Market Overview

VPG Reports Fiscal 2018 Second Quarter Results

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Vishay Precision Group, Inc. (NYSE:VPG), a leading producer of
precision sensors and systems, today announced its results for its
fiscal 2018 second quarter ended June 30, 2018.

Second Quarter Highlights:

  • Growth in revenues to $74.2 million, up 19% year-over-year
  • Gross margin was 42.3% for the quarter as compared to 39.7% for the
    prior year period
  • Operating income increased by 93% to $11.3 million as compared to $5.9
    million in the prior year period
  • Operating margin for the quarter was 15.2%, compared to 9.4% for the
    prior year period
  • Earnings increased 111% to $0.57 per diluted share, compared to $0.27
    reported last year
  • Adjusted diluted EPS* increased 97% to $0.57, compared to prior year
    $0.29
  • Book-to-bill remained strong at 1.13, reflecting healthy, stable
    end-markets

Ziv Shoshani, Chief Executive Officer of VPG, commented, "We continue to
secure business opportunities across all of our end markets as reflected
in our increased revenues. Our second quarter 2018 operating results
reaffirmed that strong operating margins are firmly established in our
enterprise when we execute our business strategy in a solid business
environment, as we did again this quarter."

The Company grew second fiscal quarter 2018 net earnings attributable to
VPG stockholders to $7.7 million, or $0.57 per diluted share, compared
to $3.6 million, or $0.27 per diluted share, in the second fiscal
quarter of 2017. This growth was assisted by a foreign currency exchange
rate in the second quarter of 2018 relative to the prior year period
that increased net income by $0.2 million, or $0.01 per diluted share.

In the six fiscal months ended June 30, 2018, net earnings attributable
to VPG stockholders grew to $12.7 million, or $0.94 per diluted share,
compared to $5.6 million or $0.42 per diluted share, in the six fiscal
months ended July 1, 2017. Foreign currency exchange rates for the six
fiscal months ended June 30, 2018 had no impact on net income relative
to the prior year period.

The second fiscal quarter 2018 adjusted net earnings attributable to VPG
stockholders approximately doubled to $7.7 million, or $0.57 per diluted
share, compared to adjusted net earnings attributable to VPG
stockholders of $3.9 million, or $0.29 per diluted share, for the
comparable prior year period.

Six fiscal months ended June 30, 2018 adjusted net earnings attributable
to VPG stockholders approximately doubled to $12.7 million, or $0.94 per
diluted share, compared to adjusted net earnings attributable to VPG
stockholders of $6.4 million, or $0.48 per diluted share, for the
comparable prior year period.

Segments

Foil Technology Products segment revenues grew 16.7% to $34.2 million in
the second fiscal quarter of 2018, up from $29.3 million in the second
fiscal quarter of 2017; sequential revenue was flat compared to the
first quarter of 2018. The year-over-year increase in revenues was
attributable to precision resistors growth in all regions for
distribution and OEM customers, primarily for the test and measurement
market. Additionally, strain gage products increased across all regions
in the force measurement and test and measurement markets.

Gross profit margin for the Foil Technology Products segment was 46.1%
for the second fiscal quarter of 2018, an increase compared to 41.9% in
the second fiscal quarter of 2017 and an increase compared to 42.8% in
the first fiscal quarter of 2018. The year-over-year increase in gross
margin was due to an increase in volumes, labor efficiencies experienced
in the second quarter of 2018 and a positive exchange rate impact. The
sequential increase in gross margin was primarily attributable to labor
and manufacturing efficiencies in the second quarter of 2018.

Force Sensors segment revenues grew 23.7% to $19.4 million in the second
fiscal quarter of 2018, up from $15.7 million in the second fiscal
quarter of 2017; sequential revenue increased slightly, up from $19.2
million in the first quarter of 2018. The year-over-year increase in
revenues was mainly attributable to OEM customers in the force
measurement and precision weighing markets primarily in the Americas.

Gross profit margin for the Force Sensors segment was 29.4% for the
second fiscal quarter of 2018, an increase compared to 28.9% in the
second fiscal quarter of 2017 and an increase compared to 27.3% in the
first fiscal quarter of 2018. Gross margins were up compared to the
prior year period primarily due to the volume increase experienced in
the second fiscal quarter of 2018 partially offset by a negative
exchange rate impact. The sequential increase in gross margins was
primarily due to an increase in volume and freight savings experienced
in the second fiscal quarter of 2018.

Weighing and Control Systems segment revenues grew by 19.1% to $20.7
million in the second fiscal quarter of 2018, up from $17.4 million in
the second fiscal quarter of 2017; sequential revenue increased 4.9%
from $19.7 million in the first fiscal quarter of 2018. The increased
year-over-year revenues were attributable to all product lines in all
regions, in addition to positive exchange rate impact. The sequential
increase in revenue was primarily attributable to a volume increase
mainly in the steel product line in Asia partially offset by lower
volume in Europe for our on-board weighing and process weighing product
lines as well as a negative exchange rate impact.

The second fiscal quarter 2018 gross profit margin for the segment was
48.0%, an increase compared to 45.8% from the second fiscal quarter of
2017 and 43.9% from the first fiscal quarter of 2018. The year-over-year
increase in gross margin was primarily due to volume, positive exchange
rate impact and cost savings. The sequential increase in gross margin
was primarily due to the volume increase experienced in the second
fiscal quarter of 2018.

Near-Term Outlook

"In light of a continued solid business environment, at constant second
fiscal quarter 2018 exchange rates and taking into account the normal
seasonality of our business, we expect net revenues in the range of $70
million to $77 million for the third fiscal quarter of 2018," concluded
Mr. Shoshani.

*Use of Non-GAAP Financial Information

We define "adjusted net earnings" as net earnings attributable to VPG
stockholders before restructuring costs and associated tax effects. The
reconciliation table within this release reconciles the Company's
non-GAAP measures, which are provided for comparison with other results,
to the most directly comparable U.S. GAAP measures. Management believes
that these measures are meaningful because they provide insight with
respect to intrinsic operating results.

Conference Call and Webcast

A conference call will be held today (August 7) 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
9209556, 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 10122235. 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; 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;
significant developments from the recent and potential changes in
tariffs and trade regulation; 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,
2017. 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

June 30, 2018

 

July 1, 2017

Net revenues

$ 74,231 $ 62,319

Costs of products sold

  42,865     37,560  
Gross profit 31,366 24,759

Gross profit margin

42.3 % 39.7 %
 
Selling, general, and administrative expenses 19,990 18,591
Restructuring costs   61     315  
Operating income 11,315 5,853
Operating margin 15.2 % 9.4 %
 
Other income (expense):
Interest expense (478 ) (468 )
Other   (272 )   (571 )
Other income (expense) - net   (750 )   (1,039 )
 
Income before taxes 10,565 4,814
 
Income tax expense   2,882     1,198  
 
Net earnings 7,683 3,616
Less: net earnings attributable to noncontrolling interests   (10 )   (3 )
Net earnings attributable to VPG stockholders $ 7,693   $ 3,619  
 
Basic earnings per share attributable to VPG stockholders $ 0.57 $ 0.27
Diluted earnings per share attributable to VPG stockholders $ 0.57 $ 0.27
 
Weighted average shares outstanding - basic 13,464 13,257
Weighted average shares outstanding - diluted 13,513 13,446
 
 
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)
 
  Six fiscal months ended
June 30, 2018   July 1, 2017
Net revenues $ 147,322 $ 122,106
Costs of products sold   87,451     74,830  
Gross profit 59,871 47,276
Gross profit margin 40.6 % 38.7 %
 
Selling, general, and administrative expenses 40,309 36,609
Restructuring costs   61     869  
Operating income 19,501 9,798
Operating margin 13.2 % 8.0 %
 
Other income (expense):
Interest expense (920 ) (920 )
Other   (921 )   (1,100 )
Other income (expense) - net   (1,841 )   (2,020 )
 
Income before taxes 17,660 7,778
 
Income tax expense   5,019     2,159  
 
Net earnings 12,641 5,619
Less: net (earnings) loss attributable to noncontrolling interests   (40 )   5  
Net earnings attributable to VPG stockholders $ 12,681   $ 5,614  
 
Basic earnings per share attributable to VPG stockholders $ 0.95 $ 0.42
Diluted earnings per share attributable to VPG stockholders $ 0.94 $ 0.42
 
Weighted average shares outstanding - basic 13,409 13,233
Weighted average shares outstanding - diluted 13,511 13,442
 
 
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Balance Sheets
(In thousands)
  June 30, 2018   December 31, 2017
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 74,713 $ 74,292
Accounts receivable, net 52,103 46,789
Inventories:
Raw materials 19,502 16,601
Work in process 23,936 23,160
Finished goods 21,984 20,174
Inventories, net 65,422 59,935
Prepaid expenses and other current assets 11,660 10,299
Total current assets 203,898 191,315
 
Property and equipment, at cost:
Land 3,412 3,434
Buildings and improvements 50,376 50,276
Machinery and equipment 97,772 95,158
Software 8,160 7,955
Construction in progress 2,172 2,252
Accumulated depreciation (107,399) (103,401)
Property and equipment, net 54,493 55,674
 
Goodwill 18,799 19,181
 
Intangible assets, net 18,966 20,475
 
Other assets 18,743 19,906
Total assets $ 314,899 $ 306,551
 
Liabilities and equity
Current liabilities:
Trade accounts payable $ 11,049 $ 13,678
Payroll and related expenses 14,932 15,892
Other accrued expenses 16,758 15,952
Income taxes 2,888 2,515
Current portion of long-term debt 4,088 3,878
Total current liabilities 49,715 51,915
 
Long-term debt, less current portion 26,690 28,477
Deferred income taxes 2,300 2,300
Other liabilities 13,781 14,131
Accrued pension and other postretirement costs 16,115 16,424
Total liabilities 108,601 113,247
 
Commitments and contingencies
 
Equity:
Common stock 1,307 1,288
Class B convertible common stock 103 103
Treasury stock (8,765) (8,765)
Capital in excess of par value 195,668 192,904
Retained earnings 55,604 43,076
Accumulated other comprehensive loss (37,598) (35,450)
Total Vishay Precision Group, Inc. stockholders equity 206,319 193,156
Noncontrolling interests (21) 148
Total equity 206,298 193,304
Total liabilities and equity $ 314,899 $ 306,551
 
 
VISHAY PRECISION GROUP, INC.

Consolidated Condensed Statements of Cash Flows

(Unaudited - In thousands)
 
  Six fiscal months ended
June 30, 2018   July 1, 2017
Operating activities
Net earnings $ 12,641 $ 5,619
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 5,332 5,318
Gain on disposal of property and equipment (83 ) (141 )
Share-based compensation expense 801 492
Inventory write-offs for obsolescence 1,158 982
Deferred income taxes 1,086 (104 )
Other 455 (445 )
Net changes in operating assets and liabilities:
Accounts receivable, net (6,141 ) (6,928 )
Inventories, net (7,304 ) (761 )
Prepaid expenses and other current assets (1,724 ) (1,397 )
Trade accounts payable (390 ) 1,020
Other current liabilities   1,536     3,676  
Net cash provided by operating activities   7,367     7,331  
 
Investing activities
Capital expenditures (6,134 ) (3,146 )
Proceeds from sale of property and equipment   106     326  
Net cash used in investing activities   (6,028 )   (2,820 )
 
 
Financing activities
Principal payments on long-term debt and capital leases (3,847 ) (1,314 )
Proceeds from revolving facility 11,000 16,000
Payments on revolving facility (6,000 ) (16,000 )
Distributions to noncontrolling interests (129 ) (46 )
Payments of employee taxes on certain share-based arrangements   (801 )   (303 )
Net cash provided by (used in) financing activities 223 (1,663 )
Effect of exchange rate changes on cash and cash equivalents   (1,141 )   1,858  
Increase in cash and cash equivalents 421 4,706
 
Cash and cash equivalents at beginning of period   74,292     58,452  
Cash and cash equivalents at end of period $ 74,713   $ 63,158  
 
Supplemental disclosure of non-cash investing transactions:
Capital expenditures purchased $ (3,988 ) $ (3,146 )
Supplemental disclosure of non-cash financing transactions:
Conversion of exchangeable notes to common stock $ (2,794 ) $ (1,303 )

 

 
VISHAY PRECISION GROUP, INC.
Reconciliation of Consolidated Adjusted Gross Profit Margin
(Unaudited - In thousands)
  Fiscal quarter ended     Six fiscal months ended
June 30, 2018   July 1, 2017 June 30, 2018   July 1, 2017
Gross profit $ 31,366 $ 24,759 $ 59,871 $ 47,276
Gross profit margin 42.3 % 39.7 % 40.6 % 38.7 %
 
       
Adjusted gross profit $ 31,366   $ 24,759   $ 59,871   $ 47,276  
Adjusted gross profit margin 42.3 % 39.7 % 40.6 % 38.7 %
 
 
VISHAY PRECISION GROUP, INC.
Reconciliation of Consolidated Adjusted Operating Margin
(Unaudited - In thousands)
 
Fiscal quarter ended Six fiscal months ended
June 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017
Operating income $ 11,315 $ 5,853 $ 19,501 $ 9,798
Operating margin 15.2 % 9.4 % 13.2 % 8.0 %
 

Reconciling items affecting operating margin

Restructuring costs 61 315 61 869
       

Adjusted operating income

$ 11,376   $ 6,168   $ 19,562   $ 10,667  
Adjusted operating margin 15.3 % 9.9 % 13.3 % 8.7 %
 
 
VISHAY PRECISION GROUP, INC.
Reconciliation of Adjusted Earnings Per Share
(Unaudited - In thousands, except per share data)
Fiscal quarter ended Six fiscal months ended
June 30, 2018 July 1, 2017 June 30, 2018 July 1, 2017
Net earnings attributable to VPG stockholders $ 7,693 $ 3,619 $ 12,681 $ 5,614
 

Reconciling items affecting operating margin

Restructuring costs 61 315 61 869

Less reconciling items affecting income tax
expense

Tax effect of reconciling items   9     13     9     56  
Adjusted net earnings attributable to VPG stockholders $ 7,745   $ 3,921   $ 12,733   $ 6,427  
 
Adjusted net earnings per diluted share $ 0.57 $ 0.29 $ 0.94 $ 0.48
 
Weighted average shares outstanding - diluted 13,513 13,446 13,511 13,442
 

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