Vishay Precision Group, Inc. 10-Q

Item 1. FINANCIAL STATEMENTS VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) June 29, 2024 December 31, 2023 (Unaudited) Assets Current assets: Cash and cash equivalents $ 84,128 $ 83,965 Accounts receivable, net 49,926 56,438 Inventories: Raw materials 35,799 33,973 Work in process 28,549 26,594 Finished goods 25,748 27,572 Inventories, net 90,096 88,139 Prepaid expenses and other current assets 17,007 14,520 Total current assets 241,157 243,062 Property and equipment: Land 4,121 4,154 Buildings and improvements 72,406 72,952 Machinery and equipment 131,392 131,738 Software 9,945 9,619 Construction in progress 10,802 11,379 Accumulated depreciation ( 141,485 ) ( 139,206 ) Property and equipment, net 87,181 90,636 Goodwill 45,491 45,734 Intangible assets, net 42,643 44,634 Operating lease right-of-use assets 26,084 26,953 Other assets 20,233 20,547 Total assets $ 462,789 $ 471,566 Continues on the following page. -3- VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) June 29, 2024 December 31, 2023 Liabilities and equity (Unaudited) Current liabilities: Trade accounts payable $ 11,284 $ 11,698 Payroll and related expenses 17,649 18,971 Other accrued expenses 21,541 22,427 Income taxes 3,704 4,524 Current portion of operating lease liabilities 4,089 4,004 Current portion of long-term debt 31,914 — Total current liabilities 90,181 61,624 Long-term debt — 31,856 Deferred income taxes 3,509 3,490 Operating lease liabilities 21,297 22,625 Other liabilities 13,888 14,770 Accrued pension and other postretirement costs 6,880 7,276 Total liabilities 135,755 141,641 Equity: Common stock 1,336 1,330 Class B convertible common stock 103 103 Treasury stock ( 23,388 ) ( 17,460 ) Capital in excess of par value 202,765 202,672 Retained earnings 192,560 182,066 Accumulated other comprehensive loss ( 46,365 ) ( 38,869 ) Total Vishay Precision Group, Inc. stockholders' equity 327,011 329,842 Noncontrolling interests 23 83 Total equity 327,034 329,925 Total liabilities and equity $ 462,789 $ 471,566 See accompanying notes. -4- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Operations (Unaudited - In thousands, except per share amounts) Fiscal quarter ended June 29, 2024 July 1, 2023 Net revenues $ 77,359 $ 90,802 Costs of products sold 44,952 52,090 Gross profit 32,407 38,712 Selling, general and administrative expenses 26,501 26,755 Restructuring costs — 162 Operating income 5,906 11,795 Other income (expense): Interest expense ( 649 ) ( 1,079 ) Other 1,701 1,019 Other income (expense) 1,052 ( 60 ) Income before taxes 6,958 11,735 Income tax expense 2,316 3,384 Net earnings 4,642 8,351 Less: net earnings attributable to noncontrolling interests 39 115 Net earnings attributable to VPG stockholders $ 4,603 $ 8,236 Basic earnings per share attributable to VPG stockholders $ 0.34 $ 0.61 Diluted earnings per share attributable to VPG stockholders $ 0.34 $ 0.60 Weighted average shares outstanding - basic 13,348 13,601 Weighted average shares outstanding - diluted 13,389 13,670 See accompanying notes. -5- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Operations (Unaudited - In thousands, except per share amounts) Six fiscal months ended June 29, 2024 July 1, 2023 Net revenues $ 158,142 $ 179,666 Costs of products sold 90,641 103,755 Gross profit 67,501 75,911 Selling, general and administrative expenses 53,895 53,914 Restructuring costs 782 278 Operating income 12,824 21,719 Other income (expense): Interest expense ( 1,277 ) ( 2,076 ) Other 3,561 1,294 Other income (expense) 2,284 ( 782 ) Income before taxes 15,108 20,937 Income tax expense 4,634 5,604 Net earnings 10,474 15,333 Less: net earnings attributable to noncontrolling interests ( 20 ) 133 Net earnings attributable to VPG stockholders $ 10,494 $ 15,200 Basic earnings per share attributable to VPG stockholders $ 0.78 $ 1.12 Diluted earnings per share attributable to VPG stockholders $ 0.78 $ 1.11 Weighted average shares outstanding - basic 13,376 13,593 Weighted average shares outstanding - diluted 13,428 13,661 See accompanying notes. -6- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited - In thousands) Fiscal quarter ended June 29, 2024 July 1, 2023 Net earnings $ 4,642 $ 8,351 Other comprehensive loss, net of tax: Foreign currency translation adjustment ( 2,596 ) ( 1,680 ) Pension and other postretirement actuarial items ( 6 ) ( 1 ) Other comprehensive loss ( 2,602 ) ( 1,681 ) Comprehensive income 2,040 6,670 Less: comprehensive income attributable to noncontrolling interests 39 115 Comprehensive income attributable to VPG stockholders $ 2,001 $ 6,555 See accompanying notes. -7- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited - In thousands) Six fiscal months ended June 29, 2024 July 1, 2023 Net earnings $ 10,474 $ 15,333 Other comprehensive loss, net of tax: Foreign currency translation adjustment ( 7,488 ) ( 178 ) Pension and other postretirement actuarial items ( 8 ) 2 Other comprehensive loss ( 7,496 ) ( 176 ) Comprehensive income 2,978 15,157 Less: comprehensive (loss) income attributable to noncontrolling interests ( 20 ) 133 Comprehensive income attributable to VPG stockholders $ 2,998 $ 15,024 See accompanying notes. -8- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Cash Flows (Unaudited - In thousands) Six fiscal months ended June 29, 2024 July 1, 2023 Operating activities Net earnings $ 10,474 $ 15,333 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 7,859 7,725 Loss (gain) on sale of property and equipment ( 155 ) 28 Share-based compensation expense 953 1,229 Inventory write-offs for obsolescence 1,163 1,049 Deferred income taxes 483 507 Foreign currency impacts and other items ( 3,602 ) ( 1,557 ) Net changes in operating assets and liabilities: Accounts receivable 4,925 ( 956 ) Inventories ( 4,155 ) ( 5,697 ) Prepaid expenses and other current assets ( 2,733 ) 2,726 Trade accounts payable 1,081 ( 684 ) Other current liabilities ( 1,293 ) ( 593 ) Other non current assets and liabilities, net ( 841 ) ( 292 ) Accrued pension and other postretirement costs, net ( 289 ) ( 606 ) Net cash provided by operating activities 13,870 18,212 Investing activities Capital expenditures ( 5,178 ) ( 6,874 ) Proceeds from sale of property and equipment 347 12 Net cash used in investing activities ( 4,831 ) ( 6,862 ) Financing activities Purchase of treasury stock ( 5,887 ) ( 420 ) Distributions to noncontrolling interests ( 40 ) ( 46 ) Payments of employee taxes on certain share-based arrangements ( 854 ) ( 825 ) Net cash used in financing activities ( 6,781 ) ( 1,291 ) Effect of exchange rate changes on cash and cash equivalents ( 2,095 ) ( 100 ) Increase in cash and cash equivalents 163 9,959 Cash and cash equivalents at beginning of period 83,965 88,562 Cash and cash equivalents at end of period $ 84,128 $ 98,521 Supplemental disclosure of investing transactions: Capital expenditures accrued but not yet paid $ 972 $ 1,118 Supplemental disclosure of financing transactions: Excise tax on net share repurchases accrued but not yet paid 41 — See accompanying notes. -9- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Equity (Unaudited - In thousands, except share amounts) Fiscal quarter ended June 29, 2024 Common Stock Class B Convertible Common Stock Treasury Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Income (Loss) Total VPG Inc. Stockholders' Equity Noncontrolling Interests Total Equity Balance at March 30, 2024 $ 1,334 $ 103 $ ( 20,230 ) $ 202,475 $ 187,957 $ ( 43,763 ) $ 327,876 $ ( 8 ) $ 327,868 Net earnings — — — — 4,603 — 4,603 39 4,642 Other comprehensive loss — — — — — ( 2,602 ) ( 2,602 ) — ( 2,602 ) Share-based compensation expense — — — 292 — — 292 — 292 Restricted stock issuances ( 16,612 shares) 2 — — ( 2 ) — — — — — Purchase of treasury stock. ( 96,710 shares) — — ( 3,132 ) — — — ( 3,132 ) — ( 3,132 ) Excise tax on net share repurchase — — ( 26 ) — — — ( 26 ) — ( 26 ) Distributions to noncontrolling interests — — — — — — — ( 8 ) ( 8 ) Balance at June 29, 2024 $ 1,336 $ 103 $ ( 23,388 ) $ 202,765 $ 192,560 $ ( 46,365 ) $ 327,011 $ 23 $ 327,034 Fiscal quarter ended July 1, 2023 Common Stock Class B Convertible Common Stock Treasury Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Income (Loss) Total VPG Inc. Stockholders' Equity Noncontrolling Interests Total Equity Balance at April 1, 2023 $ 1,328 $ 103 $ ( 11,504 ) $ 201,065 $ 163,323 $ ( 39,395 ) $ 314,920 $ ( 27 ) $ 314,893 Net earnings — — — — 8,236 — 8,236 115 8,351 Other comprehensive loss — — — — — ( 1,681 ) ( 1,681 ) — ( 1,681 ) Share-based compensation expense — — — 548 — — 548 — 548 Restricted stock issuances ( 17,386 shares) 2 — — ( 2 ) — — — — — Purchase of treasury stock. ( 12,312 shares) — — ( 420 ) — — — ( 420 ) — ( 420 ) Distributions to noncontrolling interests — — — — — — — ( 26 ) ( 26 ) Balance at July 1, 2023 $ 1,330 $ 103 $ ( 11,924 ) $ 201,611 $ 171,559 $ ( 41,076 ) $ 321,603 $ 62 $ 321,665 See accompanying notes. -10- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Equity (Unaudited - In thousands, except share amounts) Six Fiscal Months Ended June 29, 2024 Common Stock Class B Convertible Common Stock Treasury Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Income (Loss) Total VPG, Inc. Stockholders' Equity Noncontrolling Interests Total Equity Balance at December 31, 2023 $ 1,330 $ 103 $ ( 17,460 ) $ 202,672 $ 182,066 $ ( 38,869 ) $ 329,842 $ 83 $ 329,925 Net earnings — — — — 10,494 — 10,494 ( 20 ) 10,474 Other comprehensive loss — — — — — ( 7,496 ) ( 7,496 ) — ( 7,496 ) Share-based compensation expense — — — 953 — — 953 — 953 Restricted stock issuances ( 55,219 shares) 6 — — ( 860 ) — — ( 854 ) — ( 854 ) Purchase of treasury stock ( 181,475 shares) — — ( 5,887 ) — — — ( 5,887 ) — ( 5,887 ) Excise tax on net share repurchase — — ( 41 ) — — — ( 41 ) — ( 41 ) Distributions to noncontrolling interests — — — — — — — ( 40 ) ( 40 ) Balance at June 29, 2024 $ 1,336 $ 103 $ ( 23,388 ) $ 202,765 $ 192,560 $ ( 46,365 ) $ 327,011 $ 23 $ 327,034 Six Fiscal Months Ended July 1, 2023 Common Stock Class B Convertible Common Stock Treasury Stock Capital in Excess of Par Value Retained Earnings Accumulated Other Comprehensive Income (Loss) Total VPG, Inc. Stockholders' Equity Noncontrolling Interests Total Equity Balance at December 31, 2022 $ 1,325 $ 103 $ ( 11,504 ) $ 201,164 $ 156,359 $ ( 40,900 ) $ 306,547 $ ( 25 ) $ 306,522 Net earnings — — — — 15,200 — 15,200 133 15,333 Other comprehensive loss — — — — — ( 176 ) ( 176 ) — ( 176 ) Share-based compensation expense — — — 1,229 — — 1,229 — 1,229 Restricted stock issuances ( 47,189 shares) 5 — — ( 782 ) — — ( 777 ) — ( 777 ) Purchase of treasury stock ( 12,312 shares) — — ( 420 ) — — — ( 420 ) — ( 420 ) Purchase of noncontrolling interest — — — — — — — — — Distributions to noncontrolling interests — — — — — — — ( 46 ) ( 46 ) Balance at July 1, 2023 $ 1,330 $ 103 $ ( 11,924 ) $ 201,611 $ 171,559 $ ( 41,076 ) $ 321,603 $ 62 $ 321,665 See accompanying notes. -11- Vishay Precision Group, Inc. Notes to Unaudited Consolidated Condensed Financial Statements Note 1 – Basis of Presentation Background Vishay Precision Group, Inc. (“VPG” or the “Company”) is a global leader in precision measurement and sensing technologies that help power the future by bridging the physical world with the digital one. Many of our specialized sensors, weighing solutions, and measurement systems are “designed-in” by our customers, and address growing applications across a diverse array of industries and markets. Our products are marketed under 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. Interim Financial Statements These unaudited consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial statements and therefore do not include all information and footnotes necessary for the presentation of financial position, results of operations, and cash flows required by accounting principles generally accepted in the United States for complete financial statements. The information furnished reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair summary of the financial position, results of operations, and cash flows for the interim periods presented. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto as of December 31, 2023 and 2022 and for each of the three years in the period ended December 31, 2023, included in VPG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 29, 2024. The results of operations for the fiscal quarter ended June 29, 2024 are not necessarily indicative of the results to be expected for the full year. VPG reports interim financial information for 13-week periods beginning on a Sunday and ending on a Saturday, except for the first quarter, which always begins on January 1, and the fourth quarter, which always ends on December 31. The four fiscal quarters in 2024 and 2023 end on the following dates: 2024 2023 Quarter 1 March 30, April 1, Quarter 2 June 29, July 1, Quarter 3 September 28, September 30, Quarter 4 December 31, December 31, Recent Accounting Pronouncements The Company evaluates the applicability and impact of all Accounting Standards Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB"). Recent accounting pronouncements not yet adopted: In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU also allows, in addition to the measure that is most consistent with U.S. GAAP, the disclosure of additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources. The ASU is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires disclosure of specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold. The amendment also includes other changes to improve the effectiveness of income tax disclosures, including further disaggregation of income taxes paid for individually significant jurisdictions. This ASU is effective for annual periods beginning after December 15, 2024. Adoption of this ASU should be applied on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures. -12- Note 2 – Revenues (continued) Note 2 – Revenues Revenue Recognition The following table disaggregates net revenue by geographic region from contracts with customers based on net revenues generated by subsidiaries within that geographic location (in thousands) : Fiscal quarter ended June 29, 2024 Fiscal quarter ended July 1, 2023 Sensors Weighing Solutions Measurement Systems Total Sensors Weighing Solutions Measurement Systems Total United States $ 9,984 $ 11,010 $ 13,009 $ 34,003 $ 14,555 $ 13,228 $ 12,872 $ 40,655 Germany 7,119 2,737 618 10,474 7,473 2,636 1,134 11,243 Other Europe 1,267 10,504 117 11,888 1,389 11,438 177 13,004 Israel 5,872 87 — 5,959 4,131 50 — 4,181 Asia 4,626 3,043 1,649 9,318 8,718 3,909 1,494 14,121 Canada — 67 5,650 5,717 — — 7,598 7,598 Total $ 28,868 $ 27,448 $ 21,043 $ 77,359 $ 36,266 $ 31,261 $ 23,275 $ 90,802 Six Fiscal Months Ended June 29, 2024 Six Fiscal Months Ended July 1, 2023 Sensors Weighing Solutions Measurement Systems Total Sensors Weighing Solutions Measurement Systems Total United States $ 19,864 $ 22,337 $ 24,453 $ 66,654 $ 27,229 $ 28,107 $ 23,533 $ 78,869 Germany 14,657 4,988 2,900 22,545 16,961 5,470 4,271 26,702 Other Europe 2,804 22,484 260 25,548 2,723 22,430 306 25,459 Israel 10,059 164 — 10,223 8,094 126 — 8,220 Asia 10,899 6,218 5,095 22,212 17,985 6,987 3,547 28,519 Canada — 101 10,859 10,960 — — 11,897 11,897 Total $ 58,283 $ 56,292 $ 43,567 $ 158,142 $ 72,992 $ 63,120 $ 43,554 $ 179,666 The following table disaggregates net revenue from contracts with customers by market sector (in thousands) . Fiscal quarter ended Six fiscal months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Test & Measurement $ 13,968 $ 18,705 $ 29,618 $ 37,369 Avionics, Military & Space 6,199 8,284 13,188 19,991 Transportation 11,813 13,031 26,183 25,503 Other Markets 17,953 18,417 33,924 37,722 Industrial Weighing 9,629 12,027 19,443 23,053 General Industrial 4,845 5,417 10,164 10,215 Steel 12,952 14,921 25,622 25,813 Total $ 77,359 $ 90,802 $ 158,142 $ 179,666 Contract Assets & Liabilities Contract assets are established when revenues are recognized prior to a contractual payment due from the customer. When a payment becomes due based on the contract terms, the Company will reduce the contract asset and record a receivable. Contract liabilities are deferred revenues that are recorded when cash payments are received or due in advance of our performance obligations. Our payment terms vary by the type and location of the products offered. The term between invoicing and when payment is due is not significant. -13- Note 2 – Revenues (continued) The outstanding contract assets and liability accounts were as follows (in thousands) : Contract Asset Contract Liability Unbilled Revenue Accrued Customer Advances Balance at December 31, 2023 $ 2,989 $ 8,712 Balance at June 29, 2024 4,442 8,347 Increase (decrease) $ 1,453 $ ( 365 ) The amount of revenue recognized during the six fiscal months ended June 29, 2024 that was included in the contract liability balance at December 31, 2023 was $ 4.6 million. Note 3 – Goodwill The Company tests the goodwill in each of its goodwill reporting units for impairment at least annually, as of the first day of its fourth quarter, and whenever events or changes in circumstances occur indicating that a possible impairment may have been incurred. The change in the carrying amount of goodwill by segment is as follows (in thousands): Total Measurement Systems Weighing Solutions KELK Acquisition DSI Acquisition DTS Acquisition Stress-Tek Acquisition Balance at December 31, 2023 $ 45,734 $ 6,488 $ 16,902 $ 16,033 $ 6,311 Foreign currency translation adjustment $ ( 243 ) $ ( 229 ) $ ( 14 ) $ — $ — Balance at June 29, 2024 $ 45,491 $ 6,259 $ 16,888 $ 16,033 $ 6,311 Note 4 – Leases The Company primarily leases office and manufacturing facilities in addition to vehicles, which have remaining terms ranging from less than one year to twelve years, four months The Company has no finance leases. Leases recorded on the balance sheet consist of the following (in thousands) : Leases June 29, 2024 December 31, 2023 Assets Operating lease right of use asset $ 26,084 $ 26,953 Liabilities Operating lease - current $ 4,089 $ 4,004 Operating lease - non-current $ 21,297 $ 22,625 Other information related to lease term and discount rate is as follows: June 29, 2024 Operating leases weighted average remaining lease term (in years) 7.40 years Operating leases weighted average discount rate 5.02 % The components of lease expense are as follows (in thousands) : -14- Note 4 - Leases (continued) Fiscal quarter ended Six Fiscal Months Ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Operating lease cost $ 1,321 $ 1,247 $ 2,704 $ 2,491 Short-term lease cost 7 45 25 91 Sublease income ( 111 ) ( 98 ) ( 224 ) ( 198 ) Total net lease cost $ 1,217 $ 1,194 $ 2,505 $ 2,384 Right of use assets obtained in exchange for new operating lease liability during the six fiscal months ended June 29, 2024 were $ 0.2 million. The Company paid $ 1.3 million and $ 2.5 million for its operating leases for each of the six fiscal months ended June 29, 2024 and July 1, 2023, which are included in operating cash flows on the consolidated condensed statements of cash flows. Undiscounted maturities of operating lease payments as of June 29, 2024 are summarized as follows (in thousands) : 2024 (excluding the six months ended June 29, 2024) $ 2,574 2025 4,725 2026 4,029 2027 3,644 2028 3,425 Thereafter 11,859 Total future minimum lease payments $ 30,256 Less: amount representing interest ( 4,870 ) Present value of future minimum lease payments $ 25,386 Note 5 – Income Taxes VPG calculates the tax provision for interim periods using an estimated annual effective tax rate methodology based on projected full-year pre-tax earnings among the taxing jurisdictions in which we operate with adjustments for discrete items. The effective tax rate was 33.3 % and 28.8 % for the fiscal quarter ended June 29, 2024, and July 1, 2023, respectively. The effective tax rate for the fiscal quarter ended June 29, 2024 differs from the federal statutory rate of 21% due to foreign income taxed at different tax rates and changes in our valuation allowance on deferred tax assets. The effective tax rate for the fiscal quarter ended July 1, 2023 differs from the federal statutory rate of 21% due to foreign income taxed at different tax rates and changes in our valuation allowance on deferred tax assets. The Company and its subsidiaries are subject to income taxes imposed by the U.S., various states, and the foreign jurisdictions in which we operate. Each jurisdiction establishes rules that set forth the years which are subject to examination by its tax authorities. While the Company believes the tax positions taken on its tax returns for each jurisdiction are supportable, they may still be challenged by the jurisdiction's tax authorities. In anticipation of such challenges, the Company has established reserves for tax-related uncertainties. These liabilities are based on the Company’s best estimate of the potential tax exposures in each respective jurisdiction. It may take a number of years for a final tax liability in a jurisdiction to be determined, particularly in the event of an audit. If an uncertain matter is determined favorably, there could be a reduction in the Company’s tax expense. An unfavorable determination could increase tax expense and could require a cash payment, including interest and penalties. Note 6 – Long-Term Debt Long-term debt consists of the following (in thousands) : June 29, 2024 December 31, 2023 2020 Credit Agreement - Revolving Facility $ 32,000 $ 32,000 Deferred financing costs ( 86 ) ( 144 ) Total long-term debt $ 31,914 $ 31,856 Less: current portion 31,914 — Long-term debt, less: current portion $ — $ 31,856 -15- Note 6 - Long-Term Debt (continued) 2020 Credit Agreement 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 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. Because the Credit Agreement expires less than one year from the end of the first fiscal quarter of 2024, the outstanding balance of long-term debt has been reclassified as a current liability. 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. Additional customary fees apply with respect to letters of credit. Note 7 – Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss), net of tax, consist of the following (in thousands) : Foreign Currency Translation Adjustment Pension and Other Postretirement Actuarial Items Total Balance at January 1, 2024 $ ( 39,262 ) $ 393 $ ( 38,869 ) Other comprehensive income before reclassifications ( 7,488 ) — ( 7,488 ) Amounts reclassified from accumulated other comprehensive income — ( 8 ) ( 8 ) Balance at June 29, 2024 $ ( 46,750 ) $ 385 $ ( 46,365 ) Foreign Currency Translation Adjustment Pension and Other Postretirement Actuarial Items Total Balance at January 1, 2023 $ ( 41,489 ) $ 589 $ ( 40,900 ) Other comprehensive income before reclassifications ( 178 ) — ( 178 ) Amounts reclassified from accumulated other comprehensive income — 2 2 Balance at July 1, 2023 $ ( 41,667 ) $ 591 $ ( 41,076 ) Reclassifications of pension and other postretirement actuarial items out of accumulated other comprehensive income (loss) are included in the computation of net periodic benefit cost (see Note 8). Note 8 – Pension and Other Postretirement Benefits Employees of VPG participate in various defined benefit pension and other postretirement benefit ("OPEB") plans. The following table sets forth the components of the net periodic benefit cost for the Company's defined benefit pension and OPEB plans (in thousands) : -16- Note 8 - Pension and Other Postretirement Benefits ( continued) Fiscal quarter ended June 29, 2024 Fiscal quarter ended July 1, 2023 Pension Plans OPEB Plans Pension Plans OPEB Plans Net service cost $ 66 $ 4 $ 68 $ 4 Interest cost 190 27 192 28 Expected return on plan assets ( 209 ) — ( 214 ) — Amortization of actuarial losses (gains) 4 ( 3 ) 7 ( 6 ) Net periodic benefit cost $ 51 $ 28 $ 53 $ 26 Six Fiscal Months Ended June 29, 2024 Six Fiscal Months Ended July 1, 2023 Pension Plans OPEB Plans Pension Plans OPEB Plans Net service cost $ 133 $ 8 $ 137 $ 8 Interest cost $ 381 $ 54 $ 382 $ 56 Expected return on plan assets $ ( 419 ) $ — $ ( 426 ) $ — Amortization of actuarial losses (gains) $ 9 $ ( 6 ) $ 15 $ ( 12 ) Net periodic benefit cost $ 104 $ 56 $ 108 $ 52 Note 9 – Share-Based Compensation The Vishay Precision Group, Inc. 2022 Stock Incentive Plan (the "2022 plan") permits issuance of up to 608,000 shares of common stock. At June 29, 2024, the Company had reserved 444,824 shares of common stock for future grants of equity awards (restricted stock, unrestricted stock, restricted stock units ("RSUs"), or stock options) pursuant to the 2022 plan. If any outstanding awards are forfeited by the holder or canceled by the Company, the underlying shares would be available for re-grant to others. If shares are withheld for payment of taxes, those shares do not become available for grant under the 2022 plan. On March 7, 2024 and in accordance with their respective employment agreements, VPG’s three executive officers were granted annual equity awards in the form of RSUs, of which 50 % are performance-based. The awards have an aggregate target grant-date fair value of $ 1.7 million and were comprised of 49,190 RSUs. Fifty percent of these awards will vest on January 1, 2027, subject to the executives’ continued employment. The performance-based portion of the RSUs will also vest on January 1, 2027, subject to the executives' continued employment and the satisfaction of certain performance objectives relating to three-year cumulative “adjusted free cash flow” and "net earnings goals", each weighted equally. On March 7, 2024, certain non-executive VPG employees were granted annual equity awards in the form of RSUs. Certain employees received awards, of which 75 % are performance-based and certain employees received awards of which 50 % are performance-based. The awards have an aggregate grant-date fair value of $ 0.6 million and were comprised of 16,821 RSUs. The non-performance portion of these awards ( twenty-five percent for certain employees and fifty percent for certain employees) will vest on January 1, 2027, subject to the employees' continued employment. The performance-based portion of the RSUs will also vest on January 1, 2027, 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 22, 2024, and in accordance with the Company's 2024 Non-Employee Director Compensation Plan, the Board of Directors approved the issuance of an aggregate of 14,826 RSUs to the independent board members of the Board of Directors. The awards have an aggregate grant-date fair value of $ 0.5 million and will vest on or before the 2025 Annual Stockholders Meeting in May 2025, subject to each applicable director's continued service on the Board of Directors. Vesting of equity awards is subject to acceleration under certain circumstances. -17- Note 9 - Share-Based Compensation (continued) The amount of compensation cost related to share-based payment transactions is measured based on the grant-date fair value of the equity instruments issued. VPG determines compensation cost for RSUs based on the grant-date fair value of the underlying common stock. The Company recognizes compensation cost for RSUs that are expected to vest and for which performance criteria are expected to be met. The following table summarizes share-based compensation expense recognized (in thousands) : Fiscal quarter ended Six fiscal months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Share-based compensation expense $ 292 $ 548 $ 953 $ 1,229 During the second quarter of 2024, a net adjustment of $ 0.3 million decreasing share-based compensation expense was recorded based on the evaluation of performance objectives associated with awards granted in 2022, 2023 and 2024. It was determined that certain objectives were not likely to be fully met necessitating a reversal of certain compensation expenses associated with those awards. Note 10 – Segment Information VPG reports in three reporting segments: Sensors, Weighing Solutions, and Measurement Systems. The Sensors 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 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. The CODM evaluates each operating segment's performance. The evaluation of the segment's 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 following table sets forth reporting segment information (in thousands) : -18- Note 10 - Segment Information (continued) Fiscal quarter ended Six fiscal months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Net revenues: Sensors $ 28,869 $ 36,266 $ 58,283 $ 72,992 Weighing Solutions 27,447 31,261 56,292 63,120 Measurement Systems 21,043 23,275 43,567 43,554 Total $ 77,359 $ 90,802 $ 158,142 $ 179,666 Gross profit: Sensors $ 11,066 $ 14,549 $ 21,798 $ 29,693 Weighing Solutions 10,310 12,107 21,577 23,236 Measurement Systems 11,031 12,056 24,125 22,982 Total $ 32,407 $ 38,712 $ 67,500 $ 75,911 Reconciliation of segment operating income to consolidated results: Sensors $ 6,125 $ 9,567 $ 11,622 $ 19,500 Weighing Solutions 4,138 6,161 8,935 11,501 Measurement Systems 3,555 4,769 9,940 8,641 Unallocated G&A expenses ( 7,912 ) ( 8,540 ) ( 16,891 ) ( 17,645 ) Restructuring costs — ( 162 ) ( 782 ) ( 278 ) Operating income $ 5,906 $ 11,795 $ 12,824 $ 21,719 Restructuring costs: Sensors $ — $ — $ ( 542 ) $ — Weighing Solutions — ( 162 ) — ( 196 ) Measurement Systems — — — ( 32 ) Corporate/Other — — ( 240 ) ( 50 ) $ — $ ( 162 ) $ ( 782 ) $ ( 278 ) Products are transferred between segments on a basis intended to reflect, as nearly as practicable, the market value of the products. The table below summarizes intersegment sales (in thousands) : Fiscal quarter ended Six fiscal months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Sensors to Weighing Solutions $ 522 $ 433 $ 991 $ 761 Sensors to Measurement Systems 6 12 13 48 -19- Note 11 – Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share attributable to VPG stockholders (in thousands, except earnings per share) : Fiscal quarter ended Six fiscal months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Numerator: Numerator for basic earnings per share: Net earnings attributable to VPG stockholders $ 4,603 $ 8,236 $ 10,494 $ 15,200 Denominator: Denominator for basic earnings per share: Weighted average shares 13,348 13,601 13,376 13,593 Effect of dilutive securities: Restricted stock units 41 69 52 68 Dilutive potential common shares 41 69 52 68 Denominator for diluted earnings per share: Adjusted weighted average shares 13,389 13,670 13,428 13,661 Basic earnings per share attributable to VPG stockholders $ 0.34 $ 0.61 $ 0.78 $ 1.12 Diluted earnings per share attributable to VPG stockholders $ 0.34 $ 0.60 $ 0.78 $ 1.11 Note 12 – Additional Financial Statement Information Other Income (Expense) Other The caption “Other” on the consolidated condensed statements of operations consists of the following (in thousands) : Fiscal quarter ended Six fiscal months ended June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Foreign currency exchange gain $ 1,287 $ 793 $ 2,877 $ 855 Interest income 499 356 822 722 Pension expense ( 10 ) ( 71 ) ( 20 ) ( 145 ) Other ( 75 ) ( 59 ) ( 118 ) ( 138 ) $ 1,701 $ 1,019 $ 3,561 $ 1,294 Foreign currency exchange gains represent the impact of changes in foreign currency exchange rates. For the fiscal quarter and six fiscal months ended June 29, 2024, the change in foreign currency exchange gains and losses during the periods, as compared to the prior year periods, is largely due to exposure to currency fluctuations with the Japanese yen, Israeli shekel and the Canadian dollar. -20- Note 12 – Additional Financial Statement Information ( continued) For the fiscal quarter and six fiscal months ended July 1, 2023, the change in foreign currency exchange gains and losses during the periods, as compared to the prior year periods, is largely due to exposure to currency fluctuations with the Israeli shekel, the Canadian dollar, and the British pound. Other Accrued Expenses Other accrued expenses consist of the following (in thousands) : June 29, 2024 December 31, 2023 Customer advance payments $ 8,347 $ 8,712 Accrued restructuring 171 249 Goods received, not yet invoiced 1,902 2,837 Accrued taxes, other than income taxes 1,392 1,370 Accrued commissions 4,121 4,077 Accrued professional fees 1,954 1,343 Accrued technical warranty 767 770 Current accrued pensions and other post retirement costs 510 511 Other 2,377 2,558 $ 21,541 $ 22,427 Note 13 – Fair Value Measurements ASC Topic 820, Fair Value Measurement, establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3: Unobservable inputs that reflect the Company’s own assumptions. An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis (in thousands) : Fair value measurements at reporting date using: Total Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs June 29, 2024 Assets Assets held in rabbi trusts $ 6,138 $ 97 $ 6,041 $ — December 31, 2023 Assets Assets held in rabbi trusts $ 5,841 $ 59 $ 5,782 $ — The Company maintains non-qualified trusts, referred to as “rabbi” trusts, to fund payments under deferred compensation and non-qualified pension plans. Rabbi trust assets consist primarily of marketable securities, classified as available-for-sale money -21- Note 13 – Fair Value Measurements (continued) market funds at June 29, 2024 and December 31, 2023, and company-owned life insurance assets. The marketable securities held in the rabbi trusts are valued using quoted market prices on the last business day of the period. The company-owned life insurance assets are valued in consultation with the Company’s insurance brokers using the value of underlying assets of the insurance contracts. The fair value measurement of the cash equivalents held in the rabbi trust are considered a Level 1 measurement and the measurement of the company-owned life insurance assets is considered a Level 2 measurement within the fair value hierarchy. The fair value of the long-term debt, excluding capitalized deferred financing costs, at June 29, 2024 and December 31, 2023 approximates its carrying value as the revolving debt is reset on a monthly basis based on current market rates, plus a base rate as specified in the debt agreement. The fair value of long-term debt is considered a Level 2 measurement within the fair value hierarchy. The Company’s financial instruments include cash and cash equivalents, accounts receivable, short-term notes payable, and accounts payable. The carrying amounts for these financial instruments reported in the consolidated condensed balance sheets approximate their fair values. Note 14 – Restructuring Costs Restructuring costs reflect the cost reduction programs implemented by the Company. Restructuring costs are expensed during the period in which the Company determines it will incur those costs and all requirements for accrual are met. Because these costs are recorded based upon estimates, actual expenditures for the restructuring activities may differ from the initially recorded costs. If the initial estimates are too low or too high, the Company could be required either to record additional expense in future periods or to reverse part of the previously recorded charges. The Company recorded $ 0.0 million and $ 0.2 million of restructuring costs during the fiscal quarter ended June 29, 2024 and July 1, 2023, respectively and $ 0.8 million and $ 0.3 million of restructuring costs during the six fiscal months ended June 29, 2024 and July 1, 2023, respectively. Restructuring costs were comprised primarily of employee termination costs, including severance and statutory retirement allowances, and were incurred in connection with various cost reduction programs. The following table summarizes recent activity related to all restructuring programs. The accrued restructuring liability balance as of June 29, 2024 and December 31, 2023, respectively, is included in Other accrued expenses in the accompanying consolidated condensed balance sheets (in thousands) : Balance at December 31, 2023 $ 249 Restructuring charges in 2024 782 Cash payments ( 723 ) Foreign currency exchange translation ( 137 ) Balance at June 29, 2024 $ 171 Note 15 – Stockholder's Equity On August 8, 2022, the Board of Directors (the “Board”) of the Company authorized the repurchase of up to 600,000 shares of the Company’s outstanding common stock (the “Stock Repurchase Plan”). The Stock Repurchase Plan was originally set to expire on August 11, 2023. On August 8, 2023, the Company announced that its Board of Directors extended the term of the previously approved stock repurchase plan to August 9, 2024. From August 8, 2022 to June 29, 2024, the Company had repurchased an aggregate of 455,101 shares of its common stock under the stock repurchase plan for consideration of $ 14.5 million. Note 16 – Commitments and Contingencies During the second quarter of 2024, the Israel Tax Authority has issued a Value Added Tax (VAT) assessment to the Company, in the amount of ILS 8.4 million (approximately $ 2.2 million), pertaining to claims of VAT between the years 2019 to 2023. The Company believes that the liability for the assessment is not probable and intends to file an appeal against this assessment. Given the early stage of this matter, the Company is currently unable to predict the likely outcome or estimate the potential financial impact, if any, of this matter. -22-