | | | $ | — | | | $ | (466) | |
Force Sensors | — | | | — | | | — | | | (108) | |
Weighing and Control Systems | — | | | (61) | | | — | | | (61) | |
Corporate/Other | — | | | — | | | — | | | (78) | |
| $ | — | | | $ | (84) | | | $ | — | | | $ | (713) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Net revenues: | | | | | | | |
Sensors | $ | 37,879 | | | $ | 30,721 | | | $ | 115,909 | | | $ | 93,712 | |
Weighing Solutions | 31,399 | | | 30,676 | | | 92,626 | | | 93,319 | |
Measurement Systems | 20,779 | | | 20,577 | | | 57,805 | | | 40,871 | |
Total | $ | 90,057 | | | $ | 81,974 | | | $ | 266,340 | | | $ | 227,902 | |
| | | | | | | |
Gross profit: | | | | | | | |
Sensors | $ | 15,324 | | | $ | 9,568 | | | $ | 47,441 | | | $ | 34,521 | |
Weighing Solutions | 10,470 | | | 11,422 | | | 32,134 | | | 34,988 | |
Measurement Systems | 11,526 | | | 10,855 | | | 30,329 | | | 20,756 | |
Total | $ | 37,320 | | | $ | 31,845 | | | $ | 109,904 | | | $ | 90,265 | |
| | | | | | | |
Reconciliation of segment operating income to consolidated results: | | | | | | | |
Sensors | $ | 10,703 | | | $ | 5,070 | | | $ | 32,721 | | | $ | 20,217 | |
Weighing Solutions | 5,392 | | | 5,917 | | | 15,783 | | | 17,831 | |
Measurement Systems | 4,876 | | | 4,659 | | | 10,350 | | | 7,046 | |
Unallocated G&A expenses | (8,922) | | | (8,381) | | | (26,774) | | | (24,045) | |
Acquisition costs | — | | | — | | | — | | | (1,198) | |
Impairment of goodwill and indefinite-lived intangibles | — | | | — | | | — | | | (1,223) | |
| | | | | | | |
Restructuring costs | (165) | | | — | | | (1,330) | | | — | |
Operating income | $ | 11,884 | | | $ | 7,265 | | | $ | 30,750 | | | $ | 18,628 | |
| | | | | | | |
Acquisition costs: | | | | | | | |
| | | | | | | |
| | | | | | | |
Measurement Systems | — | | | — | | | — | | | (1,198) | |
| $ | — | | | $ | — | | | $ | — | | | $ | (1,198) | |
| | | | | | | |
Impairment of goodwill and indefinite-lived intangibles: | | | | | | | |
| | | | | | | |
| | | | | | | |
Measurement Systems | — | | | — | | | — | | | (1,223) | |
| $ | — | | | $ | — | | | $ | — | | | $ | (1,223) | |
| | | | | | | |
Restructuring costs: | | | | | | | |
Sensors | $ | (165) | | | $ | — | | | $ | (1,272) | | | $ | — | |
| | | | | | | |
Measurement Systems | — | | | — | | | (58) | | | — | |
| | | | | | | |
| $ | (165) | | | $ | — | | | $ | (1,330) | | | $ | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Products are transferred between segments on a basis intended to reflect, as nearly as practicable, the market value of the products. The table below summarizes intersegment sales (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Sensors to Weighing Solutions | $ | 542 | | | $ | 824 | | | $ | 1,364 | | | $ | 2,730 | |
| | | | | | | |
Sensors to Measurement Systems | 32 | | | 51 | | | 191 | | | 66 | |
Note 11 - Segment Information (continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Foil Technology Products to Force Sensors and Weighing and Control Systems | $ | 875 | | | $ | 858 | | | $ | 2,795 | | | $ | 2,451 | |
| | | | | | | |
Weighing and Control Systems to Foil Technology Products and Force Sensors | $ | 155 | | | $ | 83 | | | $ | 419 | | | $ | 294 | |
Note 12 – 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 | | Nine fiscal months ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Numerator: | | | | | | | |
Numerator for basic earnings per share: | | | | | | | |
Net earnings attributable to VPG stockholders | $ | 5,379 | | | $ | 5,598 | | | $ | 14,260 | | | $ | 10,669 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Denominator: | | | | | | | |
Denominator for basic earnings per share: | | | | | | | |
Weighted average shares | 13,626 | | | 13,575 | | | 13,612 | | | 13,562 | |
| | | | | | | |
Effect of dilutive securities: | | | | | | | |
| | | | | | | |
| | | | | | | |
Restricted stock units | 38 | | | 62 | | | 35 | | | 49 | |
Dilutive potential common shares | 38 | | | 62 | | | 35 | | | 49 | |
| | | | | | | |
Denominator for diluted earnings per share: | | | | | | | |
Adjusted weighted average shares | 13,664 | | | 13,637 | | | 13,647 | | | 13,611 | |
| | | | | | | |
Basic earnings per share attributable to VPG stockholders | $ | 0.39 | | | $ | 0.41 | | | $ | 1.05 | | | $ | 0.79 | |
| | | | | | | |
Diluted earnings per share attributable to VPG stockholders | $ | 0.39 | | | $ | 0.41 | | | $ | 1.04 | | | $ | 0.78 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Numerator: | | | | | | | |
Numerator for basic earnings per share: | | | | | | | |
Net earnings attributable to VPG stockholders | $ | 10,118 | | | $ | 5,379 | | | $ | 27,229 | | | $ | 14,260 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Denominator: | | | | | | | |
Denominator for basic earnings per share: | | | | | | | |
Weighted average shares | 13,649 | | | 13,626 | | | 13,645 | | | 13,612 | |
| | | | | | | |
Effect of dilutive securities: | | | | | | | |
| | | | | | | |
| | | | | | | |
Restricted stock units | 59 | | | 38 | | | 47 | | | 35 | |
Dilutive potential common shares | 59 | | | 38 | | | 47 | | | 35 | |
| | | | | | | |
Denominator for diluted earnings per share: | | | | | | | |
Adjusted weighted average shares | 13,708 | | | 13,664 | | | 13,692 | | | 13,647 | |
| | | | | | | |
Basic earnings per share attributable to VPG stockholders | $ | 0.74 | | | $ | 0.39 | | | $ | 2.00 | | | $ | 1.05 | |
| | | | | | | |
Diluted earnings per share attributable to VPG stockholders | $ | 0.74 | | | $ | 0.39 | | | $ | 1.99 | | | $ | 1.04 | |
Note 13 – Additional Financial Statement Information
Other Income (Expense) Other
The caption “Other” on the consolidated condensed statements of operations consists of the following (in thousands):
| | | Fiscal quarter ended | | Nine fiscal months ended | | Fiscal quarter ended | | Nine fiscal months ended |
| | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 | | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Foreign exchange (loss) gain | $ | (38) | | | $ | 162 | | | $ | 522 | | | $ | (123) | | |
Foreign currency exchange gain (loss) | | Foreign currency exchange gain (loss) | $ | 1,261 | | | $ | (38) | | | $ | 5,195 | | | $ | 522 | |
Interest income | Interest income | 151 | | | 29 | | | 216 | | | 205 | | Interest income | 91 | | | 151 | | | 235 | | | 216 | |
Pension expense | Pension expense | (151) | | | (159) | | | (431) | | | (482) | | Pension expense | (81) | | | (151) | | | (261) | | | (431) | |
Other | Other | 212 | | | (71) | | | 114 | | | (229) | | Other | (48) | | | 212 | | | (163) | | | 114 | |
| | $ | 174 | | | $ | (39) | | | $ | 421 | | | $ | (629) | | | $ | 1,223 | | | $ | 174 | | | $ | 5,006 | | | $ | 421 | |
Foreign currency exchange gains and losses represent the impact of changes in foreign currency exchange rates. For the fiscal quarter and nine fiscal months ended October 2, 2021,1, 2022, the change in foreign currency exchange gains and losses during the period, as compared to the prior year period,periods, is largely due to exposure toof currency fluctuations with the Israeli shekel, the Japanese yen, the Canadian dollar, the euro, the Israeli shekel and the British pound. The change in the dollar-shekel exchange rate resulted in a favorable foreign currency exchange impact primarily related to the shekel-denominated lease liability for the Sensors facility in Israel.
For
Included in Other for the nine fiscal months ended October 2, 2021,1, 2022 is a $0.2 million loss on the change in foreign exchange gains and losses duringliquidation of two of the period as compared to the prior year period is largely due to exposure to currency fluctuations with the euro, the Israeli shekel, and the Japanese yen.
Company's European subsidiaries.
Note 14 – Fair Value Measurements
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 |
October 2, 2021 | | | | | | | | | |
October 1, 2022 | | October 1, 2022 | | | | | | | | |
Assets | Assets | | Assets | |
Assets held in rabbi trusts | Assets held in rabbi trusts | | $ | 5,991 | | | $ | 61 | | | $ | 5,930 | | | $ | — | | Assets held in rabbi trusts | | $ | 5,282 | | | $ | 79 | | | $ | 5,203 | | | $ | — | |
| December 31, 2020 | | |
December 31, 2021 | | December 31, 2021 | |
Assets | Assets | | Assets | |
Assets held in rabbi trusts | Assets held in rabbi trusts | | $ | 5,601 | | | $ | 61 | | | $ | 5,540 | | | $ | — | | Assets held in rabbi trusts | | $ | 6,158 | | | $ | 49 | | | $ | 6,109 | | | $ | — | |
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 October 2, 20211, 2022 and December 31, 2020,2021, and company-owned life insurance assets. The marketable securities
Note 14 - Fair Value Measurements (continued)
held 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 cash equivalents held in the rabbi trust are 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 October 2, 20211, 2022 and December 31, 20202021 approximates its carrying value as the revolving debt is reset on a monthly basis based on current market 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 financial instruments include cash and cash equivalents, accounts 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$0.2 million and $0.1$0.0 million of restructuring costs during the fiscal quarter ended October 1, 2022 and October 2, 2021, and September 26, 2020, respectively and $0.0$1.3 million and $0.7$0.0 million of restructuring costs during the nine fiscal months ended October 1, 2022 and October 2, 2021, and September 26, 2020, respectively. Restructuring costs were comprised primarily of employee terminationstermination costs, including severance and statutory retirement allowances, and were incurred in connectionsconnection with various cost reduction programs.
The following table summarizes recent activity related to all restructuring programs. The accrued restructuring liability balance as of October 2, 20211, 2022 and December 31, 2020,2021, respectively, is included in Other accrued expenses in the accompanying consolidated condensed balance sheets (in thousands):
| | | | | |
| |
| |
| |
| |
Balance at December 31, 20202021 | $ | 63— | |
Restructuring charges in 2022 | 1,330 | |
| |
Cash payments | (43)(1,338) | |
Foreign currency translation | 8 | |
Balance at October 2, 20211, 2022 | $ | 20— | |
Note 16 – Stockholder's Equity
On August 8, 2022, the Board of Directors (the “Board”) of the Company authorized the repurchase of up to 600,000 shares ofthe Company’s outstanding common stock (the “Stock Repurchase Plan”). The Stock Repurchase Plan will expire on August 11, 2023, and the Board authorized purchases thereunder to be made through an issuer repurchase plan adopted under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), open market purchases or private transactions, in accordance with the applicable federal securities laws, including Rule 10b-18 under the Exchange Act. At October 1, 2022, the Company had repurchased 32,601 shares of its common stock under the Stock Repurchase Plan.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
VPG is an internationally recognized designer, manufacturera global, diversified company focused on precision measurement sensing technologies, including specialized sensors, weighing solutions, and marketermeasurement systems. Many of sensors, and sensor-basedour precision measurement systems, as well as specialty resistors and strain gages based upon our proprietary technology. We provide precisionsensing products and solutions many of which are “designed-in” by our customers specializing in theand address growing marketsapplications across a diverse array of stress, force, weight, pressure,industries 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.markets. 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 usquality, and we employ an operationally diversified structure to producemanage our businesses.
Driven by the continued proliferation of data generated by the expanding use of sensors across a wide varietywidening array of productsindustrial and non-industrial applications, precision measurement technologies help ensure and deliver required levels of quality of mission-critical or high-value data. Over the past few years, we have seen a broadening of precision sensing applications in strategically effective geographic locations that also optimizeboth our resources for specific technologies, sensors, assemblies,traditional industrial markets 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, our advanced sensors have been used in a consumer electronics product and are being evaluated for other non-industrial applications.
The precision sensor market is integralnew markets, due to the development of intelligent productshigher functionality in our customers' end products. Our precision measurement solutions are used across a wide variety of end markets upon which we focus, including industrial, test and measurement, transportation, steel, medical, agricultural, transportation, industrial,agriculture, avionics, military and space, and consumer product applications. We believeThe Company has a long heritage of innovation in sensor technologies that as original equipment manufacturers (“OEMs”) continue a drive toprovide accuracy, reliability and repeatability that make our customers' products “smarter,”safer, smarter, and more productive. As the functionality of customers products increases, and they will integrate more precision measurement sensors and related systems into their solutions in order to link the mechanical/mechanical and physical world with digital control and/or response. Weresponse, we believe this offers awill offer substantial growth opportunityopportunities for our products and expertise.
Impact of COVID-19 on Our Business
As of November 12, 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 ProductsSensors segment, the Force SensorsWeighing Solutions segment, and the Weighing and ControlMeasurement Systems segment. The Foil Technology ProductsSensors reporting segment is comprised of the foil resistor and strain gage operating segments. The Force Sensors reportingWeighing Solutions segment is comprised of transducers, load cells,specialized modules and modules.systems used to precisely measure weight, force torque, and pressure. The Weighing and ControlMeasurement Systems reporting segment is comprised of completehighly specialized systems which include load cellsfor steel production, materials development, and instrumentation for weighing, force control and force measurement for a variety of uses such as process control 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 October 2, 20211, 2022 were $82.0$90.1 million versus $67.5$82.0 million for the comparable prior year period. Net earnings attributable to VPG stockholders for the fiscal quarter ended October 2, 20211, 2022 were $10.1 million, or $0.74 per diluted share, versus $5.4 million, or $0.39 per diluted share, versus $5.6 million, or $0.41 per diluted share, for the comparable prior year period.
Net revenues for the nine fiscal months ended October 2, 20211, 2022 were $227.9$266.3 million versus $194.4$227.9 million for the comparable prior year period. Net earnings attributable to VPG stockholders for the nine fiscal months ended October 2, 20211, 2022 were $27.2 million, or $1.99 per diluted share, versus $14.3 million, or $1.04 per diluted share, versus $10.7 million, or $0.78 per diluted share, for the comparable prior year period.
The results of operations for the fiscal quarter and nine fiscal months ended October 1, 2022 and October 2, 2021 and September 26, 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 profits, adjusted gross profit margin, adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted net earnings per diluted 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 profits, adjusted gross profit margin, adjusted operating income, adjusted operating margin, adjusted net earnings, 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 useful to investors because each presents what management views as our core operating performanceresults 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. Beginning in the fourth quarter of 2020, the Company determined to 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Gross Profit | | Operating Income | | Net Earnings Attributable to VPG Stockholders | | Diluted Earnings Per share |
Three months ended | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
As reported - GAAP | $ | 31,845 | | | $ | 27,349 | | | $ | 7,265 | | | $ | 8,121 | | | $ | 5,379 | | | $ | 5,598 | | | $ | 0.39 | | | $ | 0.41 | |
As reported - GAAP Margins | 38.8 | % | | 40.5 | % | | 8.9 | % | | 12.0 | % | | | | | | | | |
Acquisition purchase accounting adjustments (a) | 1,329 | | | 4 | | | 1,329 | | | 4 | | | 1,329 | | | 4 | | | 0.10 | | | — | |
Acquisition costs | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
COVID-19 impact (b) | 111 | | | (22) | | | 111 | | | (320) | | | 111 | | | (320) | | | 0.01 | | | (0.02) | |
Start-up costs (c) | 970 | | | — | | | 970 | | | — | | | 970 | | | — | | | 0.07 | | | — | |
Impairment of goodwill and indefinite-lived intangibles | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Restructuring costs | | | — | | | — | | | 84 | | | — | | | 84 | | | — | | | 0.01 | |
Foreign exchange (gain)/loss (d) | | | — | | | | | — | | | 38 | | | (162) | | | 0.01 | | | (0.01) | |
Less: Tax effect of reconciling items and discrete tax items | | | — | | | | | — | | | 754 | | | (109) | | | 0.06 | | | (0.01) | |
As Adjusted - Non GAAP | $ | 34,255 | | | $ | 27,331 | | | $ | 9,675 | | | $ | 7,889 | | | $ | 7,073 | | | $ | 5,313 | | | $ | 0.52 | | | $ | 0.40 | |
As Adjusted - Non GAAP Margins | 41.8 | % | | 40.5 | % | | 11.8 | % | | 11.7 | % | | | | | | | | |
| | | | Gross Profit | | Operating Income | | Net Earnings Attributable to VPG Stockholders | | Diluted Earnings Per share | | Gross Profit | | Operating Income | | Net Earnings Attributable to VPG Stockholders | | Diluted Earnings Per share |
Nine fiscal months ended | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 | |
Three months ended | | Three months ended | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
As reported - GAAP | As reported - GAAP | 90,265 | | | 75,524 | | | 18,628 | | | 16,736 | | | $ | 14,260 | | | $ | 10,669 | | | $ | 1.04 | | | $ | 0.78 | | As reported - GAAP | $ | 37,320 | | | $ | 31,845 | | | $ | 11,884 | | | $ | 7,265 | | | $ | 10,118 | | | $ | 5,379 | | | $ | 0.74 | | | $ | 0.39 | |
As reported - GAAP Margins | As reported - GAAP Margins | 39.6 | % | | 38.9 | % | | 8.2 | % | | 8.6 | % | | As reported - GAAP Margins | 41.4 | % | | 38.8 | % | | 13.2 | % | | 8.9 | % | |
Acquisition purchase accounting adjustments (a) | Acquisition purchase accounting adjustments (a) | 2,259 | | | 560 | | | 2,259 | | | 560 | | | 2,259 | | | 560 | | | 0.17 | | | 0.04 | | Acquisition purchase accounting adjustments (a) | 260 | | | 1,329 | | | 260 | | | 1,329 | | | 260 | | | 1,329 | | | 0.02 | | | 0.10 | |
Acquisition costs | | — | | | 1,198 | | | — | | | 1,198 | | | — | | | 0.09 | | | — | | |
| COVID-19 impact (b) | COVID-19 impact (b) | (66) | | | 536 | | | (574) | | | 123 | | | (574) | | | 123 | | | (0.04) | | | 0.01 | | COVID-19 impact (b) | — | | | 111 | | | — | | | 111 | | | — | | | 111 | | | — | | | 0.01 | |
Start-up costs (c) | Start-up costs (c) | 2,258 | | | — | | | 2,258 | | | — | | | 2,258 | | | — | | | 0.17 | | | — | | Start-up costs (c) | — | | | 970 | | | — | | | 970 | | | — | | | 970 | | | — | | | 0.07 | |
Impairment of goodwill and indefinite-lived intangibles | — | | | — | | | 1,223 | | | — | | | 1,223 | | | — | | | 0.09 | | | — | | |
| Restructuring costs | Restructuring costs | | — | | | 713 | | | — | | | 713 | | | — | | | 0.05 | | Restructuring costs | | — | | | 165 | | | — | | | 165 | | | — | | | 0.01 | | | — | |
Foreign exchange (gain)/loss (d) | | (523) | | | 123 | | | (0.04) | | | 0.01 | | |
Foreign currency exchange (gain)/loss (d) | | Foreign currency exchange (gain)/loss (d) | | — | | | — | | | (1,261) | | | 38 | | | (0.09) | | | 0.01 | |
Less: Tax effect of reconciling items and discrete tax items | Less: Tax effect of reconciling items and discrete tax items | | 2,160 | | | 37 | | | 0.16 | | | — | | Less: Tax effect of reconciling items and discrete tax items | | — | | | — | | | (194) | | | 754 | | | (0.01) | | | 0.06 | |
As Adjusted - Non GAAP | As Adjusted - Non GAAP | $ | 94,716 | | | $ | 76,620 | | | $ | 24,992 | | | $ | 18,132 | | | $ | 17,941 | | | $ | 12,151 | | | $ | 1.32 | | | $ | 0.89 | | As Adjusted - Non GAAP | $ | 37,580 | | | $ | 34,255 | | | $ | 12,309 | | | $ | 9,675 | | | $ | 9,476 | | | $ | 7,073 | | | $ | 0.69 | | | $ | 0.52 | |
As Adjusted - Non GAAP Margins | As Adjusted - Non GAAP Margins | 41.6 | % | | 39.4 | % | | 11.0 | % | | 9.3 | % | | | | | | | | | As Adjusted - Non GAAP Margins | 41.7 | % | | 41.8 | % | | 13.7 | % | | 11.8 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | Nine fiscal months ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Net earnings attributable to VPG stockholders | $ | 5,379 | | | $ | 5,598 | | | $ | 14,260 | | | $ | 10,669 | |
Interest Expense | 328 | | | 309 | | | 906 | | | 1,037 | |
Income tax expense | 1,662 | | | 2,109 | | | 3,688 | | | 4,367 | |
Depreciation | 2,955 | | | 2,426 | | | 8,691 | | | 7,506 | |
Amortization | 970 | | | 596 | | | 2,342 | | | 1,828 | |
EBITDA | 11,294 | | | $ | 11,038 | | | 29,887 | | | $ | 25,407 | |
EBITDA MARGIN | 13.8 | % | | 16.3 | % | | 13.1 | % | | 13.1 | % |
Impairment of goodwill and indefinite-lived intangibles | — | | | — | | | 1,223 | | | — | |
Acquisition purchase accounting adjustments (a) | 1,329 | | | 4 | | | 2,259 | | | 560 | |
Acquisition costs | — | | | — | | | 1,198 | | | — | |
Restructuring costs | — | | | 84 | | | — | | | 713 | |
COVID-19 impact (b) | 111 | | | (320) | | | (574) | | | 123 | |
Start-up costs (c) | 970 | | | — | | | 2,258 | | | — | |
Foreign exchange (gain)/loss (d) | 38 | | | (162) | | | (523) | | | 123 | |
ADJUSTED EBITDA | $ | 13,742 | | | $ | 10,644 | | | $ | 35,728 | | | $ | 26,926 | |
ADJUSTED EBITDA MARGIN | 16.8 | % | | 15.8 | % | | 15.7 | % | | 13.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Gross Profit | | Operating Income | | Net Earnings Attributable to VPG Stockholders | | Diluted Earnings Per share |
Nine fiscal months ended | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
As reported - GAAP | 109,904 | | | 90,265 | | | 30,750 | | | 18,628 | | | $ | 27,229 | | | $ | 14,260 | | | $ | 1.99 | | | $ | 1.04 | |
As reported - GAAP Margins | 41.3 | % | | 39.6 | % | | 11.5 | % | | 8.2 | % | | | | | | | | |
Acquisition purchase accounting adjustments (a) | 1,310 | | | 2,259 | | | 1,310 | | | 2,259 | | | 1,310 | | | 2,259 | | | 0.10 | | | 0.17 | |
Acquisition costs | | | — | | | — | | | 1,198 | | | — | | | 1,198 | | | — | | | 0.09 | |
COVID-19 impact (b) | 138 | | | (66) | | | 138 | | | (574) | | | 138 | | | (574) | | | 0.01 | | | (0.04) | |
Start-up costs (c) | 150 | | | 2,258 | | | 150 | | | 2,258 | | | 150 | | | 2,258 | | | 0.01 | | | 0.17 | |
Impairment of goodwill and indefinite-lived intangibles | — | | | — | | | — | | | 1,223 | | | — | | | 1,223 | | | — | | | 0.09 | |
Restructuring costs | | | | | 1,330 | | | — | | | 1,330 | | | — | | | 0.10 | | | — | |
Foreign currency exchange (gain)/loss (d) | | | | | | | | | (5,195) | | | (523) | | | (0.38) | | | (0.04) | |
Less: Tax effect of reconciling items and discrete tax items | | | | | | | | | (496) | | | 2,160 | | | (0.03) | | | 0.16 | |
As Adjusted - Non GAAP | $ | 111,502 | | | $ | 94,716 | | | $ | 33,678 | | | $ | 24,992 | | | $ | 25,458 | | | $ | 17,941 | | | $ | 1.86 | | | $ | 1.32 | |
As Adjusted - Non GAAP Margins | 41.9 | % | | 41.6 | % | | 12.6 | % | | 11.0 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | Nine fiscal months ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Net earnings attributable to VPG stockholders | $ | 10,118 | | | $ | 5,379 | | | $ | 27,341 | | | $ | 14,260 | |
Interest Expense | 636 | | | 328 | | | 1,393 | | | 906 | |
Income tax expense | 2,323 | | | 1,662 | | | 6,539 | | | 3,688 | |
Depreciation | 2,937 | | | 2,955 | | | 8,622 | | | 8,691 | |
Amortization | 960 | | | 970 | | | 2,897 | | | 2,342 | |
EBITDA | 16,974 | | | $ | 11,294 | | | 46,792 | | | $ | 29,887 | |
EBITDA MARGIN | 18.8 | % | | 13.8 | % | | 17.6 | % | | 13.1 | % |
Impairment of goodwill and indefinite-lived intangibles | — | | | — | | | — | | | 1,223 | |
Acquisition purchase accounting adjustments (a) | 260 | | | 1,329 | | | 1,310 | | | 2,259 | |
Acquisition costs | — | | | — | | | — | | | 1,198 | |
Restructuring costs | 165 | | | — | | | 1,330 | | | — | |
COVID-19 impact (b) | — | | | 111 | | | 138 | | | (574) | |
Start-up costs (c) | — | | | 970 | | | 150 | | | 2,258 | |
Foreign currency exchange (gain)/loss (d) | (1,261) | | | 38 | | | (5,195) | | | (523) | |
ADJUSTED EBITDA | $ | 16,138 | | | $ | 13,742 | | | $ | 44,525 | | | $ | 21,986 | |
ADJUSTED EBITDA MARGIN | 17.9 | % | | 16.8 | % | | 16.7 | % | | 9.6 | % |
(a) Acquisition purchase accounting adjustments include fair market value adjustments associated with inventory recorded as a component of costs of products sold.
(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) Start-up costs in 2022 and 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 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 third quarter of 20202021 through the third quarter of 20212022 (dollars in thousands):
| | | 3rd Quarter | | 4th Quarter | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 3rd Quarter | | 4th Quarter | | 1st Quarter | | 2nd Quarter | | 3rd Quarter |
| | 2020 | | 2020 | | 2021 | | 2021 | | 2021 | | 2021 | | 2021 | | 2022 | | 2022 | | 2022 |
Net revenues | Net revenues | $ | 67,525 | | | $ | 75,445 | | | $ | 70,589 | | | $ | 75,339 | | | $ | 81,974 | | Net revenues | $ | 81,974 | | | $ | 90,017 | | | $ | 87,665 | | | $ | 88,618 | | | $ | 90,057 | |
| Gross profit margin | Gross profit margin | 40.5 | % | | 38.1 | % | | 40.5 | % | | 39.6 | % | | 38.8 | % | Gross profit margin | 38.8 | % | | 38.7 | % | | 40.2 | % | | 42.1 | % | | 41.4 | % |
| End-of-period backlog | End-of-period backlog | $ | 90,800 | | | $ | 87,600 | | | $ | 100,700 | | | $ | 130,900 | | | $ | 146,700 | | End-of-period backlog | $ | 146,700 | | | $ | 150,500 | | | $ | 170,600 | | | $ | 171,400 | | | $ | 171,700 | |
| Book-to-bill ratio | Book-to-bill ratio | 0.95 | | | 0.93 | | | 1.21 | | | 1.40 | | | 1.21 | | Book-to-bill ratio | 1.21 | | | 1.06 | | | 1.25 | | | 1.08 | | | 1.08 | |
| Inventory turnover | Inventory turnover | 2.38 | | | 2.86 | | | 2.67 | | | 2.64 | | | 2.55 | | Inventory turnover | 2.55 | | | 2.82 | | | 2.69 | | | 2.52 | | | 2.47 | |
| | | 3rd Quarter | | 4th Quarter | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 3rd Quarter | | 4th Quarter | | 1st Quarter | | 2nd Quarter | | 3rd Quarter |
| | 2020 | | 2020 | | 2021 | | 2021 | | 2021 | | 2021 | | 2021 | | 2022 | | 2022 | | 2022 |
Foil Technology Products | | | | | | | | | | |
Sensors | | Sensors | | | | | | | | | |
Net revenues | Net revenues | $ | 32,906 | | | $ | 36,477 | | | $ | 32,711 | | | $ | 33,308 | | | $ | 32,790 | | Net revenues | $ | 30,721 | | | $ | 34,149 | | | $ | 37,750 | | | $ | 40,280 | | | $ | 37,879 | |
Gross profit margin | Gross profit margin | 41.1 | % | | 38.4 | % | | 39.9 | % | | 38.9 | % | | 32.1 | % | Gross profit margin | 31.1 | % | | 32.1 | % | | 37.8 | % | | 44.3 | % | | 40.5 | % |
End-of-period backlog | End-of-period backlog | $ | 48,500 | | | $ | 43,700 | | | $ | 48,400 | | | $ | 60,600 | | | $ | 72,500 | | End-of-period backlog | $ | 70,100 | | | $ | 72,900 | | | $ | 81,300 | | | $ | 84,200 | | | $ | 80,600 | |
Book-to-bill ratio | Book-to-bill ratio | 1.01 | | | 0.84 | | | 1.19 | | | 1.37 | | | 1.38 | | Book-to-bill ratio | 1.37 | | | 1.11 | | | 1.27 | | | 1.17 | | | 0.99 | |
Inventory turnover | Inventory turnover | 2.63 | | | 3.05 | | | 2.72 | | | 2.67 | | | 2.88 | | Inventory turnover | 3.14 | | | 3.53 | | | 3.54 | | | 3.20 | | | 3.04 | |
| Force Sensors | | |
Weighing Solutions | | Weighing Solutions | |
Net revenues | Net revenues | $ | 13,862 | | | $ | 16,251 | | | $ | 16,933 | | | $ | 17,216 | | | $ | 17,704 | | Net revenues | $ | 30,676 | | | $ | 32,071 | | | $ | 32,768 | | | $ | 28,459 | | | $ | 31,399 | |
Gross profit margin | Gross profit margin | 30.5 | % | | 29.1 | % | | 35.7 | % | | 34.7 | % | | 34.5 | % | Gross profit margin | 37.2 | % | | 34.0 | % | | 36.9 | % | | 33.7 | % | | 33.3 | % |
End-of-period backlog | End-of-period backlog | $ | 21,300 | | | $ | 24,700 | | | $ | 26,800 | | | $ | 30,700 | | | $ | 30,700 | | End-of-period backlog | $ | 42,600 | | | $ | 41,800 | | | $ | 43,600 | | | $ | 43,000 | | | $ | 43,000 | |
Book-to-bill ratio | Book-to-bill ratio | 0.90 | | | 1.18 | | | 1.14 | | | 1.23 | | | 1.01 | | Book-to-bill ratio | 1.06 | | | 0.98 | | | 1.06 | | | 1.03 | | | 1.05 | |
Inventory turnover | Inventory turnover | 2.28 | | | 2.74 | | | 2.72 | | | 2.57 | | | 2.38 | | Inventory turnover | 2.47 | | | 2.63 | | | 2.61 | | | 2.33 | | | 2.48 | |
| Weighing and Control Systems | | |
Measurement Systems | | Measurement Systems | |
Net revenues | Net revenues | $ | 20,757 | | | $ | 22,717 | | | $ | 20,945 | | | $ | 24,815 | | | $ | 31,480 | | Net revenues | $ | 20,577 | | | $ | 23,797 | | | $ | 17,147 | | | $ | 19,879 | | | $ | 20,779 | |
Gross profit margin | Gross profit margin | 46.2 | % | | 44.0 | % | | 45.6 | % | | 43.9 | % | | 48.3 | % | Gross profit margin | 52.8 | % | | 54.7 | % | | 51.8 | % | | 49.9 | % | | 55.5 | % |
End-of-period backlog | End-of-period backlog | $ | 21,000 | | | $ | 19,200 | | | $ | 25,500 | | | $ | 39,600 | | | $ | 43,500 | | End-of-period backlog | $ | 34,000 | | | $ | 35,800 | | | $ | 45,700 | | | $ | 44,200 | | | $ | 48,100 | |
Book-to-bill ratio | Book-to-bill ratio | 0.88 | | | 0.88 | | | 1.30 | | | 1.56 | | | 1.14 | | Book-to-bill ratio | 1.18 | | | 1.08 | | | 1.56 | | | 0.98 | | | 1.27 | |
Inventory turnover | Inventory turnover | 2.13 | | | 2.67 | | | 2.54 | | | 2.64 | | | 2.32 | | Inventory turnover | 1.92 | | | 2.18 | | | 1.68 | | | 1.90 | | | 1.68 | |
Net revenues for the third quarter of 20212022 increased 8.8%1.6% from the second quarter of 20212022 mainly due to increased volume in Forces Sensorthe Weighing Solutions and Weighing and ControlMeasurement Systems reporting segments.segments partially offset by decreased volume in the Sensors reporting segment. Net revenues increased 21.4%9.9% from the third quarter of 20202021 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 ProductsSensors reporting segment decreased 1.6%6.0% compared to the second quarter of 20212022 and decreased 0.4%increased 23.3% from the third quarter of 2020. The sequential decline2021. Excluding the unfavorable impact of foreign currency exchange rates, revenue increased 35.1% from the third quarter of 2021. Excluding the unfavorable impact of foreign currency exchange rates, revenue decreased 4.2% from the second quarter of 2022. Sequentially, the decrease primarily reflected lower revenue of advanced sensors to ourrevenue in Other markets which was mainly the result of the transition to our new advanced sensors facility. Compared to a year ago, higher(mainly for consumer applications) and lower revenue of precision foil resistors in the Test and Measurements market was offset by lower revenue of precision foil resistors and Pacific Instruments systems in the Avionics, Military and Space market and by lower revenue of advanced sensors to our Other markets which was mainly the result of the transition to our new advanced sensors facility.
Net revenues in the Force Sensors reporting segment increased 2.8% from the second quarter of 2021 and increased 27.7% from the third quarter of 2020. The sequential increase was primarily due to higher revenue in our Industrial Weighing markets, partially offset by lower revenue for precision agriculture. market.The year-over-year increase in revenues was primarily reflected operational limitationsattributable to higher sales of precision resistors in the third fiscal quarterTest and
Measurements market and higher revenue of 2020 from the COVID pandemic at our facilityadvanced sensors products primarily in India.Other markets (mainly for consumer applications).
Net revenues in the Weighing and Control SystemsSolutions reporting segment increased 26.9%10.3% from the second quarter of 20212022 and increased 51.7%2.4% from the third quarter of 2020. 2021. The year-over-year and sequential increases in revenues were primarily attributable to increases in our Other markets for precision agriculture and construction applications.
Net revenues in the Measurement Systems reporting segment increased 4.5% from the second quarter of 2022 and increased 1.0% from the third quarter of 2021. Sequentially, the increase in net revenuesrevenue was primarily due to the addition of revenue forDTS, and higher revenue ofDynamic Systems Inc. ("DSI") and KELK products toin the Steel market and our Diversified Technical Systems Inc. ("DTS") products in the Transportation market. The year-over-year increase in revenue was primarily attributable to the addition ofincreased revenue for DTS, which was acquired on June 1, 2021, higher revenue of our onboard weighing products for the Transportation market, and higher revenue of our DSI products forin the Steel market.
Overall gross profit margin in the third quarter of 20212022 decreased 0.8%0.7% as compared to the second quarter of 20212022 and decreased 1.7%increased 2.6% from the third quarter of 2020.2021.
Sequentially, the decrease in the gross profit margin in the Sensors and Weighing Solutions reporting segments was partially offset by an increase in the gross profit margin in the Weighing and ControlsMeasurement Systems reporting segment was completely offset by a decrease insegments. In the gross profit margin in the Foil Technology Products reporting segment, while the Force Sensors reporting segment, gross profit margin remained flat. In the Weighing and Control Systems reporting segment, the sequential increase was mainly due to higher revenue, the addition of DTS, and favorable product mix. The Foil Technology Products
reporting segment gross profit margins decreased sequentially due to lower volume, one-time inventory adjustments, and unfavorable foreign currency exchange rates. In the Weighing Solutions reporting segment, the sequential decrease in gross profit margins was primarily due to higher materials costs and reduction of inventories partially offset by higher volume and selling price increases. The sequential increase in the gross profit margins in the Measurement Systems reporting segment was a result of favorable product mix a reduction in inventory, labor inefficiencies, and unfavorable exchange rates.higher volume.
Compared to the third quarter of 2020,2021, the Foil Technology ProductsSensors and Measurement Systems reporting segments had higher gross profit margins, while the Weighing Solutions reporting segment gross profit margin was lower.
The Sensors reporting segment had a lowerhigher gross profit margin due to impacts from charges related to start-up costs in our new advanced sensors facilityhigher volume and the impact of COVID-19 in conjunction withselling price increases partially offset by unfavorable foreign currency exchange rates and wage increases. In the Measurement Systems reporting segment, the gross profit margin was higher rent and manufacturing overheadas compared to the third quarter of 2021 primarily due to lower purchase accounting adjustments related to the new advanced sensors facility, and a reduction in inventory.DTS acquisition, partially offset by unfavorable product mix. The Force SensorsWeighing Solutions reporting segment increase in gross profit margin as compared to 2020 was primarily due to higher revenue.In the Weighing and Control Systems reporting segment, the decrease in gross profit margin as compared to the third quarter of 20202021 was primarily due to the impacthigher materials costs, unfavorable product mix, unfavorable foreign currency exchange rates, and reduction of charges related to purchase accounting adjustments from the DTS acquisition and the impact of COVID-19, which wereinventories, partially offset by higher revenue coming from DTS.volume and selling price increases.
Optimize Core Competence
The Company’s core competencycompetencies include our innovative, deep technical and keyapplications-specific expertise that adds value proposition is providing customers with proprietary foil technologyto our customers' products, our strong brands and precision measurement sensorscustomer relationships, our focus on operational excellence, our ability to select 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 productsdevelop our management teams, 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.proven M&A strategy. 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 processesprocesses.
Our foil technologySensors segment 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 unique 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 believe results in reduced manufacturing and lead times, improved quality and increased margins. As a sign of our commitment to these businesses, we signed a long-term lease for a state of the artstate-of-the-art facility whichthat has been constructed in Israel. The transition of our advanced sensors businessWe fully transitioned to thatthis facility was completed in the third quarter of fiscal 2021.
Our design, research, and product development teams, in partnership with our marketing teams, drive our efforts to 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 ways that make them more appealing, addressing changing customer needs and industry trends in terms of form, fit, and function.
We also seek to achieve significant production cost savings through the transfer, expansion, and construction 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 2019,In the past several years, we incurred restructuring expense related to closing and
downsizing of facilities as part of the manufacturing transitions of our force sensorload cell products to facilities in India and China, which marked key milestones in our ongoing strategic initiatives to align and consolidate our manufacturing footprint.
Acquisition Strategy
We expect to continue to make strategic acquisitions where opportunities present themselves to grow and expand our segments. Historically, our growth and acquisition strategy hashad been largely focused on vertical product integration, using our foil strain gages in our force sensorload cell products, and incorporating those products into our weighing and control systems. The acquisitionssolutions. In recent years, we widened our acquisition strategy to include a broader set of Stress-Tek and KELK, each of which employs our foil strain gages to manufacture load cells for its systems, continued 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. The 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 acquisitionprecision measurement 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 platform and brings unique engineering capabilities, centered on miniaturized data acquisition and systems integration with sensor technology for critical testing applications. companies.
We expect to expand our expertise, and our acquisition focus, outside our traditional vertical approach to other precision sensormeasurement solutions, including 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 to more cost effective locations. This may enable us to become more efficient and cost competitive, and also maintain tighter controls of 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 are 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 on March 11, 2021.4, 2022.
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, as of the first day of our fourth quarter, 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 impairment tests, require significant management judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to 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 and significant lease assets and liabilities.
Effects of Foreign Currency Exchange Rate on Operations
For the fiscal quarter ended October 2, 2021,1, 2022, exchange rates increaseddecreased net revenues by $0.9$5.3 million, and increaseddecreased costs of products sold and selling, general, and administrative expenses by $1.8$4.2 million, when compared to the comparable prior year period.
For the nine fiscal months ended October 2, 2021,1, 2022, exchange rates increaseddecreased net revenues by $5.8$10.8 million, and increaseddecreased costs of products sold and selling, general, and administrative expenses by $7.6$7.7 million, when compared to the comparable prior year period.
Off-Balance Sheet Arrangements
As of October 2, 2021 and December 31, 2020, we did not have any off-balance sheet arrangements.
Results of Operations
Results of operations by reporting segments for the fiscal quarter and nine fiscal months ended October 2, 2021 have been recast to reflect the new reporting segments as described under Item 7. Overview of Financial Results of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 4, 2022.
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 | | Nine fiscal months ended |
| | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 | | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Costs of products sold | Costs of products sold | 61.2 | % | | 59.5 | % | | 60.4 | % | | 61.1 | % | Costs of products sold | 58.6 | % | | 61.2 | % | | 58.7 | % | | 60.4 | % |
Gross profit | Gross profit | 38.8 | % | | 40.5 | % | | 39.6 | % | | 38.9 | % | Gross profit | 41.4 | % | | 38.8 | % | | 41.3 | % | | 39.6 | % |
Selling, general, and administrative expenses | Selling, general, and administrative expenses | 30.0 | % | | 28.4 | % | | 30.4 | % | | 29.9 | % | Selling, general, and administrative expenses | 28.1 | % | | 30.0 | % | | 29.2 | % | | 30.4 | % |
Operating income | Operating income | 8.9 | % | | 12.0 | % | | 8.2 | % | | 8.6 | % | Operating income | 13.2 | % | | 8.9 | % | | 11.5 | % | | 8.2 | % |
Income before taxes | Income before taxes | 8.7 | % | | 11.5 | % | | 8.0 | % | | 7.8 | % | Income before taxes | 13.8 | % | | 8.7 | % | | 12.9 | % | | 8.0 | % |
Net earnings | Net earnings | 6.6 | % | | 8.4 | % | | 6.3 | % | | 5.5 | % | Net earnings | 11.3 | % | | 6.6 | % | | 10.4 | % | | 6.3 | % |
Net earnings attributable to VPG stockholders | Net earnings attributable to VPG stockholders | 6.6 | % | | 8.3 | % | | 6.3 | % | | 5.5 | % | Net earnings attributable to VPG stockholders | 11.2 | % | | 6.6 | % | | 10.2 | % | | 6.3 | % |
| Effective tax rate | Effective tax rate | 23.4 | % | | 27.1 | % | | 20.3 | % | | 29.0 | % | Effective tax rate | 18.6 | % | | 23.4 | % | | 19.4 | % | | 20.3 | % |
Net Revenues
Net revenues were as follows (dollars in thousands):
| | | Fiscal quarter ended | | Nine fiscal months ended | | Fiscal quarter ended | | Nine fiscal months ended |
| | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 | | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Net revenues | Net revenues | $ | 81,974 | | | $ | 67,525 | | | $ | 227,902 | | | $ | 194,367 | | Net revenues | $ | 90,057 | | | $ | 81,974 | | | $ | 266,340 | | | $ | 227,902 | |
Change versus comparable prior year period | Change versus comparable prior year period | $ | 14,449 | | | $ | 33,535 | | | Change versus comparable prior year period | $ | 8,083 | | | $ | 38,438 | | |
Percentage change versus prior year period | Percentage change versus prior year period | 21.4 | % | | 17.3 | % | | Percentage change versus prior year period | 9.9 | % | | 16.9 | % | |
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 attributable to: | | | |
Change in volume | Change in volume | 7.6 | % | | 8.1 | % | Change in volume | 13.7 | % | | 14.2 | % |
Change in average selling prices | Change in average selling prices | 0.8 | % | | 0.2 | % | Change in average selling prices | 2.9 | % | | 2.5 | % |
Foreign currency effects | Foreign currency effects | 1.7 | % | | 3.5 | % | Foreign currency effects | (6.7) | % | | (4.8) | % |
Acquisitions | Acquisitions | 11.3 | % | | 5.5 | % | Acquisitions | 0.0 | % | | 5.0 | % |
| Net change | Net change | 21.4 | % | | 17.3 | % | Net change | 9.9 | % | | 16.9 | % |
During the fiscal quarter and nine fiscal months ended October 2, 2021,1, 2022, net revenues increased 21.4%9.9% and 17.3%16.9%, respectively, as compared to the comparable prior year periods, 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.
Gross Profit Margin
Gross profit as a percentage of net revenues was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Gross profit margin | 38.8 | % | | 40.5 | % | | 39.6 | % | | 38.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Gross profit margin | 41.4 | % | | 38.8 | % | | 41.3 | % | | 39.6 | % |
The gross profit margin for the fiscal quarter and nine fiscal months ended October 2, 2021 decreased1, 2022 increased 2.6% and 1.7%, respectively, as compared to the comparable prior year periods. For the fiscal quarter period, withthe Sensors and Measurement Systems reporting segments reported higher gross profit margins inwhile the ForceWeighing Solutions reporting segment reported lower gross profit margins when compared to the prior year period. For the nine fiscal month period, the Sensors and Weighing and ControlMeasurement Systems reporting segments being offset by lower margin in the Foil Technology Products reporting segment.
The gross profit margin for the nine fiscal months ended October 2, 2021 increased 0.7% as compared to the comparable prior year period, mainly fromreported higher gross profit margins inwhile the Force SensorsWeighing Solutions reporting segment partially offset byreported lower gross profit margins inwhen compared to the Foil Technology and Weighing and Controls Systems reporting segments.prior year period.
Segments
Analysis of revenues and gross profit margins for each of our reportable segments is provided below.
Foil Technology ProductsSensors
Net revenues of the Foil Technology ProductsSensors segment were as follows (dollars in thousands):
| | | Fiscal quarter ended | | Nine fiscal months ended | | Fiscal quarter ended | | Nine fiscal months ended |
| | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 | | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Net revenues | Net revenues | $ | 32,790 | | | $ | 32,906 | | | $ | 98,809 | | | $ | 95,168 | | Net revenues | $ | 37,879 | | | $ | 30,721 | | | $ | 115,909 | | | $ | 93,712 | |
Change versus comparable prior year period | Change versus comparable prior year period | $ | (116) | | | $ | 3,641 | | | Change versus comparable prior year period | $ | 7,158 | | | $ | 22,197 | | |
Percentage change versus prior year period | Percentage change versus prior year period | (0.4) | % | | 3.8 | % | | Percentage change versus prior year period | 23.3 | % | | 23.7 | % | |
Changes in Foil Technology ProductsSensors 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 attributable to: | | | |
Change in volume | Change in volume | (1.2) | % | | 1.8 | % | Change in volume | 32.1 | % | | 28.3 | % |
Change in average selling prices | Change in average selling prices | 0.9 | % | | 0.6 | % | Change in average selling prices | 1.7 | % | | 1.9 | % |
Foreign currency effects | Foreign currency effects | (0.1) | % | | 1.4 | % | Foreign currency effects | (10.5) | % | | (6.5) | % |
| Net change | Net change | (0.4) | % | | 3.8 | % | Net change | 23.3 | % | | 23.7 | % |
Net revenues decreased 0.4%increased 23.3% for the fiscal quarter ended October 2, 2021,1, 2022, as compared to the comparable prior year period and increased 23.7% for the nine fiscal months ended October 1, 2022, as compared to the comparable prior year period. ComparedThe year-over-year increase in revenues was primarily attributable to a year ago, higher revenuesales of precision foil resistors in the Test and Measurements market was offset by lowerand higher revenue of precision foil resistors and Pacific Instruments systems in the Avionics, Military and Space market and by lower revenue of advanced sensors to our Other markets which was mainly the result of the transition to our new advanced sensors facility.
Net revenues increased 3.8% for the nine fiscal months ended October 2, 2021, as compared to the comparable prior year period. Increases in net revenues are primarily attributable to our advanced sensors product lineproducts primarily in otherOther markets test and measurement markets, and general industrial markets, in addition to favorable exchange rate impacts.(mainly for consumer applications).
Gross profit as a percentage of net revenues for the Foil Technology ProductsSensors segment was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Gross profit margin | 32.1 | % | | 41.1 | % | | 37.0 | % | | 39.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Gross profit margin | 40.5 | % | | 31.1 | % | | 40.9 | % | | 36.8 | % |
The gross profit margin increased 9.4% for the fiscal quarter ended October 1, 2022, when compared to the comparable prior year period due to higher volume and selling price increases partially offset by unfavorable foreign currency exchange rates and wage increases. Additionally, there were higher start-up costs associated with our new advanced sensors facility in 2021.
The gross profit margin decreased 9.0%increased 4.1% for the nine fiscal quartermonths ended October 2, 2021, when1, 2022 as compared to the comparable prior year period due toperiod. Volume increases were partially offset by impacts from charges related to start-up costs in our new advanced sensors facility, wage increase, and the impact of COVID-19 in conjunction with unfavorable foreign exchange rates, higher rent and manufacturing overhead related to the new advanced sensors facility, and a reduction in inventory.labor inefficiencies.
The gross profit margin decreased 2.9% for the nine fiscal months ended October 2, 2021 as compared to the comparable prior year period. Impacts from charges related to start-up costs in our new advanced sensors facility and the impact COVID-19 completely offset the higher volume in our foil resisters products.
Force SensorsWeighing Solutions
Net revenues of the Force SensorsWeighing Solutions segment were as follows (dollars in thousands):
| | | Fiscal quarter ended | | Nine fiscal months ended | | Fiscal quarter ended | | Nine fiscal months ended |
| | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 | | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Net revenues | Net revenues | $ | 17,704 | | | $ | 13,862 | | | $ | 51,853 | | | $ | 37,473 | | Net revenues | $ | 31,399 | | | $ | 30,676 | | | $ | 92,626 | | | $ | 93,319 | |
Change versus comparable prior year period | Change versus comparable prior year period | $ | 3,842 | | | $ | 14,380 | | | Change versus comparable prior year period | $ | 723 | | | $ | (693) | | |
Percentage change versus prior year period | Percentage change versus prior year period | 27.7 | % | | 38.4 | % | | Percentage change versus prior year period | 2.4 | % | | (0.7) | % | |
Changes in Force SensorsWeighing Solutions 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 attributable to: | | | |
Change in volume | Change in volume | 25.6 | % | | 35.9 | % | Change in volume | 4.5 | % | | 0.2 | % |
Change in average selling prices | Change in average selling prices | 0.2 | % | | (0.9) | % | Change in average selling prices | 5.3 | % | | 4.0 | % |
Foreign currency effects | Foreign currency effects | 1.9 | % | | 3.4 | % | Foreign currency effects | (7.4) | % | | (4.9) | % |
| Net change | Net change | 27.7 | % | | 38.4 | % | Net change | 2.4 | % | | (0.7) | % |
Net revenues increased 27.7%2.4% for the fiscal quarter ended October 2, 2021,1, 2022, and 38.4%decreased 0.7% for the nine fiscal months ended October 2, 20211, 2022 as compared to the comparable prior year periods. The increase in fiscal quarter net revenues was primarily attributable to increases primarilyin our Other markets for precision agriculture and construction applications, while the same market reflected operational limitations in 2020 froma decrease for the COVID pandemic at our facility in India.nine fiscal month period. Both the fiscal quarter and nine fiscal month periods were negatively impacted by foreign currency exchange rate effects.
Gross profit as a percentage of net revenues for the Force SensorsWeighing Solutions segment was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Gross profit margin | 34.5 | % | | 30.5 | % | | 34.9 | % | | 23.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Gross profit margin | 33.3 | % | | 37.2 | % | | 34.7 | % | | 37.5 | % |
The gross profit margin for the fiscal quarter ended October 2, 2021 increased 4.0%1, 2022 decreased 3.9% as compared to the comparable prior year period primarily due to higher revenue.
The gross profit marginand decreased 2.8% for the nine fiscal months ended October 2, 2021 increased 11.3% as1, 2022 when compared to the prior year periodperiod. The decrease for the fiscal quarter was primarily due to higher revenue, favorablematerials costs, unfavorable product mix, unfavorable foreign currency exchange rate impactsrates, and an increase in inventory.reduction of inventories, partially offset by higher volume and selling price increases. The decrease for the nine fiscal month period was primarily due to lower volume, higher materials costs, unfavorable product mix, unfavorable foreign currency exchange rates, and reduction of inventories, partially offset by selling price increases.
Measurement Systems
Net revenues of the Weighing and ControlMeasurement Systems segment were as follows (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Net revenues | $ | 31,480 | | | $ | 20,757 | | | $ | 77,240 | | | $ | 61,726 | |
Change versus comparable prior year period | $ | 10,723 | | | | | $ | 15,514 | | | |
Percentage change versus prior year period | 51.7 | % | | | | 25.1 | % | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Net revenues | $ | 20,779 | | | $ | 20,577 | | | $ | 57,805 | | | $ | 40,871 | |
Change versus comparable prior year period | $ | 202 | | | | | $ | 16,934 | | | |
Percentage change versus prior year period | 1.0 | % | | | | 41.4 | % | | |
Changes in Weighing and ControlMeasurement 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 attributable to: | | | |
Change in volume | Change in volume | 8.3 | % | | 4.4 | % | Change in volume | 1.3 | % | | 14.3 | % |
Change in average selling prices | Change in average selling prices | 1.0 | % | | 0.5 | % | Change in average selling prices | 1.8 | % | | 1.2 | % |
Foreign currency effects | Foreign currency effects | 5.6 | % | | 6.4 | % | Foreign currency effects | (2.1) | % | | (2.1) | % |
Acquisitions | Acquisitions | 36.8 | % | | 13.8 | % | Acquisitions | 0.0 | % | | 28.0 | % |
| Net change | Net change | 51.7 | % | | 25.1 | % | Net change | 1.0 | % | | 41.4 | % |
Net revenues increased 51.7%1.0% for the fiscal quarter ended October 2, 20211, 2022 as compared to the comparable prior year period and increased 41.4% for the nine fiscal months ended October 1, 2022 as compared to the comparable prior year period. The year-over-yearincrease for the fiscal quarter was primarily due to increased revenue in the Steel market. The increase in revenue for the nine fiscal months period was primarily attributable to the addition of revenue for DTS, which was acquired on June 1, 2021, higher revenue of our onboard weighing products for the Transportation market, and higher revenue of our KELK and DSI products for the Steel market.
Net revenues increased 25.1% for the nine fiscal months ended October 2, 2021 as compared to the comparable prior year period primarily due to the addition of revenue for DTS, higher revenue of our onboard weighing products for the transportation market and favorable exchange rate impacts.steel-related businesses.
Gross profit as a percentage of net revenues for the Weighing and ControlMeasurement Systems segment were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Gross profit margin | 48.3 | % | | 46.2 | % | | 46.1 | % | | 46.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Gross profit margin | 55.5 | % | | 52.8 | % | | 52.5 | % | | 50.8 | % |
The gross profit margin for the fiscal quarter ended October 2, 2021 of 48.3%1, 2022 increased from2.7% compared to the third quarter of 20202021. The increase was primarily due to higher revenue coming from DTS.lower purchase accounting adjustments related to the DTS acquisition partially offset by an unfavorable product mix.
The gross profit margin for the nine fiscal months ended October 2, 2021 of 46.1%, decreased1, 2022 increased 1.7% from the prior year period due to the impacts of charges related to purchase accounting adjustments from the DTS acquisition and an unfavorable product mix, partially offset by the higherperiod. Higher revenues coming from DTS and favorableour KELK and DSI steel-related businesses and lower purchase accounting adjustment related to the DTS acquisition were partially offset by an unfavorable product mix and an unfavorable foreign currency exchange rate impacts.impact. Additionally, COVID-19 subsidies were received in 2021 that did not continue in 2022.
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 | | Nine fiscal months ended |
| | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 | | October 1, 2022 | | October 2, 2021 | | October 1, 2022 | | October 2, 2021 |
Total SG&A expenses | Total SG&A expenses | $ | 24,580 | | | $ | 19,144 | | | $ | 69,216 | | | $ | 58,075 | | Total SG&A expenses | $ | 25,271 | | | $ | 24,580 | | | $ | 77,824 | | | $ | 69,216 | |
| As a percentage of net revenues | As a percentage of net revenues | 30.0 | % | | 28.4 | % | | 30.4 | % | | 29.9 | % | As a percentage of net revenues | 28.1 | % | | 30.0 | % | | 29.2 | % | | 30.4 | % |
SG&A expenses for the fiscal quarter ended October 1, 2022 increased $0.7 million compared to the comparable prior year period due to increases in wages, travel costs and other fees, partially offset by favorable foreign currency exchange rate impacts.
SG&A expenses for the nine fiscal months ended October 2, 20211, 2022 increased $8.6 million compared to the comparable prior year periods with $6.1 million of the increase driven by SG&A expenses from DTS. The remaining increase is from additional SG&A expenses related to personnelwage increases, travel costs, and unfavorable foreign currency impacts and SG&A expenses from the acquisition of DTS.
Impairment of Goodwill and Indefinite-lived Intangible Assets
InFor the secondnine fiscal quarter ofmonths ended October 2, 2021, as a result of our interim impairment test, we recorded a $1.2 million pre-tax, non-cash impairment charge which reduced the carrying value of our goodwill and indefinite-lived intangible assets. See Note 4 for further discussion.
Acquisition Costs
For the nine fiscal months ended October 2, 2021, we recorded Acquisition costsCosts associated with the acquisition of DTS were as follows (in thousands):
| | | | | | | | | | | | | |
| Fiscal quarter ended | | Nine fiscal months ended |
| October 2, 2021 | | | | October 2, 2021 |
Legal fees | $ | — | | | | | $ | 341 | |
Appraisal fees | — | | | | | 18 | |
Other (investment banker and insurance costs) | — | | | | | 839 | |
| $ | — | | | | | $ | 1,198 | |
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$0.2 million and $0.1$0.0 million of restructuring costs during the fiscal quarter ended October 1, 2022 and October 2, 2021, and September 26, 2020, respectively, and $0.0$1.3 million and $0.7$0.0 million of restructuring costs during the nine fiscal months ended October 1, 2022 and October 2, 2021, and September 26, 2020, respectively. Restructuring costs recorded in the prior year were comprised primarily of employee terminationstermination costs, including severance and statutory retirement allowances, and were incurred in connectionsconnection with various cost reduction programs.
Other Income (Expense)
Interest expense for the fiscal quarter ended October 2, 2021 was higher when compared with interest expense in the comparable prior year period reflecting the impact of increased borrowings on the Company's revolving credit facility in conjunction with the acquisition of DTS. Interest expense for theand nine fiscal months ended October 2, 20211, 2022 was lowerhigher when compared with the comparable prior year periodperiods mainly due to more favorablehigher borrowing rates in 2021.2022.
The following table analyzes the components of the line “Other” on the consolidated condensed statements of operations (in thousands):
| | | Fiscal quarter ended | | | Fiscal quarter ended | |
| | October 2, 2021 | | September 26, 2020 | | Change | | October 1, 2022 | | October 2, 2021 | | Change |
Foreign exchange loss | $ | (38) | | | $ | 162 | | | $ | (200) | | |
Foreign currency exchange gain (loss) | | Foreign currency exchange gain (loss) | $ | 1,261 | | | $ | (38) | | | $ | 1,299 | |
| Interest income | Interest income | 151 | | | 29 | | | 122 | | Interest income | 91 | | | 151 | | | (60) | |
Pension expense | Pension expense | (151) | | | (159) | | | 8 | | Pension expense | (81) | | | (151) | | | 70 | |
Other | Other | 212 | | | (71) | | | 283 | | Other | (48) | | | 212 | | | (260) | |
| | $ | 174 | | | $ | (39) | | | $ | 213 | | | $ | 1,223 | | | $ | 174 | | | $ | 1,049 | |
| | | | Nine fiscal months ended | | | Nine fiscal months ended | |
| | October 2, 2021 | | September 26, 2020 | | Change | | October 1, 2022 | | October 2, 2021 | | Change |
Foreign exchange gain (loss) | $ | 522 | | | $ | (123) | | | $ | 645 | | |
Foreign currency exchange gain | | Foreign currency exchange gain | $ | 5,195 | | | $ | 522 | | | $ | 4,673 | |
Interest income | Interest income | 216 | | | 205 | | | 11 | | Interest income | 235 | | | 216 | | | 19 | |
Pension expense | Pension expense | (431) | | | (482) | | | 51 | | Pension expense | (261) | | | (431) | | | 170 | |
Other | Other | 114 | | | (229) | | | 343 | | Other | (163) | | | 114 | | | (277) | |
| | $ | 421 | | | $ | (629) | | | $ | 1,050 | | | $ | 5,006 | | | $ | 421 | | | $ | 4,585 | |
Foreign currency exchange gains and losses represent the impact of changes in foreign currency exchange rates. For the fiscal quarter and nine fiscal months ended October 2, 2021,1, 2022, the change in foreign currency exchange gains and losses during the period, as compared to the prior year period,periods, is largely due to exposure to currency fluctuations with the Israeli shekel, the Japanese yen, the Canadian dollar, the euro, the Israeli shekel and the British pound. The change in the dollar-shekel exchange rate resulted in a favorable foreign currency exchange impact primarily related to the shekel-denominated lease liability for the Sensors facility in Israel.ForIncluded in Other for the nine fiscal months ended October 2, 2021,1, 2022 is a $0.2 million loss on the change in foreign exchange gains and losses duringliquidation of two of the period as compared to the prior year period is largely due to exposure to currency fluctuations with the euro, the Israeli shekel, and the Japanese yen.Company's European subsidiaries.
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 October 2, 20211, 2022 was 23.4%18.6% compared to 27.1%23.4% for the fiscal quarter ended September 26, 2020October 2, 2021. The effective tax rate for the fiscal quarter ended October 1, 2022 was lower than the prior year period primarily due to foreign currency exchange gains and thelosses, tax rate changes and a reduction in our valuation allowance on deferred tax assets. The effective tax rate for the nine fiscal months ended October 2, 20211, 2022 was 20.3%19.4% compared to 29.0%20.3% for the nine fiscal months ended September 26, 2020.October 2, 2021. The effective tax rate for both periods presented in 2021 isthe nine fiscal months ended October 1, 2022 was lower than the prior year periodsperiod primarily due to the acquisition of DTS, which enabled the Company to reduce its valuation allowance against deferred tax assets, tax rate changes in certain foreign jurisdictions, and changes in the mix of worldwide income.income and foreign currency exchange gains and losses, tax rate changes and a reduction in our valuation allowance on deferred tax assets.
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 the Company’s best estimate of the potential tax exposures in each respective jurisdiction. It may take a number of years for a final tax liability in a jurisdiction to be determined, particularly in the event of an audit. If an uncertain matter is determined favorably, there could be a reduction in the Company’s tax 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.
InOn March 20, 2020, wethe Company entered into a third amendedThird Amended and restated credit agreement. TheRestated Credit Agreement (the “2020 Credit Agreement”) among the Company, the lenders named therein, Citizens Bank, National Association and Wells Fargo Bank, National Association as joint lead arrangers and JPMorgan Chase Bank, National Association as agent for such lenders (the “Agent”), pursuant to which the terms of ourthe Company’s multi-currency, secured credit agreementfacility were revised to provide for the following facilities: (1)a secured revolving facility (the “2020 Revolving Facility”) in an aggregate principal amount of $75.0 million, with a sublimit of $10.0 million which can be used for letters of credit for the account of the Company or its subsidiaries that are parties to the Credit Agreement, theAgreement. The proceeds of whichthe 2020 Revolving Facility may be used on an ongoing basis for working capital and general corporate purposes. The aggregate principal amount of the 2020 Revolving Facility may be increased by a maximum of $25.0 million upon the request of the Company, subject to the terms of the 2020 Credit Agreement. The 2020 Credit Agreement terminates on March 20, 2025.
Interest payable on amounts borrowed under the 2020 Revolving Facility is based upon, at the Company’s option, (1) the greatest of: the Agent’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% is added to Base Rate loans. Depending upon the Company’s leverage ratio, an interest rate margin ranging from 1.50% to 2.75% per annum is added to the applicable LIBOR or CDOR rate to determine the interest payable on the LiborLIBOR or CDOR loans. The Company is required to pay a quarterly fee of 0.25% per annum to 0.40% per annum on the unused portion of the 2020 Revolving Facility, which is determined based on the Company’s leverage ratio each quarter. Additional customary fees apply with respect to letters of credit.
The obligations of the Company under the 2020 Credit Agreement are secured by pledges of stock in certain domestic and foreign subsidiaries, as well as guarantees by substantially all of the Company’s domestic subsidiaries. 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 2020 Credit Agreement restricts the Company from paying cash dividends and requires the Company to comply with other customary covenants, representations, and warranties, including the maintenance of specific financial ratios. The financial maintenance covenants include an interest coverage ratio and a leverage ratio. We wereThe Company was in compliance with theseits financial maintenance covenants at October 2, 2021.1, 2022. If the Company is not in compliance with any of these covenant restrictions, the credit facility could be terminated by the lenders, and all amounts outstanding pursuant to the credit facility could become immediately payable.
Our business has historically generated significant cash flow. For the nine fiscal months ended October 2, 2021,1, 2022, cash provided by operating activities was $18.1$20.5 million compared to $22.8cash provided by operations of $18.1 million in the comparable prior year period. Our net cash used in investing activities for the nine fiscal months ended October 2, 20211, 2022 was higherlower compared to the prior year period mainly due to the acquisition of DTS.DTS which took place in the second quarter of 2021. Our net cash provided byused in financing activities for the nine fiscal months ended October 2, 20211, 2022 was higher comparedlower than the comparable to prior year mainlyperiod due to the 2021 borrowings on the 2020 credit facility forin connection with the acquisition of DTS.
Adjusted free cash flow generated during the nine fiscal months ended October 2, 2021, was $7.1 million. We refer to the amount of cash provided by operating activities ($18.1 million) in excess of our capital expenditures ($11.2 million)Approximately 91% and net of proceeds from the sale of assets ($0.2 million) as “adjusted free cash flow.”
The following table summarizes the components of net cash at October 2, 2021 and December 31, 2020 (in thousands):
| | | | | | | | | | | |
| October 2, 2021 | | December 31, 2020 |
Cash and cash equivalents | $ | 75,544 | | | $ | 98,438 | |
| | | |
Third-party debt, including current and long-term: | | | |
| | | |
Revolving debt | 61,000 | | | 41,000 | |
Third-party debt held by Japanese subsidiary | — | | | 18 | |
| | | |
Deferred financing costs | (308) | | | (374) | |
Total third-party debt | 60,692 | | | 40,644 | |
Net cash | $ | 14,852 | | | $ | 57,794 | |
Measurements such as “adjusted free cash flow” and “net 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 GAAP measures of performance or liquidity. However, management believes that “adjusted free cash flow” is a meaningful measure of our ability to fund acquisitions, and that an analysis of “net 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 90%87% of our cash and cash equivalents balance at October 2, 20211, 2022 and December 31, 20202021, respectively, was held by our non-U.S. subsidiaries.
See the following table for the percentage of cash and cash equivalents, by region, at October 2, 20211, 2022 and December 31, 2020:2021:
| | | October 2, 2021 | | December 31, 2020 | | October 1, 2022 | | December 31, 2021 |
Israel | Israel | 24 | % | | 26 | % | Israel | 24 | % | | 25 | % |
Asia | Asia | 25 | % | | 18 | % | Asia | 27 | % | | 24 | % |
Europe | Europe | 20 | % | | 16 | % | Europe | 15 | % | | 18 | % |
United States | United States | 10 | % | | 10 | % | United States | 9 | % | | 13 | % |
United Kingdom | United Kingdom | 14 | % | | 18 | % | United Kingdom | 11 | % | | 12 | % |
Canada | Canada | 7 | % | | 12 | % | Canada | 14 | % | | 8 | % |
| | 100 | % | | 100 | % | | 100 | % | | 100 | % |
We earn a significant amount of our operating income outside the United States, and we consider the majority of which is deemedthe undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, in the foreign jurisdictions.as of October 1, 2022. 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, howeverneeds. 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.
Adjusted free cash flow generated during the nine fiscal months ended October 1, 2022, was $5.4 million. We considerrefer to the majorityamount of the undistributed earningscash provided by operating activities ($20.5 million) in excess of our foreign subsidiaries,capital expenditures ($15.5 million) and net of proceeds from the sale of assets ($0.4 million) as “adjusted free cash flow.”
The following table summarizes the components of net cash at October 2,1, 2022 and December 31, 2021 (in thousands):
| | | | | | | | | | | |
| October 1, 2022 | | December 31, 2021 |
Cash and cash equivalents | $ | 79,910 | | | $ | 84,335 | |
| | | |
Third-party debt, including current and long-term: | | | |
Revolving debt | 61,000 | | | 61,000 | |
Deferred financing costs | (220) | | | (286) | |
Total third-party debt | 60,780 | | | 60,714 | |
Net cash | $ | 19,130 | | | $ | 23,621 | |
Measurements such as “adjusted free cash flow” and “net 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 GAAP measures of performance or liquidity. However, management believes that “adjusted free cash flow” is a meaningful measure of our ability to fund acquisitions, and that an analysis of “net cash” assists investors in understanding aspects of our cash and debt management. These measures, as calculated by us, may not be indefinitely reinvested.comparable to similarly titled measures used by other companies.
Our financial condition as of October 2, 20211, 2022 remains strong, with a current ratio (current assets to current liabilities) of 4.1 to 1.0, as compared to a ratio of 4.73.6 to 1.0 at December 31, 2020.2021.
Cash paid for property and equipment for the nine fiscal months ended October 2, 20211, 2022 was $11.2$15.5 million compared to $15.8$11.2 million in the comparable prior year period.
As of October 1, 2022 and December 31, 2021, we did not have any off-balance sheet arrangements.
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 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; compliance issues under applicable laws, such as export control laws, including the outcome of our voluntary self-disclosure of export control non-compliance; 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’sour 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’sour ability to execute itsour new corporate strategy and business continuity, operational and budget plans in light of the COVID-19 pandemic;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, 2020 and2021. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this report or as of the dates otherwise indicated in our Quarterly Report on Form 10-Q for the fiscal quarter ended October 2, 2021.such forward-looking statements. 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, 2020,2021, filed with the SEC on March 11, 2021.4, 2022.
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 October 2, 2021,1, 2022, there was no change in our internal control over financial reporting that materially affected, or is reasonable likely to materially affect, internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.The Company is subject to various legal proceedings that constitute ordinary, routine litigation incidental to its business. In addition, the Company has determined that certain export shipments of products from one of its subsidiaries did not comply with the filing requirements of U.S. export administration and foreign trade regulations, and the Company voluntarily self-disclosed such non-compliance to the U.S. government. Non-compliance with the filing requirements may result in fines and penalties.
The Company believes that the foregoing matters will not have a material adverse effect on the Company’s business or its financial condition, results of operations, and cash flows.
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, 2020,2021, filed with the SEC on March 11, 2021.4, 2022. There have been no material changes in reported risk factors from the information reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 except as follows:
A shortage of qualified labor could have a material adverse effect on our business and results of operations.
Labor is a significant component of operating our business. A number of factors may adversely affect the labor force available to us or increase labor costs, including general macroeconomic conditions, high employment levels, federal unemployment subsidies, including unemployment benefits offered in response to the COVID-19 pandemic, increased wages offered by other employers, vaccine mandates and other government regulations and our responses thereto. We are currently experiencing a shortage of qualified labor in certain geographies, particularly with manufacturing plant production workers in the United States, Israel and Japan. Outside suppliers that we rely on have also experienced shortages of qualified labor. A prolonged shortage of qualified labor could, among other things, decrease our ability to effectively produce and meet customer demand, and could have a material adverse effect on our business and results of operations.
2021.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.The following table provides information about repurchases of the Company's common stock during the three-month period ended October 1, 2022.
| | | | | | | | | | | | | | | | | | | | | | | |
| Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares that May Yet Be Purchased Under the Plans (a) |
July 3, 2022 - August 3, 2022 | — | | | — | | | — | | | — | |
August 4, 2022 - September 4, 2022 | 6,085 | | | $ | 34.60 | | | 6,085 | | | 593,915 | |
September 5, 2022 - October 1, 2022 | 26,516 | | | 32.05 | | | 26,516 | | | 567,399 | |
Total | 32,601 | | | | | 32,601 | | | 567,399 | |
(a) On August 8, 2022, the Board of Directors (the “Board”) of the Company authorized the repurchase of up to 600,000 shares of the Company’s outstanding common stock (the “Stock Repurchase Plan”). The Stock Repurchase Plan will expire on August 11, 2023, and the Board authorized purchases thereunder to be made through an issuer repurchase plan adopted under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), open market purchases or private transactions, in accordance with the applicable federal securities laws, including Rule 10b-18 under the Exchange Act. As of October 1, 2022, the Company had repurchased 32,601 shares under the Stock Repurchase Plan. |
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Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS
| | | | | | | | |
10.1 | | |
31.1 | | |
31.2 | | |
32.1 | | |
32.2 | | |
101 | | Interactive Data File (Quarterly Report on Form 10-Q, for the quarterly period ended October 2, 2021,1 2022, 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: November 12, 20218, 2022