What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-04 compared with 2021-03-11 · 237 added, 257 removed, 1343 unchanged (27% of the section changed)

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Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2021.

Our evaluation of internal control over financial reporting did not include the internal controls of the business acquired upon the purchase of Diversified Technical Systems, Inc., which is included in our 2021 consolidated financial statements beginning June 1, 2021 and constituted 4.4% of our total assets at December 31, 2021 and 6.0% of our net revenues for the year ended December 31, 2021.

We are currently in the process of integrating Diversified Technical Systems, Inc.

into our internal control over financial reporting process.

Brightman Almagor Zohar & Co., a firm in the Deloitte global network, has issued an attestation report on the effectiveness of our internal control over financial reporting, as stated in their report which is set forth on the next page.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Vishay Precision Group, Inc.

To the Stockholders and the Board of Directors of Vishay Precision Group, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Vishay Precision Group, Inc.

(the “Company”) as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2020 consolidated financial statements of the Company and our report dated March 11, 2021 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated March 4, 2022, expressed an unqualified opinion on those financial statements.

As described in Management’s Report on Internal Control over Financial Reporting , management excluded from its assessment the internal control over financial reporting at Diversified Technical Systems, Inc., which was acquired on June 1, 2021, and whose financial statements constitute 4.4% of total assets at December 31, 2021 and 6.0% of net revenues for the year ended December 31, 2021.

Accordingly, our audit did not include the internal control over financial reporting at Diversified Technical Systems, Inc.

Basis for Opinion

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OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

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iii) Exhibits

2.1 Stock Purchase Agreement, dated November 1, 2019, by and among Vishay Precision Group, Inc., DSI Holdings DE Inc., the sellers identified therein, and HCI Equity Partners III, L.P., not individually but solely in its capacity as the representative of the Sellers (previously filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 4, 2019 and incorporated herein by reference).

3.1 Amended and Restated Certificate of Incorporation of Vishay Precision Group, Inc., effective June 25, 2010 (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 1, 2010 and incorporated herein by reference).

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(previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by reference).

10.15† Amended and Restated 2010 Vishay Stock Incentive Program, adopted as of June 2, 2011 (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on June 6, 2011 and incorporated herein by reference).

10.15 Stock Purchase Agreement, dated November 1, 2019, by and among Vishay Precision Group, Inc., DSI Holdings DE Inc., the sellers identified therein, and HCI Equity Partners III, L.P., not individually but solely in its capacity as the representative of the Sellers (previously filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 4, 2019 and incorporated herein by reference).

10.16 Lease Agreement between Vishay Advanced Technologies Ltd and Mega Or Holdings Ltd, dated February 17, 2019 (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 19, 2019 and incorporated herein by reference).

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10.39† Amendment to Employment Agreement,dated March 10, 2019, by and among Vishay Advanced Technologies Ltd.

and Ziv Shoshani (previously file d as Exhibit 10.45 to the Registrant ' s Annual Report on Form 10-K filed with the SEC on March 14, 2019 and inco rporated her e in by reference) .

and Ziv Shoshani (previously filed as Exhibit 10.45 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 14, 2019 and incorporated herein by reference).

10.40† Amendment to Employment Agreement, dated March 11, 2019, by and among Vishay Precision Group, Inc.

and William Clancy (previously filed as Exhibit 10.46 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 14, 2019 and incorporated herein by reference).

16.1 Letter of Ernst & Young LLP, dated May 31, 2019 (previously filed as Exhibit 16.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 31, 2019 and incorporated herein by reference).

10.41† Amendment to Employment Agreement, dated March 4, 2021, by and between the Company and Ziv Shoshani (previously filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2021 and incorporated herein by reference).

10.42† Amendment to Employment Agreement, dated March 4, 2021, by and between the Company and William M.

Clancy (previously filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2021 and incorporated herein by reference).

10.43† Amendment to Employment Agreement, dated March 4, 2021, by and between the Company and Amir Tal (previously filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 11, 2021 and incorporated herein by reference).

10.44 Stock Purchase Agreement, dated June 1, 2021, by and among Vishay Precision Group, Inc., Diversified Technical Systems, Inc., the sellers identified therein, the guarantors identified therein, and Timothy J.

Kippen, not individually but solely in its capacity as the representative of the Sellers and Guarantors (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 1, 2021 and incorporated herein by reference).

21.1 List of Subsidiaries.

23.1 Consent of Brightman Almagor Zohar & Co, a Firm in the Deloitte Global Network, relating to the Registrant’s financial statements.

23.2 Consent of Ernst & Young LLP relating to the Registrant’s financial statements.

31.1 Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Ziv Shoshani, Chief Executive Officer.

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/s/ Ziv Shoshani

March 11, 2021 President and Chief Executive Officer

March 4, 2022

President and Chief Executive Officer

P OWER OF A TTORNEY

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Wesley Cummins

/s/ Sejal Shah Gulati

Director March 4, 2022

Sejal Shah Gulati

Vishay Precision Group, Inc.

Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Vishay Precision Group, Inc.

To the Stockholders and the Board of Directors of Vishay Precision Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Vishay Precision Group, Inc.

(the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

(the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 4, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates

Goodwill and Indefinite-lived Intangible Assets – Instrumentation and DSI Reporting Units — Refer to Note 4 to the Financial Statements

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill and Indefinite-lived Intangible Assets –DSI Reporting Unit — Refer to Notes 1 and 4 to the Financial Statements

Critical Audit Matter Description

The Company's quantitative goodwill and indefinite-lived intangible assets impairment test involves the comparison of the fair value of each reporting unit or asset to its carrying value.

In estimating the fair value of the Instrumentation and DSI reporting units, the Company used the income approach to evaluate the estimated fair value of the reporting units.

The income approach to valuation requires management to make significant estimates and assumptions related to future revenues, profitability, working capital requirements and selection of discount and long term growth rates.

Changes in these estimates and assumptions could have a significant impact on the fair value of the reporting units.

In estimating the fair value of the indefinite-lived trade names, the Company compares the carrying value to the fair value based on current revenue projections of the related operations, under the relief from royalty method.

In estimating the fair value of the DSI reporting unit, the Company used the income approach to evaluate the estimated fair value of the reporting unit.

Changes in these estimates and assumptions could have a significant impact on the fair value of the reporting unit.

In estimating the fair value of the indefinite-lived trade name, the Company compares the carrying value to the fair value based on current revenue projections of the related operation, under the relief from royalty method.

Any excess carrying value over the applicable fair value is recognized as impairment.

During 2020, the Company recognized an impairment loss of $2.4 million for the Instrumentation reporting unit’s goodwill and indefinite-lived trade name.

After considering the impact of the impairment charges, the carrying amount of goodwill and indefinite-lived trade name as of December 31, 2020, is $1.1 million and $0.4 million, respectively.

The carrying amount of goodwill and indefinite-lived trade name as of December 31, 2021, for the DSI reporting unit is $16.9 million and $3.3 million, respectively.

The fair value of the DSI reporting unit and indefinite-lived trade name exceeds the carrying value by approximately 12% and 15%, respectively.

We identified goodwill and indefinite-lived trade names for the Instrumentation and DSI reporting units as a critical audit matter because of the significant judgments made by management to estimate fair value and the sensitivity to changes in management estimates and assumptions.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasts of future revenues, profitability, working capital requirements and selection of the discount and long term growth rates.

We identified goodwill and indefinite-lived trade name for the DSI reporting unit as a critical audit matter because of the significant judgments made by management to estimate fair value and the sensitivity to changes in management estimates and assumptions.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to forecasts of future revenues, profitability, working capital requirements and selection of discount and long term growth rates used by management to estimate the fair value of the Instrumentation and DSI reporting units and indefinite-lived trade names included the following, among others:

• We tested the effectiveness of controls over management’s impairment evaluation, including those over the determination of the fair value of the Instrumentation and DSI reporting units and indefinite-lived trade names, such as controls related to management’s forecasts of future revenues, profitability, working capital requirements and selection of discount and long term growth rates.

Our audit procedures related to forecasts of future revenues, profitability, working capital requirements and selection of the discount rate and long term growth rate used by management to estimate the fair value of the DSI reporting unit and indefinite-lived trade name included the following, among others:

• We tested the effectiveness of controls over management’s impairment evaluation, including those over the determination of the fair value of the DSI reporting unit and indefinite-lived trade name, such as controls related to management’s forecasts of future revenues, profitability, working capital requirements and selection of the discount rate and long term growth rate.

• We evaluated management’s ability to accurately forecast operating performance by comparing actual results to management’s historical forecasts.

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– Internal communications to management and the Board of Directors.

• With the assistance of our fair value specialists, we evaluated the valuation methodologies and the reasonableness of the discount and long term growth rates, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount and long term growth rates selected by management.

• With the assistance of our fair value specialists, we evaluated the valuation methodologies and the reasonableness of the discount rate and long term growth rate, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rate and long term growth rate selected by management.

Acquisition of Diversified Technical Systems, Inc.

( " DTS " ) — Intangible Assets Acquired — Refer to Notes 1 and 3 to the Financial Statements

Critical Audit Matter Description

The Company completed the acquisition of DTS, for $47.2 million on June 1, 2021.

The Company allocated the purchase price between tangible and intangible assets acquired and liabilities assumed based on estimated fair values, with any residual of the purchase price recorded as goodwill.

The provisional fair values assigned to the technology, customer relationships and trade name of DTS were $13.2 million, $8.1 million and $2.4 million, respectively.

Management estimated the fair value of these intangible assets using the income approach, which is based on the present value of the future cash flows attributable to each identifiable intangible asset.

The income approach to valuation required management to make significant estimates and assumptions related to future cash flows and discount rates.

We identified the fair value of the intangible assets acquired as a critical audit matter because of the significant judgments, estimates and assumptions made by management to estimate their fair value.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to forecasts of future cash flows and selection of discount rates used by management to estimate the fair value of the acquired intangible assets included the following, among others:

• We tested the effectiveness of controls over management’s purchase price allocation, including those over the determination of the fair value of the intangible assets, such as controls related to management’s forecasts of future cash flows and selection of discount rate.

• We evaluated the reasonableness of management’s forecasts of future cash flows by comparing the forecasts to historical results and internal communications by management to the Board of Directors.

• With the assistance of our fair value specialists, we evaluated the valuation methodologies and the reasonableness of the discount rates, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management.

/s/ Brightman Almagor Zohar & Co.

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We have served as the Company’s auditor since 2019.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Vishay Precision Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive income, equity and cash flows of Vishay Precision Group, Inc.

(the Company) for the year ended December 31, 2018, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations of the Company and its cash flows for the year ended December 31, 2018, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We served as the Company’s auditor from 2009 to 2019.

Philadelphia, Pennsylvania

March 14, 2019

VISHAY PRECISION GROUP, INC.

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Total current assets 234,943 221,886

Property and equipment, at cost:

Property and equipment:

Land 4,241 4,282

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Net earnings 20,443 10,800 22,295

net earnings (loss) attributable to noncontrolling interests

net earnings attributable to noncontrolling interests 222 13 107

Net earnings attributable to VPG stockholders

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Comprehensive income 18,106 15,832 22,057

comprehensive income (loss) attributable to noncontrolling interests 13 107 ( 1 )

comprehensive income attributable to noncontrolling interests 222 13 107

Comprehensive income attributable to VPG stockholders $ 17,884 $ 15,819 $ 21,950

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Proceeds from revolving facility 20,000 — 22,000

Payments on revolving facility — — ( 19,000 )

Purchase of non-controlling interest — ( 253 ) —

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Effect of exchange rate changes on cash and cash equivalents ( 2,410 ) 3,056 405

Increase (decrease) in cash and cash equivalents 11,528 ( 3,249 ) 15,867

(Decrease) increase in cash and cash equivalents ( 14,103 ) 11,528 ( 3,249 )

Cash and cash equivalents at beginning of year 98,438 86,910 90,159

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Capital expenditures accrued but not yet paid $ 3,068 $ 2,561 $ 1,183

Supplemental disclosure of financing transactions:

Conversion of exchangeable notes to common stock $ — $ — $ ( 2,794 )

See accompanying notes.

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Other comprehensive loss — — — — — ( 238 ) ( 238 ) — ( 238 )

— — — — — ( 2,015 ) ( 2,015 ) — ( 2,015 )

Share-based compensation expense

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5 — — ( 877 ) — — ( 872 ) — ( 872 )

Common stock issuance from conversion of exchangeable notes ( 123,808 shares)

Conversion from Class B to common stock ( 2,271 shares)

— — — — — — — — —

Cumulative effect adjustment for adoption of ASU 2016-16 — — — — ( 153 ) — ( 153 ) — ( 153 )

Cumulative effect adjustment for adoption of ASC 842 — — — — 531 — 531 — 531

Impact due to DSI acquisition — — — — — — — 299 299

Distributions to noncontrolling interests

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5 — — ( 796 ) — — ( 791 ) — ( 791 )

Cumulative effect adjustment for adoption of ASC 842 — — — — 531 — 531 — 531

Conversion from Class B to common stock ( 2,271 shares)

— — — — — — — — —

Impact due to DSI acquisition — — — — — — — 299 299

Purchase of noncontrolling interest — — — 48 — — 48 ( 301 ) ( 253 )

Distributions to noncontrolling interests

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— — — — 20,221 — 20,221 222 20,443

Other comprehensive income

— — — — — 5,032 5,032 — 5,032

Other comprehensive loss — — — — — ( 2,337 ) ( 2,337 ) — ( 2,337 )

Share-based compensation expense

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5 ( 857 ) — — ( 852 ) — ( 852 )

Purchase of noncontrolling interest — — — 48 — — 48 ( 301 ) ( 253 )

Distributions to noncontrolling interests — — — — — — — ( 313 ) ( 313 )

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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.

(“VPG” or the “Company”) is a global, diversified company focused on precision measurement sensing technologies, including specialized sensors, weighing solutions, and measurement systems.

Many of our precision measurement sensing products and solutions are “designed-in” by our customers, and address growing applications across a diverse array of industries and markets.

Our products are marketed under a variety of brand names that we believe are characterized as having a very high level of precision and quality, and we employ an operationally diversified structure to manage our businesses.

Principles of Consolidation

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All transactions, accounts, and profits between individual members comprising the Company have been eliminated in consolidation.

Change in Segment Reporting

In the fourth quarter of 2021, the Company formally adopted an operationally diversified structure and strategy, by which each of VPG's operating segments maintains and deploys specific go-to-market strategies, technical expertise, capital requirements, and acquisition opportunities.

This change in structure and strategy impacted the Company's reportable segments beginning in the fourth quarter of 2021, but did not impact the Company's consolidated financial statements.

As a result, we recast our businesses into new reporting segments and the results of operations by reporting segments for prior periods presented in the financial statements have been recast to reflect the new reporting segments.

Refer to Note 13 for further information about the Company's reporting segments.

Use of Estimates

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Warranty related costs continue to be recognized as expense when the products are sold.

Sales, value add and other taxes collected concurrent with revenue-producing activities are excluded from revenue.

Note 1 – Background and Summary of Significant Accounting Policies (continued)

Sales, value added taxes and other taxes collected concurrent with revenue-producing activities are excluded from revenue.

See Note 2 for further details on Revenues.

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The amount charged to expense for research and development was $ 17.2 million, $ 12.6 million, and $ 12.1 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Note 1 – Background and Summary of Significant Accounting Policies (continued)

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

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Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets.

On December 22, 2017, the SEC staff issued SAB 118 to address the application of U.S.

GAAP in situations when a registrant does not have all the necessary information available to prepare and analyze the accounting treatment for the proper recognition of the tax impact of the 2017 Tax Act.

In accordance with SAB 118 guidance, the Company had recorded the provisional tax impacts related to the deemed distribution of foreign earnings and the expense for the revaluation of deferred tax assets and liabilities in its consolidated financial statements for the year ended December 31, 2017.

In accordance with SAB 118, the financial reporting impact of the 2017 Tax Act was completed in the fourth quarter of 2018 resulting in a net increase in tax expense of $ 0.8 million.

Cash and Cash Equivalents

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Property and Equipment

Property and equipment is carried at cost and is depreciated principally by the straight-line method based upon the estimated useful lives of the assets.

Property and equipment are carried at cost and is depreciated principally by the straight-line method based upon the estimated useful lives of the assets.

Machinery and equipment are being depreciated over useful lives of seven to fifteen years .

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The Company allocates the purchase price of an acquired company, including when applicable, the fair value of contingent consideration between tangible and intangible assets acquired and liabilities assumed from the acquired businesses based on estimated fair values, with any residual of the purchase price recorded as goodwill.

Third party appraisal firms and other consultants are engaged to assist management in determining the fair values of certain assets acquired and liabilities assumed.

Estimating fair values requires significant judgments, estimates and assumptions including but not limited to:

discount rates, future cash flows and the economic lives of trade names, technology, customer relationships, property, plant and equipment, as well as income taxes.

discount rates, future cash flows and the economic lives of trade names, technology, and customer relationships.

These estimates are based on historical experience and information obtained from the management of the acquired companies, and are inherently uncertain.

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The Company's required goodwill and indefinite-lived asset annual impairment test is completed as of the first day of the fourth fiscal quarter each year.

As more fully described in Note 4 to the consolidated financial statements, the 2020 annual impairment test resulted in an impairment charge in the fourth quarter of 2020.

The 2019 annual impairment test resulted in no impairment.

As described in Note 4 to the consolidated financial statements, the 2021 interim impairment test resulted in an impairment charge in the second quarter of 2021.

The 2020 annual impairment test resulted in an impairment charge in the fourth quarter of 2020.

In 2019 the annual impairment test resulted in no impairment.

Definite-lived intangible assets, such as customer relationships, patents and acquired technology, non-competition agreements, and certain trade names are amortized on a straight-line method over their estimated useful lives.

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dollar as their functional currency.

Note 1 – Background and Summary of Significant Accounting Policies (continued)

For those subsidiaries where the local currency is the functional currency, assets and liabilities in the consolidated balance sheets have been translated at the rate of exchange as of the balance sheet date.

Revenues and expenses are translated at the average exchange rate for the year.

Revenues and expenses are translated at the

Note 1 – Background and Summary of Significant Accounting Policies (continued)

average exchange rate for the year.

Translation adjustments do not impact the consolidated statements of operations and are reported as a separate component of accumulated other comprehensive loss within the statement of comprehensive income.

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For performance based awards, the Company recognizes compensation cost for awards that are expected to vest based on whether performance criteria are expected to be met.

For options and restricted stock units subject to graded vesting, the Company recognizes expense over the service period for each separately vesting portion of the award as if the award was comprised of multiple awards.

The Company determines if an arrangement is or contains a lease at inception or modification of such agreement.

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Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.

ASU 2016-13, and subsequent related amendments to ASU 2016-13, replace the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates.

The Company adopted this ASU, effective January 1, 2020, using the modified retrospective approach, and the effect on the Company's consolidated condensed financial statements and related disclosures was not material.

In August 2018, the FASB issued ASU No.

2018-13, "Fair Value Measurements (Topic 820)." This ASU modifies the disclosures on fair value measurements by removing the requirements to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers.

The ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income.

The Company adopted this ASU effective January 1, 2020, and the effect on the Company's disclosures in its consolidated financial statements was not material.

Note 1 – Background and Summary of Significant Accounting Policies (continued)

In August 2018, the FASB issued ASU No.

2018-14, "Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans." This ASU amends Accounting Standards Codification ("ASC") 715 to add, remove and clarify disclosure requirements related to defined benefit and pension and other postretirement plans.

The Company adopted this ASU effective January 1, 2020, and determined that the effect on the Company's disclosures in its consolidated financial statements was not material.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU No.

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 and early adoption is permitted.

The Company has not yet adopted this ASU.

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

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) :

Note 2 – Revenues (continued)

Year Ended December 31, 2021

Foil Technology

Products Force

Sensors Weighing and

Control Systems Total

Sensors Weighing Solutions Measurement Systems Total

United States $ 39,845 $ 52,542 $ 40,095 $ 132,482

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Year Ended December 31, 2020

Foil Technology

Products Force

Sensors Weighing and

Control Systems Total

Sensors Weighing Solutions Measurement Systems Total

United States $ 39,624 $ 46,980 $ 21,656 $ 108,260

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Year Ended December 31, 2019

Foil Technology

Products Force

Sensors Weighing and

Control Systems Total

Sensors Weighing Solutions Measurement Systems Total

United States $ 47,220 $ 54,679 $ 12,416 $ 114,315

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$ 121,827 $ 119,854 $ 42,277 $ 283,958

Note 2 – Revenues (continued)

The following table disaggregates net revenue by market sector (in thousands) :

12 unchanged sentences

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.

Contract liabilities are deferred revenues that are recorded when cash payments are received or due in advance of our

Note 2 – Revenues (continued)

performance obligations.

Our payment terms vary by the type and location of the products offered.

11 unchanged sentences

Note 3 – Acquisition Activity

Diversified Technical Systems, Inc.

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.

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 Measurement System segment.

The following table summarizes the provisional fair values assigned to the assets and liabilities of DTS as of June 1, 2021 (in thousands):

Working capital $ 12,587

Property and equipment 1,209

Deferred income tax liability ( 6,178 )

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 31,313

Purchase price $ 47,216

Goodwill $ 15,903

(a) Working capital accounts include accounts receivable, inventory, prepaid expenses, accounts payable, accrued expenses, and accrued payroll.

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.

Note 3 – Acquisition Activity ( continued)

The Company recorded acquisition costs associated with this transaction as follows (in thousands ):

Year Ended December 31,

Legal fees $ 341

Appraisal fees 18

Investment banker fees and insurance costs 839

Included in the results of the operations of the Company, starting on June 1, 2021, are net revenues of $ 19.2 million and net earnings of $ 1.2 million for the year ended December 31, 2021.

DTS results include amortization of the inventory step-up of $ 2.7 million and amortization of intangible assets of $ 0.8 million for year ended December 31, 2021.

Following are 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 (unaudited):

Year ended December 31, Year ended December 31,

(unaudited) (unaudited)

Pro forma net revenues

$ 331,155 $ 301,577

Pro forma net earnings attributable to VPG stockholders

$ 25,109 $ 14,289

Pro forma basic earnings per share attributable to VPG stockholders

$ 1.84 $ 1.05

Pro forma diluted earnings per share attributable to VPG stockholders

$ 1.84 $ 1.05

Dynamic Systems Inc.

On November 1, 2019, VPG completed the acquisition of New York-based Dynamic Systems Inc.

("DSI"), a provider of specialized dynamic thermal-mechanical test and simulation systems used to develop new metal alloys and optimize production processes, for a purchase price of $ 40.3 million, subject to customary adjustments.

During the second quarter of 2020, the Company received $ 0.2 million from escrow as a purchase price adjustment, resulting in a reduction of goodwill.

Additionally, it was determined that an earn out, which was part of the purchase price, was not achieved.

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

("DSI"), a provider of specialized dynamic thermal-mechanical test and simulation systems used to develop new metal alloys and optimize production processes, for a purchase price of $ 40.3 million.

DSI reports into the Company's Measurement Systems segment.

The following table summarizes the final fair values assigned to the assets and liabilities of DSI as of November 1, 2019 (in thousands):

November 1, 2019 Adjustments Adjusted

November 1, 2019

Working capital (a)

$ 6,874 $ ( 134 ) $ 6,740

Property and equipment 1,727

10 unchanged sentences

(a) Working capital accounts include accounts receivable, inventory, prepaid expenses, accounts payable, accrued expenses, and accrued payroll.

The fair value of the contingent consideration is zero .

Note 3 – Acquisition Activity ( continued)

The weighted average useful lives for the patents and acquired technology and customer relationships are 16 years and 15 years, respectively.

4 unchanged sentences

Appraisal fees 13

Note 3 – Acquisition Activity ( continued)

Following are the supplemental consolidated financial results for the Company on an unaudited pro forma basis, as if the DSI acquisition had been consummated on January 1, 2019 (unaudited):

Year ended December 31,

Pro forma net revenues

Pro forma net earnings attributable to VPG stockholders

Pro forma basic earnings per share attributable to VPG stockholders

Pro forma diluted earnings per share attributable to VPG stockholders

Note 4 – Goodwill and Other Intangible Assets

The Company has four reporting units to which goodwill is allocated:

steel, on-board weighing, instrumentation, and DSI.

At the beginning of 2021, the Company had five reporting units to which goodwill was allocated:

steel, on-board weighing, instrumentation, DSI, and DTS.

For the steel and on-board weighing goodwill reporting units, the Company performed the qualitative assessment, which included assessment of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and other entity specific events which could impact the reporting unit.

Based on this review, it was determined that the fair value of each of those reporting units was in excess of its carrying value and therefore no quantitative impairment test was required.

For the instrumentation and DSI goodwill reporting units, the Company performed the quantitative impairment test.

In estimating the fair value of our instrumentation and DSI reporting units the Company used the income approach.

It further uses the market approach to evaluate the estimated fair value of the reporting units that was obtained by using the income approach.

During the second quarter of 2021, due to updated financial projections, the Company performed a quantitative impairment test on its instrumentation reporting unit's goodwill and indefinite-lived intangible trade name.

The Company recognized a non-cash impairment loss of $ 1.1 million in goodwill and $ 0.1 million in indefinite-lived intangible trade name.

The impairment was driven mainly by changes in forecasted projections including slower growth rate in revenues.

The Company performed its annual impairment test on indefinite-lived trade names as of the first day of the fourth fiscal quarter of 2021.

The impairment test indicated no additional impairment.

After considering the impact of the second quarter impairment charges, the carrying amount of goodwill and indefinite-lived trade names as of December 31, 2021 was $ 0.0 million and $ 0.3 million, respectively.

For the DSI goodwill reporting unit, the Company performed the quantitative impairment test.

In estimating the fair value of our DSI reporting unit the Company used the income approach.

2 unchanged sentences

In 2021, the results of the quantitative impairment test for the DSI reporting unit indicated no impairment, with the fair value exceeding the carrying value by approximately 12 % for goodwill and 15 % for the indefinite-lived trade name.

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 fourth quarter of 2020, the Company recognized a non-cash impairment loss of $ 2.4 million.

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 December 31, 2020 was $ 1.1 million and $ 0.4 million, respectively.

The Company's analysis in 2019 resulted in the fair value exceeding the carrying value for all reporting units.

The Company's analysis in 2020 resulted in the fair value exceeding the carrying value for the DSI reporting unit and a non-cash impairment loss of $ 2.4 million for the instrumentation reporting unit.

In 2019, the Company did not recognize an impairment for the instrumentation reporting unit, as the fair value exceeded its carrying value by approximately 12 %.

During 2018, the Company recognized a non-cash impairment loss associated with the goodwill and indefinite lived intangible assets in the instrumentation reporting unit of $ 2.5 million.

The impairment was primarily from lower margins on the forecasted projections due to product mix.

The impairment test for the remaining reporting units resulted in the fair value exceeding the carrying value, passing the quantitative impairment test.

The goodwill and indefinite-lived trade name allocated the DTS goodwill reporting unit is still provisional as of December 31, 2021 and therefore will be tested in the following year's annuals impairment test.

The change in the carrying amount of goodwill by segment is as follows ( in thousands) :

Note 4 – Goodwill and Other Intangible Assets (continued)

Total Weighing and Control Systems Segment Foil Technology Products Segment

KELK Acquisition DSI Acquisition Stress-Tek Acquisition Pacific Instruments

Total Measurement Systems

KELK Acquisition DSI Acquisition Stress-Tek Acquisition Pacific Instruments Acquisition DTS Acquisition

Balance at January 1, 2020 $ 35,018 $ 6,559 $ 18,606 $ 6,311 $ 3,542 $ —

Goodwill acquired 18,606 — 18,606 — —

Adjustment to goodwill acquired ( 1,700 ) — ( 1,700 ) — — —

Impairment charges ( 2,416 ) — — — ( 2,416 ) —

Foreign currency translation adjustment 203 167 36 — — —

Balance at December 31, 2020 31,105 6,726 16,942 6,311 1,126 —

Adjustments to purchase price ( 1,700 ) — ( 1,700 ) — —

Goodwill acquired 15,903 — — — — 15,903

Impairment charges ( 1,126 ) — — — ( 1,126 ) —

21 unchanged sentences

Certain intangible assets are subject to foreign currency translation.

In conjunction with the acquisition of DTS on June 1, 2021 (See Note 3), the Company allocated $ 8.1 million of the purchase price to customer relationships, $ 13.2 million to patents and acquired technology, and $ 2.4 million to indefinite-lived trade names.

Amortization expense was $ 3.3 million, $ 2.4 million, and $ 1.7 million, for the years ended December 31, 2021, 2020, and 2019, respectively.

Amortization expense in 2021 included $ 0.8 million related to the DTS acquisition.

Note 4 – Goodwill and Other Intangible Assets (continued)

Estimated annual amortization expense for each of the next five years is as follows (in thousands) :

11 unchanged sentences

Restructuring charges 76 918

Adjustment for adoption of ASU 2016-02 — ( 69 )

Cash payments ( 138 ) ( 1,458 )

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federal tax benefit ( 391 ) ( 176 ) ( 21 )

GILTI tax, net of foreign tax credits 77 — —

Effect of foreign operations 2,096 729 ( 109 )

6 unchanged sentences

Loss of benefit of U.S.

net operating loss (a)

Excess tax benefits related to share based compensation (a)

( 168 ) ( 357 ) —

2017 Tax Act:

Effects of U.S.

tax reform — — ( 135 )

Change in valuation allowance — — 945

net operating loss — 1,064 967

Excess tax benefits related to share based compensation — ( 168 ) ( 357 )

Other ( 244 ) 6 ( 315 )

Total income tax expense $ 5,469 $ 7,509 $ 4,145

Note 6 – Income Taxes (continued)

(a) Amounts for 2018 are included in Other and fell below the 5% threshold.

On December 22, 2017, the SEC staff issued SAB 118 which provides for a measurement period of one year from the enactment date to finalize the accounting for effects of the 2017 Tax Act.

Consistent with that guidance, the Company had provisionally determined the tax cost of the one-time transition tax under the 2017 Tax Act to be approximately $ 2.2 million.

In accordance with SAB 118, the financial reporting impact of the 2017 Tax Act was completed in the fourth quarter of 2018 resulting in a net $ 0.8 million increase in tax expense caused by a decrease in the transition tax and an increase in the valuation allowance.

The 2017 Tax Act subjects a U.S.

3 unchanged sentences

The Company has elected to recognize tax expense related to GILTI in the year the tax is incurred.

Note 6 – Income Taxes (continued)

The Company recognized approximately $ 11.9 million and $ 14.3 million of GILTI income for the years ended December 31, 2021 and 2020, respectively.

tax on the GILTI income was fully offset by foreign tax credits associated with GILTI and U.S.

operating losses exclusive of GILTI.

tax on the GILTI income, net of foreign tax credits, was $ 0.1 million for the year ended December 31, 2021 and was fully offset by foreign tax credits associated with GILTI and U.S.

operating losses exclusive of GILTI for the year ended December 31, 2020.

Any excess foreign tax credits associated with GILTI are lost and cannot be carried forward to future years.

The Company would have generated a net operating loss for U.S.

For the year ended December 31, 2020, the Company would have generated a net operating loss for U.S.

federal income tax purposes but for the effects of the GILTI provision.

23 unchanged sentences

The most significant negative evidence is continuing cumulative operating losses in the U.S.

The impact of the acquisitions of Stress-Tek, Pacific Instruments and DSI was also considered in determining the realization of the U.S.

The impact of the acquisitions of Stress-Tek, Pacific Instruments, DSI and DTS was also considered in determining the realization of the U.S.

deferred tax assets.

2 unchanged sentences

However, there was insufficient positive evidence to overcome the negative evidence.

Note 6 – Income Taxes (continued)

In November 2019, the Company acquired Dynamic Systems, Inc.

("DSI"), a U.S.

In November 2019, the Company acquired DSI.

DSI's opening balance sheet included $ 17 million of gross deferred tax liabilities, including $ 4.1 million of indefinite-lived liabilities.

1 unchanged sentence

In the fourth quarter of 2020, the Company completed the purchase accounting for the acquisition of DSI, which resulted in the recognition of additional deferred tax assets of $ 1.7 million and a corresponding increase in valuation allowance.

In June 2021, the Company acquired DTS.

DTS's opening balance sheet included $ 26.4 million of gross deferred tax liabilities, including $ 2.4 million of indefinite-lived liabilities.

The acquisition contributed to a $ 1.6 million net reduction in valuation allowance and deferred tax benefit for the Company in 2021.

The Company has one year from the date of acquisition to finalize the purchase accounting for DTS.

Overall, the cumulative losses and the acquisition impacts still indicate that realization of our U.S.

deferred tax assets remains uncertain such that the Company cannot conclude that it is "more likely than not" that the deferred tax assets will be recoverable.

deferred tax assets remains uncertain such that the Company cannot conclude that it is "more likely than not" that the deferred tax assets will be

Note 6 – Income Taxes (continued)

We will continue to monitor the realization of U.S.

3 unchanged sentences

The net change in valuation allowance was approximately $ 1.0 million.

The valuation allowance related to state taxes was $ 0.7 million and $ 0.8 million expense for the years ended December 31, 2020 and 2019, respectively.

The change in valuation allowance related to state taxes was $ 0.6 million and $ 0.7 million expense for the years ended December 31, 2021 and 2020, respectively.

The Company also has valuation allowances of $ 2.6 million and $ 2.0 million at December 31, 2021 and 2020, respectively, with respect to certain foreign net operating loss and capital loss carryforwards.

8 unchanged sentences

federal net operating losses $ 5,097 No expiration

federal net operating loss 315 2036

federal interest expense carryover 4,169 No expiration

2 unchanged sentences

Israel capital losses 6,681 No expiration

federal net operating losses shown above are pre-acquisition losses of DSI.

The utilization of these losses is limited to $ 765 thousand per year pursuant to Internal Revenue Code ("IRC") Section 382.

In addition, utilization of U.S.

Utilization of U.S.

federal net operating losses is taken into account before the GILTI deduction allowable by IRC Section 250.

Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $ 178.2 million at December 31, 2020 compared to $ 159.0 million at December 31, 2019.

Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $ 213.9 million at December 31, December 31, 2021 compared to $ 178.2 million at December 31, 2020.

As a result of the 2017 Tax Act, in 2017 the Company had provided for a deferred tax liability of approximately $ 1.8 million of withholding tax associated with a planned cash distribution of approximately $ 25.5 million.

3 unchanged sentences

In addition to the $ 1.5 million, additional withholding taxes of approximately $ 22.5 million are estimated to be payable upon remittance of the remaining previously unremitted earnings as of December 31, 2021.

Note 6 – Income Taxes (continued)

Net income taxes paid were $ 7.7 million, $ 4.3 million, and $ 11.1 million for the years ended December 31, 2021, 2020, and 2019, respectively.

7 unchanged sentences

An unfavorable determination could increase tax expense and could require a cash payment, including interest and penalties.

Note 6 – Income Taxes (continued)

The following table summarizes changes in the Company's gross liabilities, excluding interest and penalties, associated with unrecognized tax benefits (in thousands) :

14 unchanged sentences

The Company believes that it is reasonably possible that an increase in unrecognized tax benefits related to foreign exposures of between $ 0.1 million and $ 0.2 million may be necessary in 2022.

As of December 31, 2020, the Company anticipates that it is reasonably possible that it will reverse less than $ 0.1 million of its current unrecognized tax benefits within the next calendar year due to the expiration of the statute of limitations in certain jurisdictions.

As of December 31, 2021, the Company anticipates that it is reasonably possible that it will reverse $ 0.3 million of its current unrecognized tax benefits within the next calendar year due to the expiration of the statute of limitations in certain jurisdictions.

None of the unrecognized tax benefits the Company expects to reverse in 2022 due to statute lapses are covered by the Tax Matters Agreement.

4 unchanged sentences

Additionally, the Company's foreign subsidiaries file income tax returns in the countries in which they have operations and the statutes of limitations in those jurisdictions generally range from 3 to 10 years.

During the fourth quarter of 2020, the Company concluded a tax examination in Israel for one of its subsidiaries covering 2015.

The conclusion of the audit resulted in no significant change in tax and a release of $ 0.1 million of reserves for uncertain tax positions for that year, including accrued interest.

During the fourth quarters of 2020 and 2021, the Company concluded tax examinations in Israel for one of its subsidiaries covering 2015 and 2016, respectively.

The conclusions of the audits resulted in no significant changes in tax and a releases of less than $ 0.1 million of reserves for uncertain tax positions for each of those years, including accrued interest.

During the second and third quarters of 2019, the Company concluded tax examinations in Taiwan and Belgium, respectively, for two of its subsidiaries, covering the years 2016 and 2017.

The conclusion of the tax examinations resulted in no significant change in tax.

During the fourth quarter of 2018, the Company concluded a tax examination in Germany for one of its subsidiaries, covering the years 2015 and 2016.

The conclusion of the tax examination resulted in no significant change in tax.

The Company is subject to ongoing income tax audits, administrative appeals and judicial proceedings in India spanning a number of years.

2 unchanged sentences

2020 Credit Agreement - Revolving Facility $ 61,000 $ 41,000

2015 Credit Agreement - Revolving Facility — 34,000

2015 Credit Agreement - U.S.

Closing Date Term Facility — 2,038

2015 Credit Agreement - U.S.

Delayed Draw Term Facility — 4,982

2015 Credit Agreement - Canadian Term Facility — 3,476

Other debt — 18

5 unchanged sentences

On March 20, 2020, the Company entered into a Third Amended and Restated Credit Agreement (the “2020 Credit Agreement”) among the Company, the lenders named therein, Citizens Bank, National Association and Wells Fargo Bank, National Association as joint lead arrangers and JPMorgan Chase Bank, National Association as agent for such lenders (the “Agent”), pursuant to which the terms of the Company’s multi-currency, secured credit facility were revised to provide a secured revolving facility (the “2020 Revolving Facility”) in an aggregate principal amount of $ 75.0 million, with a sublimit of $ 10.0 million which can be used for letters of credit for the account of the Company or its subsidiaries that are parties to the Credit Agreement.

The proceeds of the 2020 Revolving Facility may be used for working capital and general corporate purposes, and a portion of such proceeds was used to refinance the Company’s existing revolving credit facility in the amount of $ 34.0 million and the Company’s existing term loans as follows:

(1) the “2015 U.S.

Closing Date Term Facility” in an aggregate principal amount of $ 2.0 million;

and (2) the "2015 U.S.

Delayed Draw Term Facility" in an aggregate principal amount of $ 5.0 million.

The proceeds of the 2020 Revolving Facility may be used on an ongoing basis for working capital and general corporate purposes.

The aggregate principal amount of the 2020 Revolving Facility may be increased by a maximum of $ 25.0 million upon the request of the Company, subject to the terms of the 2020 Credit Agreement.

The 2020 Credit Agreement terminates on March 20, 2025.

The 2020 Credit Agreement replaced the 2015 Credit Agreement.

Interest payable on amounts borrowed under the 2020 Revolving Facility is based upon, at the Company’s option, (1) the greatest of:

13 unchanged sentences

The Company had outstanding letters of credit under these short-term lines of credit of $ 2.0 million and $ 0.4 million at December 31, 2021 and 2020, respectively.

Other debt consisted of zero interest rate debt held by VPG’s Japanese subsidiary, which was fully paid off in 2021.

Note 7 – Long-Term Debt (continued)

Other debt consists of debt held by VPG’s Japanese subsidiary and is payable monthly over the next 1 year at a zero interest rate.

Aggregate annual maturities of long-term debt are as follows (in thousands) :

26 unchanged sentences

( 31,319 ) ( 290 ) 21 ( 269 ) ( 31,588 )

Reclassification adjustment for foreign currency translation

$ ( 37,465 ) $ ( 414 ) $ 176 $ ( 238 ) $ ( 37,703 )

6 unchanged sentences

( 30,761 ) 5,070 99 5,169 ( 25,592 )

Reclassification adjustment for foreign currency translation

$ ( 37,703 ) $ 4,687 $ 345 $ 5,032 $ ( 32,671 )

$ ( 37,465 ) $ ( 414 ) $ 176 $ ( 238 ) $ ( 37,703 )

December 31, 2021

26 unchanged sentences

Note 9 – Pensions and Other Postretirement Benefits (continued)

In 2018, the Company undertook several measures to de-risk the UK pension plan.

The first measure was to freeze the plan, with no new participants permitted and no further benefits accrue.

The second measure was to execute an enhanced transfer value exercise to transfer pension benefits outside of the plan.

As a result, the Company incurred $ 0.7 million of expense related to these de-risking measures.

The following table sets forth a reconciliation of the benefit obligation, plan assets, and funded status related to pension plans (in thousands) :

17 unchanged sentences

Benefits paid ( 75 ) ( 851 ) ( 75 ) ( 659 )

Curtailments and settlements — — — ( 25 )

Currency translation — ( 246 ) — 743

1 unchanged sentence

Funded status at end of year $ ( 2,626 ) $ ( 6,440 ) $ ( 2,747 ) $ ( 9,931 )

Actuarial losses incurred in 2020 related to our U.S.

plans are primarily the result of a decrease in the discount rate assumptions used to estimate the benefit obligations as of December 31, 2020 compared to December 31, 2019.

Actuarial gains incurred in 2021 related to our U.S.

plans are primarily the result of an increase in the discount rate assumptions used to estimate the benefit obligations as of December 31, 2021 compared to December 31, 2020.

Actuarial losses incurred in 2020 related to our U.S.

10 unchanged sentences

Actuarial items consist of the following (in thousands) :

Note 9 – Pensions and Other Postretirement Benefits (continued)

December 31, 2021 December 31, 2020

3 unchanged sentences

Unrecognized prior service cost — 55 — 60

Unamortized transition obligation — — — 1

$ 693 $ 6,764 $ 823 $ 9,068

Note 9 – Pensions and Other Postretirement Benefits (continued)

The following table sets forth additional information regarding the projected and accumulated benefit obligations for the pension plans (in thousands) :

38 unchanged sentences

Amortization of transition obligation

— ( 8 ) — 5 — 1

Curtailment and settlement losses

3 unchanged sentences

See Note 8 for the pre-tax, tax effect, and after tax amounts included in other comprehensive income during the years ended December 31, 2021, 2020, and 2019.

Note 9 – Pensions and Other Postretirement Benefits (continued)

The following weighted-average assumptions were used to determine benefit obligations at December 31 of the respective years:

4 unchanged sentences

Expected return on plan assets N/A 2.10 % N/A 2.66 %

Note 9 – Pensions and Other Postretirement Benefits (continued)

The following weighted-average assumptions were used to determine the net periodic pension costs for the years ended December 31, 2021 and 2020:

25 unchanged sentences

A summary of the Company’s pension plan assets for each fair value hierarchy level are as follows for the periods presented (see Note 16 for further description of the levels within the fair value hierarchy (in thousands)) :

Note 9 – Pensions and Other Postretirement Benefits (continued)

As of December 31, 2021 Fair value measurements at reporting date using:

5 unchanged sentences

$ 19,717 $ 1,577 $ 18,140 $ —

Note 9 – Pensions and Other Postretirement Benefits (continued)

As of December 31, 2020 Fair value measurements at reporting date using:

14 unchanged sentences

These plans provide medical and death benefits to retirees.

Note 9 – Pensions and Other Postretirement Benefits (continued)

The following table sets forth a reconciliation of the benefit obligation, plan assets, and funded status related to other postretirement benefit plans (in thousands) :

15 unchanged sentences

Funded status at end of year $ ( 2,885 ) $ ( 3,577 )

Note 9 – Pensions and Other Postretirement Benefits (continued)

Actuarial gains incurred in 2021 related to our post-retirement plans are primarily the result of an increase in the discount rate assumptions used to estimate the benefit obligations as of December 31, 2021 compared to December 31, 2020.

Actuarial gains incurred in 2020 related to our post-retirement plans are primarily the result of a prior year adjustment of $ 763 , changes in medical claims and age variance assumptions, net of a decrease in the discount rate assumptions used to estimate the benefit obligations as of December 31, 2020 compared to December 31, 2019.

Actuarial gains incurred in 2019 related to our post-retirement plans are primarily the result of a decrease in the discount rate assumptions used to estimate the benefit obligations as of December 31, 2019 compared to December 31, 2018.

Amounts recognized in the consolidated balance sheets consist of the following pre-tax amounts (in thousands) :

1 unchanged sentence

Accrued pension and other postretirement costs $ ( 2,658 ) $ ( 3,311 )

Accumulated other comprehensive loss $ 583 $ 1,808

Accumulated other comprehensive (gain)/loss $ ( 28 ) $ 583

$ ( 2,913 ) $ ( 2,994 )

Actuarial items consist of the following (in thousands) :

Unrecognized net actuarial loss $ 583 $ 1,808

Unrecognized net actuarial (gain)/loss $ ( 28 ) $ 583

$ ( 28 ) $ 583

1 unchanged sentence

The following table sets forth the components of net periodic benefit costs (in thousands) :

Note 9 – Pensions and Other Postretirement Benefits (continued)

Years ended December 31,

9 unchanged sentences

The following weighted-average assumptions were used to determine the net periodic benefit costs for the years ended December 31, 2021 and 2020:

Note 9 – Pensions and Other Postretirement Benefits (continued)

Discount rate 1.99 % 2.97 %

5 unchanged sentences

As the plans are unfunded, the Company's anticipated contributions for 2021 are equal to the estimated benefit payment.

Note 9 – Pensions and Other Postretirement Benefits (continued)

Other Retirement Obligations

22 unchanged sentences

VPG determines compensation cost for RSUs based on the grant-date fair value of the underlying common stock.

Compensation cost is recognized over the period that the participant provides service in exchange for the award.

Compensation cost is recognized over the period that the participant provides service in

Note 10 – Share-Based Compensation (continued)

exchange for the award.

The Company recognizes compensation cost for RSUs that are expected to vest and for which performance criteria are expected to be met.

On March 5, 2020, VPG’s three current executive officers were granted annual equity awards in the form of RSUs, of which 75 % are performance-based.

On March 4, 2021, and in accordance with their respective employment agreements, VPG’s three current 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 were comprised of 52,486 RSUs.

Twenty-five percent of these awards will vest on January 1, 2023 , subject to the executives' continued employment.

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.

The awards issued in 2019 and 2018 have similar allocations and vesting criteria.

On March 16, 2020, certain VPG employees were granted annual equity awards in the form of RSUs, of which 75 % are performance-based.

On March 8, 2021, certain VPG employees were granted annual equity awards in the form of RSUs, of which 75 % are performance-based and certain employees received awards of which 50 % are performance based.

The awards have an aggregate target grant-date fair value of $ 0.6 million and were comprised of 17,793 RSUs.

Twenty-five percent of these awards will vest on January 1, 2023 subject to the employees' continued employment.

The performance-based portion of the RSUs will also vest on January 1, 2023, subject to the employee's continued employment and the satisfaction of certain performance objectives relating to three-year cumulative earnings goals and cash flow goals.

On May 21, 2020, the Board of Directors approved the issuance of an aggregate of 15,564 RSUs to the independent board members of the Board of Directors and to the non-executive Chairman of the Board of Directors.

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, the Compensation Committee of 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 may be subject to acceleration under certain circumstances.

Note 10 – Share-Based Compensation (continued)

RSU activity is presented below (number of RSUs in thousands) :

24 unchanged sentences

Restricted stock units $ 2,244 $ 1,387 $ 1,336

Note 10 – Share-Based Compensation (continued)

Share-based compensation expense is recognized ratably over the vesting period of the awards and for RSUs with performance criteria, is recognized for RSU's that are expected to vest and for which performance criteria are expected to be met.

During the fourth quarter of 2020, a net adjustment reducing share-based compensation expense by $ 0.1 million was recorded, based on the evaluation of performance objectives associated with awards granted in 2018, 2019 and 2020.

During the fourth quarter of 2021, a net adjustment of $ 0.5 million increasing share-based compensation expense was recorded, based on the evaluation of performance objectives associated with awards granted in 2019.

It was determined that certain objectives, which were deemed not likely to be met in previous years, were met.

During the fourth quarter of 2020, a net adjustment decreasing share-based compensation expense by $ 0.1 million was recorded, based on the evaluation of performance objectives associated with awards granted in 2018, 2019 and 2020.

It was determined that certain objectives were not likely to be fully met, necessitating a reversal of certain compensation expense associated with those awards.

7 unchanged sentences

The Company is of the opinion that the disposition of these proceedings will not have a material adverse effect on its business or its financial condition, results of operations, and cash flows.

Note 11 – Commitments, Contingencies, and Concentrations (continued)

Executive Employment Agreements

15 unchanged sentences

At December 31, 2021 and 2020, the Company had no significant concentrations of credit risk.

Note 11 – Commitments, Contingencies, and Concentrations (continued)

Geographic Concentrations

9 unchanged sentences

Note 12 - Leases

The Company primarily leases office and manufacturing facilities in addition to vehicles, which have remaining terms of less than one year to twelve years .

The Company has no finance leases.

In 2019, one of the Company's indirect wholly-owned subsidiaries entered into a lease agreement as tenant related to a property in Israel.

The facility was made available to the Company during the second quarter of 2020, at which time the Company established an operating right of use asset and operating lease liability, with a lease term of 12.5 years, of $ 14.4 million, in accordance with the terms of the lease agreement.

The Company primarily leases office and manufacturing facilities in addition to vehicles, which have remaining terms of less than one year to fifteen years .

Leases recorded on the balance sheet consist of the following (in thousands) :

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The components of lease expense are as follows (in thousands) :

December 31, 2020 December 31, 2019

December 31, 2021 December 31, 2020 December 31, 2019

Operating lease cost $ 5,185 $ 4,389 $ 3,376

1 unchanged sentence

Short-term lease cost 141 124 87

Total lease cost $ 4,513 $ 3,507

Sublease income $ ( 220 ) $ — $ —

Total net lease cost $ 5,106 $ 4,513 $ 3,507

Right of use assets obtained in exchange for new operating lease liability during 2021 were $ 10.7 million and in 2020 were $ 16.3 million.

5 unchanged sentences

Present value of future minimum lease payments $ 29,750

Rent expense on operating leases prior to adoption of ASC 842 was $ 3.6 million for the year ended December 31, 2018.

Note 13 – Segment and Geographic Data

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 and on-board weighing applications.

VPG evaluates reporting segment performance based on multiple performance measures including gross profits, revenues, and operating income, exclusive of certain items.

Management believes that evaluating segment performance, excluding items such as restructuring and severance costs, and other items is meaningful because it provides insight with respect to the intrinsic operating results of VPG.

VPG reports in three reportable segments:

Sensors segment, Weighing Solutions segment, and Measurement Systems segment.

The Sensors reporting segment is comprised of the foil resistor and strain gage operating segments.

The Weighing Solutions segment is comprised of specialized modules and systems used to precisely measure weight, force torque, and pressure.

The Measurement Systems reporting segment is comprised of highly specialized systems for steel production, materials development, and safety testing.

The chief operating decision maker ("CODM") is our chief executive officer.

Starting from the fourth quarter of 2021, the CODM evaluates the operating segments performance based on the new segments structure.

The evaluation of the segments performance is based on multiple performance measures including gross profits, revenues, and operating income, exclusive of certain items.

Management believes that evaluating segment performance, excluding items such as restructuring and severance costs, impairment of goodwill and indefinite-lived intangible assets, acquisition costs, and other items is meaningful because they relate to occurrences or events that are outside of our core operations, and management believes that the use of these measures provides a consistent basis to evaluate our operating profitability and performance trends across comparable periods.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 1).

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The following table sets forth reporting segment information (in thousands) :

Foil Technology

Products Force

Sensors Weighing and

Control Systems Corporate/

Sensors Weighing Solutions Measurement Systems Corporate/

Net third-party revenues $ 127,861 $ 125,390 $ 64,668 $ 317,919

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Segment operating income (loss) 26,527 23,184 13,480 ( 35,819 ) 27,372

Acquisition costs — — 1,198 — 1,198

Impairment of goodwill and indefinite-lived intangibles — — 1,223 — 1,223

2,440 — — — 2,440

Restructuring costs — 76 — — 76

6 unchanged sentences

Segment operating income (loss) 29,486 12,145 11,763 ( 30,737 ) 22,657

Acquisition costs — — 443 — 443

Executive severance costs — — — 611 611

Impairment of goodwill and indefinite-lived intangibles — — 2,440 — 2,440

Restructuring costs 551 234 51 82 918

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Segment operating income (loss) 30,262 19,121 10,191 ( 30,926 ) 28,648

Impairment of goodwill and indefinite-lived intangibles 2,820 — — — 2,820

Acquisition costs — — 443 — 443

Executive severance costs — — — 611 611

Restructuring costs 79 2,041 7 166 2,293

28 unchanged sentences

Numerator for basic earnings per share:

Net earnings attributable to VPG stockholders

$ 10,787 $ 22,188 $ 23,646

Adjustment to the numerator for net earnings:

Interest savings assuming conversion of dilutive exchangeable notes, net of tax

Numerator for diluted earnings per share:

5 unchanged sentences

Effect of dilutive securities:

Exchangeable notes

Restricted stock units

16 unchanged sentences

$ ( 230 ) $ ( 2,982 ) $ ( 701 )

Foreign currency exchange gains and losses represent the impact of changes in foreign currency exchange rates.

The change in foreign exchange gains / (losses) for the year ended December 31, 2021, as compared to the prior year period, is primarily due to fluctuations in the Israeli shekel.

Additionally in 2021, there were favorable foreign exchange impacts from the Japanese yen and the Canadian dollar.

Note 15 – Additional Financial Statement Information (continued)

Foreign currency exchange gains and losses represent the impact of changes in foreign currency exchange rates.

The change in foreign exchange gains / (losses) during the period, as compared to the prior year period, is primarily due to fluctuations in the Israeli shekel.

The change in the dollar-shekel exchange rate, particularly in the fourth quarter of 2020, resulted in an unfavorable foreign exchange impact primarily related to the shekel-denominated lease liability for a new Foil Technology Products facility in Israel .

The change in foreign exchange gains / (losses) for the year ended December 31, 2020, as compared to the prior year period, was primarily due to fluctuations in the Israeli shekel.

Pension expense represents the net periodic benefit cost excluding the service cost.

In 2018, the Company recognized a settlement loss of $ 0.7 million related to measures taken to de-risk the UK pension schemes as discussed in Note 9 to the consolidated financial statements.

Included in Other for the year ended December 31, 2019, is a one-time $ 0.8 million gain on liquidation of one of the Company's subsidiaries.

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Accrued professional fees 1,336 1,169

Accrued technical warranty 761 780

Current accrued pension and other post retirement costs 709 611

Other 2,997 2,427

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The accompanying consolidated balance sheets at December 31, 2021 and December 31, 2020 include a $ 8.4 million and $ 8.3 million liability, respectively, associated with Israeli severance requirements in other liabilities.

Executive Severance

During the second fiscal quarter of 2019, the Company recorded $ 0.6 million of severance costs associated with the resignation of an executive officer of the Company.

The severance costs consisted of payments and other benefits as specified in the executive officer's separation agreement.

Note 16 – Fair Value Measurements

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Note 17 – Related Party Transactions

Until July 6, 2010, VPG was part of Vishay Intertechnology, and the assets and liabilities consisted of those that Vishay Intertechnology attributed to its precision measurement and foil resistor businesses.

Following the spin-off on July 6, 2010, VPG is an independent, publicly-traded company, and Vishay Intertechnology does not retain any ownership interest in VPG, although a common group of stockholders control a significant portion of the voting power of each company and the companies have three common board members.

Following the spin-off from Vishay Intertechnology, Inc.

on July 6, 2010, VPG is an independent, publicly-traded company, and Vishay Intertechnology does not retain any ownership interest in VPG, although a common group of stockholders control a significant portion of the voting power of each company and the companies have three common board members.

Subsequent to the spin-off, VPG and Vishay Intertechnology continue to share certain manufacturing locations.

4 unchanged sentences

Executive RSU grant

On March 4 2021, VPG’s three current executive officers were granted annual equity awards in the form of RSUs, of which 50 % are performance-based and 50 % are time-based.

On March 3, 2022, VPG’s three current executive officers were granted annual equity awards in the form of RSUs, of which 50 % are performance-based and 50 % are service-based.

The awards have an aggregate target grant-date fair value of $ 1.5 million and were comprised of 47,831 RSUs.

The time-based awards will vest on January 1, 2024, subject to the executives continued employment.

The service-based awards will vest on January 1, 2025, subject to the executives continued employment.

The performance-based awards will also vest on January 1, 2025, 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.

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-K

Item 9A. Controls and Procedures