What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-03-01 · 98 added, 90 removed, 426 unchanged (31% of the section changed)

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Over the past few years, we have seen a broadening of precision sensing applications in both our traditional industrial markets and new markets, due to the development of higher functionality in our customers' end products.

Our precision measurement solutions are used across a wide variety of end markets upon which we focus, including industrial, test and measurement, transportation, steel, medical, agriculture, avionics, military and space, and consumer product applications.

Our precision measurement solutions are used across a wide variety of end markets upon which we focus, including test and measurement, industrial, transportation, steel, avionics, military and space, as well as other markets such as agriculture, consumer, and medical.

The Company has a long heritage of innovation in sensor technologies that provide accuracy, reliability and repeatability that make our customers' products safer, smarter, and more productive.

As the functionality of customers' products continues to increase, and they integrate more precision measurement sensors and related systems into their solutions, we believe this will offer substantial growth opportunities for our products and expertise.

The impact of the recent Israel-Hamas war

In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets.

Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel.

These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers.

Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks.

As of February 29, 2024 (the date of this filing), our operations in Israel have operated at near normal levels.

The extent and duration of the current war, as well as the possibility of further spread of the conflict to other countries in the region as well as involving other political and military entities in the Middle East, poses risks to our operations and may lead to disruptions which could adversely affect our business, prospects, financial condition and results of operations.

While sales to customers in Israel account for a relatively small portion of our revenues, our operations in Israel include executive offices, which are the workplace for key executives including our chief executive officer, as well as two manufacturing facilities located in the central part of Israel which manufacture products representing approximately 25 percent of our total worldwide revenues.

As of February 29, 2024, these facilities remain open and operational.

We have implemented a contingency plan that we believe will secure supply of materials and logistics, build safety stock of finished goods and transfer these goods to our distribution centers outside of Israel, and we continue to take measures with regards to the safety of our employees.

We may, however, determine to temporarily discontinue production in Israel for the safety of our employees.

We could also face future production slowdowns or interruptions at either manufacturing location in Israel due to the impacts of the war, including personnel absences as a number of our employees have been called to active military duty, or due to other resource constraints such as the inability to source materials for production.

Overview of Financial Results

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335 1,550 335 1,550 335 1,550 0.02 0.11

Acquisition costs (b)

— — — 1,198 — 1,198 — 0.09

COVID-19 impact (c)

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— 150 — 150 — 150 — 0.01

Impairment of goodwill and indefinite-lived intangibles — — — 1,223 — 1,223 — 0.09

Restructuring costs — — 1,560 1,518 1,560 1,518 0.11 0.11

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EBITDA MARGIN 16.2 % 17.2 %

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

Acquisition purchase accounting adjustments (a) 335 1,550

Acquisition costs (b) — 1,198

Restructuring costs 1,560 1,518

COVID-19 impact (c) 138 (574)

Start-up costs (d) 150 3,174

Foreign exchange (gain) loss (e) (3,579) 109

COVID-19 impact (b) — 138

Start-up costs (c) — 150

Foreign exchange (gain) loss (d) 822 (3,579)

ADJUSTED EBITDA 60,374 61,997

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(a) Acquisition purchase accounting adjustments include fair market value adjustments associated with inventory recorded as a component of costs of products sold.

(b) Acquisition costs associated with the acquisition of DTS in 2021.

(c) COVID-19 impact is the net impact to the Company of costs incurred as a result of the COVID-19 pandemic, net of government subsidies received.

(d) Start-up costs in 2022 and 2021 are associated with the ramp up of our new manufacturing facility in Israel.

(e) Impact of foreign currency exchange rates on assets and liabilities.

(f) Included in the discrete items for 2021 is a $1.6 million tax benefit related to the acquisition of DTS.

(b) COVID-19 impact is the net impact to the Company of costs incurred as a result of the COVID-19 pandemic, net of government subsidies received.

(d) Impact of foreign currency exchange rates on assets and liabilities.

Financial Metrics

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Inventory turnover 2.11 1.70 1.94 1.94 1.87

Net revenues for the fourth quarter of 2022 increased 6.9% from the net revenues of $90.1 million reported in the third quarter of 2022, and increased 6.9% from $90.0 million for the comparable prior year period.

Net revenues in the Sensors segment of $36.3 million in the fourth quarter of 2022 decreased 4.1% from $37.9 million in the third quarter of 2022, and increased 6.3% from $34.1 million in the fourth quarter of 2021.

Sequentially, the decrease in revenues reflected lower precision resistor sales in the Test and Measurement market which was partially offset by an increase in the Avionics, Military and Space (AMS) market, and a decrease in sales of our advanced sensors, primarily in our consumer electronics market.

The year-over-year increase in revenues was primarily attributable to an increase in sales of precision resistors in the Test and Measurement market, and higher sales of our advance sensors products primarily in the AMS market and General Industrial markets.

Net revenues for the fourth quarter of 2023 increased 4.3% from the net revenues of $85.9 million reported in the third quarter of 2023, and decreased 7.0% from $96.2 million for the comparable prior year period.

Net revenues in the Sensors segment of $34.3 million in the fourth quarter of 2023 increased 5.3% from $32.5 million in the third quarter of 2023, and decreased 5.7% from $36.3 million in the fourth quarter of 2022.

Sequentially, the increase in revenues primarily reflected higher precision resistor sales in the Test and Measurement market.

The year-over-year decrease in revenues was primarily attributable to lower sales of advanced sensors in our Other markets for consumer applications, and in our Avionics, Military and Space ("AMS") market, and in our General Industrial market, which offset higher sales of precision resistors in the Test and Measurement market.

Net revenues in the Weighing Solutions segment of $30.4 million in the fourth quarter of 2023 increased 5.1% compared to revenues of $29.0 million in the third quarter of 2023.

The sequential increase in revenues was primarily attributable to increased revenues from OEM customers for precision agriculture and construction applications in our Other market segment and higher revenue in our Industrial Weighing market, partially offset by lower sales in the Transportation market.

Net revenues in the fourth quarter of 2022 increased 3.2% compared to $32.1 million in the fourth quarter of 2021 mainly due to increased revenues from OEM customers for precision agriculture applications in our Other market segment.

Net revenues in the Measurement Systems segment of $26.8 million in the fourth quarter of 2022 increased 29.2% from $20.8 million in the third quarter of 2022 and increased 12.8% from $23.8 million in the fourth quarter of 2021.

The sequential increase in revenues was primarily attributable to increased revenues from OEM customers for precision agriculture and construction applications in our Other market segment and higher revenue in our General Industrial market, partially offset by lower sales in the Transportation market.

Net revenues in the fourth quarter of 2023 decreased 8.0% compared to $33.1 million in the fourth quarter of 2022 mainly due to lower revenues in our Industrial Weighing market and lower revenues from OEM customers for precision agriculture applications in our Other market segment.

Net revenues in the Measurement Systems segment of $24.8 million in the fourth quarter of 2023 increased 2.0% from $24.4 million in the third quarter of 2023 and decreased 7.5% from $26.8 million in the fourth quarter of 2022.

The sequential increase in revenue was primarily attributable to higher sales of Diversified Technical Systems, Inc.

("DTS") products to the Transportation and AMS markets and higher sales of KELK and Dynamic Systems Inc.

("DSI") to Steel markets.

The year-over-year increase in revenues was primarily attributable to higher sales of DTS products to the AMS and Transportation markets, and higher KELK and DSI steel-related sales.

The gross profit margin for the fourth quarter of 2022 decreased 0.2% compared to the third quarter of 2022, and increased 2.5% from the fourth quarter of 2021.

Sequentially, gross profit margins decreased in the Sensors segment, were flat in the Weighing Solutions segment, and improved in the Measurement Systems segments.

The decrease in the Sensors segment gross profit margin was primarily due to a decrease in volume and temporary manufacturing inefficiencies.

In the Weighing Solutions segment, gross profit margin was flat as higher volume was offset by unfavorable foreign currency exchange rates.

In the Measurement Systems segment, gross profit margin increased slightly reflecting higher volume which was partially offset by unfavorable product mix and foreign exchange rates.

Compared to the fourth quarter of 2021, gross profit margins increased in the Sensors and Measurement Systems segments and decreased in the Weighing Solutions segment.

In the Sensors segment, the increase in gross profit margin was primarily due to an increase in volume and average selling prices.

In the Measurement Systems segment, gross profit margin increased as higher revenue, higher average selling prices, and lower purchase accounting adjustments related to the DSI acquisition were partially offset by unfavorable product mix, unfavorable foreign exchange rates and higher materials costs.

In the Weighing Solutions segment, the decrease in g ross profit margin was primarily due to higher material costs and unfavorable foreign currency exchange rates, partially offset by higher volume and selling price increases.

("DTS") products to the AMS market, which was partially offset by lower sales of Dynamic Systems Inc.

("DSI") and KELK products to the Steel market.

The year-over-year decline in revenues was primarily attributable to lower sales of DSI and KELK products to the steel market and lower sales of DTS products to the Transportation market, which was partially offset by higher sales of DTS products to the AMS market.

The gross profit margin for the fourth quarter of 2023 increased 1.1% compared to the third quarter of 2023, and increased 1.8% from the fourth quarter of 2022.

Sequentially, gross profit margins improved in the Sensors segment, decreased in the Weighing Solutions segment, and improved in the Measurement Systems segments.

The increase in the Sensors segment gross profit margin was primarily due to higher volume and improved manufacturing efficiencies.

In the Weighing Solutions segment, gross profit margin decreased due to a reduction in inventory and unfavorable product mix, partially offset by higher volume.

In the Measurement Systems segment, gross profit margin increased reflecting higher volume and favorable product mix.

Compared to the fourth quarter of 2022, gross profit margins increased in all of the reporting segments.

In the Sensors segment, the increase in gross profit margin was primarily due to favorable foreign exchange rates and improved manufacturing efficiencies, which offset the impact of lower volume.

In the Weighing Solutions segment, the increase in g ross profit margin was primarily due to increased selling prices, favorable foreign currency exchange rates, and manufacturing efficiencies, partially offset by lower volume.

In the Measurement Systems segment, gross profit margin increased reflecting higher volume and favorable product mix.

Operationally Diversified

In the fourth quarter of fiscal 2021, we formally adopted an operationally diversified structure and strategy, through which each of VPG's business segments maintains and deploys distinct go-to-market strategies, technical expertise, capital requirements, and acquisition opportunities.

Each of VPG's business segments maintains and deploys distinct go-to-market strategies, technical expertise, capital requirements, and acquisition opportunities.

We use an operationally diversified strategy and structure to be close to our customers and to leverage our high-level engineering expertise to optimize and enhance the performance of our customers' solutions.

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Optimize Core Competence

The Company’s core competencies include our innovative deep technical and applications-specific expertise to add value to our customers' products, our strong brands and customer relationships, our focus on operational excellence, our ability to select and develop our management teams, and our proven M&A strategy.

The Company’s core competencies include our innovative deep technical and applications-specific expertise, our strong brands and customer relationships, our focus on operational excellence, our ability to select and develop our management teams, and our proven M&A strategy.

We continue to optimize all aspects of our development, manufacturing and sales processes, including by increasing our technical sales efforts;

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We also seek to achieve significant production cost savings through the transfer, expansion, and construction of manufacturing operations in countries such as India, Japan, and Israel, where we can benefit from improved efficiencies or available tax and other government-sponsored incentives.

In the past several years, we incurred restructuring expense related to closing and downsizing of facilities as part of the manufacturing transitions of our load cell products to facilities in India and China, which marked key milestones in our ongoing strategic initiatives to align and consolidate our manufacturing footprint.

In the past several years, we incurred restructuring expense related to closing and downsizing of facilities as part of the manufacturing transitions of our load cell products to facilities in India, which marked key milestones in our ongoing strategic initiatives to align and consolidate our manufacturing footprint.

Acquisition Strategy

We expect to continue to make strategic acquisitions where opportunities present themselves to grow and expand our segments.

Historically, our growth and acquisition strategy had been largely focused on vertical product integration, using our foil strain gages in our load cell products, and incorporating those products into our weighing solutions.

In recent years, we widened our acquisition strategy to include a broader set of precision measurement systems and product companies.

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

Our acquisition strategy is focused on identifying and acquiring high-value, growing technology-driven businesses that augment, expand and/or leverage our current offering in precision measurement and sensor markets.

We expect to expand our expertise and our acquisition focus to other precision measurement solutions, including 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.

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Research and development will continue to play a key role in our efforts to introduce innovative products to generate new sales and to improve profitability.

We expect to continue to expand our position as a leading supplier of precision foil technology

We expect to continue to expand our position as a leading supplier of precision foil technology products.

We believe our R&D efforts should provide us with a variety of opportunities to leverage technology, products, and our manufacturing base in order to ultimately improve our financial performance.

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Effects of Foreign Exchange Rate on Operations

For the year ended December 31, 2023, exchange rate impacts decreased net revenues by $2.2 million and decrease costs of products sold and selling, general, and administrative expenses by $9.1 million.

For the year ended December 31, 2022, exchange rate impacts decreased net revenues by $16.1 million and decreased costs of products sold and selling, general, and administrative expenses by $13.3 million.

For the year ended December 31, 2021,

exchange rate impacts increased net revenues by $5.3 million and increased costs of products sold and selling, general, and administrative expenses by $8.7 million.

Critical Accounting Policies and Estimates

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Goodwill and indefinite-lived trademarks are tested for impairment at least annually, and whenever events or changes in circumstances occur indicating that it is "more likely than not" impairment may have been incurred.

We have the option to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying amount as a basis for determining if it is necessary to perform the quantitative goodwill impairment test.

However, if we conclude otherwise, then we are required to perform the quantitative impairment test by calculating the fair value of the reporting unit and comparing it against its carrying amount.

We have the option to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying value as a basis for determining if it is necessary to perform the quantitative goodwill impairment test.

However, if we conclude otherwise, then we are required to perform the quantitative impairment test by calculating the fair value of the reporting unit and comparing it against its carrying value.

We have four reporting units to which goodwill was allocated:

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If the fair value exceeds the carrying value, no further evaluation is required and no impairment loss is recognized.

An impairment charge would be recognized to the extent the carrying amount of goodwill exceeds the reporting unit fair value.

An impairment charge would be recognized to the extent the carrying value of goodwill exceeds the reporting unit fair value.

The indefinite-lived trade names are tested for impairment either by employing the qualitative approach outlined above, or by comparing the carrying value to the fair value based on current revenue projections of the related operations, under the relief from royalty method.

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Accounting for defined benefit pension and other postretirement plans involves numerous assumptions and estimates.

The discount rate at which obligations could effectively be settled and the expected long-term rate of return on plan assets are two

critical assumptions in measuring the cost and benefit obligations of our pension and other postretirement benefit plans.

Other important assumptions include the anticipated rate of future increases in compensation levels, estimated mortality, and for postretirement medical plans, increases or trends in health care costs.

The discount rate at which obligations could effectively be settled and the expected long-term rate of return on plan assets are two critical assumptions in measuring the cost and benefit obligations of our pension and other postretirement benefit plans.

Other important assumptions include the anticipated rate of future increases in compensation levels, estimated mortality, and for

postretirement medical plans, increases or trends in health care costs.

Management reviews these assumptions at least annually.

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Foreign currency effects (0.7) %

Acquisitions 3.6 %

Net change (2.1) %

During the year ended December 31, 2022, net revenues increased 14.0% over the prior year.

Volume increased in the Sensors and Measurement System reporting segments while revenues remained flat in the Weighing Solutions segments.

We saw a volume increase in all of our end markets, with the largest revenue increases year over year in the Test and Measurement markets.

During the year ended December 31, 2023, net revenues decreased 2.1% over the prior year.

Decreased volume in the Sensors and Weighing Solutions reporting segments was partially offset by volume increase in the Measurement System reporting segment.

Volume increases in our steel and AMS end markets, were offset by lower volume across all of our other market sectors.

The overall volume decreases were partially offset by increased selling prices across all of our reporting segments.

Gross Profit Margin

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The gross profit margin for the year ended December 31, 2023 increased 1.0% over the prior year.

The increase in gross profit margin was primarily due to improved gross profit margins in the Sensors and Measurement Systems reporting segments, partially offset by decreased gross profit margins in the Weighing Solution reporting segment.

The increase in gross profit margin was primarily due to improved gross profit margins in the Weighing Solutions and Measurement Systems reporting segments partially offset by decreased gross profit margin in the Sensors reporting segment.

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

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Net change (8.2) %

For the year ended December 31, 2022, net revenues increased 19.1% as compared to the prior year, due to higher sales of precision resistors in the Test and Measurements market and higher revenue of our advanced sectors products, primarily in Other markets (mainly for consumer applications) and in the General Industrial market.

For the year ended December 31, 2023, net revenues decreased 8.2% as compared to the prior year, due to lower sales of precision resistors in the Test and Measurement market, and lower sales of advanced sensors products primarily in our Other markets (mainly for consumer applications), partially offset by increases in precision resistor sales in the AMS market.

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

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Gross profit margin 39.4 % 40.1 %

For the year ended December 31, 2022, the gross profit margin increased 4.5% as compared to the prior year.

Volume increases were partially offset by wage increases, and labor inefficiencies.

For the year ended December 31, 2023, the gross profit margin decreased 0.7% as compared to the prior year primarily due to volume decreases and manufacturing inefficiencies, which were partially offset by favorable foreign currency exchange rates.

Weighing Solutions

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Net change (2.5) %

For the year ended December 31, 2022, net revenues increased 0.3% from the prior year.

The impact on revenues of increased average selling prices, coupled with a slight increase in volume, was almost completely offset by unfavorable exchange rate

impacts, primarily from the Euro, the Swedish krone, and the British pound.

The volume increase was mainly from sales of products into Other Markets, for precision agriculture and construction applications, and sales of products into the General Industrial market, partially offset by lower sales of products in the Transportation market.

For the year ended December 31, 2023, net revenues decreased 2.5% from the prior year.

Increased sales of load cells in our Other markets for precision agriculture and construction applications and transducer systems in our Industrial Weighing market,

were offset by lower sales of our load cell products in our Industrial weighing market.

The overall volume decline was only partially offset by higher average selling prices.

Gross profit as a percentage of net revenues for the Weighing Solutions segment was as follows:

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Gross profit margin 37.0 % 34.3 %

For the year ended December 31, 2022, the gross profit margin decreased 2.3% as compared to the prior year.

The slight increase in revenue as described above was offset by higher material costs, an unfavorable product mix and a reduction of inventories.

For the year ended December 31, 2023, the gross profit margin increased 2.7% as compared to the prior year.

The increase in gross profit margin was primarily due to cost reductions, manufacturing efficiencies, favorable foreign currency exchange rates, and higher selling prices, which offset the impact of lower volume.

Measurement Systems

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Foreign currency effects (1.4) %

Acquisitions 17.7 %

Net change 9.6 %

For the year ended December 31, 2022, net revenues increased 30.9% as compared to the prior year, primarily due to the addition of revenue from DTS, which was acquired on June 1, 2021, in our AMS and Transportation markets and higher revenue of our KELK and DSI steel-related businesses.

For the year ended December 31, 2023, net revenues increased 9.6% as compared to the prior year, primarily due to increased revenue in the Steel market and higher sales of DTS products in the AMS market.

Gross profit as a percentage of net revenues for the Measurement Systems segment was as follows:

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For the year ended December 31, 2023, the gross profit margin increased 0.2% from the prior year.

Higher revenue coming from DTS and our KELK and DSI steel-related businesses coupled with lower purchase accounting adjustments related to the DTS acquisition were partially offset by an unfavorable product mix, higher material costs and unfavorable foreign currency exchange rate impacts.

Additionally, COVID-19 subsidies were received in 2021 that did not continue in 2022.

Higher revenues coupled with lower purchase accounting adjustments related to the DTS acquisition were partially offset by higher material costs and higher manufacturing costs.

Selling, General, and Administrative Expenses

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as a percentage of net revenues 30.1 % 28.8 %

SG&A expenses for the year ended December 31, 2022 increased $9.0 million as compared to the prior year due to SG&A expenses related to the acquisition of DTS, higher personnel costs including wage increases and travel costs, and other fees.

SG&A expenses for the year ended December 31, 2023 increased $2.5 million as compared to the prior year due to higher personnel costs, including increases in headcount, wages and travel costs, higher IT costs and higher commissions.

Impairment of Goodwill and Indefinite-lived Intangible Assets

For the year ended December 31, 2022, as a result of our annual impairment test performed on goodwill and indefinite-lived intangible assets there was no impairment on goodwill and indefinite-lived intangible assets.

For the year ended December 31, 2021, 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.

For the years ended December 31, 2023 and December 31, 2022, as a result of our annual impairment tests performed on goodwill and indefinite-lived intangible assets there was no impairment on goodwill and indefinite-lived intangible assets.

Restructuring Costs

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Acquisition Costs

There were no acquisition costs recorded in our consolidated statements of operations for the year ended December 31, 2022.

For the year ended December 31, 2021, we recorded acquisition costs in our consolidated statements of operations of $1.2 million in connection with the acquisition of DTS.

There were no acquisition costs recorded in our consolidated statements of operations for the year ended December 31, 2023 or December 31, 2022.

Other Income (Expense)

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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, 2022, as compared to the prior year period, is primarily due to fluctuations in the Israeli shekel, the Japanese yen and the British pound.

The change in the dollar-shekel exchange rate resulted in a favorable currency exchange impact primarily related to the shekel-denominated lease liability for the Sensors facility in Israel.

The change in foreign exchange gains / (losses) for the year ended December 31, 2023, as compared to the prior year period, is primarily due to fluctuations in the Israeli shekel, the Canadian dollar and the British pound.

The change in the dollar-shekel exchange rate resulted in a unfavorable currency exchange impact primarily related to the shekel-denominated lease liability for the Sensors facility in Israel.

Our effective tax rate for the year ended December 31, 2023 was 32.3%, as compared to 18.9% for the year ended December 31, 2022.

Our effective tax rate was lower in 2022 compared to 2021 primarily due to changes in our geographical mix of income and releases of reserves for uncertain tax positions, offset by increases related to state income taxes, foreign currency gains and losses, changes in valuation allowances and statutory rate changes in foreign jurisdictions.

Our effective tax rate was higher in 2023 compared to 2022 primarily due to increases in valuation allowances, increases in reserves for uncertain tax positions and changes in our geographical mix of income.

We reassessed our ability to realize our U.S.

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statutory rate and foreign tax rates

• 3.3% increase related to changes in valuation allowances

• 2.3% increase related to residual U.S.

tax on foreign earnings

• 1.2% increase related to changes in reserves for uncertain tax positions

• 1.4% decrease related to specialty tax credits, such as research credits

• 2.8% increase related to the effects of foreign operations primarily related to the difference between the U.S.

statutory rate and foreign tax rates

• 1.5% increase related to foreign currency primarily attributable to our operations in India, Israel and Taiwan

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• 3.6% decrease related to changes in valuation allowances

• 8.1% increase related to the effects of foreign operations primarily related to the difference between the U.S.

statutory rate and foreign tax rates.

• 4.6% decrease related to a decrease in valuation allowance, primarily as a result of the acquisition of DTS

• 1.5% decrease related to state income taxes

• 1.3% decrease related to specialty tax credits

Additional information about income taxes is included in Note 6 to our consolidated financial statements.

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The 2020 Credit Agreement terminates on March 20, 2025.

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

the Agent’s prime rate, the Federal Funds rate, or a LIBOR floor (the “Base Rate”), or (2) LIBOR or CDOR plus a specified margin.

An interest margin of 0.25% is added to Base Rate loans.

Depending upon the Company’s leverage ratio, an interest rate margin ranging from 1.50% to 2.75% per annum is added to the applicable LIBOR or CDOR rate to determine the interest payable on the LIBOR or CDOR loans.

On May 5, 2023, the Company entered into Amendment No.

1 to Third Amended and Restated Credit Agreement (the “Credit Agreement Amendment”) amending the Third Amended and Restated Credit Agreement, dated March 20, 2020.

The primary purpose of the changes made in the Credit Agreement Amendment were to update the interest rate provisions to replace LIBOR with SOFR for U.S.

dollar denominated loans as well as update the other applicable reference borrowing rates for foreign currency loans which took effect on June 15, 2023.

Interest payable on amounts borrowed under the 2020 Revolving Facility, taking into account the effect of the Credit Agreement Amendment, is based upon the following:

(a) for revolving credit loans denominated in US Dollars, the SOFR rate plus applicable credit spread;

and (b) for revolving credit loans denominated in foreign currencies, at other applicable local reference rates plus an interest margin.

Depending upon the Company’s leverage ratio, an interest rate margin ranging from 1.50% to 2.75% per annum is added to the applicable SOFR rate to determine the interest payable on the SOFR loans.

The Company is required to pay a quarterly fee of 0.25% per annum to 0.40% per annum on the unused portion of the 2020 Revolving Facility, which is determined based on the Company’s leverage ratio each quarter.

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Our cash provided by operating activities for the year ended December 31, 2023 was $45.9 million as compared to $33.0 million for the year ended December 31, 2022.

Our net cash used in investing activities for the year ended December 31, 2022 was $20.8 million, compared to $64.0 million for the year ended December 31, 2021, which included $47.2 million for the purchase of DTS.

Our net cash provided by financing activities for the year ended December 31, 2022 was $3.6 million, as compared to net cash used for financing activities of $18.8 million for the year ended December 31, 2021, which included the borrowing on the 2020 credit facility for the acquisition of DTS.

Our net cash used in investing activities for the year ended December 31, 2023 was $15.1 million, compared to $20.8 million for the year ended December 31, 2022.

Our net cash used in financing activities for the year ended December 31, 2023 was $35.9 million, which included a pay down on the 2020 credit facility of $29.0 million, as compared to $3.6 million for the year ended December 31, 2022.

Approximately 92% and 83% of our cash and cash equivalents balance at December 31, 2023 and 2022, respectively, was held by our non-U.S.

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Capital spending for 2023 was comprised of building projects related to capacity expansion in Israel and Asia, and other projects related to the normal maintenance of business.

Capital expenditures for 2023 are expected to be approximately $18.5 million, which includes approximately $10.4 million in capital equipment for capacity expansion in the Sensors reporting segment and expected building projects of approximately $5.9 million for capacity expansion, mainly in Asia.

Capital expenditures for 2024 are expected to be approximately $15.0 million.

As of December 31, 2023 and 2022, we did not have any off-balance sheet arrangements.

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general business and economic conditions;

impact of inflation, issues respecting the United States federal government debt ceiling, global labor and supply chain challenges;

impact of inflation;

potential issues respecting the United States federal government debt ceiling;

global labor and supply chain challenges;

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

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changes in foreign currency exchange rates;

political, economic, health (including the COVID-19 pandemic) and military instability in the countries in which we operate;

political, economic, and health (including pandemics) instabilities;

instability caused by military hostilities in the regions or countries in which we operate (including Israel);

difficulties in implementing our cost reduction strategies, such as underutilization of production facilities, labor unrest or legal challenges to our lay-off or termination plans, operation of redundant facilities due to difficulties in transferring production to achieve efficiencies;

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significant developments from the recent and potential changes in tariffs and trade regulation;

our efforts and efforts by governmental authorities to mitigate the COVID-19 pandemic, such as travel bans, shelter-in-place orders and business closures and the related impact on resource allocations, manufacturing and supply chains;

status as a “critical”, “essential” or “life-sustaining” business in light of COVID-19 business closure laws, orders and guidance being challenged by a governmental body or other applicable authority;

our efforts and efforts by governmental authorities to mitigate the COVID-19 pandemic, such as travel bans, shelter-in-place orders and business closures and the related impact on resource

allocations, manufacturing and supply chains;

our status as a “critical”, “essential” or “life-sustaining” business in light of COVID-19 business closure laws, orders and guidance being challenged by a governmental body or other applicable authority;

our ability to execute our new corporate strategy and business continuity, operational and budget plans;

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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-K

Item 7. Management’s Discussion and Analysis