Performance through Precision

Press Release

VPG Reports Fiscal 2017 Second Quarter Results

Company Release - 8/8/2017 7:30 AM ET

MALVERN, Pa.--(BUSINESS WIRE)-- Vishay Precision Group, Inc. (NYSE: VPG), a leading producer of precision sensors and systems, today announced its results for its fiscal 2017 second quarter and six fiscal months ended July 1, 2017.

Second Quarter Highlights:

  • Growth in revenues to $62.3 million, up 7.5% year-over- year and up 4.2% sequentially
  • Gross margin for the quarter is 39.7%
  • Operating margin for the quarter is 9.1%, adjusted operating margin* for the quarter is 9.6%
  • Earnings increased to $0.27 per diluted share, compared to $0.14 reported last year
  • Adjusted diluted EPS* increased to $0.29 compared to prior year $0.15
  • Cash from operations was $4.4 million with free cash flow* of $3.4 million
  • Book-to-bill of 1.08 continues to reflect broadly improving end-markets

Ziv Shoshani, Chief Executive Officer of VPG, commented, “Our operating performance continues to reveal the benefits of successful prior restructuring and an improved business climate. Our growth and profitability gains in the quarter were broad-based and each segment contributed to our performance year-over-year. We expect our current business performance will drive value to our shareholders.”

The Company grew second quarter 2017 net earnings attributable to VPG stockholders to $3.6 million, or $0.27 per diluted share, compared to $1.9 million, or $0.14 per diluted share, in the second fiscal quarter of 2016. This growth was achieved despite a foreign currency exchange rates headwind in the second quarter of 2017 relative to the prior year period that reduced net income by $0.8 million, or $0.06 per diluted share.

In the six fiscal months ended July 1, 2017, net earnings attributable to VPG stockholders grew to $5.6 million, or $0.42 per diluted share, compared to $2.3 million, or $0.18 per diluted share, in the six months ended 2016. Foreign currency exchange rates for the six fiscal months ended July 1, 2017 had a negative impact on net income of $1.7 million, or $0.13 per diluted share as compared to the prior year’s first half.

Second quarter 2017 adjusted net earnings attributable to VPG stockholders nearly doubled to $3.9 million, or $0.29 per diluted share, compared to adjusted net earnings attributable to VPG stockholders of $2.0 million, or $0.15 per diluted share, for the comparable prior year period.

Six fiscal months ended July 1, 2017 adjusted net earnings attributable to VPG stockholders grew by 76% to $6.4 million, or $0.48 per diluted share, compared to adjusted net earnings attributable to VPG stockholders of $3.6 million, or $0.27 per diluted share, for the comparable prior year period.

The reconciliation table within this release reconciles the Company's non-GAAP measures, which are provided for comparison with other results, and the most directly comparable U.S. GAAP measures.

Segments

Foil Technology Products segment revenues grew 15.6% to $29.3 million in the second quarter of 2017, up from $25.4 million in the second quarter of 2016; sequential growth was 5.6%, up from $27.8 million in the first quarter of 2017. The year-over-year increase in revenues was attributable to precision resistors growth in Asia within the test and measurement market along with instrumentation growth in the U.S. within the avionics, military and space markets for the Pacific Instruments product line. Sequentially, the increase in revenue is primarily attributable to increased sales from the Pacific Instruments product line in the avionics, military and space end markets in the U.S.

Gross profit margin for the segment was 41.9% for the second quarter of 2017, up 5.1 percentage points compared to 36.8% in the second quarter of 2016. The second quarter gross profit margin is slightly improved from the 41.4% reported in the first quarter of 2017. The year-over-year improvement in gross margin mainly reflects higher volume and manufacturing efficiencies.

Force Sensors segment revenues grew 1.7% to $15.7 million in the second quarter of 2017, up from $15.4 million in the second quarter of 2016; sequential revenue increased 1.2%, up from $15.5 million in the first quarter of 2017. The year-over-year increase in revenues was attributable to OEM customers in the precision agriculture end market, partially offset by a negative exchange rate. The increase in sequential revenue of $0.2 million was attributable to a positive exchange rate impact.

Gross profit margin for Force Sensors was 28.9% for the second quarter of 2017, flat compared to 29.0% in the second quarter of 2016, but up significantly from the 23.9% margin reported in the first quarter of 2017. The sequential gross profit margin increase was primarily due to an increase in inventory.

Weighing and Control Systems segment revenues grew by 0.7% to $17.4 million in the second quarter of 2017, up from $17.2 million in the second quarter of 2016; sequential growth was 4.8%, up from $16.6 million in the first quarter of 2017. The increased sales year-over-year are primarily attributable to stronger demand in the steel end market and process weighing in Europe, with some offset from a negative exchange rate. The sequential increase in revenue is primarily due to the steel market in Asia, and process weighing in the U.S., offset by a reduction in on-board weighing product lines.

Second quarter 2017 gross profit margin in the segment increased to 45.8% from the second quarter of 2016 of 44.7% (and as compared to 45.6% excluding a purchase accounting adjustment of $0.2 million for the Stress-Tek acquisition). Excluding the purchase accounting adjustment, the year-over-year gross profit margin was flat. The gross profit margin increase from 44.3% reported in the first quarter of 2017 was attributable to higher volume.

Near-Term Outlook

“In light of an improved business environment, at constant second quarter 2017 exchange rates and taking into account the normal seasonality of our business, we expect net revenues in the range of $60 million to $65 million for the third quarter of 2017,” concluded Mr. Shoshani.

*Use of Non-GAAP Financial Information

We define “adjusted net earnings” as net earnings attributable to VPG stockholders before acquisition purchase accounting adjustments, acquisition costs, restructuring costs and associated tax effects. “Adjusted gross margin” is defined as gross margin before acquisition purchase accounting adjustments. “Adjusted operating margin” is defined as operating margin before acquisition purchase accounting adjustments, acquisition costs and restructuring costs. “Free cash flow” is defined as the amount of cash generated from operations ($4.4 million for the second quarter of 2017), in excess of our capital expenditures ($1.2 million for the second quarter of 2017) net of proceeds, if any, for the sale of assets ($0.2 million in the second quarter of 2017). For a reconciliation of GAAP to non-GAAP financial information, refer to the quarterly financial tables.

Conference Call and Webcast

A conference call will be held today (August 8) at 10:00 a.m. ET (9:00 a.m. CT). To access the conference call, interested parties may call 1-888-317-6003 or internationally 1-412-317-6061 and use passcode 2478127, or log on to the investor relations page of the VPG website at www.vpgsensors.com.

A replay will be available approximately one hour after the completion of the call by calling toll-free 1-877-344-7529 or internationally 1-412-317-0088 and by using the passcode 10110677. The replay will also be available on the investor relations page of the VPG website at www.vpgsensors.com for a limited time.

About VPG

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

Forward-Looking Statements

From time to time, information provided by us, including but not limited to statements in this report, or other statements made by or on our behalf, may contain "forward-looking" information within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks, uncertainties, and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those anticipated.

Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, expected, estimated, or projected. Among the factors that could cause actual results to materially differ include: general business and economic conditions; difficulties or delays in completing acquisitions and integrating acquired companies (including the acquisitions of Stress-Tek and Pacific Instruments); 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; 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; and other factors affecting our operations, markets, products, services, and prices that are set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

   
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)
 
Fiscal quarter ended
July 1, 2017 July 2, 2016
Net revenues $ 62,319 $ 57,996
Costs of products sold   37,560     36,501  
Gross profit 24,759 21,495
Gross profit margin 39.7 % 37.1 %
 
Selling, general, and administrative expenses 18,800 18,444
Acquisition costs - 352
Restructuring costs   315     1,011  
Operating income 5,644 1,688
Operating margin 9.1 % 2.9 %
 
Other income (expense):
Interest expense (468 ) (371 )
Other   (362 )   (30 )
Other income (expense) - net   (830 )   (401 )
 
Income before taxes 4,814 1,287
 
Income tax expense (benefit)   1,198     (562 )
 
Net earnings 3,616 1,849
Less: net loss attributable to noncontrolling interests   (3 )   (19 )
Net earnings attributable to VPG stockholders $ 3,619   $ 1,868  
 
Basic earnings per share attributable to VPG stockholders $ 0.27 $ 0.14
Diluted earnings per share attributable to VPG stockholders $ 0.27 $ 0.14
 
Weighted average shares outstanding - basic 13,257 13,184
Weighted average shares outstanding - diluted 13,446 13,405
   
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)
 
Six fiscal months ended
July 1, 2017 July 2, 2016
Net revenues $ 122,106 $ 114,625
Costs of products sold   74,830     73,355  
Gross profit 47,276 41,270
Gross profit margin 38.7 % 36.0 %
 
Selling, general, and administrative expenses 37,026 36,492
Acquisition costs - 414
Restructuring costs   869     1,686  
Operating income 9,381 2,678
Operating margin 7.7 % 2.3 %
 
Other income (expense):
Interest expense (920 ) (699 )
Other   (683 )   395  
Other income (expense) - net   (1,603 )   (304 )
 
Income before taxes 7,778 2,374
 
Income tax expense   2,159     29  
 
Net earnings 5,619 2,345
Less: net earnings (loss) attributable to noncontrolling interests   5     (3 )
Net earnings attributable to VPG stockholders $ 5,614   $ 2,348  
 
Basic earnings per share attributable to VPG stockholders $ 0.42 $ 0.18
Diluted earnings per share attributable to VPG stockholders $ 0.42 $ 0.18
 
Weighted average shares outstanding - basic 13,233 13,181
Weighted average shares outstanding - diluted 13,442 13,402
   
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Balance Sheets
(In thousands)
July 1, 2017 December 31, 2016
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 63,158 $ 58,452
Accounts receivable, net 42,376 34,270
Inventories:
Raw materials 16,046 15,647
Work in process 20,640 21,115
Finished goods   20,223     19,559  
Inventories, net 56,909 56,321
Prepaid expenses and other current assets   8,261     6,831  
Total current assets 170,704 155,874
 
Property and equipment, at cost:
Land 3,399 3,344
Buildings and improvements 49,958 48,454
Machinery and equipment 91,487 89,080
Software 7,646 7,441
Construction in progress 2,353 4,340
Accumulated depreciation   (100,421 )   (97,374 )
Property and equipment, net 54,422 55,285
 
Goodwill 18,934 18,717
 
Intangible assets, net 21,046 21,585
 
Other assets   19,949     19,049  
Total assets $ 285,055   $ 270,510  
 
Liabilities and equity
Current liabilities:
Trade accounts payable $ 9,447 $ 8,264
Payroll and related expenses 13,296 11,978
Other accrued expenses 14,335 13,285
Income taxes 2,306 772
Current portion of long-term debt   2,853     2,623  
Total current liabilities 42,237 36,922
 
Long-term debt, less current portion 30,763 33,529
Deferred income taxes 813 735
Other liabilities 13,776 13,054
Accrued pension and other postretirement costs   14,999     14,713  
Total liabilities   102,588     98,953  
 
Commitments and contingencies
 
Equity:
Common stock 1,288 1,278
Class B convertible common stock 103 103
Treasury stock (8,765 ) (8,765 )
Capital in excess of par value 191,897 190,373
Retained earnings 34,345 28,731
Accumulated other comprehensive loss   (36,534 )   (40,337 )
Total Vishay Precision Group, Inc. stockholders' equity 182,334 171,383
Noncontrolling interests   133     174  
Total equity   182,467     171,557  
Total liabilities and equity $ 285,055   $ 270,510  
   
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
 
Six fiscal months ended
July 1, 2017 July 2, 2016
Operating activities
Net earnings $ 5,619 $ 2,345
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 5,318 5,640
Gain on disposal of property and equipment (141 ) (31 )
Share-based compensation expense 492 547
Inventory write-offs for obsolescence 982 865
Deferred income taxes (104 ) (1,540 )
Other (445 ) (804 )
Net changes in operating assets and liabilities:
Accounts receivable, net (6,928 ) 991
Inventories, net (761 ) (1,681 )
Prepaid expenses and other current assets (1,397 ) (879 )
Trade accounts payable 1,020 91
Other current liabilities   3,676     (5,271 )
Net cash provided by operating activities   7,331     273  
 
Investing activities
Capital expenditures (3,146 ) (4,434 )
Proceeds from sale of property and equipment 326 250
Purchase of business   -     (10,727 )
Net cash used in investing activities   (2,820 )   (14,911 )
 
Financing activities
Principal payments on long-term debt and capital leases (1,314 ) (1,064 )
Proceeds from revolving facility 16,000 11,000
Payments on revolving facility (16,000 ) (6,000 )
Distributions to noncontrolling interests (46 ) (8 )
Payments of employee taxes on certain share-based arrangements   (303 )   (85 )
Net cash used in financing activities (1,663 ) 3,843
Effect of exchange rate changes on cash and cash equivalents   1,858     377  
Increase (decrease) in cash and cash equivalents 4,706 (10,418 )
 
Cash and cash equivalents at beginning of period   58,452     62,641  
Cash and cash equivalents at end of period $ 63,158   $ 52,223  
 
Supplemental disclosure of non-cash financing transactions:
Conversion of exchangeable notes to common stock $ (1,303 ) $ -
       
VISHAY PRECISION GROUP, INC.
Reconciliation of Consolidated Adjusted Gross Profit Margin
(Unaudited - In thousands)
Fiscal quarter ended Six fiscal months ended
July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016
Gross profit $ 24,759 $ 21,495 $ 47,276 $ 41,270
Gross profit margin 39.7 % 37.1 % 38.7 % 36.0 %
 

Reconciling items affecting gross profit margin

Acquisition purchase accounting adjustments 195 491
       
Adjusted gross profit $ 24,759   $ 21,690   $ 47,276   $ 41,761  
Adjusted gross profit margin 39.7 % 37.4 % 38.7 % 36.4 %
 
 
 
 
VISHAY PRECISION GROUP, INC.
Reconciliation of Consolidated Adjusted Operating Margin
(Unaudited - In thousands)
 
Fiscal quarter ended Six fiscal months ended
July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016
Operating income $ 5,644 $ 1,688 $ 9,381 $ 2,678
Operating margin 9.1 % 2.9 % 7.7 % 2.3 %
 

Reconciling items affecting operating margin

Acquisition purchase accounting adjustments 195 491
Acquisition costs 352 414
Restructuring costs 315 1,011 869 1,686
       
Adjusted operating income $ 5,959   $ 3,246   $ 10,250   $ 5,269  
Adjusted operating margin 9.6 % 5.6 % 8.4 % 4.6 %
 
 
 
 
VISHAY PRECISION GROUP, INC.
Reconciliation of Adjusted Earnings Per Share
(Unaudited - In thousands, except per share data)
Fiscal quarter ended Six fiscal months ended
July 1, 2017 July 2, 2016 July 1, 2017 July 2, 2016
Net earnings attributable to VPG stockholders $ 3,619 $ 1,868 $ 5,614 $ 2,348
 

Reconciling items affecting operating margin

Acquisition purchase accounting adjustments 195 491
Acquisition costs 352 414
Restructuring costs 315 1,011 869 1,686
 

Less reconciling items affecting income tax expense

Tax effect of reconciling items and discrete tax items   13     1,469     56     1,290  
Adjusted net earnings attributable to VPG stockholders $ 3,921   $ 1,957   $ 6,427   $ 3,649  
 
Adjusted net earnings per diluted share $ 0.29 $ 0.15 $ 0.48 $ 0.27
 
Weighted average shares outstanding - diluted 13,446 13,405 13,442 13,402

VPG
For Investors
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James Palczynski, 203-682-8229
jp@icrinc.com
or
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Source: VPG