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:
- Sales of $67.4 million.
- Gross profit margin of 38.3%.
- Operating margin of 9.2%, adjusted operating margin* of
10.0%.
- Net earnings per diluted share of $0.33, adjusted net earnings
per diluted share* of $0.37.
- Cash from operations of $7.6 million with free cash flow* of
$4.8 million.
- Acquisition of Dynamic Systems Inc. completed on November 1,
2019.
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/
Steve Cantor Vishay Precision Group tel.: 857-636-0367
steve.cantor@vpgsensors.com
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