Performance through Precision

Press Release

VPG Reports Fiscal 2020 Third Quarter Results

11/03/2020

MALVERN, Pa., Nov. 03, 2020 (GLOBE NEWSWIRE) -- Vishay Precision Group, Inc. (NYSE: VPG), a leading producer of precision sensors and sensor-based systems, today announced its results for its fiscal 2020 third quarter ended September 26, 2020.

Third Quarter Highlights:

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

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

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

Third Quarter and Nine Month Financial Trends:

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

In the nine fiscal months ended September 26, 2020 net earnings attributable to VPG stockholders were $10.7 million, or $0.78 per diluted share, compared to $18.3 million, or $1.35 per diluted share, in the nine fiscal months ended September 28, 2019. Foreign currency exchange rates for the nine fiscal months ended September 26, 2020 decreased net income by $0.5 million, or $0.04 per diluted share, relative to the prior year period.

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

In the nine fiscal months ended September 26, 2020 adjusted net earnings* attributable to VPG stockholders were $12.0 million, or $0.88 per diluted share, compared to $19.4 million, or $1.43 per diluted share in the nine fiscal months ended September 28, 2019.

Segments

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

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

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

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

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

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

Impacts From the Global COVID-19 Pandemic:

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

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

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

*Use of Non-GAAP Financial Information

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

Conference Call and Webcast

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

About VPG

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

Forward-Looking Statements

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

Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, expected, estimated, or projected. Among the factors that could cause actual results to materially differ include: general business and economic conditions; difficulties or delays in identifying, negotiating and completing acquisitions and integrating acquired companies (including DSI); the inability to realize anticipated synergies and expansion possibilities; difficulties in new product development; changes in competition and technology in the markets that we serve and the mix of our products required to address these changes; changes in foreign currency exchange rates; political, economic, health (including the COVID-19 pandemic) and military instability in the countries in which we operate; difficulties in implementing our cost reduction strategies, such as underutilization of production facilities, labor unrest or legal challenges to our lay-off or termination plans, operation of redundant facilities due to difficulties in transferring production to achieve efficiencies; significant developments from the recent and potential changes in tariffs and trade regulation; our efforts and efforts by governmental authorities to mitigate the COVID-19 pandemic, such as travel bans, shelter-in-place orders and business closures and the related impact on resource allocations, manufacturing and supply chains; the Company’s status as a “critical”, “essential” or “life-sustaining” business in light of COVID-19 business closure laws, orders and guidance being challenged by a governmental body or other applicable authority; the Company’s ability to execute its business continuity, operational and budget plans in light of the COVID-19 pandemic; and other factors affecting our operations, markets, products, services, and prices that are set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and Quarterly Report on Form 10-Q for the fiscal quarter ended March 28, 2020. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

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



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



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



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



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



VISHAY PRECISION GROUP, INC.                    
Reconciliation of Consolidated Adjusted Gross Profit, Operating Income, Net Earnings Attributable to VPG Stockholders and Diluted Earnings Per Share    
(Unaudited - In thousands)                              
                               
  Gross Profit   Operating Income   Net Earnings Attributable to VPG Stockholders   Diluted Earnings
Per share
Three months ended September 26, 2020   September 28, 2019   September 26, 2020   September 28, 2019   September 26, 2020   September 28, 2019   September 26, 2020   September 28, 2019
As reported - GAAP $ 27,349     $ 25,790     $ 8,121     $ 6,186     $ 5,598     $ 4,509     $ 0.41     $ 0.33  
As reported - GAAP Margins 40.5 %   38.3  %   12.0 %   9.2 %                
Acquisition purchase accounting adjustments 4         4         4         —       
COVID-19 impact (22 )       (320 )       (320 )       (0.03 )    
Executive Severance costs                         —       
Restructuring costs         84     547     84     547     0.01     0.04  
Less:  Tax effect of reconciling items and discrete tax items                 (84 )   80     (0.01 )    
As Adjusted - Non GAAP $ 27,331     $ 25,790     $ 7,889     $ 6,733     $ 5,450     $ 4,976     $ 0.40     $ 0.37  
As Adjusted - Non GAAP Margins 40.5 %   38.3 %   11.7 %   10.0 %                
                               
  Gross Profit   Operating Income   Net Earnings Attributable to VPG Stockholders   Diluted Earnings
Per share
Nine fiscal months ended September 26, 2020   September 28, 2019   September 26, 2020   September 28, 2019   September 26, 2020   September 28, 2019   September 26, 2020   September 28, 2019
As reported - GAAP $ 75,524     $ 87,450     $ 16,736     $ 26,891     $ 10,669     $ 18,317     $ 0.78     $ 1.35  
As reported - GAAP Margins 38.9 %   40.7 %   8.6 %   12.5 %                
Acquisition purchase accounting adjustments 560         560         560         0.04      
COVID-19 impact 536         123         123         0.01      
Executive Severance costs             611         611         0.04  
Restructuring costs         713     547     713     547     0.05     0.04  
Less:  Tax effect of reconciling items and discrete tax items                 59     80          
As Adjusted - Non GAAP $ 76,620     $ 87,450     $ 18,132     $ 28,049     $ 12,006     $ 19,395     0.88     $ 1.43  
As Adjusted - Non GAAP Margins 39.4 %   40.7 %   9.3 %   13.1 %                

 

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

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

vpg_logo.jpg

Source: Vishay Precision Group


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