Vishay Precision Group, Inc. 10-Q

Item 1. FINANCIAL STATEMENTS VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) July 3, 2021 December 31, 2020 (Unaudited) Assets Current assets: Cash and cash equivalents $ 73,456 $ 98,438 Accounts receivable, net 51,818 45,339 Inventories: Raw materials 25,858 21,894 Work in process 27,560 21,534 Finished goods 24,060 18,920 Inventories, net 77,478 62,348 Prepaid expenses and other current assets 15,698 15,761 Total current assets 218,450 221,886 Property and equipment: Land 4,269 4,282 Buildings and improvements 68,118 67,581 Machinery and equipment 118,543 115,717 Software 9,431 10,026 Construction in progress 3,807 6,341 Accumulated depreciation ( 127,611 ) ( 128,931 ) Property and equipment, net 76,557 75,016 Goodwill 45,732 31,105 Intangible assets, net 54,474 32,039 Operating lease right-of-use assets 25,451 21,788 Other assets 19,633 20,053 Total assets $ 440,297 $ 401,887 Continues on the following page. -3- VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) July 3, 2021 December 31, 2020 Liabilities and equity Current liabilities: Trade accounts payable $ 11,061 $ 10,487 Payroll and related expenses 16,818 17,595 Other accrued expenses 18,138 13,843 Income taxes 969 1,593 Current portion of operating lease liabilities 4,445 4,011 Current portion of long-term debt — 18 Total current liabilities 51,431 47,547 Long-term debt, less current portion 60,670 40,626 Deferred income taxes 8,345 3,403 Operating lease liabilities 22,346 19,504 Other liabilities 15,747 16,263 Accrued pension and other postretirement costs 15,840 16,687 Total liabilities 174,379 144,030 Commitments and contingencies Equity: Common stock 1,322 1,317 Class B convertible common stock 103 103 Treasury stock ( 8,765 ) ( 8,765 ) Capital in excess of par value 197,856 197,764 Retained earnings 108,956 100,075 Accumulated other comprehensive loss ( 33,546 ) ( 32,671 ) Total Vishay Precision Group, Inc. stockholders' equity 265,926 257,823 Noncontrolling interests ( 8 ) 34 Total equity 265,918 257,857 Total liabilities and equity $ 440,297 $ 401,887 See accompanying notes. -4- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Operations (Unaudited - In thousands, except per share amounts) Fiscal quarter ended July 3, 2021 June 27, 2020 Net revenues $ 75,339 $ 59,146 Costs of products sold 45,541 36,036 Gross profit 29,798 23,110 Selling, general, and administrative expenses 22,453 18,640 Acquisition costs 1,198 — Impairment of goodwill and indefinite-lived intangibles 1,223 — Restructuring costs — 499 Operating income 4,924 3,971 Other income (expense): Interest expense ( 273 ) ( 267 ) Other ( 326 ) ( 1,273 ) Other income (expense) ( 599 ) ( 1,540 ) Income before taxes 4,325 2,431 Income tax expense 262 684 Net earnings 4,063 1,747 Less: net earnings (loss) attributable to noncontrolling interests 143 ( 12 ) Net earnings attributable to VPG stockholders $ 3,920 $ 1,759 Basic earnings per share attributable to VPG stockholders $ 0.29 $ 0.13 Diluted earnings per share attributable to VPG stockholders $ 0.29 $ 0.13 Weighted average shares outstanding - basic 13,618 13,571 Weighted average shares outstanding - diluted 13,646 13,609 See accompanying notes. -5- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Operations (Unaudited - In thousands, except per share amounts) Six fiscal months ended July 3, 2021 June 27, 2020 Net revenues $ 145,928 $ 126,842 Costs of products sold 87,508 78,667 Gross profit 58,420 48,175 Selling, general, and administrative expenses 44,636 38,931 Acquisition costs 1,198 — Impairment of goodwill and indefinite-lived intangibles 1,223 — Restructuring costs — 629 Operating income 11,363 8,615 Other income (expense): Interest expense ( 578 ) ( 728 ) Other 247 ( 590 ) Other income (expense) ( 331 ) ( 1,318 ) Income before taxes 11,032 7,297 Income tax expense 2,026 2,258 Net earnings 9,006 5,039 Less: net earnings (loss) attributable to noncontrolling interests 125 ( 32 ) Net earnings attributable to VPG stockholders $ 8,881 $ 5,071 Basic earnings per share attributable to VPG stockholders $ 0.65 $ 0.37 Diluted earnings per share attributable to VPG stockholders $ 0.65 $ 0.37 Weighted average shares outstanding - basic 13,605 13,556 Weighted average shares outstanding - diluted 13,638 13,598 See accompanying notes. -6- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited - In thousands) Fiscal quarter ended July 3, 2021 June 27, 2020 Net earnings $ 4,063 $ 1,747 Other comprehensive income (loss): Foreign currency translation adjustment 607 3,271 Pension and other postretirement actuarial items, net of tax 109 ( 152 ) Other comprehensive income 716 3,119 Comprehensive income 4,779 4,866 Less: comprehensive income (loss) attributable to noncontrolling interests 143 ( 12 ) Comprehensive income attributable to VPG stockholders $ 4,636 $ 4,878 See accompanying notes. -7- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited - In thousands) Six fiscal months ended July 3, 2021 June 27, 2020 Net earnings $ 9,006 $ 5,039 Other comprehensive income (loss): Foreign currency translation adjustment ( 1,193 ) ( 2,070 ) Pension and other postretirement actuarial items, net of tax 318 ( 311 ) Other comprehensive loss ( 875 ) ( 2,381 ) Comprehensive income 8,131 2,658 Less: comprehensive income (loss) attributable to noncontrolling interests 125 ( 32 ) Comprehensive income attributable to VPG stockholders $ 8,006 $ 2,690 See accompanying notes. -8- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Cash Flows (Unaudited - In thousands) Six fiscal months ended July 3, 2021 June 27, 2020 Operating activities Net earnings $ 9,006 $ 5,039 Adjustments to reconcile net earnings to net cash provided by operating activities: Impairment of goodwill and indefinite-lived intangibles 1,223 — Depreciation and amortization 7,108 6,312 Loss from extinguishment of debt — 30 Loss (gain) on sale of property and equipment 44 ( 143 ) Share-based compensation expense 942 757 Inventory write-offs for obsolescence 1,135 1,302 Deferred income taxes ( 1,110 ) ( 146 ) Other ( 1,820 ) 25 Net changes in operating assets and liabilities: Accounts receivable, net ( 776 ) 2,077 Inventories, net ( 7,744 ) ( 1,383 ) Prepaid expenses and other current assets 314 ( 632 ) Trade accounts payable 1,715 1,228 Other current liabilities 2,341 2,229 Net cash provided by operating activities 12,378 16,695 Investing activities Capital expenditures ( 8,309 ) ( 11,018 ) Proceeds from sale of property and equipment 16 378 Purchase of business, net of cash acquired ( 47,216 ) 156 Net cash used in investing activities ( 55,509 ) ( 10,484 ) Financing activities Principal payments on long-term debt ( 18 ) ( 3,418 ) Proceeds from revolving facility 20,000 — Debt issuance costs — ( 402 ) Purchase of noncontrolling interest — ( 253 ) (Distributions to) contributions from noncontrolling interests ( 167 ) 117 Payments of employee taxes on certain share-based arrangements ( 846 ) ( 813 ) Net cash provided by (used in) financing activities 18,969 ( 4,769 ) Effect of exchange rate changes on cash and cash equivalents ( 820 ) ( 1,155 ) (Decrease) increase in cash and cash equivalents ( 24,982 ) 287 Cash and cash equivalents at beginning of period 98,438 86,910 Cash and cash equivalents at end of period $ 73,456 $ 87,197 Supplemental disclosure of investing transactions: Capital expenditures purchased $ ( 6,353 ) $ ( 10,290 ) Capital expenditures accrued but not yet paid $ 606 $ 455 See accompanying notes. -9- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Equity (Unaudited - In thousands, except share amounts) Fiscal quarter ended July 3, 2021 Common Stock Class B Convertible Common Stock Treasury Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Income (Loss) Total VPG Inc. Stockholders' Equity Noncontrolling Interests Total Equity Balance at April 3, 2021 $ 1,320 $ 103 $ ( 8,765 ) $ 197,282 $ 105,036 $ ( 34,262 ) $ 260,714 $ ( 95 ) $ 260,619 Net earnings — — — — 3,920 — 3,920 143 4,063 Other comprehensive income — — — — — 716 716 — 716 Share-based compensation expense — — — 576 — — 576 — 576 Restricted stock issuances ( 15,564 shares) 2 — — ( 2 ) — — — — — Distributions to noncontrolling interests — — — — — — — ( 56 ) ( 56 ) Balance at July 3, 2021 $ 1,322 $ 103 $ ( 8,765 ) $ 197,856 $ 108,956 $ ( 33,546 ) $ 265,926 $ ( 8 ) $ 265,918 Fiscal quarter ended June 27, 2020 Common Stock Class B Convertible Common Stock Treasury Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Income (Loss) Total VPG Inc. Stockholders' Equity Noncontrolling Interests Total Equity Balance at March 28, 2020 $ 1,316 $ 103 $ ( 8,765 ) $ 196,709 $ 92,600 $ ( 43,203 ) $ 238,760 $ 347 $ 239,107 Net earnings — — — — 1,759 — 1,759 ( 12 ) 1,747 Other comprehensive loss — — — — — 3,119 3,119 — 3,119 Share-based compensation expense — — — 378 — — 378 — 378 Restricted stock issuances ( 8,244 shares) 1 — — ( 1 ) — — — — — Purchase of noncontrolling interest — — — 48 — — 48 ( 301 ) ( 253 ) Contribution from noncontrolling interests — — — — — — — 142 142 Balance at June 27, 2020 $ 1,317 $ 103 $ ( 8,765 ) $ 197,134 $ 94,359 $ ( 40,084 ) $ 244,064 $ 176 $ 244,240 See accompanying notes. -10- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Equity (Unaudited - In thousands, except share amounts) Six Fiscal Months Ended July 3, 2021 Common Stock Class B Convertible Common Stock Treasury Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Income (Loss) Total VPG, Inc. Stockholders' Equity Noncontrolling Interests Total Equity Balance at December 31, 2020 $ 1,317 $ 103 $ ( 8,765 ) $ 197,764 $ 100,075 $ ( 32,671 ) $ 257,823 $ 34 $ 257,857 Net earnings — — — — 8,881 — 8,881 125 9,006 Other comprehensive loss — — — — — ( 875 ) ( 875 ) — ( 875 ) Share-based compensation expense — — — 942 — — 942 — 942 Restricted stock issuances ( 50,316 shares) 5 — — ( 850 ) — — ( 845 ) — ( 845 ) Distributions to noncontrolling interests — — — — — — — ( 167 ) ( 167 ) Balance at July 3, 2021 $ 1,322 $ 103 $ ( 8,765 ) $ 197,856 $ 108,956 $ ( 33,546 ) $ 265,926 $ ( 8 ) $ 265,918 Six Fiscal Months Ended June 27, 2020 Common Stock Class B Convertible Common Stock Treasury Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Income (Loss) Total VPG, Inc. Stockholders' Equity Noncontrolling Interests Total Equity Balance at December 31, 2019 $ 1,312 $ 103 $ ( 8,765 ) $ 197,125 $ 89,288 $ ( 37,703 ) $ 241,360 $ 392 $ 241,752 Net earnings — — — — 5,071 — 5,071 ( 32 ) 5,039 Other comprehensive loss — — — — — ( 2,381 ) ( 2,381 ) — ( 2,381 ) Share-based compensation expense — — — 757 — — 757 — 757 Restricted stock issuances ( 52,433 shares) 5 — — ( 796 ) — — ( 791 ) — ( 791 ) Purchase of noncontrolling interest — — — 48 — — 48 ( 301 ) ( 253 ) Contributions from noncontrolling interests — — — — — — — 117 117 Balance at June 27, 2020 $ 1,317 $ 103 $ ( 8,765 ) $ 197,134 $ 94,359 $ ( 40,084 ) $ 244,064 $ 176 $ 244,240 See accompanying notes. -11- Vishay Precision Group, Inc. Notes to Unaudited Consolidated Condensed Financial Statements Note 1 – Basis of Presentation Background Vishay Precision Group, Inc. (“VPG” or the “Company”) is an internationally recognized designer, manufacturer and marketer of sensors, and sensor-based measurement systems, as well as specialty resistors and strain gages based upon the Company's proprietary technology. The Company provides precision products and solutions, many of which are “designed-in” by its customers, specializing in the growing markets of stress, force, weight, pressure, and current measurements. Interim Financial Statements These unaudited consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial statements and therefore do not include all information and footnotes necessary for the presentation of financial position, results of operations, and cash flows required by accounting principles generally accepted in the United States for complete financial statements. The information furnished reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair summary of the financial position, results of operations, and cash flows for the interim periods presented. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of December 31, 2020 and 2019 and for each of the three years in the period ended December 31, 2020, included in VPG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 11, 2021. The results of operations for the fiscal quarter ended July 3, 2021 are not necessarily indicative of the results to be expected for the full year. VPG reports interim financial information for 13-week periods beginning on a Sunday and ending on a Saturday, except for the first quarter, which always begins on January 1, and the fourth quarter, which always ends on December 31. The four fiscal quarters in 2021 and 2020 end on the following dates: 2021 2020 Quarter 1 April 3, March 28, Quarter 2 July 3, June 27, Quarter 3 October 2, September 26, Quarter 4 December 31, December 31, Recently Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update No. ASU 2019-12, "Simplifying the Accounting for Income Taxes". This ASU amends Accounting Standards Codification ("ASC") 740 by removing certain exceptions to the general principles, clarifying and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020. The Company adopted this standard in the first quarter of 2021. The adoption of this ASU did not impact our financial statements or the related disclosures. Note 2 – Revenues Revenue Recognition The following table disaggregates net revenue by geographic region from contracts with customers based on net revenues generated by subsidiaries within that geographic location (in thousands) : -12- Note 2 – Revenues (continued) Fiscal quarter ended July 3, 2021 Fiscal quarter ended June 27, 2020 Foil Technology Products Force Sensors Weighing and Control Systems Total Foil Technology Products Force Sensors Weighing and Control Systems Total United States $ 11,003 $ 8,017 $ 10,574 $ 29,594 $ 10,789 $ 4,113 $ 6,009 $ 20,911 United Kingdom 1,102 514 3,681 5,297 587 1,711 1,723 4,021 Other Europe 6,604 5,018 5,204 16,826 6,973 1,434 3,430 11,837 Israel 5,284 261 — 5,545 5,691 93 — 5,784 Asia 9,315 3,406 2,012 14,733 7,745 1,565 1,859 11,169 Canada — — 3,344 3,344 — — 5,424 5,424 Total $ 33,308 $ 17,216 $ 24,815 $ 75,339 $ 31,785 $ 8,916 $ 18,445 $ 59,146 Six Fiscal Months Ended July 3, 2021 Six Fiscal Months Ended June 27, 2020 Foil Technology Products Force Sensors Weighing and Control Systems Total Foil Technology Products Force Sensors Weighing and Control Systems Total United States $ 21,482 $ 15,788 $ 18,241 $ 55,511 $ 22,723 $ 12,505 $ 14,898 $ 50,126 United Kingdom 2,000 1,081 7,694 10,775 1,537 3,691 5,435 10,663 Other Europe 13,870 10,493 9,765 34,128 14,686 3,808 7,174 25,668 Israel 11,725 391 — 12,116 8,646 190 — 8,836 Asia 16,942 6,396 3,613 26,951 14,670 3,417 3,530 21,617 Canada — — 6,447 6,447 — — 9,932 9,932 Total $ 66,019 $ 34,149 $ 45,760 $ 145,928 $ 62,262 $ 23,611 $ 40,969 $ 126,842 The following table disaggregates net revenue from contracts with customers by market sector (in thousands) . Fiscal quarter ended Six fiscal months ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 Test & Measurement $ 16,279 $ 14,027 $ 30,695 $ 28,372 Avionics, Military & Space 5,872 6,727 11,902 12,887 Transportation 11,930 5,188 21,484 13,432 Other Markets 17,489 12,192 35,034 25,320 Industrial Weighing 12,042 8,583 24,047 21,050 General Industrial 4,173 3,623 8,255 7,662 Steel 7,554 8,806 14,511 18,119 Total $ 75,339 $ 59,146 $ 145,928 $ 126,842 Contract Assets & Liabilities Contract assets are established when revenues are recognized prior to a contractual payment due from the customer. When a payment becomes due based on the contract terms, the Company will reduce the contract asset and record a receivable. Contract liabilities are deferred revenues that are recorded when cash payments are received or due in advance of our performance obligations. Our payment terms vary by the type and location of the products offered. The term between invoicing and when payment is due is not significant. The outstanding contract assets and liability accounts were as follows (in thousands) : -13- Note 2 – Revenues (continued) Contract Asset Contract Liability Unbilled Revenue Accrued Customer Advances Balance at December 31, 2020 $ 3,605 $ 2,873 Balance at July 3, 2021 4,656 4,525 (Decrease)/increase $ 1,051 $ 1,652 The amount of revenue recognized during the six fiscal months ended July 3, 2021 that was included in the contract liability balance at December 31, 2020 was $ 2.4 million. Practical Expedients The Company does not disclose the value of unsatisfied performance obligations for contracts that have a duration of one year or less and for contracts that are substantially complete. The Company treats shipping and handling activities as fulfillment costs. Note 3 - Acquisition On June 1, 2021, VPG completed the acquisition of California-based Diversified Technical Systems, Inc. (“DTS”), a manufacturer of data acquisition systems and sensors for product safety and testing, for a purchase price of $ 47.2 million, subject to customary adjustments. The Company used cash on hand and borrowings under its revolving credit facility to fund the purchase price under the purchase agreement. DTS reports into the Company's Weighing and Control Systems segment. The following table summarizes the provisional fair values assigned to the assets and liabilities of DTS as of June 1, 2021 (in thousands): June 1, 2021 Working capital $ 12,999 Property and equipment 1,209 Deferred income tax liability ( 6,274 ) Intangible assets: Acquired technology 13,167 Customer relationships 8,135 Trade names 2,393 Total intangible assets 23,695 Fair value of acquired identifiable assets 31,629 Purchase price $ 47,216 Goodwill $ 15,587 The Company utilizes certain valuations and studies to determine the fair value of the tangible and intangible assets acquired. These valuations and studies are currently being analyzed and have yet to be finalized. Accordingly, the assets and liabilities assumed are subject to adjustment once the detailed analysis is completed. The provisional estimated weighted average useful lives for the acquired technology and customer relationships are 15 years. Trade names are treated as indefinite-lived intangible assets. None of the goodwill associated with DTS will be deductible for income tax purposes. The Company recorded acquisition costs associated with this transaction as follows (in thousands ): Fiscal quarter ended Six fiscal months ended July 3, 2021 July 3, 2021 Legal fees $ 341 $ 341 Appraisal fees 18 18 Other (investment banker and insurance costs) 839 839 $ 1,198 $ 1,198 -14- Note 3 - Acquisition (continued) Included in the results of the operations of the Company, starting on June 1, 2021, are net revenues of $ 3.0 million and a net loss of $ 0.2 million from DTS for the fiscal quarter and six fiscal months ended July 3, 2021. DTS results include amortization of the inventory step-up of $ 0.9 million and amortization of intangible assets of $ 0.1 million. Following is the supplemental consolidated financial results for the Company on an unaudited pro forma basis, as if the DTS acquisition had been consummated on January 1, 2020: Fiscal quarter ended Six fiscal months ended Fiscal quarter ended Six fiscal months ended June 27, 2020 June 27, 2020 July 3, 2021 July 3, 2021 Pro forma net revenues $ 64,907 $ 139,158 80,243 159,164 Pro forma net earnings attributable to VPG stockholders $ 1,629 $ 3,658 6,741 13,411 Pro forma basic earnings per share attributable to VPG stockholders $ 0.12 $ 0.27 $ 0.50 $ 0.99 Pro forma diluted earnings per share attributable to VPG stockholders $ 0.12 $ 0.27 $ 0.49 $ 0.98 Note 4 – Goodwill and Other Intangible Assets The Company tests the goodwill in each of its goodwill reporting units for impairment at least annually, as of the first day of it's fourth quarter, and whenever events or changes in circumstances occur indicating that a possible impairment may have been incurred. Due to updated financial projections, the Company performed a quantitative impairment test for the instrumentation reporting unit during the second quarter of 2021. In estimating the fair value of our instrumentation reporting unit the Company used the income approach. The results of the quantitative impairment test for the instrumentation reporting unit's goodwill and indefinite-lived trade name indicated an impairment, and in the second quarter of 2021, the Company recognized a non-cash impairment loss of $ 1.1 million in goodwill and $ 0.1 million to the indefinite-lived trade name. The impairment was driven mainly by changes in forecasted projections including a slower growth rate in revenues. After considering the impact of the impairment charges, the carrying amount of goodwill and indefinite-lived trade names as of July 3, 2021 was $ 0.0 million and $ 0.3 million, respectively. The change in the carrying amount of goodwill by segment is as follows (in thousands): Total Weighing and Control Systems Segment Foil Technology Products Segment KELK Acquisition DSI Acquisition DTS Acquisition Stress-Tek Acquisition Pacific Acquisition Balance at December 31, 2020 $ 31,105 $ 6,726 $ 16,942 $ 6,311 $ 1,126 Goodwill acquired 15,587 15,587 Impairment charges ( 1,126 ) ( 1,126 ) Foreign currency translation adjustment 166 180 ( 14 ) — — Balance at July 3, 2021 $ 45,732 $ 6,906 $ 16,928 $ 15,587 $ 6,311 $ — -15- Note 4 – Goodwill and Other Intangible Assets (continued) Intangible assets were as follows (in thousands) : July 3, 2021 December 31, 2020 Intangible assets subject to amortization (Definite-lived): Patents and acquired technology $ 33,069 $ 19,804 Customer relationships 34,393 26,061 Trade names 1,697 1,747 Non-competition agreements 11,646 12,259 80,805 59,871 Accumulated amortization: Patents and acquired technology ( 6,552 ) ( 5,895 ) Customer relationships ( 14,191 ) ( 13,363 ) Trade names ( 1,697 ) ( 1,747 ) Non-competition agreements ( 11,639 ) ( 12,250 ) ( 34,079 ) ( 33,255 ) Net intangible assets subject to amortization $ 46,726 $ 26,616 Intangible assets not subject to amortization (Indefinite-lived): Trade names 7,748 5,423 $ 54,474 $ 32,039 The increase in net intangible assets from December 31, 2020 is due to the acquisition of DTS on June 1, 2021. The Company has preliminarily allocated $ 21.3 million of the purchase price to definite-lived intangible assets and $ 2.4 million to indefinite-lived intangible assets. Amortization expense for the fiscal quarter and six fiscal months ended July 3, 2021 was $ 0.7 million and $ 1.4 million, respectively. The DTS intangible assets accounted for $ 0.1 million of amortization expense for the fiscal quarter and six fiscal months ended July 3, 2021. Estimated annual amortization expense for the full year of 2021 and each of the next four years, is as follows ( in thousands) : 2021 $ 3,280 2022 3,871 2023 3,763 2024 3,728 2025 3,728 Note 5 – Leases The Company primarily leases office and manufacturing facilities in addition to vehicles, which have remaining terms of less than one year to eleven years . The Company has no finance leases. Leases recorded on the balance sheet consist of the following (in thousands) : -16- Note 5 - Leases (continued) Leases July 3, 2021 December 31, 2020 Assets Operating lease right of use asset $ 25,451 $ 21,788 Liabilities Operating lease - current $ 4,445 $ 4,011 Operating lease - non-current $ 22,346 $ 19,504 Other information related to lease term and discount rate is as follows: July 3, 2021 Operating leases weighted average remaining lease term (in years) 8.49 years Operating leases weighted average discount rate 3.36 % The components of lease expense are as follows (in thousands) : Fiscal quarter ended Six Fiscal Months Ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 Operating lease cost $ 1,258 $ 1,139 $ 2,439 $ 2,013 Short-term lease cost 35 34 68 57 Sublease income ( 19 ) — ( 28 ) — Total net lease cost $ 1,274 $ 1,173 $ 2,479 $ 2,070 Right of use assets obtained in exchange for new operating lease liability during 2021 were $ 5.9 million. The Company paid $ 2.4 million and $ 1.7 million for its operating leases for each of the six fiscal months ended July 3, 2021 and June 27, 2020, which are included in operating cash flows on the consolidated condensed statements of cash flows. Undiscounted maturities of operating lease payments as of July 3, 2021 are summarized as follows (in thousands) : 2021 (excluding the six months ended July 3, 2021) $ 2,596 2022 4,500 2023 3,968 2024 3,555 2025 3,083 Thereafter 12,894 Total future minimum lease payments $ 30,596 Less: amount representing interest ( 3,805 ) Present value of future minimum lease payments $ 26,791 Note 6 – Income Taxes VPG calculates the tax provision for interim periods using an estimated annual effective tax rate methodology based on projected full-year pre-tax earnings among the taxing jurisdictions in which we operate with adjustments for discrete items. The effective tax rate for the fiscal quarter ended July 3, 2021 was 6.1 % compared to 28.1 % for the fiscal quarter ended June 27, 2020, and the effective tax rate for the six fiscal months ended July 3, 2021 was 18.4 % compared to 30.9 % for the six fiscal months ended June 27, 2020. The tax rate for both periods presented in 2021 is lower than the prior year periods primarily due to the acquisition of DTS, which enabled the Company to reduce its valuation allowance against deferred tax assets, tax rate changes in certain foreign jurisdictions, and changes in the mix of worldwide income. The Company and its subsidiaries are subject to income taxes imposed by the U.S., various states, and the foreign jurisdictions in which we operate. Each jurisdiction establishes rules that set forth the years which are subject to examination by its tax authorities. While the Company believes the tax positions taken on its tax returns for each jurisdiction are supportable, they -17- Note 6 - Income Taxes (continued) may still be challenged by the jurisdiction's tax authorities. In anticipation of such challenges, the Company has established reserves for tax-related uncertainties. These liabilities are based on the Company’s best estimate of the potential tax exposures in each respective jurisdiction. It may take a number of years for a final tax liability in a jurisdiction to be determined, particularly in the event of an audit. If an uncertain matter is determined favorably, there could be a reduction in the Company’s tax expense. An unfavorable determination could increase tax expense and could require a cash payment, including interest and penalties. Note 7 – Long-Term Debt Long-term debt consists of the following (in thousands) : July 3, 2021 December 31, 2020 2020 Credit Agreement - Revolving Facility $ 61,000 $ 41,000 Other debt — 18 Deferred financing costs ( 330 ) ( 374 ) Total long-term debt 60,670 40,644 Less: current portion — 18 Long-term debt, less current portion $ 60,670 $ 40,626 Note 8 – Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss), net of tax, consist of the following (in thousands) : Foreign Currency Translation Adjustment Pension and Other Postretirement Actuarial Items Total Balance at January 1, 2021 $ ( 25,591 ) $ ( 7,080 ) $ ( 32,671 ) Other comprehensive loss before reclassifications ( 1,193 ) — ( 1,193 ) Amounts reclassified from accumulated other comprehensive income (loss) — 318 318 Balance at July 3, 2021 $ ( 26,784 ) $ ( 6,762 ) $ ( 33,546 ) Foreign Currency Translation Adjustment Pension and Other Postretirement Actuarial Items Total Balance at January 1, 2020 $ ( 30,761 ) $ ( 6,942 ) $ ( 37,703 ) Other comprehensive loss before reclassifications ( 2,070 ) — ( 2,070 ) Amounts reclassified from accumulated other comprehensive income (loss) — ( 311 ) ( 311 ) Balance at June 27, 2020 $ ( 32,831 ) $ ( 7,253 ) $ ( 40,084 ) Reclassifications of pension and other postretirement actuarial items out of accumulated other comprehensive income (loss) are included in the computation of net periodic benefit cost (see Note 9). Note 9 – Pension and Other Postretirement Benefits Employees of VPG participate in various defined benefit pension and other postretirement benefit ("OPEB") plans. The following table sets forth the components of the net periodic benefit cost for the Company's defined benefit pension and OPEB plans (in thousands) : -18- Note 9 - Pension and Other Postretirement Benefits ( continued) Fiscal quarter ended July 3, 2021 Fiscal quarter ended June 27, 2020 Pension Plans OPEB Plans Pension Plans OPEB Plans Net service cost $ 96 $ 9 $ 99 $ 31 Interest cost 103 17 127 33 Expected return on plan assets ( 97 ) — ( 109 ) — Amortization of actuarial losses 102 5 76 34 Net periodic benefit cost $ 204 $ 31 $ 193 $ 98 Six fiscal months ended July 3, 2021 Six fiscal months ended June 27, 2020 Pension Plans OPEB Plans Pension Plans OPEB Plans Net service cost $ 193 $ 18 $ 198 $ 62 Interest cost 206 34 256 66 Expected return on plan assets ( 194 ) — ( 220 ) — Amortization of actuarial losses 204 10 153 68 Net periodic benefit cost $ 409 $ 62 $ 387 $ 196 Note 10 – Share-Based Compensation The Amended and Restated Vishay Precision Group, Inc. 2010 Stock Incentive Program (as amended and restated, the “Plan”) permits the issuance of up to 1,000,000 shares of common stock. At July 3, 2021, the Company had reserved 320,654 shares of common stock for future grants of equity awards (restricted stock, unrestricted stock, restricted stock units ("RSUs"), or stock options) pursuant to the Plan. If any outstanding awards are forfeited by the holder or canceled by the Company, the underlying shares would be available for re-grant to others. On March 4, 2021 and in accordance with their respective employment agreements, VPG’s three executive officers were granted annual equity awards in the form of RSUs, of which 50 % are performance-based. The awards have an aggregate target grant-date fair value of $ 1.7 million and were comprised of 52,486 RSUs. Fifty percent of these awards will vest on January 1, 2024, subject to the executives’ continued employment. The performance-based portion of the RSUs will also vest on January 1, 2024, subject to the executives' continued employment and the satisfaction of certain performance objectives relating to three-year cumulative “adjusted free cash flow” and "net earnings goals", each weighted equally. On March 8, 2021, certain non-executive VPG employees were granted annual equity awards in the form of RSUs. Certain employees received awards, of which 75 % are performance-based and certain employees received awards of which 50 % are performance-based. The awards have an aggregate grant-date fair value of $ 0.6 million and were comprised of 17,793 RSUs. The non-performance portion of these awards ( twenty-five percent for certain employees and fifty percent for certain employees) will vest on January 1, 2024 subject to the employees' continued employment. The performance-based portion of the RSUs will also vest on January 1, 2024, subject to the employees' continued employment and the satisfaction of certain performance objectives relating to three-year cumulative earnings and cash flow goals, each weighted equally. On May 27, 2021 and in accordance with the Company's 2017 Non-Employee Director Compensation Plan, the Board of Directors approved the issuance of an aggregate of 9,936 RSUs to the independent board members of the Board of Directors and to the non-executive Chairman of the Board of Directors. The awards have an aggregate grant-date fair value of $ 0.3 million and will vest on the earlier of the 2022 Annual Stockholders Meeting or May 27, 2022, subject to the directors' continued service on the Board of Directors. Vesting of equity awards is subject to acceleration under certain circumstances. -19- Note 10 - Share-Based Compensation (continued) The amount of compensation cost related to share-based payment transactions is measured based on the grant-date fair value of the equity instruments issued. VPG determines compensation cost for RSUs based on the grant-date fair value of the underlying common stock. The Company recognizes compensation cost for RSUs that are expected to vest and for which performance criteria are expected to be met. The following table summarizes share-based compensation expense recognized (in thousands) : Fiscal quarter ended Six fiscal months ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 Restricted stock units $ 576 $ 378 $ 942 $ 757 Note 11 – Segment Information VPG reports in three product segments: the Foil Technology Products segment, the Force Sensors segment, and the Weighing and Control Systems segment. The Foil Technology Products reporting segment is comprised of the foil resistor and strain gage operating segments. The Force Sensors reporting segment is comprised of transducers, load cells, and modules. The Weighing and Control Systems reporting segment is comprised of complete systems which include load cells and instrumentation for weighing, force control and force measurement for a variety of uses such as process control on-board weighing applications. VPG evaluates reporting segment performance based on multiple performance measures including third party net revenues, gross profits and operating income, exclusive of certain items. Management believes that evaluating segment performance, excluding items such as restructuring costs, executive severance costs, and other items is meaningful because it provides insight with respect to the intrinsic operating results of VPG. The following table sets forth reporting segment information (in thousands) : -20- Note 11 - Segment Information (continued) Fiscal quarter ended Six fiscal months ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 Net revenues: Foil Technology Products $ 33,308 $ 31,785 $ 66,019 $ 62,262 Force Sensors 17,216 8,916 34,149 23,611 Weighing and Control Systems 24,815 18,445 45,760 40,969 Total $ 75,339 $ 59,146 $ 145,928 $ 126,842 Gross profit: Foil Technology Products $ 12,942 $ 13,286 $ 25,981 $ 24,487 Force Sensors 5,969 1,038 12,008 4,610 Weighing and Control Systems 10,887 8,786 20,431 19,078 Total $ 29,798 $ 23,110 $ 58,420 $ 48,175 Reconciliation of segment operating income to consolidated results: Foil Technology Products $ 7,219 $ 8,070 $ 14,052 $ 13,454 Force Sensors 3,474 ( 1,013 ) 6,977 191 Weighing and Control Systems 4,595 4,019 8,419 8,687 Unallocated G&A expenses ( 7,943 ) ( 6,606 ) ( 15,664 ) ( 13,088 ) Acquisition costs ( 1,198 ) — ( 1,198 ) — Impairment of goodwill and indefinite-lived intangibles ( 1,223 ) — ( 1,223 ) — Restructuring costs — ( 499 ) — ( 629 ) Operating income $ 4,924 $ 3,971 $ 11,363 $ 8,615 Acquisition costs: Weighing and Control Systems ( 1,198 ) — ( 1,198 ) — $ ( 1,198 ) $ — $ ( 1,198 ) $ — Impairment of goodwill and indefinite-lived intangibles: Foil Technology Products $ ( 1,223 ) $ — $ ( 1,223 ) $ — $ ( 1,223 ) $ — $ ( 1,223 ) $ — Restructuring costs: Foil Technology Products $ — $ ( 341 ) $ — $ ( 443 ) Force Sensors $ — $ ( 80 ) $ — $ ( 108 ) Corporate/Other — ( 78 ) — ( 78 ) $ — $ ( 499 ) $ — $ ( 629 ) Products are transferred between segments on a basis intended to reflect, as nearly as practicable, the market value of the products. The table below summarizes intersegment sales (in thousands) : -21- Note 11 - Segment Information (continued) Fiscal quarter ended Six fiscal months ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 Foil Technology Products to Force Sensors and Weighing and Control Systems $ 959 $ 868 $ 1,920 $ 1,592 Weighing and Control Systems to Foil Technology Products and Force Sensors $ 150 $ 124 $ 264 $ 211 Note 12 – Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share attributable to VPG stockholders (in thousands, except earnings per share) : Fiscal quarter ended Six fiscal months ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 Numerator: Numerator for basic earnings per share: Net earnings attributable to VPG stockholders $ 3,920 $ 1,759 $ 8,881 $ 5,071 Denominator: Denominator for basic earnings per share: Weighted average shares 13,618 13,571 13,605 13,556 Effect of dilutive securities: Restricted stock units 28 38 33 42 Dilutive potential common shares 28 38 33 42 Denominator for diluted earnings per share: Adjusted weighted average shares 13,646 13,609 13,638 13,598 Basic earnings per share attributable to VPG stockholders $ 0.29 $ 0.13 $ 0.65 $ 0.37 Diluted earnings per share attributable to VPG stockholders $ 0.29 $ 0.13 $ 0.65 $ 0.37 -22- Note 13 – Additional Financial Statement Information Other Income (Expense) Other The caption “Other” on the consolidated condensed statements of operations consists of the following (in thousands) : Fiscal quarter ended Six fiscal months ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 Foreign exchange (loss) gain $ ( 174 ) $ ( 1,185 ) $ 561 $ ( 285 ) Interest income 20 109 65 176 Pension expense ( 143 ) ( 164 ) ( 280 ) ( 323 ) Other ( 29 ) ( 33 ) ( 99 ) ( 158 ) $ ( 326 ) $ ( 1,273 ) $ 247 $ ( 590 ) Foreign currency exchange gains and losses represent the impact of changes in foreign currency exchange rates. For the fiscal quarter ended July 3, 2021, the change in foreign exchange gains and losses during the period, as compared to the prior year period, is largely due to exposure to currency fluctuations with the Canadian dollar, Japanese yen, the Israeli shekel and the British pound. For the six fiscal months ended July 3, 2021, the change in foreign exchange gains and losses during the period as compared to the prior year period is largely due to exposure to currency fluctuations with the Canadian dollar, the Israeli shekel, the Japanese yen, the euro and the British pound Note 14 – Fair Value Measurements ASC Topic 820, Fair Value Measurement, establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Unobservable inputs that reflect the Company’s own assumptions. An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis (in thousands) : Fair value measurements at reporting date using: Total Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs July 3, 2021 Assets Assets held in rabbi trusts $ 5,995 $ 80 $ 5,915 $ — December 31, 2020 Assets Assets held in rabbi trusts $ 5,601 $ 61 $ 5,540 $ — The Company maintains non-qualified trusts, referred to as “rabbi” trusts, to fund payments under deferred compensation and non-qualified pension plans. Rabbi trust assets consist primarily of marketable securities, classified as available-for-sale money market funds at July 3, 2021 and December 31, 2020, and company-owned life insurance assets. The marketable securities held -23- Note 14 - Fair Value Measurements (continued) in the rabbi trusts are valued using quoted market prices on the last business day of the period. The company-owned life insurance assets are valued in consultation with the Company’s insurance brokers using the value of underlying assets of the insurance contracts. The fair value measurement of the marketable securities held in the rabbi trust is considered a Level 1 measurement and the measurement of the company-owned life insurance assets is considered a Level 2 measurement within the fair value hierarchy. The fair value of the long-term debt, excluding capitalized deferred financing costs, at July 3, 2021 and December 31, 2020 approximates its carrying value as the revolving debt is reset on a monthly basis based on current market rates, plus a base rate as specified in the debt agreement. The fair value of long-term debt is considered a Level 2 measurement within the fair value hierarchy. The Company’s financial instruments include cash and cash equivalents, accounts receivable, short-term notes payable, and accounts payable. The carrying amounts for these financial instruments reported in the consolidated condensed balance sheets approximate their fair values. Note 15 – Restructuring Costs Restructuring costs reflect the cost reduction programs implemented by the Company. Restructuring costs are expensed during the period in which the Company determines it will incur those costs and all requirements for accrual are met. Because these costs are recorded based upon estimates, actual expenditures for the restructuring activities may differ from the initially recorded costs. If the initial estimates are too low or too high, the Company could be required to either record additional expense in future periods or to reverse part of the previously recorded charges. The Company recorded $ 0.0 million and $ 0.5 million of restructuring costs during the fiscal quarter ended July 3, 2021 and June 27, 2020, respectively and $ 0.0 million and $ 0.6 million of restructuring costs during the six fiscal months ended July 3, 2021 and June 27, 2020, respectively. Restructuring costs were comprised primarily of employee terminations costs, including severance and statutory retirement allowances, and were incurred in connections with various cost reduction programs. The following table summarizes recent activity related to all restructuring programs. The accrued restructuring liability balance as of July 3, 2021 and December 31, 2020, respectively, is included in Other accrued expenses in the accompanying consolidated condensed balance sheets (in thousands) : Balance at December 31, 2020 $ 63 Cash payments ( 51 ) Balance at July 3, 2021 $ 12 -24-