Market Overview

VPG Reports Fiscal 2019 Second Quarter Results

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Vishay Precision Group, Inc. (NYSE:VPG), a leading producer of precision sensors and sensor-based systems, today announced its results for its fiscal 2019 second quarter ended June 29, 2019.

Second Quarter Highlights:

  • Sales of $70.9 million.
  • Gross profit margin of 40.4%.
  • Operating margin of 11.4%, adjusted operating margin* of 12.3%.
  • Net earnings per diluted share of $0.41, adjusted net earnings per diluted share* of $0.45.
  • Cash from operations of $8.9 million with free cash flow* of $6.7 million.

Ziv Shoshani, Chief Executive Officer of VPG, commented, "We have delivered a solid operating margin and cash generation for this quarter. Despite the current macro environment, we have reported two consecutive years of above average, double digit growth, the benefits of the work we have done to optimize our global operations continue to benefit our operating results. This effect has enabled us to continue to drive margin performance across our segments, and we remain positioned to deploy capital to value generating opportunities to drive incremental returns."

The Company's second fiscal quarter 2019 net earnings attributable to VPG stockholders was $5.6 million, or $0.41 per diluted share, compared to $7.7 million, or $0.57 per diluted share, in the second fiscal quarter of 2018. Foreign currency exchange rates for the second quarter of 2019 decreased net income by $0.2 million, or $0.02 per diluted share, relative to the prior year period.

In the six fiscal months ended June 29, 2019, net earnings attributable to VPG stockholders grew to $13.8 million, or $1.02 per diluted share, compared to $12.7 million, or $0.94 per diluted share in the six fiscal months ended June 30, 2018. Foreign currency exchange rates for the six fiscal months of 2019 increased net income by $0.1 million, or $0.01 per diluted share, relative to the prior year period.

The second fiscal quarter 2019 adjusted net earnings* attributable to VPG stockholders was $6.2 million, or $0.45 per diluted share, compared to $7.7 million, or $0.57 per diluted share in the second fiscal quarter of 2018.

In the six fiscal months ended June 29, 2019, adjusted net earnings* attributable to VPG stockholders was $14.4 million, or $1.06 per diluted share compared to $12.7 million, or $0.94 per diluted share in the six fiscal months ended June 30, 2018.

Segments

Foil Technology Products segment revenues decreased 3.5% to $33.0 million in the second fiscal quarter of 2019, down from $34.2 million in the second fiscal quarter of 2018; sequential revenue decreased 10.9% compared to $37.0 million in the first quarter of 2019. The year-over-year decrease in revenues was attributable to Pacific Instruments products in the Americas for end user customers in the avionics, military and space market and strain gage products in the test and measurement and force measurement end markets, primarily in the Americas. This was partially offset by a revenue increase in the Advanced Sensors products in the force measurement market in Asia. The sequential decrease in revenues was attributable to Pacific Instruments products for end user customers in the avionics, military and space market in the Americas.

Gross profit margin for the Foil Technology Products segment was 43.6% for the second fiscal quarter of 2019, a decrease compared to 46.1% in the second fiscal quarter of 2018, and a decrease compared to 44.7% in the first fiscal quarter of 2019. The year-over-year decrease in gross profit margin was primarily due to a decrease in volume, the impact of negative exchange rates, and an increase in wages and manufacturing costs. The sequential decrease in gross profit margin was primarily due to a decrease in volume.

Force Sensors segment revenues declined 15.5% to $16.3 million in the second fiscal quarter of 2019, compared to $19.4 million in the second fiscal quarter of 2018; sequential revenue declined 2.3%, compared to $16.7 million in the first quarter of 2019. The year-over-year decrease in revenues was mainly attributable to OEM customers in the force measurement market, primarily in the Americas. The sequential decrease in revenues was mainly attributable to OEM customers in the force measurement end market in the Americas and OEM customers in the medical end market in Europe, partially offset by an increase in revenues from OEM customers in the medical end market in the Americas.

Gross profit margin for the Force Sensors segment was 26.9% for the second fiscal quarter of 2019, a decrease compared to 29.4% in the second fiscal quarter of 2018, and a decrease compared to 30.2% in the first fiscal quarter of 2019. The year-over-year decrease in gross profit margin was primarily due to a decrease in volume. Sequentially, gross profit margin decreased due to a decrease in volume, impact of negative exchange rates, and a one-time charge.

Weighing and Control Systems segment revenues grew by 4.1% to $21.5 million in the second fiscal quarter of 2019, up from $20.7 million in the second fiscal quarter of 2018; sequential revenue decreased 5.4% from $22.7 million in the first fiscal quarter of 2019. The increase in revenues year-over-year was primarily attributable to the steel product line in Europe and the on board weighing products in Europe and the Americas. The sequential decrease in revenue was primarily attributable to a decrease in the steel product line in Europe and the Americas and process weighing products in Europe, partially offset by an increase in on-board weighing products mainly in the Americas.

The second fiscal quarter 2019 gross profit margin for the Weighing and Control Systems segment was 45.6%, a decrease compared to 48.0% from the second fiscal quarter of 2018, and a decrease compared to 50.2% from the first fiscal quarter of 2019. The year-over-year decrease in gross profit margin was primarily due to an increase in wages, higher manufacturing costs, and the impact of negative exchange rates, partially offset by an increase in volume, with an unfavorable product mix. Sequential gross profit margin decrease was primarily due to lower volume with an unfavorable product mix.

Near-Term Outlook

"Given the current business environment and our most recent order intake, at constant second fiscal quarter 2019 exchange rates, we expect net revenues in the range of $67 million to $73 million for the third fiscal quarter of 2019," concluded Mr. Shoshani.

*Use of Non-GAAP Financial Information

We define "adjusted operating margin" as operating margin before restructuring costs and executive severance costs. We define "adjusted earnings " and "adjusted earnings per share" as net earnings attributable to VPG stockholders before restructuring costs, executive severance costs, and associated tax effects. We define "free cash flow" as the amount of cash generated from operations ($8.9 million for the second fiscal quarter of 2019), in excess of our capital expenditures ($(2.4) million for the second fiscal quarter of 2019) net of proceeds, if any, from the sale of assets ($0.2 million for the second fiscal quarter of 2019).

Conference Call and Webcast

A conference call will be held today (August 6) 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 6252344, 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 10133115. 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; 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 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; 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, 2018. 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 29, 2019

 

 

June 30, 2018

Net revenues

$

70,870

 

 

$

74,231

 

Costs of products sold

42,261

 

 

42,865

 

Gross profit

28,609

 

 

31,366

 

Gross profit margin

40.4

%

 

42.3

%

 

 

 

 

Selling, general, and administrative expenses

19,896

 

 

19,990

 

Executive severance costs

611

 

 

 

Restructuring costs

 

 

61

 

Operating income

8,102

 

 

11,315

 

Operating margin

11.4

%

 

15.2

%

 

 

 

 

Other income (expense):

 

 

 

Interest expense

(359

)

 

(478

)

Other

(160

)

 

(272

)

Other income (expense)

(519

)

 

(750

)

 

 

 

 

Income before taxes

7,583

 

 

10,565

 

 

 

 

 

Income tax expense

2,003

 

 

2,882

 

 

 

 

 

Net earnings

5,580

 

 

7,683

 

Less: net earnings attributable to noncontrolling interests

15

 

 

(10

)

Net earnings attributable to VPG stockholders

$

5,565

 

 

$

7,693

 

 

 

 

 

Basic earnings per share attributable to VPG stockholders

$

0.41

 

 

$

0.57

 

Diluted earnings per share attributable to VPG stockholders

$

0.41

 

 

$

0.57

 

 

 

 

 

Weighted average shares outstanding - basic

13,518

 

 

13,464

 

Weighted average shares outstanding - diluted

13,595

 

 

13,513

 

 

VISHAY PRECISION GROUP, INC.

 

 

 

Consolidated Condensed Statements of Operations

 

 

 

(Unaudited - In thousands, except per share amounts)

 

 

 

 

 

 

 

 

Six fiscal months ended

 

 

 

 

June 29, 2019

 

 

June 30, 2018

Net revenues

$

147,395

 

 

$

147,322

 

Costs of products sold

85,735

 

 

87,451

 

Gross profit

61,660

 

 

59,871

 

Gross profit margin

41.8

%

 

40.6

%

 

 

 

 

Selling, general, and administrative expenses

40,344

 

 

40,309

 

Executive severance costs

611

 

 

 

Restructuring costs

 

 

61

 

Operating income

20,705

 

 

19,501

 

Operating margin

14.0

%

 

13.2

%

 

 

 

 

Other income (expense):

 

 

 

Interest expense

(747

)

 

(920

)

Other

(932

)

 

(921

)

Other income (expense)

(1,679

)

 

(1,841

)

 

 

 

 

Income before taxes

19,026

 

 

17,660

 

 

 

 

 

Income tax expense

5,120

 

 

5,019

 

 

 

 

 

Net earnings

13,906

 

 

12,641

 

Less: net earnings (loss) attributable to noncontrolling interests

98

 

 

(40

)

Net earnings attributable to VPG stockholders

$

13,808

 

 

$

12,681

 

 

 

 

 

Basic earnings per share attributable to VPG stockholders

$

1.02

 

 

$

0.95

 

Diluted earnings per share attributable to VPG stockholders

$

1.02

 

 

$

0.94

 

 

 

 

 

Weighted average shares outstanding - basic

13,506

 

 

13,409

 

Weighted average shares outstanding - diluted

13,579

 

 

13,511

 

 

VISHAY PRECISION GROUP, INC.

 

 

 

Consolidated Condensed Balance Sheets

 

 

 

(In thousands)

 

 

 

 

June 29, 2019

 

 

December 31, 2018

 

 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

98,705

 

 

$

90,159

 

Accounts receivable, net

46,291

 

 

53,156

 

Inventories:

 

 

 

Raw materials

18,672

 

 

18,052

 

Work in process

23,835

 

 

22,007

 

Finished goods

21,775

 

 

22,182

 

Inventories, net

64,282

 

 

62,241

 

 

 

 

 

Prepaid expenses and other current assets

12,702

 

 

9,314

 

Total current assets

221,980

 

 

214,870

 

 

 

 

 

Property and equipment, at cost:

 

 

 

Land

3,391

 

 

3,390

 

Buildings and improvements

51,787

 

 

51,055

 

Machinery and equipment

109,326

 

 

105,840

 

Software

9,205

 

 

8,532

 

Construction in progress

1,319

 

 

2,157

 

Accumulated depreciation

(115,525

)

 

(111,555

)

Property and equipment, net

59,503

 

 

59,419

 

 

 

 

 

Goodwill

16,387

 

 

16,141

 

 

 

 

 

Intangible assets, net

17,190

 

 

17,656

 

 

 

 

 

Other assets

27,410

 

 

18,297

 

Total assets

$

342,470

 

 

$

326,383

 

 

VISHAY PRECISION GROUP, INC.

 

 

 

Consolidated Condensed Balance Sheets

 

 

 

(In thousands)

 

 

 

 

June 29, 2019

 

 

December 31, 2018

 

 

 

 

(Unaudited)

 

 

 

Liabilities and equity

 

 

 

Current liabilities:

 

 

 

Trade accounts payable

$

10,059

 

 

$

11,461

 

Payroll and related expenses

15,127

 

 

17,757

 

Other accrued expenses

17,560

 

 

17,031

 

Income taxes

2,981

 

 

3,879

 

Current portion of long-term debt

4,882

 

 

4,654

 

Total current liabilities

50,609

 

 

54,782

 

 

 

 

 

Long-term debt, less current portion

19,924

 

 

22,421

 

Deferred income taxes

2,200

 

 

2,200

 

Other liabilities

20,567

 

 

13,545

 

Accrued pension and other postretirement costs

14,928

 

 

14,982

 

Total liabilities

108,228

 

 

107,930

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Equity:

 

 

 

Common stock

1,312

 

 

1,307

 

Class B convertible common stock

103

 

 

103

 

Treasury stock

(8,765

)

 

(8,765

)

Capital in excess of par value

196,875

 

 

196,666

 

Retained earnings

80,908

 

 

66,569

 

Accumulated other comprehensive loss

(36,329

)

 

(37,465

)

Total Vishay Precision Group, Inc. stockholders' equity

234,104

 

 

218,415

 

Noncontrolling interests

138

 

 

38

 

Total equity

234,242

 

 

218,453

 

Total liabilities and equity

$

342,470

 

 

$

326,383

 

 

VISHAY PRECISION GROUP, INC.

 

 

 

Consolidated Condensed Statements of Cash Flows

 

 

 

(Unaudited - In thousands)

 

 

 

 

 

 

 

 

Six Fiscal Months Ended

 

 

 

June 29, 2019

 

 

June 30, 2018

Operating activities

 

 

 

Net earnings

$

13,906

 

 

$

12,641

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

Depreciation and amortization

5,619

 

 

5,332

 

Gain on disposal of property and equipment

(50

)

 

(83

)

Share-based compensation expense

1,086

 

 

801

 

Inventory write-offs for obsolescence

1,389

 

 

1,158

 

Deferred income taxes

379

 

 

1,086

 

Other

(2,753

)

 

455

 

Net changes in operating assets and liabilities:

 

 

 

Accounts receivable, net

7,085

 

 

(6,141

)

Inventories, net

(3,288

)

 

(7,304

)

Prepaid expenses and other current assets

(3,301

)

 

(1,724

)

Trade accounts payable

(645

)

 

(390

)

Other current liabilities

(2,396

)

 

1,536

 

Net cash provided by operating activities

17,031

 

 

7,367

 

 

 

 

 

Investing activities

 

 

 

Capital expenditures

(5,764

)

 

(6,134

)

Proceeds from sale of property and equipment

214

 

 

106

 

Net cash used in investing activities

(5,550

)

 

(6,028

)

 

 

 

 

Financing activities

 

 

 

Principal payments on long-term debt

(2,311

)

 

(3,847

)

Proceeds from revolving facility

 

 

11,000

 

Payments on revolving facility

 

 

(6,000

)

Contributions from (distributions to) noncontrolling interests

2

 

 

(129

)

Payments of employee taxes on certain share-based arrangements

(854

)

 

(801

)

Net cash (used in) provided by financing activities

(3,163

)

 

223

 

Effect of exchange rate changes on cash and cash equivalents

228

 

 

(1,141

)

Increase in cash and cash equivalents

8,546

 

 

421

 

 

 

 

 

Cash and cash equivalents at beginning of period

90,159

 

 

74,292

 

Cash and cash equivalents at end of period

$

98,705

 

 

$

74,713

 

 

 

 

 

Supplemental disclosure of investing transactions:

 

 

 

Capital expenditures purchased

$

(4,992

)

 

$

(3,988

)

Supplemental disclosure of non-cash financing transactions:

 

 

 

Conversion of exchangeable notes to common stock

$

 

 

$

(2,794

)

Capital expenditures accrued but not yet paid as of June 29, 2019 were $1,077.

 

VISHAY PRECISION GROUP, INC.

Reconciliation of Consolidated Adjusted Operating Margin

(Unaudited - In thousands)

 

 

 

 

 

 

 

 

 

 

 

Fiscal quarter ended

 

 

Six fiscal months ended

 

 

 

 

 

June 29, 2019

 

 

June 30, 2018

 

 

June 29, 2019

 

 

June 30, 2018

Operating income

 

$

8,102

 

 

$

11,315

 

 

$

20,705

 

 

$

19,501

 

Operating margin

 

11.4

%

 

15.2

%

 

14.0

%

 

13.2

%

 

 

 

 

 

 

 

 

 

Reconciling items affecting operating margin

 

 

 

 

 

 

 

 

Executive severance costs

 

611

 

 

 

 

611

 

 

 

Restructuring costs

 

 

 

61

 

 

 

 

61

 

 

 

 

 

 

 

 

 

 

Adjusted operating income

 

$

8,713

 

 

$

11,376

 

 

$

21,316

 

 

$

19,562

 

Adjusted operating margin

 

12.3

%

 

15.3

%

 

14.5

%

 

13.3

%

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 29, 2019

 

 

June 30, 2018

 

 

June 29, 2019

 

 

June 30, 2018

Net earnings attributable to VPG stockholders

$

5,565

 

 

$

7,693

 

 

$

13,808

 

 

$

12,681

 

 

 

 

 

 

 

 

 

Reconciling items affecting operating margin

 

 

 

 

 

 

 

Executive severance costs

611

 

 

 

 

611

 

 

 

Restructuring costs

 

 

61

 

 

 

 

61

 

Less reconciling items affecting income tax expense

 

 

 

 

 

 

 

Tax effect of reconciling items

 

 

9

 

 

 

 

9

 

Adjusted net earnings attributable to VPG stockholders

$

6,176

 

 

$

7,745

 

 

$

14,419

 

 

$

12,733

 

 

 

 

 

 

 

 

 

Adjusted net earnings per diluted share

$

0.45

 

 

$

0.57

 

 

$

1.06

 

 

$

0.94

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - diluted

13,595

 

 

13,513

 

 

13,579

 

 

13,511

 

 

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