Vishay Precision Group, Inc. 10-Q

Item 1. FINANCIAL STATEMENTS VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) September 28, 2024 December 31, 2023 (Unaudited) Assets Current assets: Cash and cash equivalents $ 81,077 $ 83,965 Accounts receivable, net 52,821 56,438 Inventories: Raw materials 34,027 33,973 Work in process 28,275 26,594 Finished goods 26,000 27,572 Inventories, net 88,302 88,139 Prepaid expenses and other current assets 20,137 14,520 Total current assets 242,337 243,062 Property and equipment: Land 4,186 4,154 Buildings and improvements 73,759 72,952 Machinery and equipment 133,281 131,738 Software 10,198 9,619 Construction in progress 10,761 11,379 Accumulated depreciation ( 145,391 ) ( 139,206 ) Property and equipment, net 86,794 90,636 Goodwill 45,610 45,734 Intangible assets, net 41,807 44,634 Operating lease right-of-use assets 25,239 26,953 Other assets 20,739 20,547 Total assets $ 462,526 $ 471,566 Continues on the following page. -3- VISHAY PRECISION GROUP, INC. Consolidated Condensed Balance Sheets (In thousands) September 28, 2024 December 31, 2023 Liabilities and equity (Unaudited) Current liabilities: Trade accounts payable $ 9,986 $ 11,698 Payroll and related expenses 17,819 18,971 Other accrued expenses 21,989 22,427 Income taxes 1,150 4,524 Current portion of operating lease liabilities 4,053 4,004 Total current liabilities 54,997 61,624 Long-term debt 31,383 31,856 Deferred income taxes 3,645 3,490 Operating lease liabilities 20,645 22,625 Other liabilities 14,145 14,770 Accrued pension and other postretirement costs 7,054 7,276 Total liabilities 131,869 141,641 Equity: Common stock 1,336 1,330 Class B convertible common stock 103 103 Treasury stock ( 25,335 ) ( 17,460 ) Capital in excess of par value 202,872 202,672 Retained earnings 191,209 182,066 Accumulated other comprehensive loss ( 39,564 ) ( 38,869 ) Total Vishay Precision Group, Inc. stockholders' equity 330,621 329,842 Noncontrolling interests 36 83 Total equity 330,657 329,925 Total liabilities and equity $ 462,526 $ 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 September 28, 2024 September 30, 2023 Net revenues $ 75,727 $ 85,854 Costs of products sold 45,467 49,919 Gross profit 30,260 35,935 Selling, general and administrative expenses 26,337 26,558 Restructuring costs 82 1,153 Operating income 3,841 8,224 Other (expense) income : Interest expense ( 648 ) ( 1,119 ) Other ( 2,646 ) 1,671 Other (expense) income ( 3,294 ) 552 Income before taxes 546 8,776 Income tax expense 1,874 2,419 Net (loss) earnings ( 1,328 ) 6,357 Less: net earnings attributable to noncontrolling interests 23 77 Net (loss) earnings attributable to VPG stockholders $ ( 1,351 ) $ 6,280 Basic (loss) earnings per share attributable to VPG stockholders $ ( 0.10 ) $ 0.46 Diluted (loss) earnings per share attributable to VPG stockholders $ ( 0.10 ) $ 0.46 Weighted average shares outstanding - basic 13,254 13,600 Weighted average shares outstanding - diluted 13,254 13,686 See accompanying notes. -5- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Operations (Unaudited - In thousands, except per share amounts) Nine fiscal months ended September 28, 2024 September 30, 2023 Net revenues $ 233,869 $ 265,520 Costs of products sold 136,108 153,674 Gross profit 97,761 111,846 Selling, general and administrative expenses 80,232 80,472 Restructuring costs 864 1,431 Operating income 16,665 29,943 Other (expense) income : Interest expense ( 1,925 ) ( 3,195 ) Other 915 2,965 Other (expense) income ( 1,010 ) ( 230 ) Income before taxes 15,654 29,713 Income tax expense 6,508 8,023 Net earnings 9,146 21,690 Less: net earnings attributable to noncontrolling interests 3 210 Net earnings attributable to VPG stockholders $ 9,143 $ 21,480 Basic earnings per share attributable to VPG stockholders $ 0.68 $ 1.58 Diluted earnings per share attributable to VPG stockholders $ 0.68 $ 1.57 Weighted average shares outstanding - basic 13,367 13,596 Weighted average shares outstanding - diluted 13,405 13,670 See accompanying notes. -6- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited - In thousands) Fiscal quarter ended September 28, 2024 September 30, 2023 Net (loss) earnings $ ( 1,328 ) $ 6,357 Other comprehensive income (loss), net of tax: Foreign currency translation adjustment 6,809 ( 3,653 ) Pension and other postretirement actuarial items ( 8 ) — Other comprehensive income (loss) 6,801 ( 3,653 ) Comprehensive income 5,473 2,704 Less: comprehensive income attributable to noncontrolling interests 23 77 Comprehensive income attributable to VPG stockholders $ 5,450 $ 2,627 See accompanying notes. -7- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Comprehensive Income (Loss) (Unaudited - In thousands) Nine fiscal months ended September 28, 2024 September 30, 2023 Net earnings $ 9,146 $ 21,690 Other comprehensive loss, net of tax: Foreign currency translation adjustment ( 679 ) ( 3,831 ) Pension and other postretirement actuarial items ( 16 ) 2 Other comprehensive loss ( 695 ) ( 3,829 ) Comprehensive income 8,451 17,861 Less: comprehensive income attributable to noncontrolling interests 3 210 Comprehensive income attributable to VPG stockholders $ 8,448 $ 17,651 See accompanying notes. -8- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Cash Flows (Unaudited - In thousands) Nine fiscal months ended September 28, 2024 September 30, 2023 Operating activities Net earnings $ 9,146 $ 21,690 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 11,771 11,559 Loss (gain) on sale of property and equipment ( 154 ) 38 Share-based compensation expense 1,060 1,885 Inventory write-offs for obsolescence 1,722 1,567 Deferred income taxes 512 691 Foreign currency impacts and other items ( 1,213 ) ( 2,755 ) Net changes in operating assets and liabilities: Accounts receivable 3,340 1,604 Inventories ( 1,816 ) ( 7,811 ) Prepaid expenses and other current assets ( 5,576 ) 1,990 Trade accounts payable ( 743 ) ( 1,151 ) Other current liabilities ( 3,921 ) ( 1,082 ) Other non current assets and liabilities, net ( 767 ) ( 170 ) Accrued pension and other postretirement costs, net ( 322 ) ( 945 ) Net cash provided by operating activities 13,039 27,110 Investing activities Capital expenditures ( 6,965 ) ( 9,848 ) Proceeds from sale of property and equipment 647 50 Purchase of short term investment — ( 1,000 ) Net cash used in investing activities ( 6,318 ) ( 10,798 ) Financing activities Payments on revolving facility — ( 7,000 ) Debt issuance costs ( 569 ) — Purchase of treasury stock ( 7,815 ) ( 1,196 ) Distributions to noncontrolling interests ( 50 ) ( 138 ) Payments of employee taxes on certain share-based arrangements ( 860 ) ( 825 ) Net cash used in financing activities ( 9,294 ) ( 9,159 ) Effect of exchange rate changes on cash and cash equivalents ( 315 ) ( 1,083 ) (Decrease) Increase in cash and cash equivalents ( 2,888 ) 6,070 Cash and cash equivalents at beginning of period 83,965 88,562 Cash and cash equivalents at end of period $ 81,077 $ 94,632 Supplemental disclosure of investing transactions: Capital expenditures accrued but not yet paid $ 1,354 $ 1,204 Supplemental disclosure of financing transactions: Excise tax on net share repurchases accrued but not yet paid 60 — See accompanying notes. -9- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Equity (Unaudited - In thousands, except share amounts) Fiscal quarter ended September 28, 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 June 29, 2024 $ 1,336 $ 103 $ ( 23,388 ) $ 202,765 $ 192,560 $ ( 46,365 ) $ 327,011 $ 23 $ 327,034 Net (loss) earnings — — — — ( 1,351 ) — ( 1,351 ) 23 ( 1,328 ) Other comprehensive income — — — — — 6,801 6,801 — 6,801 Share-based compensation expense — — — 107 — — 107 — 107 Purchase of treasury stock. ( 63,227 shares) — — ( 1,928 ) — — — ( 1,928 ) — ( 1,928 ) Excise tax on net share repurchase — — ( 19 ) — — — ( 19 ) — ( 19 ) Distributions to noncontrolling interests — — — — — — — ( 10 ) ( 10 ) Balance at September 28, 2024 $ 1,336 $ 103 $ ( 25,335 ) $ 202,872 $ 191,209 $ ( 39,564 ) $ 330,621 $ 36 $ 330,657 Fiscal quarter ended September 30, 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 July 1, 2023 $ 1,330 $ 103 $ ( 11,924 ) $ 201,611 $ 171,559 $ ( 41,076 ) $ 321,603 $ 62 $ 321,665 Net earnings — — — — 6,280 — 6,280 77 6,357 Other comprehensive loss — — — — — ( 3,653 ) ( 3,653 ) — ( 3,653 ) Share-based compensation expense — — — 656 — — 656 — 656 Purchase of treasury stock. ( 22,894 shares) — — ( 776 ) — — — ( 776 ) — ( 776 ) Distributions to noncontrolling interests — — — — — — — ( 92 ) ( 92 ) Balance at September 30, 2023 $ 1,330 $ 103 $ ( 12,700 ) $ 202,267 $ 177,839 $ ( 44,729 ) $ 324,110 $ 47 $ 324,157 See accompanying notes. -10- VISHAY PRECISION GROUP, INC. Consolidated Condensed Statements of Equity (Unaudited - In thousands, except share amounts) Nine Fiscal Months Ended September 28, 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 — — — — 9,143 — 9,143 3 9,146 Other comprehensive loss — — — — — ( 695 ) ( 695 ) — ( 695 ) Share-based compensation expense — — — 1,060 — — 1,060 — 1,060 Restricted stock issuances ( 55,219 shares) 6 — — ( 860 ) — — ( 854 ) — ( 854 ) Purchase of treasury stock ( 244,702 shares) — — ( 7,815 ) — — — ( 7,815 ) — ( 7,815 ) Excise tax on net share repurchase — — ( 60 ) — — — ( 60 ) — ( 60 ) Distributions to noncontrolling interests — — — — — — — ( 50 ) ( 50 ) Balance at September 28, 2024 $ 1,336 $ 103 $ ( 25,335 ) $ 202,872 $ 191,209 $ ( 39,564 ) $ 330,621 $ 36 $ 330,657 Nine Fiscal Months Ended September 30, 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 — — — — 21,480 — 21,480 210 21,690 Other comprehensive loss — — — — — ( 3,829 ) ( 3,829 ) — ( 3,829 ) Share-based compensation expense — — — 1,885 — — 1,885 — 1,885 Restricted stock issuances ( 47,189 shares) 5 — — ( 782 ) — — ( 777 ) — ( 777 ) Purchase of treasury stock ( 35,206 shares) — — ( 1,196 ) — — — ( 1,196 ) — ( 1,196 ) Distributions to noncontrolling interests — — — — — — — ( 138 ) ( 138 ) Balance at September 30, 2023 $ 1,330 $ 103 $ ( 12,700 ) $ 202,267 $ 177,839 $ ( 44,729 ) $ 324,110 $ 47 $ 324,157 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 consolidated condensed 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 September 28, 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 1 – Basis of Presentation (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 September 28, 2024 Fiscal quarter ended September 30, 2023 Sensors Weighing Solutions Measurement Systems Total Sensors Weighing Solutions Measurement Systems Total United States $ 10,068 $ 11,154 $ 14,751 $ 35,973 $ 11,860 $ 12,622 $ 15,520 $ 40,002 Germany 6,193 1,913 181 8,287 6,731 2,198 674 9,603 Other Europe 1,282 9,104 197 10,583 1,564 11,006 120 12,690 Israel 5,179 102 — 5,281 4,773 89 — 4,862 Asia 5,479 2,901 1,778 10,158 7,604 3,054 2,899 13,557 Canada — — 5,445 5,445 — — 5,140 5,140 Total $ 28,201 $ 25,174 $ 22,352 $ 75,727 $ 32,532 $ 28,969 $ 24,353 $ 85,854 Nine Fiscal Months Ended September 28, 2024 Nine Fiscal Months Ended September 30, 2023 Sensors Weighing Solutions Measurement Systems Total Sensors Weighing Solutions Measurement Systems Total United States $ 29,931 $ 33,491 $ 39,204 $ 102,626 $ 39,089 $ 40,729 $ 39,053 $ 118,871 Germany 20,850 6,901 3,081 30,832 23,693 7,668 4,945 36,306 Other Europe 4,086 31,588 458 36,132 4,286 33,437 425 38,148 Israel 15,238 267 — 15,505 12,867 215 — 13,082 Asia 16,378 9,119 6,873 32,370 25,589 10,041 6,446 42,076 Canada — 101 16,303 16,404 — — 17,037 17,037 Total $ 86,483 $ 81,467 $ 65,919 $ 233,869 $ 105,524 $ 92,090 $ 67,906 $ 265,520 The following table disaggregates net revenue from contracts with customers by market sector (in thousands) . Fiscal quarter ended Nine fiscal months ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Test & Measurement $ 14,337 $ 17,080 $ 43,955 $ 54,449 Avionics, Military & Space 8,581 8,294 21,769 28,285 Transportation 12,802 15,490 38,985 40,993 Other Markets 14,826 16,402 48,750 54,124 Industrial Weighing 8,578 10,533 28,021 33,586 General Industrial 4,538 4,643 14,702 14,858 Steel 12,065 13,412 37,687 39,225 Total $ 75,727 $ 85,854 $ 233,869 $ 265,520 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 September 28, 2024 5,005 8,272 Increase (decrease) $ 2,016 $ ( 440 ) The amount of revenue recognized during the nine fiscal months ended September 28, 2024 that was included in the contract liability balance at December 31, 2023 was $ 7.2 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 $ ( 124 ) $ ( 126 ) $ 2 $ — $ — Balance at September 28, 2024 $ 45,610 $ 6,362 $ 16,904 $ 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 September 28, 2024 December 31, 2023 Assets Operating lease right of use asset $ 25,239 $ 26,953 Liabilities Operating lease - current $ 4,053 $ 4,004 Operating lease - non-current $ 20,645 $ 22,625 Other information related to lease term and discount rate is as follows: September 28, 2024 Operating leases weighted average remaining lease term (in years) 7.23 years Operating leases weighted average discount rate 5.03 % The components of lease expense are as follows (in thousands) : -14- Note 4 - Leases (continued) Fiscal quarter ended Nine Fiscal Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Operating lease cost $ 1,319 $ 1,331 $ 4,024 $ 3,822 Short-term lease cost 6 24 31 115 Sublease income ( 111 ) ( 95 ) ( 334 ) ( 293 ) Total net lease cost $ 1,214 $ 1,260 $ 3,721 $ 3,644 Right of use assets obtained in exchange for new operating lease liability during the nine fiscal months ended September 28, 2024 were $ 1.5 million. The Company paid $ 3.9 million and $ 3.8 million for its operating leases for each of the nine fiscal months ended September 28, 2024 and September 30, 2023, which are included in operating cash flows on the consolidated condensed statements of cash flows. Undiscounted maturities of operating lease payments as of September 28, 2024 are summarized as follows (in thousands) : 2024 (excluding the nine months ended September 28, 2024) $ 1,302 2025 4,787 2026 4,099 2027 3,698 2028 3,465 Thereafter 11,953 Total future minimum lease payments $ 29,304 Less: amount representing interest ( 4,606 ) Present value of future minimum lease payments $ 24,698 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 343.2 % and 27.6 % for the fiscal quarter ended September 28, 2024, and September 30, 2023, respectively. The effective tax rate for the fiscal quarter ended September 28, 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 September 30, 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) : September 28, 2024 December 31, 2023 Credit Agreement - Revolving Facility $ 32,000 $ 32,000 Deferred financing costs ( 617 ) ( 144 ) Total long-term debt $ 31,383 $ 31,856 -15- Note 6 - Long-Term Debt (continued) 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 was 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. On August 15, 2024, the Company entered into a Fourth Amended and Restated Credit Agreement (the “2024 Credit Agreement”) among the Company, the lenders party thereto, JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A. and HSBC as joint lead arrangers and joint bookrunner, and JPMorgan Chase Bank, N.A, as agent for such lenders, pursuant to which the 2020 Credit Agreement, was amended and restated to, among other things, extend the maturity date from March 20, 2025 to August 15, 2029 and adjust the interest rate and commitment fee. The 2024 Credit Agreement provides for a multi-currency, secured credit facility (the “2024 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 2024 Credit Agreement, the proceeds of which may be used for working capital and general corporate purposes, and a portion of which were used to refinance the 2020 Revolving Facility. The Company may elect to make loans under the 2024 Revolving Facility in US Dollars, Euros, Canadian Dollars, Sterling, Japanese Yen or such other freely convertible foreign currency. Amounts borrowed under the 2024 Revolving Facility accrue interest in an amount equal to a floating rate plus a specified margin. Such floating rates are (i) for loans denominated in US Dollars, at the Company’s option, either (a) the greatest of: the Agent’s prime rate, the Federal Funds rate, or a 1.00 % floor (the “US Base Rate”), or (b) the SOFR, (ii) for loans denominated in Canadian Dollars, at the Company’s option, either (x) the greatest of: the PRIMCAN Index rate, the average 30 day rate for loans accruing interest based on the Canadian Overnight Repo Rate Average (“CORRA”) (the “Canadian Base Rate”), or (y) CORRA, (iii) for loans denominated in Pounds Sterling, the Sterling Overnight Index Average (“SONIA”), (iv) for loans denominated in Euros, the Euro Interbank Offered Rate (“EURIBOR"), and (v) for loans denominated in Japanese Yen, the Tokyo Interbank Offered Rate (“TIBOR”). The specified interest margin for US Base Rate Loans and Canadian Base Rate Loans is 0.25 %. Depending upon the Company’s leverage ratio, the interest rate margin for loans based on SOFR, CORRA, SONIA, EURIBOR and TIBOR ranges from 1.75 % to 3.00 % per annum. The Company is required to pay a quarterly fee of 0.20 % per annum to 0.40 % per annum on the unused portion of the 2024 Revolving Facility, which is also determined based on the Company’s leverage ratio. Additional customary fees apply with respect to letters of credit. The obligations of the Company under the 2024 Credit Agreement are secured by pledges of stock in certain domestic and foreign subsidiaries, as well as guarantees by substantially all of the Company’s domestic subsidiaries. The obligations of the Company and the guarantors under the 2024 Credit Agreement are secured by substantially all the assets (excluding real estate) of the Company and such guarantors. The 2024 Credit Agreement restricts the Company from paying cash dividends and requires the Company to comply with other customary covenants, representations, and warranties, including the maintenance of a specified interest coverage ratio and a leverage ratio, each tested as of the last day of each fiscal quarter. If the Company is not in compliance with any of these covenant restrictions, the 2024 Revolving Facility could be terminated by the lenders, and all amounts outstanding pursuant to the 2024 Credit Agreement could become immediately payable. -16- 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 loss before reclassifications ( 679 ) — ( 679 ) Amounts reclassified from accumulated other comprehensive loss — ( 16 ) ( 16 ) Balance at September 28, 2024 $ ( 39,941 ) $ 377 $ ( 39,564 ) Foreign Currency Translation Adjustment Pension and Other Postretirement Actuarial Items Total Balance at January 1, 2023 $ ( 41,489 ) $ 589 $ ( 40,900 ) Other comprehensive loss before reclassifications ( 3,831 ) — ( 3,831 ) Amounts reclassified from accumulated other comprehensive income — 2 2 Balance at September 30, 2023 $ ( 45,320 ) $ 591 $ ( 44,729 ) 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) : -17- Note 8 - Pension and Other Postretirement Benefits ( continued) Fiscal quarter ended September 28, 2024 Fiscal quarter ended September 30, 2023 Pension Plans OPEB Plans Pension Plans OPEB Plans Net service cost $ 66 $ 4 $ 67 $ 4 Interest cost 191 27 193 28 Expected return on plan assets ( 211 ) — ( 216 ) — Amortization of actuarial losses (gains) 4 ( 3 ) 7 ( 6 ) Net periodic benefit cost $ 50 $ 28 $ 51 $ 26 Nine Fiscal Months Ended September 28, 2024 Nine Fiscal Months Ended September 30, 2023 Pension Plans OPEB Plans Pension Plans OPEB Plans Net service cost $ 199 $ 12 $ 204 $ 12 Interest cost $ 572 $ 81 $ 575 $ 84 Expected return on plan assets $ ( 630 ) $ — $ ( 642 ) $ — Amortization of actuarial losses (gains) $ 13 $ ( 9 ) $ 22 $ ( 18 ) Net periodic benefit cost $ 154 $ 84 $ 159 $ 78 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 September 28, 2024, the Company had reserved 442,558 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. -18- Note 9 - Share-Based Compensation (continued) On August 14, 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 1,835 RSUs to an independent board member of the Board of Directors in connection with his appointment to the Board of Directors. The award had an aggregate grant-date fair value of $ 0.06 million and will vest on or before the 2025 Annual Stockholders Meeting in May 2025, subject to such independent director's continued service on the Board of Directors. Vesting of such equity awards is subject to acceleration under certain circumstances. 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 Nine fiscal months ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Share-based compensation expense $ 107 $ 656 $ 1,060 $ 1,885 During the fiscal third quarter of 2024, a net adjustment of $ 0.5 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) : -19- Note 10 - Segment Information (continued) Fiscal quarter ended Nine fiscal months ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Net revenues: Sensors $ 28,201 $ 32,532 $ 86,484 $ 105,524 Weighing Solutions 25,174 28,970 81,466 92,090 Measurement Systems 22,352 24,352 65,919 67,906 Total $ 75,727 $ 85,854 $ 233,869 $ 265,520 Gross profit: Sensors $ 8,730 $ 11,681 $ 30,528 $ 41,374 Weighing Solutions 8,840 11,207 30,416 34,443 Measurement Systems 12,690 13,047 36,815 36,029 Total $ 30,260 $ 35,935 $ 97,759 $ 111,846 Reconciliation of segment operating income to consolidated results: Sensors $ 3,640 $ 6,543 $ 15,262 $ 26,043 Weighing Solutions 2,845 5,393 11,781 16,894 Measurement Systems 5,130 5,605 15,070 14,246 Unallocated G&A expenses ( 7,692 ) ( 8,164 ) ( 24,584 ) ( 25,809 ) Restructuring costs ( 82 ) ( 1,153 ) ( 864 ) ( 1,431 ) Operating income $ 3,841 $ 8,224 $ 16,665 $ 29,943 Restructuring costs: Sensors $ ( 59 ) $ — $ ( 601 ) $ — Weighing Solutions ( 23 ) ( 1,153 ) ( 23 ) ( 1,349 ) Measurement Systems — — — ( 32 ) Corporate/Other — — ( 240 ) ( 50 ) $ ( 82 ) $ ( 1,153 ) $ ( 864 ) $ ( 1,431 ) 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 Nine fiscal months ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Sensors to Weighing Solutions $ 332 $ 417 $ 1,323 $ 1,178 Sensors to Measurement Systems 4 4 17 52 -20- 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 Nine fiscal months ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Numerator: Numerator for basic earnings per share: Net (loss) earnings attributable to VPG stockholders $ ( 1,351 ) $ 6,280 $ 9,143 $ 21,480 Denominator: Denominator for basic earnings per share: Weighted average shares 13,254 13,600 13,367 13,596 Effect of dilutive securities: Restricted stock units — 86 38 74 Dilutive potential common shares — 86 38 74 Denominator for diluted earnings per share: Adjusted weighted average shares 13,254 13,686 13,405 13,670 Basic (loss) earnings per share attributable to VPG stockholders $ ( 0.10 ) $ 0.46 $ 0.68 $ 1.58 Diluted (loss) earnings per share attributable to VPG stockholders $ ( 0.10 ) $ 0.46 $ 0.68 $ 1.57 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 Nine fiscal months ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Foreign currency exchange gain (loss) $ ( 2,912 ) $ 1,283 $ ( 36 ) $ 2,138 Interest income 370 543 1,192 1,265 Pension expense ( 8 ) ( 72 ) ( 28 ) ( 217 ) Other ( 96 ) ( 83 ) ( 213 ) ( 221 ) $ ( 2,646 ) $ 1,671 $ 915 $ 2,965 -21- Note 12 – Additional Financial Statement Information ( continued) Foreign currency exchange gains (loss) represent the impact of changes in foreign currency exchange rates. For the fiscal quarter and nine fiscal months ended September 28, 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. For the fiscal quarter and nine fiscal months ended September 30, 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, the EURO and the British pound. Other Accrued Expenses Other accrued expenses consist of the following (in thousands) : September 28, 2024 December 31, 2023 Customer advance payments $ 8,272 $ 8,712 Accrued restructuring 169 249 Goods received, not yet invoiced 1,638 2,837 Accrued taxes, other than income taxes 1,901 1,370 Accrued commissions 4,095 4,077 Accrued professional fees 2,016 1,343 Accrued technical warranty 778 770 Current accrued pensions and other post retirement costs 511 511 Other 2,609 2,558 $ 21,989 $ 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) : -22- Note 13 – Fair Value Measurements (continued) Fair value measurements at reporting date using: Total Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs September 28, 2024 Assets Assets held in rabbi trusts $ 6,281 $ 71 $ 6,210 $ — 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 market funds at September 28, 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 September 28, 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 $ 0.1 million and $ 1.2 million of restructuring costs during the fiscal quarter ended September 28, 2024 and September 30, 2023, respectively and $ 0.9 million and $ 1.4 million of restructuring costs during the nine fiscal months ended September 28, 2024 and September 30, 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 September 28, 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 864 Cash payments ( 794 ) Foreign currency exchange translation ( 150 ) Balance at September 28, 2024 $ 169 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 -23- previously approved stock repurchase plan to August 9, 2024. The stock repurchase plan expired in accordance with its terms on August 9, 2024. From August 8, 2022 to August 9, 2024, the Company had repurchased an aggregate of 518,328 shares of its common stock under the stock repurchase plan for consideration of $ 16.5 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. Note 17 – Subsequent Event On September 30, 2024, the Company acquired Nokra Optische Prueftechnik und Automation GmbH, a Germany-based, privately held maker of precision measuring and testing equipment for manufacturing, for a total consideration of Euro 3.95 million. Nokra’s laser-based measuring systems expand our existing measurement and inspection solutions for steel and aluminum rolling mills, as well as for the metal processing industry. Nokra’s laser-based measurement gauge systems are used to precisely measure the thickness, flatness, contour, width or 3D profile of various metals depending on the application, in both inline and offline production. -24-