VPG Reports Fiscal 2015 Second Quarter and Six Month Results

Second quarter net revenues of $59.5 million, within guidance. Company files Form 10-Q for the second quarter and first six months of fiscal 2015.

MALVERN, Pa.--()--Vishay Precision Group, Inc. (NYSE: VPG), a leading producer of precision sensors and systems, today announced its results for its second quarter fiscal 2015 and six months ended June 27, 2015.

Ziv Shoshani, VPG’s chief executive officer said, “We have completed our review and analysis of certain adjustments to our historical financial statements for a subsidiary located in India as a result of certain transactions that were recorded for this subsidiary in the local currency, the Indian rupee, instead of the functional currency, the U.S. dollar, in prior periods extending back to 2011. The impact of these prior period adjustments was not material to any of these prior periods. As a result, we have made adjustments to our financial statements to correct these and other immaterial errors. The adjusted financial statements may be found in Note 12 of our Form 10-Q, which we filed with the Securities and Exchange Commission today.”

In commenting on second quarter fiscal 2015 financial results, Mr. Shoshani added, “From a performance perspective, our revenues continued to be significantly impacted by the negative effect of foreign currency exchange rates of $5.1 million, compared to the second quarter of 2014. At the same time, our new advanced sensor product and on-board weighing systems continue to gain traction in the marketplace. We remain focused on our strategy of enhancing shareholder value.”

Net revenues for the second quarter of 2015 were $59.5 million, representing an 8.7% decrease from $65.2 million of net revenues for the comparable prior year period. Net revenues for the six months ended June 27, 2015 were $116.1 million, representing an 8.1% decrease from the $126.4 million of net revenues for comparable prior year period. Comparing sequential results, net revenues for the second quarter of 2015 increased by $2.9 million, or 5.1%, from $56.6 million in the first quarter of 2015.

Net earnings attributable to VPG stockholders for the second quarter of 2015 were $1.5 million, or $0.11 per diluted share, compared to net earnings attributable to VPG stockholders for the second quarter of 2014 of $3.6 million, or $0.26 per diluted share. Foreign currency exchange rates for the second quarter of 2015 as compared to the prior year period had a negative impact on net income of $0.4 million, or $0.03 per diluted share. Net earnings attributable to VPG stockholders for the six months ended June 27, 2015 were $2.3 million, or $0.17 per diluted share, compared to net earnings attributable to VPG stockholders of $4.8 million, or $0.34 per diluted share for the comparable prior year period. Foreign currency exchange rates for the six months of 2015 as compared to the prior year period had a negative impact on net income of $0.8 million, or $0.06 per diluted share.

Adjusted net earnings attributable to VPG stockholders for the second quarter of 2015 were $1.8 million, or $0.13 per diluted share, versus adjusted net earnings attributable to VPG stockholders of $3.6 million, or $0.26 per diluted share for the comparable prior year period. Net earnings attributable to VPG stockholders for the second quarter of 2015 include $0.03 million of KELK acquisition purchase accounting adjustments (which impacted costs of products sold), $0.3 million of restructuring costs, and $0.04 million of associated tax effects.

Adjusted net earnings attributable to VPG stockholders for the six months ended June 27, 2015 were $2.7 million, or $0.19 per diluted share, versus adjusted net earnings attributable to VPG stockholders of $5.0 million, or $0.36 per diluted share for the comparable prior year period. Net earnings attributable to VPG stockholders for the six months ended June 27, 2015 include $0.03 million of KELK acquisition purchase accounting adjustments (which impacted cost of products sold), $0.4 million of restructuring costs, and $0.06 million of associated tax effects, versus $0.4 million of KELK acquisition purchase accounting adjustments and restructuring costs, and $0.1 million of associated tax effects for the comparable prior year period.

Segments

The Foil Technology Products segment revenues were $26.2 million in the second quarter of 2015, down 6.7% from $28.0 million in the second quarter last year, and up 4.4% from $25.1 million in the first quarter of 2015. Net revenues were negatively impacted by the effects of foreign currency exchange rates by $1.7 million in the second quarter of 2015 as compared to the second quarter of 2014, and were negatively impacted by $0.2 million as compared to the first quarter of 2015. The gross profit margin for the segment decreased to 39.6% for the second quarter of 2015 compared to 40.5% in the second quarter last year, and down from 41.4% in the first quarter of 2015. The gross profit margin decreased from the comparable prior year period primarily due to the effects of foreign currency exchange rates and additional headcount for expansion of our advanced sensor platform. Despite an increase in revenues, the sequential gross profit margin decrease was due primarily to the effects of foreign currency exchange rates and other costs.

The Force Sensors segment revenues of $15.6 million in the second quarter of 2015 were down 7.9% compared to $17.0 million in the second quarter last year, and were up 2.7% from $15.2 million in the first quarter of 2015. Decreased year-over-year revenues are attributable primarily to the effect of foreign currency exchange rates of $0.9 million. The increase in sequential revenues is attributable to higher volume. The gross profit margin for the segment was 19.0% in the second quarter of 2015 versus 22.7% in the second quarter of 2014 and 21.8% in the first quarter of 2015. The gross profit margin for the quarter decreased from the comparable prior year period primarily due to the effects of foreign currency exchange rates. The sequential gross profit margin decreased due to a reduction in inventory.

The Weighing and Control Systems segment revenues were $17.7 million in the second quarter of 2015, down 12.1% from $20.2 million in the second quarter last year, and up 8.6% from $16.3 million in the first quarter of 2015. Net revenues were negatively impacted by the effects of foreign currency exchange rates of $2.4 million in the second quarter of 2015 as compared to the second quarter of 2014. The sequential increase is attributable to volume in our process weighing business. The gross profit margin for the segment was 43.6% in the second quarter of 2015 versus 48.2% in the second quarter of 2014 and 44.6% in the first quarter of 2015. The year-over-year decrease in gross profit margin is primarily due to the effects of foreign currency exchange rates and unfavorable product mix. The sequential decrease in gross profit margin is primarily due to higher freight costs and unfavorable product mix.

Outlook

Mr. Shoshani concluded, “Assuming a similar exchange rate impact to our revenues and given the normal seasonality in our business, we expect net revenues in the range of $55 million to $60 million for the third quarter of 2015.”

*Editor’s Note: We define adjusted net earnings as net earnings attributable to VPG stockholders before acquisition purchase accounting adjustments, restructuring costs, and associated tax effects. ** For a reconciliation of GAAP to non-GAAP financial information, refer to the quarterly financial tables.

About VPG

Vishay Precision Group, Inc. (VPG) is an internationally recognized designer, manufacturer and marketer of: components based on its resistive foil technology; sensors; and sensor-based systems specializing in the growing markets of stress, force, weight, pressure, and current measurements. VPG is a market leader of foil technology products, providing ongoing technology innovations in precision foil resistors and foil strain gages, which are the foundation of the company's force sensors products and its weighing and control systems. The product portfolio consists of a variety of well-established brand names recognized for precision and quality in the marketplace. To learn more, visit VPG at www.vpgsensors.com.

Forward-Looking Statements

From time to time, information provided by us, including but not limited to statements in this report, or other statements made by or on our behalf, may contain "forward-looking" information within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks, uncertainties, and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from those anticipated.

Such statements are based on current expectations only, and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, expected, estimated, or projected. Among the factors that could cause actual results to materially differ include: general business and economic conditions, changes in the current pace of economic recovery, including if such recovery stalls or does not continue as expected; difficulties or delays in completing acquisitions and integrating acquired companies; the inability to realize anticipated synergies and expansion possibilities; difficulties in new product development; changes in competition and technology in the markets that we serve and the mix of our products required to address these changes; changes in foreign currency exchange rates; difficulties in implementing our ERP system and the associated impact on manufacturing efficiencies and customer satisfaction; difficulties in implementing our cost reduction strategies, such as underutilization of production facilities, labor unrest or legal challenges to our lay-off or termination plans, operation of redundant facilities due to difficulties in transferring production to lower-labor-cost countries; and other factors affecting our operations, markets, products, services, and prices that are set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

   
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)
 
Fiscal quarter ended
June 27, 2015 June 28, 2014
 
Net revenues $ 59,508 $ 65,162
Costs of products sold   38,473     40,253  
Gross profit 21,035 24,909
Gross profit margin 35.3 % 38.2 %
 
Selling, general, and administrative expenses 18,396 19,897
Restructuring costs   304     7  
Operating income 2,335 5,005
Operating margin 3.9 % 7.7 %
 
Other income (expense):
Interest expense (173 ) (240 )
Other   (414 )   (247 )
Other income (expense) - net   (587 )   (487 )
 
Income before taxes 1,748 4,518
 
Income tax expense   288     948  
 
Net earnings 1,460 3,570
Less: net (loss) earnings attributable to noncontrolling interests   (16 )   (8 )
Net earnings attributable to VPG stockholders $ 1,476   $ 3,578  
 
Basic earnings per share attributable to VPG stockholders $ 0.11 $ 0.26
Diluted earnings per share attributable to VPG stockholders $ 0.11 $ 0.26
 
Weighted average shares outstanding - basic 13,580 13,756
Weighted average shares outstanding - diluted 13,790 13,968
 
   
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)
 
Six fiscal months ended
June 27, 2015 June 28, 2014
 
Net revenues $ 116,116 $ 126,402
Costs of products sold   74,102     79,783  
Gross profit 42,014 46,619
Gross profit margin 36.2 % 36.9 %
 
Selling, general, and administrative expenses 37,144 39,060
Restructuring costs   382     331  
Operating income 4,488 7,228
Operating margin 3.9 % 5.7 %
 
Other income (expense):
Interest expense (360 ) (456 )
Other   (1,343 )   (683 )
Other income (expense) - net   (1,703 )   (1,139 )
 
Income before taxes 2,785 6,089
 
Income tax expense   478     1,277  
 
Net earnings 2,307 4,812
Less: net (loss) earnings attributable to noncontrolling interests   (29 )   59  
Net earnings attributable to VPG stockholders $ 2,336   $ 4,753  
 
Basic earnings per share attributable to VPG stockholders $ 0.17 $ 0.35
Diluted earnings per share attributable to VPG stockholders $ 0.17 $ 0.34
 
Weighted average shares outstanding - basic 13,663 13,754
Weighted average shares outstanding - diluted 13,875 13,963
 
   
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Balance Sheets
(In thousands)
 
June 27, 2015

December 31,
2014

(Unaudited)

Assets
Current assets:
Cash and cash equivalents $ 65,456 $ 79,642
Accounts receivable, net 38,250 37,427
Inventories:
Raw materials 13,808 14,223
Work in process 21,245 19,813
Finished goods   20,716     18,806  
Inventories, net 55,769 52,842
 
Deferred income taxes 5,552 5,636
Prepaid expenses and other current assets   9,394     10,361  
Total current assets 174,421 185,908
 
Property and equipment, at cost:
Land 1,891 1,893
Buildings and improvements 50,555 49,909
Machinery and equipment 79,948 78,500
Software 6,997 6,837
Construction in progress 2,678 2,928
Accumulated depreciation   (91,820 )   (89,374 )
Property and equipment, net 50,249 50,693
 
Goodwill 12,046 12,788
 
Intangible assets, net 15,416 17,381
 
Other assets   20,352     20,393  
Total assets $ 272,484   $ 287,163  
 
Liabilities and equity
Current liabilities:
Trade accounts payable $ 8,780 $ 10,559
Payroll and related expenses 14,046 14,216
Other accrued expenses 14,776 16,902
Income taxes 127 2,133
Current portion of long-term debt   16,366     5,120  
Total current liabilities 54,095 48,930
 
Long-term debt, less current portion 4,635 17,713
Deferred income taxes 610 638
Other liabilities 7,431 7,644
Accrued pension and other postretirement costs   12,014     12,353  
Total liabilities   78,785     87,278  
 
Commitments and contingencies
 
Equity:
Common stock 1,276 1,273
Class B convertible common stock 103 103
Treasury stock (6,169 ) (32 )
Capital in excess of par value 189,769 189,532
Retained earnings 37,671 35,335
Accumulated other comprehensive loss   (29,111 )   (26,560 )
Total Vishay Precision Group, Inc. stockholders' equity 193,539 199,651
Noncontrolling interests   160     234  
Total equity   193,699     199,885  
Total liabilities and equity $ 272,484   $ 287,163  
 
   
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
 
Six fiscal months ended
June 27, 2015 June 28, 2014
 
Operating activities
Net earnings $ 2,307 $ 4,812
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
Impairment of goodwill and indefinite-lived intangibles
Depreciation and amortization 5,524 5,783
(Gain) loss on disposal of property and equipment (1 ) 9
Share-based compensation expense 416 485
Inventory write-offs for obsolescence 916 562
Other 1,121 (54 )
Net changes in operating assets and liabilities:
Accounts receivable, net (1,671 ) (4,857 )
Inventories, net (4,345 ) 346
Prepaid expenses and other current assets 943 (586 )
Trade accounts payable (1,670 ) (281 )
Other current liabilities   (3,589 )   (1,338 )
Net cash (used in) provided by operating activities   (49 )   4,881  
 
Investing activities
Capital expenditures (5,037 ) (3,435 )
Proceeds from sale of property and equipment   65     63  
Net cash used in investing activities   (4,972 )   (3,372 )
 
Financing activities
Principal payments on long-term debt and capital leases (1,810 ) (2,070 )
Purchase of treasury stock (6,137 )
Distributions to noncontrolling interests   (45 )   (43 )
Net cash used in financing activities (7,992 ) (2,113 )
Effect of exchange rate changes on cash and cash equivalents   (1,173 )   250  
Decrease in cash and cash equivalents (14,186 ) (354 )
 
Cash and cash equivalents at beginning of period   79,642     72,809  
Cash and cash equivalents at end of period $ 65,456   $ 72,455  
 
       
VISHAY PRECISION GROUP, INC.
Reconciliation of Consolidated Adjusted Gross Profit Margin
(Unaudited - In thousands)
 
Fiscal quarter ended Six fiscal months ended
June 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014
Gross profit $ 21,035 $ 24,909 $ 42,014 $ 46,619
Gross profit margin 35.3 % 38.2 % 36.2 % 36.9 %
 

Reconciling items affecting gross profit margin

Acquisition purchase accounting adjustments 26 2 26 41
       
Adjusted gross profit $ 21,061   $ 24,911   $ 42,040   $ 46,660  
Adjusted gross profit margin 35.4 % 38.2 % 36.2 % 36.9 %
 
 
 
VISHAY PRECISION GROUP, INC.
Reconciliation of Adjusted Earnings Per Share
(Unaudited - In thousands, except per share data)
 
Fiscal quarter ended Six fiscal months ended
June 27, 2015 June 28, 2014 June 27, 2015 June 28, 2014
Net earnings attributable to VPG stockholders $ 1,476 $ 3,578 $ 2,336 $ 4,753
 

Reconciling items affecting operating margin

Acquisition purchase accounting adjustments 26 2 26 41
Restructuring costs 304 7 382 331
 

Reconciling items affecting income tax expense

Tax effect of adjustments for purchase accounting and restructuring costs   41     2     57     94  
Adjusted net earnings attributable to VPG stockholders $ 1,765   $ 3,585   $ 2,687   $ 5,031  
 
Weighted average shares outstanding - diluted 13,790 13,968 13,875 13,963
 
Adjusted net earnings per diluted share $ 0.13 $ 0.26 $ 0.19 $ 0.36
 

Contacts

VPG
Wendy Wilson
Senior Director Investor Relations and Corporate Communications
919-374-5501
wendy.wilson@vpgsensors.com

Contacts

VPG
Wendy Wilson
Senior Director Investor Relations and Corporate Communications
919-374-5501
wendy.wilson@vpgsensors.com