VPG Reports Fiscal 2020 First Quarter Results

Vishay Precision Group

MALVERN, PA — Vishay Precision Group, Inc. (NYSE: VPG), a leading producer of precision sensors and sensor-based systems, today announced its results for its fiscal 2020 first quarter ended March 28, 2020.

First Quarter Highlights:

  • Revenues of $67.7 million declined 11.5% from a year ago.
  • Operating margin was 6.9% as compared to 16.5% reported a year ago.
  • Adjusted operating margin was 7.8%, as compared to 16.5% reported a year ago.
  • Diluted earnings per share of $0.24 as compared to $0.61 reported a year ago.
  • Adjusted diluted earnings per share of $0.29, as compared to $0.61 reported a year ago.
  • Cash from operating activities was $6.3 million with adjusted free cash flow of $3.0 million
  • Book-to-bill ratio was 1.08 as compared to 0.92 from a year ago.

Ziv Shoshani, Chief Executive Officer of VPG, commented, “We are satisfied with our financial and operating performance in the first quarter given the extraordinary circumstances that have unfolded around the world due to the COVID-19 pandemic.  Our employee teams across our businesses responded quickly and diligently to fast-changing operating conditions and restrictions to serve our customers.”

Mr. Shoshani said: “While the global economic outlook for the second quarter is turbulent, our broad and diverse set of end-markets that we serve provides us with a degree of resilience in our revenue streams, which was evident by the year-over-year growth in orders and the positive book-to-bill in the first quarter.  As we continue to take steps to ensure the health and safety of our employees and customers, our focus on our key long-term growth and cost-savings initiatives is unchanged. While we expect that our financial results in the second quarter of 2020 will be negatively impacted by the pandemic, our strong balance sheet and cash from operations supports our confidence in our ability to navigate successfully through these challenging times.”

First Quarter Financial Trends:

The Company’s first fiscal quarter 2020 net earnings attributable to VPG stockholders was $3.3 million, or $0.24 per diluted share, compared to $8.2 million, or $0.61 per diluted share, in the first fiscal quarter of 2019.  Foreign currency exchange rates for the first quarter of 2020 increased net income by $0.4 million, or $0.03 per diluted share, relative to the prior year period.

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The first fiscal quarter 2020 adjusted net earnings attributable to VPG stockholders was $4.0 million, or $0.29 per diluted share, compared to $8.2 million, or $0.61 per diluted share in the first fiscal quarter of 2019.

Segments

Foil Technology Products segment revenues decreased 17.7% to $30.5 million in the first fiscal quarter of 2020, down from $37.0 million in the first fiscal quarter of 2019; sequential revenue increased 2.8% compared to $29.6 million in the fourth quarter of 2020. The year-over-year decrease in revenues was primarily attributable to precision resistor products in all regions for distribution, OEM and EMS customers, primarily in the test and measurement end market. The decrease was also reflected in the Americas and Asia for end customers in the avionics, military and space end market for the Pacific Instrument product line.    The sequential increase in revenue was attributable to precision resistor products in all regions for distribution and EMS customers, primarily in the avionics, military and space, as well as test and measurement end markets.

Gross profit margin for the Foil Technology Products segment was 36.7% for the first fiscal quarter of 2020, a decrease compared to 44.7% in the first fiscal quarter of 2019, and an increase compared to 34.9% in the fourth fiscal quarter of 2019. The year-over-year decrease in gross profit margin was primarily due to lower volume, negative impact of foreign exchange rates and inventory reductions.   The sequential increase in gross profit margin was primarily due to higher volume.

Force Sensors segment revenues declined 12.2% to $14.7 million in the first fiscal quarter of 2020, compared to $16.7 million in the first fiscal quarter of 2019; sequential revenue declined 2.4%, compared to $15.1 million in the fourth quarter of 2019. The year-over-year decrease in revenues was mainly attributable to distribution and OEM customers in the industrial weighing market, mainly in the Americas and in Europe.  The sequential decrease in revenue was mainly attributable to distribution customers in the industrial weighing market, mainly in the Americas and Asia.

Gross profit margin for the Force Sensors segment was 24.3% for the first fiscal quarter of 2020, a decrease compared to 30.2% in the first fiscal quarter of 2019, and was flat with 24.2% in the fourth fiscal quarter of 2019. The year-over-year decrease in gross profit margin was primarily due to lower volume, a reduction in export grants, negative impact of foreign exchange, and inventory reductions, which was partially offset by cost savings initiatives. Sequentially, gross profit margin was flat as the favorable impact from cost savings initiatives offset lower volume and a reduction in export grants.

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Weighing and Control Systems segment revenues declined 1.0% to $22.5 million in the first fiscal quarter of 2020, down from $22.7 million in the first fiscal quarter of 2019; sequential revenue decreased 7.9% from $24.4 million in the fourth fiscal quarter of 2019. The decrease in revenues year-over-year was primarily attributable to our KELK steel product line in the Americas and in Europe, onboard weighing product line for the transportation end market in Europe, and the European process weighing product line, mostly offset with the additional revenues of Dynamic Systems Inc. (“DSI”), which was acquired in November 2019.  The sequential decrease in revenue was primarily attributable to a reduction in the steel product line in the Americas and in Asia for end user customers.

The first fiscal quarter 2020 gross profit margin for the Weighing and Control Systems segment was 45.7% (48.0% excluding the purchasing accounting adjustments of $0.5 million related to the DSI acquisition), compared to 50.2% from the first fiscal quarter of 2019, and an increase compared to 41.6% (46.8% excluding the purchase accounting adjustment of $1.3 million related to the DSI acquisition) from the fourth fiscal quarter of 2019.  The year-over-year decrease in adjusted gross profit margin was primarily due to unfavorable product mix.   The sequential adjusted gross profit margin increase was primarily due to manufacturing efficiencies which were partially offset by lower volume.

Impacts From the Global COVID-19 Pandemic:

As the COVID-19 pandemic began to unfold around the world, the Company took measures to protect its employees and customers.  Those measures included suspending business travel, enabling certain employees to work from home, implementing workplace distancing, and adjusting work shifts to minimize employees’ contact with other employees. While the majority of the Company’s operations have been able to maintain full or partial operations, two of the Company’s Force Sensors operations were required per government orders in their jurisdictions to shut down completely or to operate with minimal staff.

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The Company’s manufacturing facility in China was closed for approximately three weeks in January and February of 2020, and the Company’s manufacturing facility in India was essentially shut down since late March 2020 as part of a government COVID-19 mitigation order.

The Company has received approval from the Indian government to resume partial operations on May 4, 2020 and is expecting the Indian government to lift all operating restrictions on May 17, 2020.

Although the impact of these restrictions on the Company’s financial results was minimal in the first quarter, the Company expects the reduction in its India operations to reduce Force Sensors revenues by $5 million to $7 million in the second quarter, and to result in an impact of approximately $3.5 million to operating profit, assuming the full reopening of its India manufacturing facility on May 17, 2020.

The Company currently expects to recover the majority of the revenue shortfall in subsequent quarters once restrictions are lifted. If the operating restrictions on their Indian facility are not lifted on May 17, 2020 as they expect, they anticipate an additional negative impact on their results of operation.

As of May 5, 2020, all of the Company’s facilities, with the exception of the facility in India, are operating fully.  Nonetheless, given the impacts to date and the ongoing uncertainty concerning the magnitude of the impact and duration of the COVID-19 pandemic, the ongoing economic disruption may continue to adversely affect the Company’s business and financial results.

Near-Term Outlook

“Given the effects of the COVID-19 pandemic, at constant first fiscal quarter 2020 exchange rates, we expect net revenues in the range of $56 million to $62 million for the second fiscal quarter of 2020,” concluded Mr. Shoshani.

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