VPG Vishay Precision Group Inc

Second quarter net revenues of $59.5 million, within guidance. Company files Form 10-Q for the second quarter and first six months of fiscal 2015.

Vishay Precision Group, Inc. (NYSE: VPG), a leading producer of precision sensors and systems, today announced its results for its second quarter fiscal 2015 and six months ended June 27, 2015.

Ziv Shoshani, VPG’s chief executive officer said, “We have completed our review and analysis of certain adjustments to our historical financial statements for a subsidiary located in India as a result of certain transactions that were recorded for this subsidiary in the local currency, the Indian rupee, instead of the functional currency, the U.S. dollar, in prior periods extending back to 2011. The impact of these prior period adjustments was not material to any of these prior periods. As a result, we have made adjustments to our financial statements to correct these and other immaterial errors. The adjusted financial statements may be found in Note 12 of our Form 10-Q, which we filed with the Securities and Exchange Commission today.”

In commenting on second quarter fiscal 2015 financial results, Mr. Shoshani added, “From a performance perspective, our revenues continued to be significantly impacted by the negative effect of foreign currency exchange rates of $5.1 million, compared to the second quarter of 2014. At the same time, our new advanced sensor product and on-board weighing systems continue to gain traction in the marketplace. We remain focused on our strategy of enhancing shareholder value.”

Net revenues for the second quarter of 2015 were $59.5 million, representing an 8.7% decrease from $65.2 million of net revenues for the comparable prior year period. Net revenues for the six months ended June 27, 2015 were $116.1 million, representing an 8.1% decrease from the $126.4 million of net revenues for comparable prior year period. Comparing sequential results, net revenues for the second quarter of 2015 increased by $2.9 million, or 5.1%, from $56.6 million in the first quarter of 2015.

Net earnings attributable to VPG stockholders for the second quarter of 2015 were $1.5 million, or $0.11 per diluted share, compared to net earnings attributable to VPG stockholders for the second quarter of 2014 of $3.6 million, or $0.26 per diluted share. Foreign currency exchange rates for the second quarter of 2015 as compared to the prior year period had a negative impact on net income of $0.4 million, or $0.03 per diluted share. Net earnings attributable to VPG stockholders for the six months ended June 27, 2015 were $2.3 million, or $0.17 per diluted share, compared to net earnings attributable to VPG stockholders of $4.8 million, or $0.34 per diluted share for the comparable prior year period. Foreign currency exchange rates for the six months of 2015 as compared to the prior year period had a negative impact on net income of $0.8 million, or $0.06 per diluted share.

Adjusted net earnings attributable to VPG stockholders for the second quarter of 2015 were $1.8 million, or $0.13 per diluted share, versus adjusted net earnings attributable to VPG stockholders of $3.6 million, or $0.26 per diluted share for the comparable prior year period. Net earnings attributable to VPG stockholders for the second quarter of 2015 include $0.03 million of KELK acquisition purchase accounting adjustments (which impacted costs of products sold), $0.3 million of restructuring costs, and $0.04 million of associated tax effects.

Adjusted net earnings attributable to VPG stockholders for the six months ended June 27, 2015 were $2.7 million, or $0.19 per diluted share, versus adjusted net earnings attributable to VPG stockholders of $5.0 million, or $0.36 per diluted share for the comparable prior year period. Net earnings attributable to VPG stockholders for the six months ended June 27, 2015 include $0.03 million of KELK acquisition purchase accounting adjustments (which impacted cost of products sold), $0.4 million of restructuring costs, and $0.06 million of associated tax effects, versus $0.4 million of KELK acquisition purchase accounting adjustments and restructuring costs, and $0.1 million of associated tax effects for the comparable prior year period.

Segments

The Foil Technology Products segment revenues were $26.2 million in the second quarter of 2015, down 6.7% from $28.0 million in the second quarter last year, and up 4.4% from $25.1 million in the first quarter of 2015. Net revenues were negatively impacted by the effects of foreign currency exchange rates by $1.7 million in the second quarter of 2015 as compared to the second quarter of 2014, and were negatively impacted by $0.2 million as compared to the first quarter of 2015. The gross profit margin for the segment decreased to 39.6% for the second quarter of 2015 compared to 40.5% in the second quarter last year, and down from 41.4% in the first quarter of 2015. The gross profit margin decreased from the comparable prior year period primarily due to the effects of foreign currency exchange rates and additional headcount for expansion of our advanced sensor platform. Despite an increase in revenues, the sequential gross profit margin decrease was due primarily to the effects of foreign currency exchange rates and other costs.

The Force Sensors segment revenues of $15.6 million in the second quarter of 2015 were down 7.9% compared to $17.0 million in the second quarter last year, and were up 2.7% from $15.2 million in the first quarter of 2015. Decreased year-over-year revenues are attributable primarily to the effect of foreign currency exchange rates of $0.9 million. The increase in sequential revenues is attributable to higher volume. The gross profit margin for the segment was 19.0% in the second quarter of 2015 versus 22.7% in the second quarter of 2014 and 21.8% in the first quarter of 2015. The gross profit margin for the quarter decreased from the comparable prior year period primarily due to the effects of foreign currency exchange rates. The sequential gross profit margin decreased due to a reduction in inventory.

The Weighing and Control Systems segment revenues were $17.7 million in the second quarter of 2015, down 12.1% from $20.2 million in the second quarter last year, and up 8.6% from $16.3 million in the first quarter of 2015. Net revenues were negatively impacted by the effects of foreign currency exchange rates of $2.4 million in the second quarter of 2015 as compared to the second quarter of 2014. The sequential increase is attributable to volume in our process weighing business. The gross profit margin for the segment was 43.6% in the second quarter of 2015 versus 48.2% in the second quarter of 2014 and 44.6% in the first quarter of 2015. The year-over-year decrease in gross profit margin is primarily due to the effects of foreign currency exchange rates and unfavorable product mix. The sequential decrease in gross profit margin is primarily due to higher freight costs and unfavorable product mix.

Outlook

Mr. Shoshani concluded, “Assuming a similar exchange rate impact to our revenues and given the normal seasonality in our business, we expect net revenues in the range of $55 million to $60 million for the third quarter of 2015.”

*Editor’s Note: We define adjusted net earnings as net earnings attributable to VPG stockholders before acquisition purchase accounting adjustments, restructuring costs, and associated tax effects. ** For a reconciliation of GAAP to non-GAAP financial information, refer to the quarterly financial tables.

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 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, changes in the current pace of economic recovery, including if such recovery stalls or does not continue as expected; 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 ERP system and the associated impact on manufacturing efficiencies and customer satisfaction; 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 lower-labor-cost countries; 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, 2014. 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 27, 2015 June 28, 2014   Net revenues $ 59,508 $ 65,162 Costs of products sold   38,473     40,253   Gross profit 21,035 24,909 Gross profit margin 35.3 % 38.2 %   Selling, general, and administrative expenses 18,396 19,897 Restructuring costs   304     7   Operating income 2,335 5,005 Operating margin 3.9 % 7.7 %   Other income (expense): Interest expense (173 ) (240 ) Other   (414 )   (247 ) Other income (expense) - net   (587 )   (487 )   Income before taxes 1,748 4,518   Income tax expense   288     948     Net earnings 1,460 3,570 Less: net (loss) earnings attributable to noncontrolling interests   (16 )   (8 ) Net earnings attributable to VPG stockholders $ 1,476   $ 3,578     Basic earnings per share attributable to VPG stockholders $ 0.11 $ 0.26 Diluted earnings per share attributable to VPG stockholders $ 0.11 $ 0.26   Weighted average shares outstanding - basic 13,580 13,756 Weighted average shares outstanding - diluted 13,790 13,968       VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Operations (Unaudited - In thousands, except per share amounts)   Six fiscal months ended June 27, 2015 June 28, 2014   Net revenues $ 116,116 $ 126,402 Costs of products sold   74,102     79,783   Gross profit 42,014 46,619 Gross profit margin 36.2 % 36.9 %   Selling, general, and administrative expenses 37,144 39,060 Restructuring costs   382     331   Operating income 4,488 7,228 Operating margin 3.9 % 5.7 %   Other income (expense): Interest expense (360 ) (456 ) Other   (1,343 )   (683 ) Other income (expense) - net   (1,703 )   (1,139 )   Income before taxes 2,785 6,089   Income tax expense   478     1,277     Net earnings 2,307 4,812 Less: net (loss) earnings attributable to noncontrolling interests   (29 )   59   Net earnings attributable to VPG stockholders $ 2,336   $ 4,753     Basic earnings per share attributable to VPG stockholders $ 0.17 $ 0.35 Diluted earnings per share attributable to VPG stockholders $ 0.17 $ 0.34   Weighted average shares outstanding - basic 13,663 13,754 Weighted average shares outstanding - diluted 13,875 13,963       VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands)   June 27, 2015

December 31,2014

(Unaudited)

Assets Current assets: Cash and cash equivalents $ 65,456 $ 79,642 Accounts receivable, net 38,250 37,427 Inventories: Raw materials 13,808 14,223 Work in process 21,245 19,813 Finished goods   20,716     18,806   Inventories, net 55,769 52,842   Deferred income taxes 5,552 5,636 Prepaid expenses and other current assets   9,394     10,361   Total current assets 174,421 185,908   Property and equipment, at cost: Land 1,891 1,893 Buildings and improvements 50,555 49,909 Machinery and equipment 79,948 78,500 Software 6,997 6,837 Construction in progress 2,678 2,928 Accumulated depreciation   (91,820 )   (89,374 ) Property and equipment, net 50,249 50,693   Goodwill 12,046 12,788   Intangible assets, net 15,416 17,381   Other assets   20,352     20,393   Total assets $ 272,484   $ 287,163     Liabilities and equity Current liabilities: Trade accounts payable $ 8,780 $ 10,559 Payroll and related expenses 14,046 14,216 Other accrued expenses 14,776 16,902 Income taxes 127 2,133 Current portion of long-term debt   16,366     5,120   Total current liabilities 54,095 48,930   Long-term debt, less current portion 4,635 17,713 Deferred income taxes 610 638 Other liabilities 7,431 7,644 Accrued pension and other postretirement costs   12,014     12,353   Total liabilities   78,785     87,278     Commitments and contingencies   Equity: Common stock 1,276 1,273 Class B convertible common stock 103 103 Treasury stock (6,169 ) (32 ) Capital in excess of par value 189,769 189,532 Retained earnings 37,671 35,335 Accumulated other comprehensive loss   (29,111 )   (26,560 ) Total Vishay Precision Group, Inc. stockholders' equity 193,539 199,651 Noncontrolling interests   160     234   Total equity   193,699     199,885   Total liabilities and equity $ 272,484   $ 287,163         VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Cash Flows (Unaudited - In thousands)   Six fiscal months ended June 27, 2015 June 28, 2014   Operating activities Net earnings $ 2,307 $ 4,812 Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: Impairment of goodwill and indefinite-lived intangibles Depreciation and amortization 5,524 5,783 (Gain) loss on disposal of property and equipment (1 ) 9 Share-based compensation expense 416 485 Inventory write-offs for obsolescence 916 562 Other 1,121 (54 ) Net changes in operating assets and liabilities: Accounts receivable, net (1,671 ) (4,857 ) Inventories, net (4,345 ) 346 Prepaid expenses and other current assets 943 (586 ) Trade accounts payable (1,670 ) (281 ) Other current liabilities   (3,589 )   (1,338 ) Net cash (used in) provided by operating activities   (49 )   4,881     Investing activities Capital expenditures (5,037 ) (3,435 ) Proceeds from sale of property and equipment   65     63   Net cash used in investing activities   (4,972 )   (3,372 )   Financing activities Principal payments on long-term debt and capital leases (1,810 ) (2,070 ) Purchase of treasury stock (6,137 ) — Distributions to noncontrolling interests   (45 )   (43 ) Net cash used in financing activities (7,992 ) (2,113 ) Effect of exchange rate changes on cash and cash equivalents   (1,173 )   250   Decrease in cash and cash equivalents (14,186 ) (354 )   Cash and cash equivalents at beginning of period   79,642     72,809   Cash and cash equivalents at end of period $ 65,456   $ 72,455             VISHAY PRECISION GROUP, INC. Reconciliation of Consolidated Adjusted Gross Profit Margin (Unaudited - In thousands)   Fiscal quarter ended Six fiscal months ended June 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014 Gross profit $ 21,035 $ 24,909 $ 42,014 $ 46,619 Gross profit margin 35.3 % 38.2 % 36.2 % 36.9 %  

Reconciling items affecting gross profit margin

Acquisition purchase accounting adjustments 26 2 26 41         Adjusted gross profit $ 21,061   $ 24,911   $ 42,040   $ 46,660   Adjusted gross profit margin 35.4 % 38.2 % 36.2 % 36.9 %       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 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014 Net earnings attributable to VPG stockholders $ 1,476 $ 3,578 $ 2,336 $ 4,753  

Reconciling items affecting operating margin

Acquisition purchase accounting adjustments 26 2 26 41 Restructuring costs 304 7 382 331  

Reconciling items affecting income tax expense

Tax effect of adjustments for purchase accounting and restructuring costs   41     2     57     94   Adjusted net earnings attributable to VPG stockholders $ 1,765   $ 3,585   $ 2,687   $ 5,031     Weighted average shares outstanding - diluted 13,790 13,968 13,875 13,963   Adjusted net earnings per diluted share $ 0.13 $ 0.26 $ 0.19 $ 0.36  

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VPGWendy WilsonSenior Director Investor Relations and Corporate Communications919-374-5501wendy.wilson@vpgsensors.com