What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-12 compared with 2021-08-10 · 112 added, 118 removed, 377 unchanged (38% of the section changed)

15 unchanged sentences

Impact of COVID-19 on Our Business

As of August 10, 2021, all of the Company’s facilities are open and operational.

As of November 12, 2021, all of the Company’s facilities are open and operational.

The Company is continuing to maintain COVID-19 best practices it believes are warranted with respect to working conditions.

9 unchanged sentences

DTS reports into the Company's Weighing and Control Systems segment.

Net revenues for the fiscal quarter ended July 3, 2021 were $75.3 million versus $59.1 million for the comparable prior year period.

Net earnings attributable to VPG stockholders for the fiscal quarter ended July 3, 2021 were $3.9 million, or $0.29 per diluted share, versus $1.8 million, or $0.13 per diluted share, for the comparable prior year period.

Net revenues for the six fiscal months ended July 3, 2021 were $145.9 million versus $126.8 million for the comparable prior year period.

Net earnings attributable to VPG stockholders for the six fiscal months ended July 3, 2021 were $8.9 million, or $0.65 per diluted share, versus $5.1 million, or $0.37 per diluted share, for the comparable prior year period.

The results of operations for the fiscal quarter ended July 3, 2021 and June 27, 2020 include items affecting comparability as listed in the reconciliations below.

Net revenues for the fiscal quarter ended October 2, 2021 were $82.0 million versus $67.5 million for the comparable prior year period.

Net earnings attributable to VPG stockholders for the fiscal quarter ended October 2, 2021 were $5.4 million, or $0.39 per diluted share, versus $5.6 million, or $0.41 per diluted share, for the comparable prior year period.

Net revenues for the nine fiscal months ended October 2, 2021 were $227.9 million versus $194.4 million for the comparable prior year period.

Net earnings attributable to VPG stockholders for the nine fiscal months ended October 2, 2021 were $14.3 million, or $1.04 per diluted share, versus $10.7 million, or $0.78 per diluted share, for the comparable prior year period.

The results of operations for the fiscal quarter ended October 2, 2021 and September 26, 2020 include items affecting comparability as listed in the reconciliations below.

The reconciliations below include certain financial measures which are not recognized in accordance with U.S.

generally accepted accounting principles ("GAAP"), including adjusted gross profits, adjusted gross profit margin, adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted net earnings per diluted share, EBITDA and adjusted EBITDA.

These non-GAAP measures should not be viewed as an alternative to GAAP measures of

These non-GAAP measures should not be viewed as an alternative to

GAAP measures of performance.

Non-GAAP measures such as adjusted gross profits, adjusted gross profit margin, adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted net earnings per diluted share, EBITDA and adjusted EBITDA do not have uniform definitions.

6 unchanged sentences

Gross Profit Operating Income Net Earnings Attributable to VPG Stockholders Diluted Earnings Per share

Three months ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Three months ended October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

As reported - GAAP $ 31,845 $ 27,349 $ 7,265 $ 8,121 $ 5,379 $ 5,598 $ 0.39 $ 0.41

1 unchanged sentence

Acquisition purchase accounting adjustments (a) 1,329 4 1,329 4 1,329 4 0.10 —

Acquisition costs (b) — 1,198 — 1,198 — 0.09 —

Acquisition costs — — — — — — —

COVID-19 impact (b) 111 (22) 111 (320) 111 (320) 0.01 (0.02)

7 unchanged sentences

Gross Profit Operating Income Net Earnings Attributable to VPG Stockholders Diluted Earnings Per share

Six fiscal months ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Nine fiscal months ended October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

As reported - GAAP 90,265 75,524 18,628 16,736 $ 14,260 $ 10,669 $ 1.04 $ 0.78

1 unchanged sentence

Acquisition purchase accounting adjustments (a) 2,259 560 2,259 560 2,259 560 0.17 0.04

Acquisition costs (b) — 1,198 — 1,198 — 0.09 —

Acquisition costs — 1,198 — 1,198 — 0.09 —

COVID-19 impact (b) (66) 536 (574) 123 (574) 123 (0.04) 0.01

8 unchanged sentences

As Adjusted - Non GAAP Margins 41.6 % 39.4 % 11.0 % 9.3 %

Three months ended Six fiscal months ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Three months ended Nine fiscal months ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Net earnings attributable to VPG stockholders $ 5,379 $ 5,598 $ 14,260 $ 10,669

37 unchanged sentences

The quarter-to-quarter trends in these financial metrics can also be an important indicator of the likely direction of our business.

The following tables show net revenues, gross profit margin, end-of-period backlog, book-to-bill ratio, and inventory turnover for our business as a whole and by segment during the five quarters beginning with the second quarter of 2020 through the second quarter of 2021 (dollars in thousands) :

2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter

The following tables show net revenues, gross profit margin, end-of-period backlog, book-to-bill ratio, and inventory turnover for our business as a whole and by segment during the five quarters beginning with the third quarter of 2020 through the third quarter of 2021 (dollars in thousands) :

3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter

2020 2020 2021 2021 2021

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Inventory turnover 2.38 2.86 2.67 2.64 2.55

2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter

3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter

2020 2020 2021 2021 2021

17 unchanged sentences

Inventory turnover 2.13 2.67 2.54 2.64 2.32

Net revenues for the second quarter of 2021 increased 6.7% from the first quarter of 2021 mainly due to increased volume in all of the Company's reporting segments.

Net revenues increased 27.4% from the second quarter of 2020 with increased volume primarily from the Force Sensors reporting segment and the Weighing and Control Systems segment.

Net revenues for the third quarter of 2021 increased 8.8% from the second quarter of 2021 mainly due to increased volume in Forces Sensor and Weighing and Control Systems reporting segments.

Net revenues increased 21.4% from the third quarter of 2020 with increased volume primarily from the Force Sensors reporting segment and the Weighing and Control Systems segment.

The increase in the Weighing and Control Systems reporting segment was aided by the addition of revenues from the acquisition of DTS.

Net revenues in the Foil Technology Products reporting segment increased 1.8% compared to the first quarter of 2021 and increased 4.8% from the second quarter of 2020.

Sequentially, the increase in revenue was primarily driven by higher sales of precision foil resistors in the test and measurements market, partially offset by lower revenue to the Avionics, Military and Space market.

In addition, the sequential increase in revenue in our Pacific Instrument product line in the Avionics, Military and Space market was partially offset by lower revenue of advanced sensors in our other markets.

The year-over-year increase in revenue was primarily attributable to an increase in our advanced sensors product line, primarily in our general industrial market and an increase in our Pacific Instrument product line in the Avionics, Military and Space market.

Net revenues in the Force Sensors reporting segment increased 1.7% from the first quarter of 2021 and increased 93.1% from the second quarter of 2020.

The sequential increase was primarily due to higher revenue in our Other markets, mainly in consumer and construction.

The year-over-year increase primarily reflected operational limitations in the second fiscal quarter of 2020 from the COVID pandemic at our facility in India.

Net revenues in the Weighing and Control Systems reporting segment increased 18.5% from the first quarter of 2021 and increased 34.5% from the second quarter of 2020.

The sequential increase in net revenues was primarily due to the acquisition of DTS and higher revenue of process weighing solutions and KELK products.

The year-over-year increase in revenue was primarily attributable to the addition of revenue for DTS, higher revenue of our onboard weighing products for the transportation market, higher revenue of our process weighing solutions for the industrial market, and higher revenue of our Dynamic Systems, Inc.

("DSI") products for the steel market, which was partially offset by lower revenue of KELK steel-related products.

Overall gross profit margin in the second quarter of 2021 decreased 0.9% as compared to the first quarter of 2021 and increased 0.5% from the second quarter of 2020.

Sequentially, all reporting segments contributed to the decrease in the gross profit margin.

The Foil Technology Products reporting segment gross profit margins decreased sequentially due to the impact of charges related to start-up costs in our new advanced sensors facility and the impact of COVID-19, which were partially offset by manufacturing efficiencies, an increase

in inventory and higher volume.

The Force Sensors reporting segment gross profit margin decreased sequentially due to unfavorable foreign exchange rates, partially offset by increases in inventory and volume.

In the Weighing and Control Systems reporting segment, the decrease in gross profit margin compared to the prior sequential quarter was due to the impact of charges related to the purchase accounting adjustment from the DTS acquisition and the impact of COVID-19, which were partially offset by the addition of DTS.

Compared to the second quarter of 2020, the Foil Technology Products reporting segment had a lower gross profit margin.

Impacts from charges related to start-up costs in our new advanced sensors facility and the impact of COVID-19 were partially offset by higher volume and favorable product mix.

The Force Sensors reporting segment increase in gross profit margin as compared to 2020 was primarily due to higher revenue and an increase in inventory.

In the Weighing and Control Systems segment, the decrease in gross profit margin as compared to the second quarter of 2020 was due to the impact of charges related to purchase accounting adjustments from the DTS acquisition and the impact of COVID-19, along with an unfavorable product mix, which were partially offset by the addition of DTS and favorable exchange rates.

Net revenues in the Foil Technology Products reporting segment decreased 1.6% compared to the second quarter of 2021 and decreased 0.4% from the third quarter of 2020.

The sequential decline primarily reflected lower revenue of advanced sensors to our Other markets which was mainly the result of the transition to our new advanced sensors facility.

Compared to a year ago, higher revenue of precision foil resistors in the Test and Measurements market was offset by lower revenue of precision foil resistors and Pacific Instruments systems in the Avionics, Military and Space market and by lower revenue of advanced sensors to our Other markets which was mainly the result of the transition to our new advanced sensors facility.

Net revenues in the Force Sensors reporting segment increased 2.8% from the second quarter of 2021 and increased 27.7% from the third quarter of 2020.

The sequential increase was primarily due to higher revenue in our Industrial Weighing markets, partially offset by lower revenue for precision agriculture.

The year-over-year increase primarily reflected operational limitations in the third fiscal quarter of 2020 from the COVID pandemic at our facility in India.

Net revenues in the Weighing and Control Systems reporting segment increased 26.9% from the second quarter of 2021 and increased 51.7% from the third quarter of 2020.

The sequential increase in net revenues was primarily due to the addition of revenue for DTS, and higher revenue of Dynamic Systems, Inc.

("DSI") and KELK products to the Steel market The year-over-year increase in revenue was primarily attributable to the addition of revenue for DTS, which was acquired on June 1, 2021, higher revenue of our onboard weighing products for the Transportation market, and higher revenue of our DSI products for the Steel market.

Overall gross profit margin in the third quarter of 2021 decreased 0.8% as compared to the second quarter of 2021 and decreased 1.7% from the third quarter of 2020.

Sequentially, the increase in the gross profit margin in the Weighing and Controls Systems reporting segment was completely offset by a decrease in the gross profit margin in the Foil Technology Products reporting segment, while the Force Sensors reporting segment gross profit margin remained flat.

In the Weighing and Control Systems reporting segment, the sequential increase was mainly due to higher revenue, the addition of DTS, and favorable product mix.

The Foil Technology Products

reporting segment gross profit margins decreased sequentially due to lower volume and unfavorable product mix, a reduction in inventory, labor inefficiencies, and unfavorable exchange rates.

Compared to the third quarter of 2020, the Foil Technology Products reporting segment had a lower gross profit margin due to impacts from charges related to start-up costs in our new advanced sensors facility and the impact of COVID-19 in conjunction with unfavorable foreign exchange rates, higher rent and manufacturing overhead related to the new advanced sensors facility, and a reduction in inventory.

The Force Sensors reporting segment increase in gross profit margin as compared to 2020 was primarily due to higher revenue.

In the Weighing and Control Systems reporting segment, the decrease in gross profit margin as compared to the third quarter of 2020 was due to the impact of charges related to purchase accounting adjustments from the DTS acquisition and the impact of COVID-19, which were partially offset by higher revenue coming from DTS .

Optimize Core Competence

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As a sign of our commitment to these businesses, we signed a long-term lease for a state of the art facility which has been constructed in Israel.

Our administrative personnel have moved to the new facility, and we have begun the transition of our advanced sensors business to that facility and we expect to complete the transition to the new facility in the third quarter of 2021.

The transition of our advanced sensors business to that facility was completed in the third quarter of 2021.

Our design, research, and product development teams, in partnership with our marketing teams, drive our efforts to bring innovations to market.

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DTS adds complementary technology to our platform and brings unique engineering capabilities, centered on miniaturized data acquisition and systems integration with sensor technology for critical testing applications.

We expect to expand our expertise, and our acquisition focus, outside our traditional vertical approach to other precision sensor solutions in the fields of

measurement of force, weight, pressure, torque, tilt, motion, and acceleration.

We expect to expand our expertise, and our acquisition focus, outside our traditional vertical approach to other precision sensor solutions in the fields of measurement of force, weight, pressure, torque, tilt, motion, and acceleration.

We believe acquired businesses will benefit from improvements we implement to reduce redundant functions and from our current global manufacturing and distribution footprint.

39 unchanged sentences

For those foreign subsidiaries where the U.S.

dollar is the functional currency, all foreign currency financial statement amounts are remeasured into U.S.

dollar is the functional

currency, all foreign currency financial statement amounts are remeasured into U.S.

Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in the results of operations.

2 unchanged sentences

Effects of Foreign Exchange Rate on Operations

For the fiscal quarter ended July 3, 2021, exchange rates increased net revenues by $2.8 million, and increased costs of products sold and selling, general, and administrative expenses by $3.5 million, when compared to the comparable prior year period.

For the six fiscal months ended July 3, 2021, exchange rates increased net revenues by $4.9 million, and increased costs of products sold and selling, general, and administrative expenses by $5.8 million, when compared to the comparable prior year period.

For the fiscal quarter ended October 2, 2021, exchange rates increased net revenues by $0.9 million, and increased costs of products sold and selling, general, and administrative expenses by $1.8 million, when compared to the comparable prior year period.

For the nine fiscal months ended October 2, 2021, exchange rates increased net revenues by $5.8 million, and increased costs of products sold and selling, general, and administrative expenses by $7.6 million, when compared to the comparable prior year period.

Off-Balance Sheet Arrangements

As of July 3, 2021 and December 31, 2020, we did not have any off-balance sheet arrangements.

As of October 2, 2021 and December 31, 2020, we did not have any off-balance sheet arrangements.

Results of Operations

Statement of operations’ captions as a percentage of net revenues and the effective tax rates were as follows:

Fiscal quarter ended Six fiscal months ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Fiscal quarter ended Nine fiscal months ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Costs of products sold 61.2 % 59.5 % 60.4 % 61.1 %

7 unchanged sentences

Net revenues were as follows (dollars in thousands) :

Fiscal quarter ended Six fiscal months ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Fiscal quarter ended Nine fiscal months ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Net revenues $ 81,974 $ 67,525 $ 227,902 $ 194,367

10 unchanged sentences

Net change 21.4 % 17.3 %

During the fiscal quarter ended July 3, 2021, net revenues increased 27.4% as compared to the comparable prior year period, with increased volume primarily from the Force Sensors reporting segment and the Weighing and Control Systems segment.

During the fiscal quarter and nine fiscal months ended October 2, 2021, net revenues increased 21.4% and 17.3%, respectively, as compared to the comparable prior year periods, with increased volume primarily from the Force Sensors reporting segment and the Weighing and Control Systems segment.

The increase in the Weighing and Control Systems reporting segment was aided by the addition of revenues from the acquisition of DTS.

During six fiscal months ended July 3, 2021, net revenues increased 15.0%, as compared to the comparable prior year period, mainly due to increased volume in the Foil Technology and Force Sensors reporting segment, and the addition of revenues from the acquisition of DTS on June 1, 2021.

Gross Profit Margin

Gross profit as a percentage of net revenues was as follows:

Fiscal quarter ended Six fiscal months ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Fiscal quarter ended Nine fiscal months ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Gross profit margin 38.8 % 40.5 % 39.6 % 38.9 %

The gross profit margin for the fiscal quarter ended July 3, 2021 increased 0.5% as compared to the comparable prior year period with higher gross profit margins in the Force Sensors reporting segment being offset by lower margin in the Foil Technology and Weighing and Controls Systems reporting segments.

The gross profit margin for the six fiscal months ended July 3, 2021 increased 2% as compared to the comparable prior year period, mainly from higher gross profit margins in the Force Sensors reporting segment.

The gross profit margin for the fiscal quarter ended October 2, 2021 decreased 1.7% as compared to the comparable prior year period with higher gross profit margins in the Force Sensors and Weighing and Control Systems reporting segments being offset by lower margin in the Foil Technology Products reporting segment.

The gross profit margin for the nine fiscal months ended October 2, 2021 increased 0.7% as compared to the comparable prior year period, mainly from higher gross profit margins in the Force Sensors reporting segment, partially offset by lower gross profit margins in the Foil Technology and Weighing and Controls Systems reporting segments.

Analysis of revenues and gross profit margins for each of our reportable segments is provided below.

1 unchanged sentence

Net revenues of the Foil Technology Products segment were as follows (dollars in thousands) :

Fiscal quarter ended Six fiscal months ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Fiscal quarter ended Nine fiscal months ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Net revenues $ 32,790 $ 32,906 $ 98,809 $ 95,168

2 unchanged sentences

Percentage change versus prior year period

(0.4) % 3.8 %

Changes in Foil Technology Products segment net revenues were attributable to the following:

4 unchanged sentences

Net change (0.4) % 3.8 %

Net revenues increased 4.8% for the fiscal quarter ended July 3, 2021, as compared to the comparable prior year period.

Net revenues increased 6.0% for the six fiscal months ended July 3, 2021, as compared to the comparable prior year period.

Increases in net revenues are primarily attributable to our advanced sensors product line in other markets, test and measurement markets, and general industrial markets.

Net revenues decreased 0.4% for the fiscal quarter ended October 2, 2021, as compared to the comparable prior year period.

Net revenues increased 3.8% for the nine fiscal months ended October 2, 2021, as compared to the comparable prior year period.

Increases in net revenues are primarily attributable to our advanced sensors product line in other markets, test and measurement markets, and general industrial markets, in addition to favorable exchange rate impacts.

Gross profit as a percentage of net revenues for the Foil Technology Products segment was as follows:

Fiscal quarter ended Six fiscal months ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Fiscal quarter ended Nine fiscal months ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Gross profit margin 32.1 % 41.1 % 37.0 % 39.9 %

The gross profit margin decreased 2.9% for the fiscal quarter ended July 3, 2021, when compared to the comparable prior year period.

Impacts from charges related to start-up costs in our new advanced sensors facility and the impact of COVID-19 were partially offset by higher volume and favorable product mix.

The gross profit margin increased 0.1% for the six fiscal months ended July 3, 2021 as compared to the comparable prior year period.

Impacts from charges related to start-up costs in our new advanced sensors facility and the impact COVIID-19 completely offset the higher volume and favorable product mix.

The gross profit margin decreased 9.0% for the fiscal quarter ended October 2, 2021, when compared to the comparable prior year period due to impacts from charges related to start-up costs in our new advanced sensors facility and the impact of COVID-19 in conjunction with unfavorable foreign exchange rates, higher rent and manufacturing overhead related to the new advanced sensors facility, and a reduction in inventory.

The gross profit margin decreased 2.9% for the nine fiscal months ended October 2, 2021 as compared to the comparable prior year period.

Impacts from charges related to start-up costs in our new advanced sensors facility and the impact COVID-19 completely offset the higher volume in our foil resisters products.

Force Sensors

Net revenues of the Force Sensors segment were as follows (dollars in thousands) :

Fiscal quarter ended Six fiscal months ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Fiscal quarter ended Nine fiscal months ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

$ 17,704 $ 13,862 $ 51,853 $ 37,473

9 unchanged sentences

Net change 27.7 % 38.4 %

Net revenues increased 93.1% for the fiscal quarter ended July 3, 2021, and 44.6% for the six fiscal months ended July 3, 2021 as compared to the comparable prior year periods.

The year-over-year increase primarily reflected operational limitations in the second fiscal quarter of 2020 from the COVID pandemic at our facility in India.

Net revenues increased 27.7% for the fiscal quarter ended October 2, 2021, and 38.4% for the nine fiscal months ended October 2, 2021 as compared to the comparable prior year periods.

The increases primarily reflected operational limitations in 2020 from the COVID pandemic at our facility in India.

Gross profit as a percentage of net revenues for the Force Sensors segment was as follows:

Fiscal quarter ended Six fiscal months ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Fiscal quarter ended Nine fiscal months ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Gross profit margin 34.5 % 30.5 % 34.9 % 23.6 %

The gross profit margin for the fiscal quarter ended July 3, 2021 increased 23.1% as compared to the comparable prior year period primarily due to higher revenue and an increase in inventory.

The gross profit margin for the six fiscal months ended July 3, 2021 increased 15.7% as compared to the prior year period primarily due to higher revenue and an increase in inventory.

The gross profit margin for the fiscal quarter ended October 2, 2021 increased 4.0% as compared to the comparable prior year period primarily due to higher revenue.

The gross profit margin for the nine fiscal months ended October 2, 2021 increased 11.3% as compared to the prior year period primarily due to higher revenue, favorable exchange rate impacts and an increase in inventory.

Weighing and Control Systems

Net revenues of the Weighing and Control Systems segment were as follows (dollars in thousands) :

Fiscal quarter ended Six fiscal months ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Fiscal quarter ended Nine fiscal months ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Net revenues $ 31,480 $ 20,757 $ 77,240 $ 61,726

10 unchanged sentences

Net change 51.7 % 25.1 %

Net revenues increased 34.5% for the fiscal quarter ended July 3, 2021 as compared to the comparable prior year period.

("DSI") products for the steel market, which was partially offset by lower revenue of KELK steel-related products.

Net revenues increased 11.7% for the six fiscal months ended July 3, 2021 as compared to the comparable prior year period primarily due to the addition of revenue for DTS and favorable foreign currency effects.

Net revenues increased 51.7% for the fiscal quarter ended October 2, 2021 as compared to the comparable prior year period.

The year-over-year increase in revenue was primarily attributable to the addition of revenue for DTS, which was acquired on June 1, 2021, higher revenue of our onboard weighing products for the Transportation market, and higher revenue of our DSI products for the Steel market.

Net revenues increased 25.1% for the nine fiscal months ended October 2, 2021 as compared to the comparable prior year period primarily due to the addition of revenue for DTS, higher revenue of our onboard weighing products for the transportation market and favorable exchange rate impacts.

Gross profit as a percentage of net revenues for the Weighing and Control Systems segment were as follows:

Fiscal quarter ended Six fiscal months ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Fiscal quarter ended Nine fiscal months ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Gross profit margin 48.3 % 46.2 % 46.1 % 46.5 %

The gross profit margin for the fiscal quarter ended July 3, 2021 of 43.9% decreased from the second quarter of 2020 due to the impacts of charges related to purchase accounting adjustments from the DTS acquisitions and the impact of COVID-19, along with an unfavorable product mix, which were partially offset by the addition of DTS and favorable exchange rates.

The gross profit margin for the six fiscal months ended July 3, 2021 of 44.6%, decreased from the prior year period due to the impacts of charges related to purchase accounting adjustments from the DTS acquisitions, lower volume and unfavorable product mix, which were partially offset by the addition of DTS and favorable exchange rate impacts.

The gross profit margin for the fiscal quarter ended October 2, 2021 of 48.3% increased from the third quarter of 2020 due to higher revenue coming from DTS.

The gross profit margin for the nine fiscal months ended October 2, 2021 of 46.1%, decreased from the prior year period due to the impacts of charges related to purchase accounting adjustments from the DTS acquisition and an unfavorable product mix, partially offset by the higher revenues coming from DTS and favorable exchange rate impacts.

Selling, General, and Administrative Expenses

Selling, general, and administrative (“SG&A”) expenses are summarized as follows (dollars in thousands) :

Fiscal quarter ended Six fiscal months ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Fiscal quarter ended Nine fiscal months ended

October 2, 2021 September 26, 2020 October 2, 2021 September 26, 2020

Total SG&A expenses $ 24,580 $ 19,144 $ 69,216 $ 58,075

As a percentage of net revenues 30.0 % 28.4 % 30.4 % 29.9 %

SG&A expenses for the fiscal quarter and six fiscal months ended July 3, 2021 increased compared to the comparable prior year periods with additional SG&A expenses related to personnel costs and foreign currency impacts and SG&A expenses from the acquisition of DTS.

SG&A expenses for the fiscal quarter and nine fiscal months ended October 2, 2021 increased compared to the comparable prior year periods with additional SG&A expenses related to personnel costs and unfavorable foreign currency impacts and SG&A expenses from the acquisition of DTS.

Impairment of Goodwill and Indefinite-lived Intangible Assets

For the fiscal quarter and six fiscal months ended July 3, 2021, as a result of our interim impairment test, we recorded a $1.2 million pre-tax, non-cash impairment charge which reduced the carrying value of our goodwill and indefinite-lived intangible assets.

In the second fiscal quarter of 2021, as a result of our interim impairment test, we recorded a $1.2 million pre-tax, non-cash impairment charge which reduced the carrying value of our goodwill and indefinite-lived intangible assets.

See Note 4 for further discussion.

1 unchanged sentence

Acquisition costs associated with the acquisition of DTS were as follows (in thousands):

Fiscal quarter ended Six fiscal months ended

July 3, 2021 July 3, 2021

Fiscal quarter ended Nine fiscal months ended

October 2, 2021 October 2, 2021

Legal fees $ — $ 341

1 unchanged sentence

Other (investment banker and insurance costs) — 839

$ 1,198 $ 1,198

Restructuring Costs

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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 Company recorded $0.0 million and $0.1 million of restructuring costs during the fiscal quarter ended October 2, 2021 and September 26, 2020, respectively, and $0.0 million and $0.7 million of restructuring costs during the nine fiscal months ended October 2, 2021 and September 26, 2020, respectively.

Restructuring costs recorded in the prior year were comprised primarily of employee terminations costs, including severance and statutory retirement allowances, and were incurred in connections with various cost reduction programs.

Other Income (Expense)

Interest expense for the fiscal quarter ended July 3, 2021 was flat when compared with interest expense in the comparable prior year period.

The impact of increased borrowings on the Company's revolving credit facility in conjunction with the acquisition of DTS were offset by more favorable borrowing rates in 2021.

Interest expense for the six fiscal months ended July 3, 2021 was lower when compared with the comparable prior year period mainly due to more favorable borrowing rates in 2021.

Interest expense for the fiscal quarter ended October 2, 2021 was higher when compared with interest expense in the comparable prior year period reflecting the impact of increased borrowings on the Company's revolving credit facility in conjunction with the acquisition of DTS.

Interest expense for the nine fiscal months ended October 2, 2021 was lower when compared with the comparable prior year period mainly due to more favorable borrowing rates in 2021.

The following table analyzes the components of the line “Other” on the consolidated condensed statements of operations (in thousands) :

Fiscal quarter ended

July 3, 2021 June 27, 2020 Change

October 2, 2021 September 26, 2020 Change

Foreign exchange loss $ (38) $ 162 $ (200)

3 unchanged sentences

$ 174 $ (39) $ 213

Six fiscal months ended

July 3, 2021 June 27, 2020 Change

Nine fiscal months ended

October 2, 2021 September 26, 2020 Change

Foreign exchange gain (loss) $ 522 $ (123) $ 645

4 unchanged sentences

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

For the fiscal quarter ended October 2, 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 euro, the Israeli shekel and the British pound.

For the nine fiscal months ended October 2, 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 euro, the Israeli shekel, and the Japanese yen.

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 effective tax rate for the fiscal quarter ended October 2, 2021 was 23.4% compared to 27.1% for the fiscal quarter ended September 26, 2020 and the effective tax rate for the nine fiscal months ended October 2, 2021 was 20.3% compared to 29.0% for the nine fiscal months ended September 26, 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.

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The financial maintenance covenants include interest coverage ratio and a leverage ratio.

We were in compliance with these covenants at July 3, 2021.

We were in compliance with these covenants at October 2, 2021.

If the Company is not in compliance with any of these covenant restrictions, the credit facility could be terminated by the lenders, and all amounts outstanding pursuant to the credit facility could become immediately payable.

Our business has historically generated significant cash flow.

For the six fiscal months ended July 3, 2021, cash provided by operating activities was $12.4 million compared to $16.7 million in the comparable prior year period.

Our net cash used in investing activities for the six fiscal months ended July 3, 2021 was higher compared to the prior year period mainly due to the acquisition of DTS.

Our net cash provided by financing activities for the six fiscal months ended July 3, 2021 was higher compared to prior year mainly due to the borrowings on the 2020 credit facility for the acquisition of DTS.

Adjusted free cash flow generated during the six fiscal months ended July 3, 2021, was $4.1 million.

For the nine fiscal months ended October 2, 2021, cash provided by operating activities was $18.1 million compared to $22.8 million in the comparable prior year period.

Our net cash used in investing activities for the nine fiscal months ended October 2, 2021 was higher compared to the prior year period mainly due to the acquisition of DTS.

Our net cash provided by financing activities for the nine fiscal months ended October 2, 2021 was higher compared to prior year mainly due to the borrowings on the 2020 credit facility for the acquisition of DTS.

Adjusted free cash flow generated during the nine fiscal months ended October 2, 2021, was $7.1 million.

We refer to the amount of cash provided by operating activities ($18.1 million) in excess of our capital expenditures ($11.2 million) and net of proceeds from the sale of assets ($0.2 million) as “adjusted free cash flow.”

The following table summarizes the components of net cash at July 3, 2021 and December 31, 2020 (in thousands) :

July 3, 2021 December 31, 2020

The following table summarizes the components of net cash at October 2, 2021 and December 31, 2020 (in thousands) :

October 2, 2021 December 31, 2020

Cash and cash equivalents $ 75,544 $ 98,438

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These measures, as calculated by us, may not be comparable to similarly titled measures used by other companies.

Approximately 87% and 90% of our cash and cash equivalents balance at July 3, 2021 and December 31, 2020, respectively, was held by our non-U.S.

Approximately 90% of our cash and cash equivalents balance at October 2, 2021 and December 31, 2020 was held by our non-U.S.

subsidiaries.

See the following table for the percentage of cash and cash equivalents, by region, at July 3, 2021 and December 31, 2020:

July 3, 2021 December 31, 2020

See the following table for the percentage of cash and cash equivalents, by region, at October 2, 2021 and December 31, 2020:

October 2, 2021 December 31, 2020

Israel 24 % 26 %

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These alternatives could result in higher tax expense, increased interest expense, or dilution of our earnings.

We consider the majority of the undistributed earnings of our foreign subsidiaries, as of July 3, 2021, to be indefinitely reinvested.

Our financial condition as of July 3, 2021 remains strong, with a current ratio (current assets to current liabilities) of 4.2 to 1.0, as compared to a ratio of 4.7 to 1.0 at December 31, 2020.

Cash paid for property and equipment for the six fiscal months ended July 3, 2021 was $8.3 million compared to $11.0 million in the comparable prior year period.

We consider the majority of the undistributed earnings of our foreign subsidiaries, as of October 2, 2021, to be indefinitely reinvested.

Our financial condition as of October 2, 2021 remains strong, with a current ratio (current assets to current liabilities) of 4.1 to 1.0, as compared to a ratio of 4.7 to 1.0 at December 31, 2020.

Cash paid for property and equipment for the nine fiscal months ended October 2, 2021 was $11.2 million compared to $15.8 million in the comparable prior year period.

Safe Harbor Statement

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general business and economic conditions;

global labor and supply chain challenges;

difficulties or delays in identifying, negotiating and completing acquisitions and integrating acquired companies;

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the Company’s ability to execute its business continuity, operational and budget plans in light of the COVID-19 pandemic;

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, 2020.

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, 2020 and in our Quarterly Report on Form 10-Q for the fiscal quarter ended October 2, 2021.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis