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VPG Reports Fiscal 2019 Third Quarter Results

November 5, 2019

MALVERN, Pa.--(BUSINESS WIRE)--Nov 5, 2019--

Vishay Precision Group, Inc. (NYSE: VPG), a leading producer of precision sensors and sensor-based systems, today announced its results for its fiscal 2019 third quarter ended September 28, 2019.

Third Quarter Highlights:

Ziv Shoshani, Chief Executive Officer of VPG, commented, “Our third-quarter results reflected slower global industrial demand trends reflecting in part trade uncertainty and destocking by customers. Despite the lower revenues, VPG delivered adjusted earnings per diluted share of $0.37 and solid free cash flow. We continue to execute on our key strategic initiatives which position us for future growth.”

Acquisition of Dynamic Systems Inc.:

On November 1, 2019, VPG completed the acquisition of New York-based Dynamic Systems Inc. (“DSI”), a specialized provider of dynamic thermal-mechanical test and simulation systems used to develop new metal alloys and optimize production processes, for a purchase price of $41 million, subject to customary adjustments, plus a potential earn out of up to an additional $3 million. Over the past three years, DSI achieved average annual sales of $16 million and high EBITDA margins. Going forward, DSI will report into the Company’s Weighing and Control Systems segment.

Ziv Shoshani commented: “We are very pleased with the addition of DSI to the VPG platform and the value this transaction creates for our shareholders. The acquisition reflects our strategy to deploy capital to drive incremental returns. DSI is an established, high margin business, with a strong brand and has the largest installed base of products of its type in the world, according to market estimates. DSI expands our position in the steel market, and offers good opportunities for growth by leveraging our sales capabilities and market presence, and by expanding DSI’s product line to address new ‘blue ocean’ opportunities.”

Third Quarter and Nine Month Financial Trends:

The Company’s third fiscal quarter 2019 net earnings attributable to VPG stockholders was $4.5 million, or $0.33 per diluted share, compared to $7.5 million, or $0.56 per diluted share, in the third fiscal quarter of 2018. Foreign currency exchange rates for the third quarter of 2019 decreased net income by $0.4 million, or $0.03 per diluted share, relative to the prior year period.

In the nine fiscal months ended September 28, 2019, net earnings attributable to VPG stockholders grew to $18.3 million, or $1.35 per diluted share, compared to $20.2 million, or $1.50 per diluted share in the nine fiscal months ended September 29, 2018. Foreign currency exchange rates for the nine fiscal months of 2019 decreased net income by $0.5 million, or $0.03 per diluted share, relative to the prior year period.

The third fiscal quarter 2019 adjusted net earnings* attributable to VPG stockholders was $5.0 million, or $0.37 per diluted share, compared to $7.7 million, or $0.57 per diluted share in the third fiscal quarter of 2018.

In the nine fiscal months ended September 28, 2019, adjusted net earnings* attributable to VPG stockholders was $19.4 million, or $1.43 per diluted share compared to $20.5 million, or $1.51 per diluted share in the nine fiscal months ended September 29, 2018.

Segments

Foil Technology Products segment revenues decreased 10.6% to $32.1 million in the third fiscal quarter of 2019, down from $35.9 million in the third fiscal quarter of 2018; sequential revenue decreased 2.7% compared to $33.0 million in the second 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 for test and measurement applications, primarily in the Americas. This was partially offset by a revenue increase in the Advanced Sensors products primarily in the Americas. 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 and strain gage products for test and measurement applications, primarily in Europe. We also saw a decrease in precision resistor foil products in all regions for test and measurement applications.

Gross profit margin for the Foil Technology Products segment was 37.3% for the third fiscal quarter of 2019, a decrease compared to 43.9% in the third fiscal quarter of 2018, and a decrease compared to 43.6% in the second 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, unfavorable product mix, and the impact of negative exchange rates.

Force Sensors segment revenues declined 7.9% to $16.2 million in the third fiscal quarter of 2019, compared to $17.6 million in the third fiscal quarter of 2018; sequential revenue declined 0.8%, compared to $16.3 million in the second quarter of 2019. The year-over-year decrease in revenues was mainly attributable to OEM customers, primarily in the Americas. The sequential decrease in revenues was mainly attributable to OEM customers for precision weighing applications in the Americas and Asia, partially offset by an increase in revenues from OEM customers for medical and agriculture applications in the Americas.

Gross profit margin for the Force Sensors segment was 30.4% for the third fiscal quarter of 2019, an increase compared to 25.9% in the third fiscal quarter of 2018, and an increase compared to 26.9% in the second fiscal quarter of 2019. The year-over-year increase in gross profit margin was primarily due to an increase in export grants in India, the impact of positive exchange rates and manufacturing efficiencies partially offset by a decrease in volume. Sequentially, gross profit margin increased due to manufacturing efficiencies and a one-time charge recorded in the second quarter of 2019.

Weighing and Control Systems segment revenues declined 13.2% to $19.1 million in the third fiscal quarter of 2019, down from $22.0 million in the third fiscal quarter of 2018; sequential revenue decreased 11.3% from $21.5 million in the second fiscal quarter of 2019. The decrease in revenues year-over-year was primarily attributable to the steel product line in Europe, the on board weighing products in Europe and the Americas and the process weighing products in the Americas and Europe. The sequential decrease in revenue was primarily attributable to a decrease in the process weighing products in Europe, and in on-board weighing products mainly in Europe and the Americas.

The third fiscal quarter 2019 gross profit margin for the Weighing and Control Systems segment was 46.6%, flat compared to 46.6% from the third fiscal quarter of 2018, and an increase compared to 45.6% from the second fiscal quarter of 2019. Sequential gross profit margin increase was primarily due to manufacturing efficiencies partially offset by lower volume.

Near-Term Outlook

“Given the current business environment and our order trends, at constant third fiscal quarter 2019 exchange rates, and including approximately two months of sales related to the acquisition of DSI, we expect net revenues in the range of $63 million to $69 million for the fourth 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 ($7.6 million for the third fiscal quarter of 2019), in excess of our capital expenditures ($(2.9) million for the third fiscal quarter of 2019) net of proceeds, if any, from the sale of assets ($0.1 million for the third fiscal quarter of 2019).

Conference Call and Webcast

A conference call will be held today (November 5) 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 6560848, 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 10136035. 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 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

 

 

September 28,

2019

 

September 29,

2018

Net revenues

 

$

67,421

 

 

$

75,490

 

Costs of products sold

 

41,631

 

 

44,910

 

Gross profit

 

25,790

 

 

30,580

 

Gross profit margin

 

38.3

%

 

40.5

%

 

 

 

 

 

Selling, general, and administrative expenses

 

19,057

 

 

19,721

 

Restructuring costs

 

547

 

 

228

 

Operating income

 

6,186

 

 

10,631

 

Operating margin

 

9.2

%

 

14.1

%

 

 

 

 

 

Other income (expense):

 

 

 

 

Interest expense

 

(324

)

 

(413

)

Other

 

547

 

 

(172

)

Other income (expense)

 

223

 

 

(585

)

 

 

 

 

 

Income before taxes

 

6,409

 

 

10,046

 

 

 

 

 

 

Income tax expense

 

1,879

 

 

2,479

 

 

 

 

 

 

Net earnings

 

4,530

 

 

7,567

 

Less: net earnings attributable to noncontrolling interests

 

21

 

 

20

 

Net earnings attributable to VPG stockholders

 

$

4,509

 

 

$

7,547

 

 

 

 

 

 

Basic earnings per share attributable to VPG stockholders

 

$

0.33

 

 

$

0.56

 

Diluted earnings per share attributable to VPG stockholders

 

$

0.33

 

 

$

0.56

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

13,523

 

 

13,474

 

Weighted average shares outstanding - diluted

 

13,607

 

 

13,534

 

VISHAY PRECISION GROUP, INC.

Consolidated Condensed Statements of Operations

(Unaudited - In thousands, except per share amounts)

 

 

 

 

 

 

 

Nine fiscal months ended

 

 

September 28,

2019

 

September 29,

2018

Net revenues

 

$

214,816

 

 

$

222,812

 

Costs of products sold

 

127,366

 

 

132,361

 

Gross profit

 

87,450

 

 

90,451

 

Gross profit margin

 

40.7

%

 

40.6

%

 

 

 

 

 

Selling, general, and administrative expenses

 

59,401

 

 

60,030

 

Executive severance costs

 

611

 

 

 

Restructuring costs

 

547

 

 

289

 

Operating income

 

26,891

 

 

30,132

 

Operating margin

 

12.5

%

 

13.5

%

 

 

 

 

 

Other income (expense):

 

 

 

 

Interest expense

 

(1,071

)

 

(1,333

)

Other

 

(385

)

 

(1,093

)

Other income (expense)

 

(1,456

)

 

(2,426

)

 

 

 

 

 

Income before taxes

 

25,435

 

 

27,706

 

 

 

 

 

 

Income tax expense

 

6,999

 

 

7,498

 

 

 

 

 

 

Net earnings

 

18,436

 

 

20,208

 

Less: net earnings (loss) attributable to noncontrolling interests

 

119

 

 

(20

)

Net earnings attributable to VPG stockholders

 

$

18,317

 

 

$

20,228

 

 

 

 

 

 

Basic earnings per share attributable to VPG stockholders

 

$

1.36

 

 

$

1.51

 

Diluted earnings per share attributable to VPG stockholders

 

$

1.35

 

 

$

1.50

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

13,512

 

 

13,431

 

Weighted average shares outstanding - diluted

 

13,588

 

 

13,519

 

VISHAY PRECISION GROUP, INC.

Consolidated Condensed Balance Sheets

(In thousands)

 

 

 

September 28, 2019

 

December 31, 2018

 

 

(Unaudited)

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

101,299

 

 

$

90,159

 

Accounts receivable, net

 

44,430

 

 

53,156

 

Inventories:

 

 

 

 

Raw materials

 

18,894

 

 

18,052

 

Work in process

 

23,792

 

 

22,007

 

Finished goods

 

21,431

 

 

22,182

 

Inventories, net

 

64,117

 

 

62,241

 

 

 

 

 

 

Prepaid expenses and other current assets

 

15,081

 

 

9,314

 

Total current assets

 

224,927

 

 

214,870

 

 

 

 

 

 

Property and equipment, at cost:

 

 

 

 

Land

 

3,368

 

 

3,390

 

Buildings and improvements

 

51,750

 

 

51,055

 

Machinery and equipment

 

110,047

 

 

105,840

 

Software

 

9,310

 

 

8,532

 

Construction in progress

 

2,565

 

 

2,157

 

Accumulated depreciation

 

(117,712

)

 

(111,555

)

Property and equipment, net

 

59,328

 

 

59,419

 

 

 

 

 

 

Goodwill

 

16,318

 

 

16,141

 

 

 

 

 

 

Intangible assets, net

 

16,703

 

 

17,656

 

 

 

 

 

 

Other assets

 

27,482

 

 

18,297

 

Total assets

 

$

344,758

 

 

$

326,383

 

VISHAY PRECISION GROUP, INC.

Consolidated Condensed Balance Sheets

(In thousands)

 

 

 

September 28, 2019

 

December 31, 2018

 

 

(Unaudited)

 

 

Liabilities and equity

 

 

 

 

Current liabilities:

 

 

 

 

Trade accounts payable

 

$

8,804

 

 

$

11,461

 

Payroll and related expenses

 

15,695

 

 

17,757

 

Other accrued expenses

 

19,199

 

 

17,031

 

Income taxes

 

2,798

 

 

3,879

 

Current portion of long-term debt

 

4,996

 

 

4,654

 

Total current liabilities

 

51,492

 

 

54,782

 

 

 

 

 

 

Long-term debt, less current portion

 

18,676

 

 

22,421

 

Deferred income taxes

 

2,200

 

 

2,200

 

Other liabilities

 

20,866

 

 

13,545

 

Accrued pension and other postretirement costs

 

14,873

 

 

14,982

 

Total liabilities

 

108,107

 

 

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

 

197,381

 

 

196,666

 

Retained earnings

 

85,417

 

 

66,569

 

Accumulated other comprehensive loss

 

(38,909

)

 

(37,465

)

Total Vishay Precision Group, Inc. stockholders' equity

 

236,539

 

 

218,415

 

Noncontrolling interests

 

112

 

 

38

 

Total equity

 

236,651

 

 

218,453

 

Total liabilities and equity

 

$

344,758

 

 

$

326,383

 

VISHAY PRECISION GROUP, INC.

Consolidated Condensed Statements of Cash Flows

(Unaudited - In thousands)

 

 

 

 

 

 

 

Nine Fiscal Months Ended

 

 

September 28,

2019

 

September 29,

2018

Operating activities

 

 

 

 

Net earnings

 

$

18,436

 

 

$

20,208

 

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

 

 

 

 

Depreciation and amortization

 

8,639

 

 

7,939

 

Gain on disposal of property and equipment

 

(100

)

 

(146

)

Share-based compensation expense

 

1,592

 

 

1,172

 

Inventory write-offs for obsolescence

 

1,937

 

 

1,633

 

Deferred income taxes

 

605

 

 

1,584

 

Other

 

(829

)

 

536

 

Net changes in operating assets and liabilities:

 

 

 

 

Accounts receivable, net

 

8,348

 

 

(8,128

)

Inventories, net

 

(4,138

)

 

(6,935

)

Prepaid expenses and other current assets

 

(5,788

)

 

(2,600

)

Trade accounts payable

 

(1,353

)

 

(1,342

)

Other current liabilities

 

(2,727

)

 

4,031

 

Net cash provided by operating activities

 

24,622

 

 

17,952

 

 

 

 

 

 

Investing activities

 

 

 

 

Capital expenditures

 

(8,621

)

 

(9,966

)

Proceeds from sale of property and equipment

 

265

 

 

169

 

Net cash used in investing activities

 

(8,356

)

 

(9,797

)

 

 

 

 

 

Financing activities

 

 

 

 

Principal payments on long-term debt

 

(3,461

)

 

(4,728

)

Proceeds from revolving facility

 

 

 

22,000

 

Payments on revolving facility

 

 

 

(19,000

)

Distributions to noncontrolling interests

 

(45

)

 

(101

)

Payments of employee taxes on certain share-based arrangements

 

(854

)

 

(801

)

Net cash used in financing activities

 

(4,360

)

 

(2,630

)

Effect of exchange rate changes on cash and cash equivalents

 

(766

)

 

(1,189

)

Increase in cash and cash equivalents

 

11,140

 

 

4,336

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

90,159

 

 

74,292

 

Cash and cash equivalents at end of period

 

$

101,299

 

 

$

78,628

 

 

 

 

 

 

Supplemental disclosure of investing transactions:

 

 

 

 

Capital expenditures purchased

 

$

(7,383

)

 

$

(7,599

)

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 September 28, 2019 were $613.

VISHAY PRECISION GROUP, INC.

Reconciliation of Consolidated Adjusted Operating Margin

(Unaudited - In thousands)

 

 

 

 

 

 

 

 

 

 

 

Fiscal quarter ended

 

Nine fiscal months ended

 

 

September 28,

2019

 

September 29,

2018

 

September 28,

2019

 

September 29,

2018

Operating income

 

$

6,186

 

 

$

10,631

 

 

$

26,891

 

 

$

30,132

 

Operating margin

 

9.2

%

 

14.1

%

 

12.5

%

 

13.5

%

 

 

 

 

 

 

 

 

 

Reconciling items affecting operating margin

 

 

 

 

 

 

 

 

Executive severance costs

 

 

 

 

 

611

 

 

 

Restructuring costs

 

547

 

 

228

 

 

547

 

 

289

 

 

 

 

 

 

 

 

 

 

Adjusted operating income

 

$

6,733

 

 

$

10,859

 

 

$

28,049

 

 

$

30,421

 

Adjusted operating margin

 

10.0

%

 

14.4

%

 

13.1

%

 

13.7

%

VISHAY PRECISION GROUP, INC.

Reconciliation of Adjusted Earnings Per Share

(Unaudited - In thousands, except per share data)

 

 

 

Fiscal quarter ended

 

Nine fiscal months ended

 

 

September 28,

2019

 

September 29,

2018

 

September 28,

2019

 

September 29,

2018

Net earnings attributable to VPG stockholders

 

$

4,509

 

 

$

7,547

 

 

$

18,317

 

 

$

20,228

 

 

 

 

 

 

 

 

 

 

Reconciling items affecting operating margin

 

 

 

 

 

 

 

 

Executive severance costs

 

 

 

 

 

611

 

 

 

Restructuring costs

 

547

 

 

228

 

 

547

 

 

289

 

Less reconciling items affecting income tax expense

 

 

 

 

 

 

 

 

Tax effect of reconciling items

 

80

 

 

35

 

 

80

 

 

44

 

Adjusted net earnings attributable to VPG stockholders

 

$

4,976

 

 

$

7,740

 

 

$

19,395

 

 

$

20,473

 

 

 

 

 

 

 

 

 

 

Adjusted net earnings per diluted share

 

$

0.37

 

 

$

0.57

 

 

$

1.43

 

 

$

1.51

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - diluted

 

13,607

 

 

13,534

 

 

13,588

 

 

13,519

 

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191105005322/en/

CONTACT: Steve Cantor

Vishay Precision Group

tel.: 857-636-0367

steve.cantor@vpgsensors.com

KEYWORD: PENNSYLVANIA NEW YORK UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: SEMICONDUCTOR HARDWARE MANUFACTURING TECHNOLOGY ENGINEERING

SOURCE: VPG

Copyright Business Wire 2019.

PUB: 11/05/2019 07:30 AM/DISC: 11/05/2019 07:30 AM

http://www.businesswire.com/news/home/20191105005322/en