VPG Vishay Precision Group Inc

Vishay Precision Group, Inc. (NYSE: VPG), a leading producer of precision sensors and systems, today announced its results for its fiscal 2017 fourth quarter and twelve fiscal months ended December 31, 2017.

Fourth Quarter Highlights:

• Growth in revenues to $69.4 million, up 24.4% year-over-year
• Earnings increased to $0.33 per diluted share, compared to $0.22 reported last year
• Adjusted diluted EPS* increased 50% to $0.39 compared to prior year $0.26
• Operating margin for the quarter is 10.0%, adjusted operating margin* for the quarter is 11.1%
• Cash from operations was $7.9 million with free cash flow* of $5.4 million
• Book-to-bill remains strong at 1.18, continues to reflect broadly improving end-markets
• Enactment of the US Tax Cuts and Jobs Act impact, while provisional, of $1.5 million expense

Ziv Shoshani, Chief Executive Officer of VPG, commented, “Our operating performance in the fourth quarter of 2017 continues to demonstrate our ability to capitalize on an improved business climate across our end markets. We had good operating margins, solid cash generation and continued to capture opportunity, reflected in our steady, strong book-to-bill. 2017 was a successful year for VPG, and as we progress through next year, we believe we have an opportunity to further leverage our end markets and deliver value to our shareholders.”

The Company grew fourth fiscal quarter 2017 net earnings attributable to VPG stockholders to $4.5 million, or $0.33 per diluted share, compared to $3.0 million, or $0.22 per diluted share, in the fourth fiscal quarter of 2016. This growth was achieved despite a foreign currency exchange rates headwind that reduced net income by $0.7 million, or $0.05 per diluted share relative to the fourth quarter of last year.

In the twelve fiscal months ended December 31, 2017, net earnings attributable to VPG stockholders grew to $14.3 million, or $1.07 per diluted share, compared to $6.4 million, or $0.48 per diluted share, in the twelve fiscal months ended 2016. This growth was achieved despite a negative impact from foreign currency exchange rates of $2.9 million, or $0.21 per diluted share, as compared to the prior year’s twelve-month period.

Included within Other income (expense) and in cash from operations, for the twelve fiscal months ended December 31, 2017, are net proceeds of $1.5 million related to a one time lease termination payment at the Company’s Tianjin, People's Republic of China location. The relocation of operations in Tianjin has been completed.

Fourth fiscal quarter 2017 adjusted net earnings attributable to VPG stockholders grew 55% to $5.3 million, or $0.39 per diluted share, compared to adjusted net earnings attributable to VPG stockholders of $3.4 million, or $0.26 per diluted share, for the comparable prior year period.

Twelve fiscal months ended December 31, 2017 adjusted net earnings attributable to VPG stockholders grew by 54% to $15.3 million, or $1.14 per diluted share, compared to adjusted net earnings attributable to VPG stockholders of $9.9 million, or $0.74 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, to the most directly comparable U.S. GAAP measures.

Segments

Foil Technology Products segment revenues grew 17.6% to $29.9 million in the fourth fiscal quarter of 2017, up from $25.4 million in the fourth fiscal quarter of 2016; sequential revenue increased 2.0% up from $29.3 million in the third quarter of 2017. The year-over-year increase in revenues was attributable to precision resistors growth in all regions for the test and measurement and AMS markets, in addition to an increase mainly in the advance sensors products for the force measurement market mainly in Asia. The sequential increase in revenues was attributable to the advanced sensors products for the force measurement market in Asia.

Gross profit margin for the segment was 39.3% for the fourth fiscal quarter of 2017, a decrease compared to 40.6% in the fourth fiscal quarter of 2016 and 41.7% in the third fiscal quarter of 2017. The year-over-year decline in gross margin reflects a negative exchange rate impact and inventory adjustments. The sequential decline in gross margins primarily reflects inventory adjustments, an increase in wages and repair and maintenance, and a negative exchange rate impact.

Force Sensors segment revenues grew 20.0% to $17.7 million in the fourth fiscal quarter of 2017, up from $14.8 million in the fourth fiscal quarter of 2016; sequential revenue increased 6.8% up from $16.6 million in the third quarter of 2017. The year-over-year increase in revenues was attributable to OEM customers in the force measurement market, mainly in the Americas and Europe. The increase in sequential revenue was attributable to OEM customers in the force measurement market in the Americas.

Gross profit margin for Force Sensors was 29.5% for the fourth fiscal quarter of 2017, an increase compared to 25.3% in the fourth fiscal quarter of 2016 and 28.6% in the third fiscal quarter of 2017. Gross margins were up compared to the prior year period and sequentially directly due to the volume increase experienced in the fourth fiscal quarter of 2017.

Weighing and Control Systems segment revenues grew by 39.6% to $21.8 million in the fourth fiscal quarter of 2017, up from $15.6 million in the fourth fiscal quarter of 2016; sequential revenue increased 29.2% from $16.9 million in the third fiscal quarter of 2017. The increased year-over-year revenues and sequential revenues are primarily attributable to the steel market in Europe and Asia in addition to on-board weighing products in Europe and the Americas. Additionally, the year-over-year revenues were positively impacted by exchange rates.

Fourth fiscal quarter 2017 gross profit margin for the segment was 44.8%, a decline from the fourth fiscal quarter of 2016 of 46.5% and up from the third fiscal quarter of 2017 of 43.1%. The year-over-year decline in gross margin was primarily due to an increase in fixed manufacturing costs. The sequential gross margin improvement mainly reflects higher volumes.

Near-Term Outlook

“In light of an improved business environment, excluding the cyclical nature of the project-driven end user steel market, and at constant fourth fiscal quarter 2017 exchange rates, we expect net revenues in the range of $65 million to $70 million for the first 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 acquisition purchase accounting adjustments, acquisition costs, strategic alternative evaluation costs, gain on sale of building, restructuring costs, net proceeds from lease termination, tax rebate and associated tax effects, including the enactment of the U.S. Tax Cuts and Jobs Act. “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, strategic alternative evaluation costs, gain on sale of building and restructuring costs. “Free cash flow” is defined as the amount of cash generated from operations ($7.9 million for the fourth fiscal quarter of 2017), in excess of our capital expenditures ($2.6 million for the fourth fiscal quarter of 2017) net of proceeds, if any, for the sale of assets ($0.1 million in the fourth fiscal 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 (February 21) 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 7782211, 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 10116650. 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 Statements of Operations (Unaudited - In thousands, except per share amounts)   Fiscal quarter ended December 31, 2017 December 31, 2016 Net revenues $ 69,439 $ 55,814 Costs of products sold   42,699     34,540   Gross profit 26,740 21,274 Gross profit margin 38.5 % 38.1 %   Selling, general, and administrative expenses 19,063 15,529 Acquisition costs — 80 Restructuring costs   752     271   Operating income 6,925 5,394 Operating margin 10.0 % 9.7 %   Other income (expense): Interest expense (450 ) (410 ) Other   (254 )   31   Other (expense) income - net   (704 )   (379 )   Income before taxes 6,221 5,015   Income tax expense   1,771     2,035     Net earnings 4,450 2,980 Less: net earnings attributable to noncontrolling interests   (26 )   (25 ) Net earnings attributable to VPG stockholders $ 4,476   $ 3,005     Basic earnings per share attributable to VPG stockholders $ 0.34 $ 0.23 Diluted earnings per share attributable to VPG stockholders $ 0.33 $ 0.22   Weighted average shares outstanding - basic 13,292 13,192 Weighted average shares outstanding - diluted 13,529 13,450             VISHAY PRECISION GROUP, INC. Consolidated Statements of Operations (Unaudited - In thousands, except per share amounts)   Years ended December 31, 2017 December 31, 2016 Net revenues $ 254,350 $ 224,929 Costs of products sold   156,067     142,120   Gross profit 98,283 82,809 Gross profit margin 38.6 % 36.8 %   Selling, general, and administrative expenses 74,614 68,938 Acquisition costs — 494 Restructuring costs   2,044     2,666   Operating income 21,625 10,711 Operating margin 8.5 % 4.8 %   Other income (expense): Interest expense (1,842 ) (1,486 ) Other   780     382   Other (expense) income - net   (1,062 )   (1,104 )   Income before taxes 20,563 9,607   Income tax expense   6,169     3,199     Net earnings 14,394 6,408 Less: net earnings attributable to noncontrolling interests   49     4   Net earnings attributable to VPG stockholders $ 14,345   $ 6,404     Basic earnings per share attributable to VPG stockholders $ 1.08 $ 0.49 Diluted earnings per share attributable to VPG stockholders $ 1.07 $ 0.48   Weighted average shares outstanding - basic 13,262 13,187 Weighted average shares outstanding - diluted 13,471 13,419             VISHAY PRECISION GROUP, INC. Consolidated Balance Sheets (In thousands, except per share amounts) December 31, 2017 December 31, 2016 (Unaudited) Assets Current assets: Cash and cash equivalents $ 74,292 $ 58,452 Accounts receivable, net of allowances for doubtful accounts 46,789 34,270 Inventories: Raw materials 16,601 15,647 Work in process 23,160 21,115 Finished goods   20,174     19,559   Inventories, net 59,935 56,321 Prepaid expenses and other current assets   10,299     6,831   Total current assets 191,315 155,874   Property and equipment, at cost: Land 3,434 3,344 Buildings and improvements 50,276 48,454 Machinery and equipment 95,158 89,080 Software 7,955 7,441 Construction in progress 2,252 4,340 Accumulated depreciation   (103,401 )   (97,374 ) Property and equipment, net 55,674 55,285   Goodwill 19,181 18,717   Intangible assets, net 20,475 21,585   Other assets   19,906     19,049   Total assets $ 306,551   $ 270,510       Liabilities and equity Current liabilities: Trade accounts payable $ 13,678 $ 8,264 Payroll and related expenses 15,892 11,978 Other accrued expenses 15,952 13,285 Income taxes 2,515 772 Current portion of long-term debt   3,878     2,623   Total current liabilities 51,915 36,922   Long-term debt, less current portion 28,477 33,529 Deferred income taxes 2,300 735 Other liabilities 14,131 13,054 Accrued pension and other postretirement costs   16,424     14,713   Total liabilities   113,247     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 192,904 190,373 Retained earnings 43,076 28,731 Accumulated other comprehensive loss   (35,450 )   (40,337 ) Total Vishay Precision Group, Inc. stockholders' equity 193,156 171,383 Noncontrolling interests   148     174   Total equity   193,304     171,557   Total liabilities and equity $ 306,551   $ 270,510               VISHAY PRECISION GROUP, INC. Consolidated Statements of Cash Flows (Unaudited - In thousands)   Years ended December 31, 2017 December 31, 2016 Operating activities Net earnings $ 14,394 $ 6,408 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 10,626 11,149 (Gain) loss on disposal of property and equipment (195 ) (823 ) Share-based compensation expense 1,499 37 Inventory write-offs for obsolescence 2,065 1,755 Deferred income taxes 1,890 301 Other 893 (2,044 ) Net changes in operating assets and liabilities, net of acquisition: Accounts receivable (10,537 ) 1,322 Inventories (4,307 ) (1,968 ) Prepaid expenses and other current assets (3,260 ) 955 Trade accounts payable 2,009 237 Other current liabilities   7,652     (5,824 ) Net cash provided by operating activities   22,729     11,505     Investing activities Capital expenditures (6,960 ) (10,425 ) Proceeds from sale of property and equipment 541 4,203 Purchase of business   —     (10,626 ) Net cash used in investing activities   (6,419 )   (16,848 )   Financing activities Principal payments on long-term debt (2,628 ) (2,133 ) Proceeds from revolving facility 41,000 25,000 Payments on revolving facility (41,000 ) (20,000 ) Distributions to noncontrolling interests (75 ) (15 ) Payments of employee taxes on certain share-based arrangements   (303 )   (85 ) Net cash (used in) provided by financing activities (3,006 ) 2,767 Effect of exchange rate changes on cash and cash equivalents   2,536     (1,613 ) Increase (decrease) in cash and cash equivalents 15,840 (4,189 )   Cash and cash equivalents at beginning of year   58,452     62,641   Cash and cash equivalents at end of year $ 74,292   $ 58,452     Supplemental disclosure of investing transactions: Capital expenditures purchased (10,092 ) (10,425 ) Supplemental disclosure of non-cash financing transactions: Conversion of exchangeable notes to common stock

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                    VISHAY PRECISION GROUP, INC. Reconciliation of Consolidated Adjusted Gross Profit Margin (Unaudited - In thousands) Fiscal quarter ended Years ended December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Gross profit $ 26,740 $ 21,274 $ 98,283 $ 82,809 Gross profit margin 38.5 % 38.1 % 38.6 % 36.8 %  

Reconciling items affecting gross profit margin

Acquisition purchase accounting adjustments 49 49 91 586                         Adjusted gross profit $ 26,789   $ 21,323   $ 98,374   $ 83,395   Adjusted gross profit margin 38.6 % 38.2 % 38.7 % 37.1 %         VISHAY PRECISION GROUP, INC. Reconciliation of Consolidated Adjusted Operating Margin (Unaudited - In thousands)   Fiscal quarter ended Years ended December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Operating income $ 6,925 $ 5,394 $ 21,625 $ 10,711 Operating margin 10.0 % 9.7 % 8.5 % 4.8 %  

Reconciling items affecting operating margin

Acquisition purchase accounting adjustments 49 49 91 586 Acquisition costs — 80 — 494 Strategic alternative evaluation costs — 265 — 1,344 Gain on sale of building — (837 ) — (837 ) Restructuring costs 752 271 2,044 2,666                         Adjusted operating income $ 7,726   $ 5,222   $ 23,760   $ 14,964   Adjusted operating margin 11.1 % 9.4 % 9.3 % 6.7 %     VISHAY PRECISION GROUP, INC. Reconciliation of Adjusted Earnings Per Share (Unaudited - In thousands, except per share data) Fiscal quarter ended Years ended December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 Net earnings attributable to VPG stockholders $ 4,476 $ 3,005 $ 14,345 $ 6,404   Reconciling items affecting operating margin Acquisition purchase accounting adjustments 49 49 91 586 Acquisition costs — 80 — 494 Strategic alternative evaluation costs — 265 — 1,344 Gain on sale of building — (837 ) — (837 ) Restructuring costs 752 271 2,044 2,666   Reconciling items affecting other income/expense Net proceeds from lease termination — — (1,544 ) — Tax rebate 189 — 189 —   Less reconciling items affecting income tax expense Tax effect of reconciling items and discrete tax items   165     (597 )   (174 )   719   Adjusted net earnings attributable to VPG stockholders $ 5,301   $ 3,430   $ 15,299   $ 9,938     Weighted average shares outstanding - diluted 13,529 13,450 13,471 13,419   Adjusted net earnings per diluted share $ 0.39 $ 0.26 $ 1.14 $ 0.74  

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VPGFor InvestorsICR, Inc.James Palczynski, 203-682-8229jp@icrinc.comorFor MediaICR, Inc.Phil Denning, 646-277-1258phil.denning@icrinc.com