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Vishay Precision Group, Inc. - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended          September 30, 2023
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 1-34679
VISHAY PRECISION GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware27-0986328
(State or Other Jurisdiction of Incorporation)(I.R.S. Employer Identification Number)
3 Great Valley Parkway, Suite 150
Malvern, PA, 19355
484-321-5300
(Address of Principal Executive Offices) (Zip Code)(Registrant’s Telephone Number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.10 par valueVPGNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files. ý Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨Accelerated filerý
Non-accelerated filer¨Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ý No
As of November 7, 2023, the registrant had 12,510,296 shares of its common stock and 1,022,887 shares of its Class B convertible common stock outstanding.


VISHAY PRECISION GROUP, INC.
FORM 10-Q
September 30, 2023
CONTENTS
Page Number
 
– September 30, 2023 (Unaudited) and December 31, 2022
 
(Unaudited) – Fiscal Quarters Ended September 30, 2023 and October 1, 2022
 
(Unaudited) – Nine Fiscal Months Ended September 30, 2023 and October 1, 2022
 
(Unaudited) – Fiscal Quarters Ended September 30, 2023 and October 1, 2022
 
(Unaudited) – Nine Fiscal Months Ended September 30, 2023 and October 1, 2022
 
(Unaudited) –Nine Fiscal Months Ended September 30, 2023 and October 1, 2022
 
(Unaudited) – Fiscal Quarters Ended September 30, 2023 and October 1, 2022
(Unaudited) – Nine Fiscal Months Ended September 30, 2023 and October 1, 2022
 
 
 
 
 
 
 
 
 
 
 
 
-2-


PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
VISHAY PRECISION GROUP, INC.
Consolidated Condensed Balance Sheets
(In thousands)
September 30, 2023December 31, 2022
(Unaudited)
Assets
Current assets:
Cash and cash equivalents$94,632 $88,562 
Short term investment1,000 — 
Accounts receivable, net57,240 60,068 
Inventories:
Raw materials34,952 31,852 
Work in process28,368 26,401 
Finished goods27,088 26,407 
Inventories, net90,408 84,660 
Prepaid expenses and other current assets16,454 18,516 
Total current assets259,734 251,806 
Property and equipment:
Land4,104 4,117 
Buildings and improvements71,379 71,613 
Machinery and equipment126,582 125,301 
Software9,141 9,539 
Construction in progress10,872 10,075 
Accumulated depreciation(135,366)(133,518)
Property and equipment, net86,712 87,127 
Goodwill45,579 45,544 
Intangible assets, net45,492 48,217 
Operating lease right-of-use assets27,440 24,342 
Other assets19,349 19,706 
Total assets$484,306 $476,742 
Continues on the following page.
-3-


VISHAY PRECISION GROUP, INC.
Consolidated Condensed Balance Sheets
(In thousands)
September 30, 2023December 31, 2022
Liabilities and equity(Unaudited)
Current liabilities:
Trade accounts payable$11,875 $13,792 
Payroll and related expenses18,169 21,966 
Other accrued expenses24,077 20,306 
Income taxes1,774 4,064 
Current portion of operating lease liabilities3,814 4,208 
Total current liabilities59,709 64,336 
Long-term debt, less current portion53,827 60,799 
Deferred income taxes4,098 4,212 
Operating lease liabilities22,587 20,043 
Other liabilities12,900 13,053 
Accrued pension and other postretirement costs7,028 7,777 
Total liabilities160,149 170,220 
Equity:
Common stock1,330 1,325 
Class B convertible common stock103 103 
Treasury stock(12,700)(11,504)
Capital in excess of par value202,267 201,164 
Retained earnings177,839 156,359 
Accumulated other comprehensive loss(44,729)(40,900)
Total Vishay Precision Group, Inc. stockholders' equity324,110 306,547 
Noncontrolling interests47 (25)
Total equity324,157 306,522 
Total liabilities and equity$484,306 $476,742 
See accompanying notes.
-4-


VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Operations
(Unaudited - In thousands, except per share amounts)
Fiscal quarter ended
September 30, 2023October 1, 2022
Net revenues$85,854 $90,057 
Costs of products sold49,919 52,737 
Gross profit35,935 37,320 
Selling, general, and administrative expenses26,558 25,271 
Restructuring costs1,153 165 
Operating income8,224 11,884 
Other income (expense):
Interest expense(1,119)(636)
Other1,671 1,223 
Other income552 587 
Income before taxes8,776 12,471 
Income tax expense2,419 2,323 
Net earnings6,357 10,148 
Less: net earnings attributable to noncontrolling interests77 30 
Net earnings attributable to VPG stockholders$6,280 $10,118 
Basic earnings per share attributable to VPG stockholders$0.46 $0.74 
Diluted earnings per share attributable to VPG stockholders$0.46 $0.74 
Weighted average shares outstanding - basic13,600 13,649 
Weighted average shares outstanding - diluted13,686 13,708 















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 30, 2023October 1, 2022
Net revenues$265,520 $266,340 
Costs of products sold153,674 156,436 
Gross profit111,846 109,904 
Selling, general, and administrative expenses80,472 77,824 
Restructuring costs1,431 1,330 
Operating income29,943 30,750 
Other income (expense):
Interest expense(3,195)(1,393)
Other2,965 5,006 
Other income (expense)(230)3,613 
Income before taxes29,713 34,363 
Income tax expense8,023 6,651 
Net earnings21,690 27,712 
Less: net earnings attributable to noncontrolling interests210 483 
Net earnings attributable to VPG stockholders$21,480 $27,229 
Basic earnings per share attributable to VPG stockholders$1.58 $2.00 
Diluted earnings per share attributable to VPG stockholders$1.57 $1.99 
Weighted average shares outstanding - basic13,596 13,645 
Weighted average shares outstanding - diluted13,670 13,692 
See accompanying notes.
-6-


VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Comprehensive Income (Loss)
(Unaudited - In thousands)
Fiscal quarter ended
September 30, 2023October 1, 2022
Net earnings$6,357 $10,148 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment(3,653)(8,479)
Pension and other postretirement actuarial items 65 
Other comprehensive loss(3,653)(8,414)
Comprehensive income2,704 1,734 
Less: comprehensive income attributable to noncontrolling interests77 30 
Comprehensive income attributable to VPG stockholders$2,627 $1,704 


































See accompanying notes.
-7-


VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Comprehensive Income (Loss)
(Unaudited - In thousands)
Nine fiscal months ended
September 30, 2023October 1, 2022
Net earnings$21,690 $27,712 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment(3,831)(18,214)
Pension and other postretirement actuarial items2 227 
Other comprehensive loss(3,829)(17,987)
Comprehensive income17,861 9,725 
Less: comprehensive income attributable to noncontrolling interests210 483 
Comprehensive income attributable to VPG stockholders$17,651 $9,242 
See accompanying notes.
-8-


VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Cash Flows
(Unaudited - In thousands)
Nine fiscal months ended
September 30, 2023October 1, 2022
Operating activities
Net earnings$21,690 $27,712 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization11,559 11,519 
Gain on sale of property and equipment38 (182)
Reclassification of foreign currency translation adjustment related to disposal of subsidiary 191 
Share-based compensation expense1,885 1,583 
Inventory write-offs for obsolescence1,567 1,451 
Deferred income taxes691 (72)
Foreign currency impacts and other items(2,755)(3,550)
Net changes in operating assets and liabilities:
Accounts receivable1,604 (2,077)
Inventories(7,811)(14,151)
Prepaid expenses and other current assets1,990 (984)
Trade accounts payable(1,151)(1,459)
Other current liabilities(1,082)1,303 
Other non current assets and liabilities, net(170)(326)
Accrued pension and other postretirement costs, net(945)(443)
Net cash provided by operating activities27,110 20,515 
Investing activities
Capital expenditures(9,848)(15,545)
Proceeds from sale of property and equipment50 397 
Purchase of short term investment(1,000)— 
Net cash used in investing activities(10,798)(15,148)
Financing activities
Payments on revolving facility(7,000)— 
Purchase of treasury stock(1,196)(1,061)
Distributions to noncontrolling interests(138)(366)
Payments of employee taxes on certain share-based arrangements(825)(435)
Net cash used in financing activities(9,159)(1,862)
Effect of exchange rate changes on cash and cash equivalents(1,083)(7,930)
Increase (decrease) in cash and cash equivalents6,070 (4,425)
Cash and cash equivalents at beginning of period88,562 84,335 
Cash and cash equivalents at end of period$94,632 $79,910 
Supplemental disclosure of investing transactions:
Capital expenditures accrued but not yet paid$1,204 $720 
See accompanying notes.
-9-


VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Equity
(Unaudited - In thousands, except share amounts)
Fiscal quarter ended 
 
September 30, 2023
Common
Stock
Class B
Convertible
Common Stock
Treasury StockCapital in
Excess of
Par Value
Retained
Earnings
Accumulated
Other
Comprehensive
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 
Fiscal quarter ended 
 
October 1, 2022
Common
Stock
Class B
Convertible
Common Stock
Treasury StockCapital in
Excess of
Par Value
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total VPG Inc.
Stockholders'
Equity
Noncontrolling
Interests
Total
Equity
Balance at July 2, 2022$1,325 $103 $(8,765)$199,749 $137,407 $(44,581)$285,238 $112 $285,350 
Net earnings
— — — — 10,118 — 10,118 30 10,148 
Other comprehensive loss— — — — — (8,414)(8,414)— (8,414)
Share-based compensation expense
— — — 559 — — 559 — 559 
Purchase of treasury stock (32,601 shares)
— — (1,061)— — (1,061)— (1,061)
Distribution to noncontrolling interests— — — — — — — (82)(82)
Balance at October 1, 2022$1,325 $103 $(9,826)$200,308 $147,525 $(52,995)$286,440 $60 $286,500 
See accompanying notes.
-10-


VISHAY PRECISION GROUP, INC.
Consolidated Condensed Statements of Equity
(Unaudited - In thousands, except share amounts)
Nine Fiscal Months Ended September 30, 2023
Common
Stock
Class B
Convertible
Common Stock
Treasury StockCapital in
Excess of
Par Value
Retained
Earnings
Accumulated
Other
Comprehensive
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 
Nine Fiscal Months Ended October 1, 2022
Common
Stock
Class B
Convertible
Common Stock
Treasury StockCapital in
Excess of
Par Value
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total VPG Inc.
Stockholders'
Equity
Noncontrolling
Interests
Total
Equity
Balance at December 31, 2021$1,322 $103 $(8,765)$199,151 $120,296 $(35,008)$277,099 $(57)$277,042 
Net earnings
— — — — 27,229 — 27,229 483 27,712 
Other comprehensive loss— — — — — (17,987)(17,987)— (17,987)
Share-based compensation expense
— — — 1,583 — — 1,583 — 1,583 
Restricted stock issuances (28,368 shares)
— — (426)— — (423)— (423)
Purchase of treasury stock (32,601 shares)
— — (1,061)— — — (1,061)— (1,061)
Distribution to noncontrolling interests— — — — — — — (366)(366)
Balance at October 1, 2022$1,325 $103 $(9,826)$200,308 $147,525 $(52,995)$286,440 $60 $286,500 
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, diversified company focused on 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, 2022 and 2021 and for each of the three years in the period ended December 31, 2022, included in VPG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023. The results of operations for the fiscal quarter ended September 30, 2023 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 2023 and 2022 end on the following dates: 
20232022
Quarter 1April 1,April 2,
Quarter 2July 1,July 2,
Quarter 3September 30,October 1,
Quarter 4December 31,December 31,
Reclassifications
Certain prior year amounts have been reclassified to conform to the current financial statement presentation.

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):
-12-

Note 2 – Revenues (continued)

Fiscal quarter ended 
 
September 30, 2023
Fiscal quarter ended 
 
October 1, 2022
SensorsWeighing SolutionsMeasurement SystemsTotalSensorsWeighing SolutionsMeasurement SystemsTotal
United States$11,860 $12,622 $15,520 $40,002 $12,992 $14,671 $13,065 $40,728 
United Kingdom1,119 4,128 90 5,337 752 4,090 55 4,897 
Other Europe7,176 9,077 703 16,956 7,740 8,714 986 17,440 
Israel4,773 89  4,862 7,447 101 — 7,548 
Asia7,604 3,054 2,899 13,557 8,948 3,815 2,462 15,225 
Canada  5,140 5,140 — 4,211 4,219 
Total$32,532 $28,970 $24,352 $85,854 $37,879 $31,399 $20,779 $90,057 
Nine Fiscal Months Ended September 30, 2023Nine Fiscal Months Ended October 1, 2022
SensorsWeighing SolutionsMeasurement SystemsTotalSensorsWeighing SolutionsMeasurement SystemsTotal
United States$39,089 $40,729 $39,053 $118,871 $39,467 $41,212 $34,838 $115,517 
United Kingdom2,845 11,961 261 15,067 2,562 12,283 514 15,359 
Other Europe25,134 29,144 5,109 59,387 23,556 28,065 3,985 55,606 
Israel12,867 215  13,082 22,828 401 — 23,229 
Asia25,589 10,041 6,446 42,076 27,496 10,657 4,283 42,436 
Canada  17,037 17,037 — 14,185 14,193 
Total$105,524 $92,090 $67,906 $265,520 $115,909 $92,626 $57,805 $266,340 

The following table disaggregates net revenue from contracts with customers by market sector (in thousands).
Fiscal quarter endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Test & Measurement$17,080 $20,659 $54,449 $60,115 
Avionics, Military & Space8,294 6,523 28,285 21,563 
Transportation15,490 13,912 40,993 41,061 
Other Markets16,402 20,110 54,124 59,295 
Industrial Weighing10,533 12,473 33,586 38,626 
General Industrial4,643 4,981 14,858 16,172 
Steel13,412 11,399 39,225 29,508 
Total$85,854 $90,057 $265,520 $266,340 

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.

The outstanding contract assets and liability accounts were as follows (in thousands):
-13-

Note 2 – Revenues (continued)

Contract AssetContract Liability
Unbilled RevenueAccrued Customer Advances
Balance at December 31, 2022$3,990 $7,983 
Balance at September 30, 20233,449 8,766 
(Decrease) increase$(541)$783 
The amount of revenue recognized during the nine fiscal months ended September 30, 2023 that was included in the contract liability balance at December 31, 2022 was $7.3 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):
TotalMeasurement SystemsWeighing Solutions
KELK AcquisitionDSI AcquisitionDTS AcquisitionStress-Tek Acquisition
Balance at December 31, 2022$45,544 $6,313 $16,887 $16,033 $6,311 
Foreign currency translation adjustment35 39 (4)— — 
Balance at September 30, 2023$45,579 $6,352 $16,883 $16,033 $6,311 

Note 4 – Leases
The Company primarily leases office and manufacturing facilities in addition to vehicles, which have remaining terms of less than one year to thirteen years. The Company has no finance leases.
Leases recorded on the balance sheet consist of the following (in thousands):
LeasesSeptember 30, 2023December 31, 2022
 Assets
 Operating lease right of use asset$27,440 $24,342 
 Liabilities
 Operating lease - current$3,814 $4,208 
 Operating lease - non-current$22,587 $20,043 
Other information related to lease term and discount rate is as follows:
September 30, 2023
 Operating leases weighted average remaining lease term (in years)8.11 years
 Operating leases weighted average discount rate4.83 %

The components of lease expense are as follows (in thousands):
-14-

Note 4 - Leases (continued)

Fiscal quarter endedNine Fiscal Months Ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Operating lease cost$1,331 $1,267 $3,822 $3,876 
Short-term lease cost24 30 115 72 
Sublease income(95)(104)(293)(321)
Total net lease cost$1,260 $1,193 $3,644 $3,627 

Right of use assets obtained in exchange for new operating lease liability during the nine fiscal months ended September 30, 2023 were $6.4 million. The Company paid $3.8 million and $3.9 million for its operating leases for each of the nine fiscal months ended September 30, 2023 and October 1, 2022, which are included in operating cash flows on the consolidated condensed statements of cash flows.
Undiscounted maturities of operating lease payments as of September 30, 2023 are summarized as follows (in thousands):
2023 (excluding the nine months ended September 30, 2023)$1,259 
20244,586 
20254,197 
20263,568 
20273,363 
Thereafter14,926 
Total future minimum lease payments$31,899 
 Less: amount representing interest(5,498)
 Present value of future minimum lease payments$26,401 
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 27.6% and 18.6% for the fiscal quarter ended September 30, 2023, and October 1, 2022, respectively. 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 effective tax rate for the fiscal quarter ended October 1, 2022 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 30, 2023December 31, 2022
2020 Credit Agreement - Revolving Facility$54,000 $61,000 
Deferred financing costs(173)(201)
Total long-term debt$53,827 $60,799 
On May 5, 2023, the Company entered into Amendment No. 1 to Third Amended and Restated Credit Agreement (the “Credit Agreement Amendment”), by and among the Company, the lenders named therein, Citizens Bank, National Association and
-15-

Note 6 - Long-Term Debt (continued)
Wells Fargo Bank, National Association as joint lead arrangers and JPMorgan Chase Bank, National Association as agent for such lenders. The Credit Agreement Amendment amends the Third Amended and Restated Credit Agreement, dated March 20, 2020, by and 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 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. There was no material impact in interest expense or the loan balance as a result of the rate change.
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 AdjustmentPension
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 $(44,729)
Foreign Currency Translation AdjustmentPension
and Other
Postretirement
Actuarial Items
Total
Balance at January 1, 2022$(30,276)$(4,732)$(35,008)
Other comprehensive loss before reclassifications(18,405)— (18,405)
Amounts reclassified from accumulated other comprehensive income191 227 418 
Balance at October 1, 2022$(48,490)$(4,505)$(52,995)
Reclassification of foreign currency translation adjustment for the loss on liquidation of subsidiaries is included in other income and expense other (see Note 12). 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 
 
September 30, 2023
Fiscal quarter ended 
 
October 1, 2022
Pension
Plans
OPEB
Plans
Pension
Plans
OPEB
Plans
Net service cost$67 $4 $79 $
Interest cost193 28 117 17 
Expected return on plan assets(216)(116)— 
Amortization of actuarial losses (gains)7 (6)69 
Net periodic benefit cost$51 $26 $149 $25 
Nine Fiscal Months Ended 
 
September 30, 2023
Nine Fiscal Months Ended 
 
October 1, 2022
Pension
Plans
OPEB
Plans
Pension
Plans
OPEB
Plans
Net service cost$204 $12 $244 $21 
Interest cost$575 $84 $360 $51 
Expected return on plan assets$(642)$ $(358)$— 
Amortization of actuarial losses (gains)$22 $(18)$215 $
Net periodic benefit cost$159 $78 $461 $75 


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 30, 2023, the Company had reserved 525,239 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 February 28, 2023 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 $1.9 million and were comprised of 43,243 RSUs. Fifty percent of these awards will vest on January 1, 2026, subject to the executives’ continued employment. The performance-based portion of the RSUs will also vest on January 1, 2026, 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 9, 2023, 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 14,338 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, 2026, subject to the employees' continued employment. The performance-based portion of the RSUs will also vest on January 1, 2026, 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 24, 2023, and in accordance with the Company's 2017 Non-Employee Director Compensation Plan, the Board of Directors approved the issuance of an aggregate of 13,923 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 the earlier of the 2024 Annual Stockholders Meeting or May 24, 2024, 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 endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Share-based compensation expense$656 $559 $1,885 $1,583 
During the second quarter of 2023, a net adjustment of $0.1 million decreasing share-based compensation expense was recorded based on the evaluation of performance objectives associated with awards granted in 2021 and 2022. It was determined that certain objectives were not likely to be fully met necessitating a reversal of certain compensation expenses associated with those awards. The result of the evaluation of performance objectives as of the end of the third quarter of 2023 was consistent with the prior quarter's evaluation and therefore there was no further adjustment required during the third quarter of 2023.
Note 10 – Segment Information
VPG reports in three product segments: the Sensors segment, the Weighing Solutions segment, and the Measurement Systems segment. The Sensors reporting 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 reporting 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 endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Net revenues:
Sensors$32,532 $37,879 $105,524 $115,909 
Weighing Solutions28,970 31,399 92,090 92,626 
Measurement Systems24,352 20,779 67,906 57,805 
Total$85,854 $90,057 $265,520 $266,340 
Gross profit:
Sensors$11,681 $15,324 $41,374 $47,441 
Weighing Solutions11,207 10,470 34,443 32,134 
Measurement Systems13,047 11,526 36,029 30,329 
Total$35,935 $37,320 $111,846 $109,904 
Reconciliation of segment operating income to consolidated results:
Sensors$6,543 $10,703 $26,043 $32,721 
Weighing Solutions5,393 5,392 16,894 15,783 
Measurement Systems5,605 4,876 14,246 10,350 
Unallocated G&A expenses(8,164)(8,922)(25,809)(26,774)
Restructuring costs(1,153)(165)(1,431)(1,330)
Operating income$8,224 $11,884 $29,943 $30,750 
Restructuring costs:
Sensors$ $(165)$ $(1,272)
Weighing Solutions(1,153)— (1,349)— 
Measurement Systems — (32)(58)
Corporate/Other — (50)— 
$(1,153)$(165)$(1,431)$(1,330)
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 endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Sensors to Weighing Solutions$417 $542 $1,178 $1,364 
Sensors to Measurement Systems4 32 52 191 
-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 endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Numerator:
Numerator for basic earnings per share:
Net earnings attributable to VPG stockholders$6,280 $10,118 $21,480 $27,229 
Denominator:
Denominator for basic earnings per share:
Weighted average shares13,600 13,649 13,596 13,645 
Effect of dilutive securities:
Restricted stock units86 59 74 47 
Dilutive potential common shares86 59 74 47 
Denominator for diluted earnings per share:
Adjusted weighted average shares13,686 13,708 13,670 13,692 
Basic earnings per share attributable to VPG stockholders
$0.46 $0.74 $1.58 $2.00 
Diluted earnings per share attributable to VPG stockholders
$0.46 $0.74 $1.57 $1.99 
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 endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Foreign currency exchange gain $1,283 $1,261 $2,138 $5,195 
Interest income543 91 1,265 235 
Pension expense(72)(81)(217)(261)
Other(83)(48)(221)(163)
$1,671 $1,223 $2,965 $5,006 

Foreign currency exchange gains represent the impact of changes in foreign currency exchange rates. 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, was largely due to exposure to currency fluctuations with the Israeli shekel, the Canadian dollar, the EURO and the British pound.
-20-

Note 12 – Additional Financial Statement Information ( continued)
For the fiscal quarter and nine fiscal months ended October 1, 2022, the change in foreign exchange gains and losses during the periods, as compared to the prior year periods, was largely due to exposure to currency fluctuations with the Israeli shekel, the Japanese yen, the Canadian dollar, and the British pound. The change in the dollar-shekel exchange rate resulted in a favorable foreign exchange impact primarily related to the shekel-denominated lease liability for the Sensors facility in Israel.

Included in Other for the nine fiscal months ended October 1, 2022 is a $0.2 million loss on the liquidation of two of the Company's European subsidiaries.

Other Accrued Expenses

Other accrued expenses consist of the following (in thousands):


September 30, 2023December 31, 2022
Customer advance payments$8,766 $7,983 
Accrued restructuring911 183 
Goods received, not yet invoiced2,632 2,523 
Accrued taxes, other than income taxes1,829 1,141 
Accrued commissions3,991 3,217 
Accrued professional fees1,847 1,360 
Accrued technical warranty771 740 
Current accrued pensions and other post retirement costs505 505 
Other2,825 2,654 
$24,077 $20,306 


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
September 30, 2023
Assets
Assets held in rabbi trusts$5,571 $85 $5,486 $ 
December 31, 2022
Assets
Assets held in rabbi trusts$5,427 $53 $5,374 $— 
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Note 13 – Fair Value Measurements (continued)
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 30, 2023 and December 31, 2022, 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 30, 2023 and December 31, 2022 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 $1.2 million and $0.2 million of restructuring costs during the fiscal quarter ended September 30, 2023 and October 1, 2022, respectively and $1.4 million and $1.3 million of restructuring costs during the nine fiscal months ended September 30, 2023 and October 1, 2022, 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 30, 2023 and December 31, 2022, respectively, is included in Other accrued expenses in the accompanying consolidated condensed balance sheets (in thousands):
Balance at December 31, 2022$183 
Restructuring charges in 20231,431 
Cash payments(705)
Foreign currency translation
Balance at September 30, 2023$911 
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 September 30, 2023, the Company had repurchased an aggregate of 120,419 shares of its common stock under the stock repurchase plan for consideration of $3.9 million.





-22-


Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
VPG is a global, diversified company focused on 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.
Driven by the continued proliferation of data generated by the expanding use of sensors across a widening array of industrial and non-industrial applications, precision measurement and sensing technologies help ensure and deliver required levels of quality of mission-critical or high-value data. VPG’s products are often at the first stage of a data value chain (i.e., the process of converting the physical world into a digital format that can be used for a specific purpose) and as such impact the effectiveness of vast number of critical, high-value downstream processes. Over the past few years, we have seen a broadening of precision sensing applications in both our traditional industrial markets and new markets, due to the development of higher functionality in our customers' end products. Our precision measurement solutions are used across a wide variety of end markets upon which we focus, including industrial, test and measurement, transportation, steel, medical, agriculture, avionics, military and space, and consumer product applications. The Company has a long heritage of innovation in sensor technologies that provide accuracy, reliability and repeatability that make our customers' products safer, smarter, and more productive. As the functionality of customers' products continues to increase, and they integrate more precision measurement sensors and related systems into their solutions, we believe this will offer substantial growth opportunities for our products and expertise.
The impact of the recent Israel-Hamas war
In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks.

As of November 7, 2023 (date of filing), our operations in Israel have operated at near normal levels. The extent and duration of the current war, as well as the possibility of further spread of the conflict to other countries in the region as well as involving other political and military entities in the Middle East, poses risks to our operations and may lead to disruptions which could adversely affect our business, prospects, financial condition and results of operations.

While sales to customers in Israel account for a relatively small portion of our revenues, our operations in Israel include executive offices, which are the workplace for key executives including our chief executive officer, as well as two manufacturing facilities located in the central part of Israel which represent approximately 25 percent of our total worldwide revenues. As of November 7, 2023, these facilities remain open and operational. We have implemented a contingency plan that we believe will secure supply of materials and logistics, build safety stock of finished goods and transfer these goods to our distribution centers outside of Israel, and we continue to take measures with regards to the safety of our employees. We may, however, determine to temporarily discontinue production in Israel for the safety of our employees. We could also face future production slowdowns or interruptions at either manufacturing location in Israel due to the impacts of the war, including personnel absences as a number of our employees have been called to active military duty, or due to other resource constraints such as the inability to source materials for production.
Overview of Financial Results
VPG reports in three product segments: the Sensors segment, the Weighing Solutions segment, and the Measurement Systems segment. The Sensors reporting 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 reporting segment is comprised of highly specialized systems for steel production, materials development, and safety testing.
Net revenues for the fiscal quarter ended September 30, 2023 were $85.9 million versus $90.1 million for the comparable prior year period. Net earnings attributable to VPG stockholders for the fiscal quarter ended September 30, 2023 were $6.3 million, or $0.46 per diluted share, versus $10.1 million, or $0.74 per diluted share, for the comparable prior year period.
Net revenues for the nine fiscal months ended September 30, 2023 were $265.5 million versus $266.3 million for the comparable prior year period. Net earnings attributable to VPG stockholders for the nine fiscal months ended September 30,
-23-


2023 were $21.5 million, or $1.57 per diluted share, versus $27.2 million, or $1.99 per diluted share, for the comparable prior year period.
The results of operations for the fiscal quarters ended September 30, 2023 and October 1, 2022 include items affecting comparability as listed in the reconciliations below. The reconciliations below include certain financial measures which are not recognized in accordance with U.S. generally accepted accounting principles ("GAAP"), including adjusted gross profits, adjusted gross profit margin, adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted net earnings per diluted share, EBITDA, and adjusted EBITDA. These non-GAAP measures should not be viewed as an alternative to GAAP measures of performance. Non-GAAP measures such as adjusted gross profits, adjusted gross profit margin, adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted net earnings per diluted share, EBITDA, and adjusted EBITDA do not have uniform definitions. These measures, as calculated by VPG, may not be comparable to similarly titled measures used by other companies. Management believes that these non-GAAP measures are useful to investors because each presents what management views as our core operating results for the relevant period. The adjustments to the applicable GAAP measures relate to occurrences or events that are outside of our core operations, and management believes that the use of these non-GAAP measures provides a consistent basis to evaluate our operating profitability and performance trends across comparable periods. In addition, the Company has historically provided these or similar non-GAAP measures and understands that some investors and financial analysts find this information helpful in analyzing the Company’s performance and in comparing the Company’s financial performance to that of its peer companies and competitors. Management believes that the Company’s non-GAAP measures are regarded as supplemental to its GAAP financial results.
Gross ProfitOperating IncomeNet Earnings Attributable to VPG StockholdersDiluted Earnings Per share
Three months ended September 30, 2023October 1, 2022September 30, 2023October 1, 2022September 30, 2023October 1, 2022September 30, 2023October 1, 2022
As reported - GAAP$35,935 $37,320 $8,224 $11,884 $6,280 $10,118 $0.46 $0.74 
As reported - GAAP Margins41.9 %41.4 %9.6 %13.2 %
Acquisition purchase accounting adjustments (a)214 260 214 260 214 260 0.02 0.02 
Restructuring costs — 1,153 165 1,153 165 0.08 0.01 
Foreign currency exchange gain (d) —  — (1,283)(1,261)(0.09)(0.09)
Less: Tax effect of reconciling items and discrete tax items —  — (77)(194) (0.01)
As Adjusted - Non GAAP$36,149 $37,580 $9,591 $12,309 $6,441 $9,476 $0.47 $0.69 
As Adjusted - Non GAAP Margins42.1 %41.7 %11.2 %13.7 %
-24-


Gross ProfitOperating IncomeNet Earnings Attributable to VPG StockholdersDiluted Earnings Per share
Nine fiscal months endedSeptember 30, 2023October 1, 2022September 30, 2023October 1, 2022September 30, 2023October 1, 2022September 30, 2023October 1, 2022
As reported - GAAP111,846 109,904 29,943 30,750 $21,480 $27,229 $1.57 $1.99 
As reported - GAAP Margins42.1 %41.3 %11.3 %11.5 %
Acquisition purchase accounting adjustments (a)304 1,310 304 1,310 304 1,310 0.02 0.10 
COVID-19 impact (b) 138  138  138  0.01 
Start-up costs (c)
 150  150  150  0.01 
Restructuring costs  1,431 1,330 1,431 1,330 0.11 0.10 
Foreign currency exchange gain (d)
    (2,139)(5,195)(0.16)(0.38)
Less: Tax effect of reconciling items and discrete tax items    (357)(496)(0.03)(0.03)
As Adjusted - Non GAAP$112,150 $111,502 $31,678 $33,678 $21,433 $25,458 $1.57 $1.86 
As Adjusted - Non GAAP Margins42.2 %41.9 %11.9 %12.6 %

Fiscal quarter endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Net earnings attributable to VPG stockholders$6,280 $10,118 $21,480 $27,229 
Interest Expense1,119 636 3,195 1,393 
Income tax expense2,419 2,323 8,023 6,651 
Depreciation2,954 2,937 8,806 8,622 
Amortization880 960 2,753 2,897 
EBITDA13,652 $16,974 44,257 $46,792 
EBITDA MARGIN15.9 %18.8 %16.7 %17.6 %
Acquisition purchase accounting adjustments (a)214 260 304 1,310 
Restructuring costs1,153 165 1,431 1,330 
COVID-19 impact (b) —  138 
Start-up costs (c) —  150 
Foreign currency exchange gain (d)(1,283)(1,261)(2,139)(5,195)
ADJUSTED EBITDA$13,736 $16,138 $43,853 $44,525 
ADJUSTED EBITDA MARGIN16.0 %17.9 %16.5 %16.7 %

(a)     Acquisition purchase accounting adjustments include fair market value adjustments associated with inventory recorded as a component of costs of products sold.
(b)    COVID-19 impact in 2022 is the net impact to the Company of costs incurred as a result of the COVID-19 pandemic, net of government subsidies received.
(c)    Start-up costs in 2022 are associated with the ramp up of our new manufacturing facility in Israel.
(d)    Impact of foreign currency exchange rates on assets and liabilities.

-25-


Financial Metrics
We utilize several financial measures and metrics to evaluate performance and assess the future direction of our business. These key financial measures and metrics include net revenues, gross profit margin, end-of-period backlog, book-to-bill ratio, and inventory turnover.
Gross profit margin is computed as gross profit as a percentage of net revenues. Gross profit is generally net revenues less costs of products sold, but could also include certain other period costs. Gross profit margin is a function of net revenues, but also reflects our cost-cutting programs and our ability to contain fixed costs.
End-of-period backlog is one indicator of potential future sales. We include in our backlog only open orders that have been released by the customer for shipment in the next twelve months. If demand falls below customers’ forecasts, or if customers do not control their inventory effectively, they may cancel or reschedule the shipments that are included in our backlog, in many instances without the payment of any penalty. Therefore, backlog is not necessarily indicative of the results expected for future periods.
Another important indicator of demand in our industry is the book-to-bill ratio, which is the ratio of the amount of product ordered during a period compared with the amount of product shipped during that period. A book-to-bill ratio that is greater than one indicates that revenues may increase in future periods. Conversely, a book-to-bill ratio that is less than one is an indicator of lower demand and may foretell declining sales. The book-to-bill ratio is also impacted by the timing of orders, particularly from our project-based product lines.
We focus on inventory turnover as a measure of how well we manage our inventory. We define inventory turnover for a financial reporting period as our costs of products sold for the four fiscal quarters ending on the last day of the reporting period divided by our average inventory (computed using each quarter-end balance) for this same period. A higher level of inventory turnover reflects more efficient use of our capital.
The quarter-to-quarter trends in these financial metrics can also be an important indicator of the likely direction of our business. The following tables show net revenues, gross profit margin, end-of-period backlog, book-to-bill ratio, and inventory turnover for our business as a whole and by segment during the five quarters beginning with the third quarter of 2022 through the third quarter of 2023.
3rd Quarter4th Quarter1st Quarter2nd Quarter3rd Quarter
(dollars in thousands)
20222022202320232023
Net revenues$90,057 $96,240 $88,864 $90,802 $85,854 
Gross profit margin41.4 %41.2 %41.9 %42.6 %41.9 %
End-of-period backlog$168,100 $151,400 $146,800 $139,700 $128,800 
Book-to-bill ratio1.08 0.76 0.94 0.94 0.90 
Inventory turnover2.47 2.63 2.39 2.34 2.20 


-26-


3rd Quarter4th Quarter1st Quarter2nd Quarter3rd Quarter
(dollars in thousands)20222022202320232023
Sensors
Net revenues$37,879 $36,312 $36,726 $36,266 $32,532 
Gross profit margin40.5 %37.6 %41.2 %40.1 %35.9 %
End-of-period backlog$77,000 $72,300 $66,200 $58,900 $52,400 
Book-to-bill ratio0.99 0.76 0.82 0.84 0.83 
Inventory turnover3.04 2.91 2.62 2.55 2.38 
Weighing Solutions
Net revenues$31,399 $33,089 $31,859 $31,261 $28,970 
Gross profit margin33.3 %33.4 %34.9 %38.7 %38.7 %
End-of-period backlog$43,000 $38,300 $35,400 $34,300 $30,800 
Book-to-bill ratio1.05 0.82 0.90 0.97 0.89 
Inventory turnover2.48 2.72 2.63 2.41 2.18 
Measurement Systems
Net revenues$20,779 $26,839 $20,279 $23,275 $24,352 
Gross profit margin55.5 %55.9 %53.9 %51.8 %53.6 %
End-of-period backlog$48,100 $40,800 $45,200 $46,500 $45,600 
Book-to-bill ratio1.27 0.70 1.21 1.06 0.98 
Inventory turnover1.68 2.11 1.70 1.94 1.94 
Net revenues for the third fiscal quarter of 2023 decreased 5.4% from the second fiscal quarter of 2023 mainly due to decreased revenues in the Sensors and Weighing Solutions reporting segments. Net revenues decreased 4.7% from the third fiscal quarter of 2022 with decreased volume, primarily in the Sensors and Weighing Solutions reporting segments, respectively, partially offset by higher volume in the Measurement Systems reporting segment.
Net revenues in the Sensors reporting segment decreased 10.3% compared to the second fiscal quarter of 2023, and decreased 14.1% from the third fiscal quarter of 2022. Sequentially, the decrease primarily reflected lower revenue of precision resistors in the Avionics, Military and Space ("AMS") market and Test and Measurement end markets and lower sales of strain gages in the General Industrial end market. The year-over-year decrease in revenues was primarily attributable to lower sales of precision resistors in the Test and Measurement market, and lower sales of advanced sensors products primarily in our Other markets (mainly for consumer applications), partially offset by increases in precision resistor sales in the AMS market.
Net revenues in the Weighing Solutions reporting segment decreased 7.3% from the second fiscal quarter of 2023, and decreased 7.7% from the third fiscal quarter of 2022. The sequential and year-over-year decreases in revenues were mainly attributable to lower sales of load cells in our Other markets for precision agriculture and construction applications and lower sales of load cells in our Industrial Weighing market, partially offset by increased sales in the Transportation market.
Net revenues in the Measurement Systems reporting segment increased 4.6% from the second fiscal quarter of 2023 and increased 17.2% from the third fiscal quarter of 2022. Sequentially, the increase in revenue was primarily due to the higher sales of Diversified Technical Systems Inc. ("DTS") products in the AMS and Transportation markets, partially offset by lower sales in the Steel market. The year-over-year increase was primarily attributable to increased revenue in the Steel market and higher sales of DTS products in the AMS market.
Total Company gross profit margin in the third fiscal quarter of 2023 decreased 0.7% as compared to the second fiscal quarter of 2023 and increased 0.5% from the third fiscal quarter of 2022.
Sequentially, the decrease in the gross profit margin in the Sensors reporting segment was partially offset by the increase in the gross profit margin in the Measurement Systems segment, while the Weighing Solutions reporting segment gross profit margin remained unchanged. In the Sensors reporting segment, the gross profit margin decreased sequentially due to lower volume and temporary labor inefficiencies. In the Weighing Solutions reporting segment, there was no sequential change in gross profit
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margins as lower operating costs offset the impact of lower volume. The sequential increase in the gross profit margin in the Measurement Systems reporting segment was primarily a result of higher volume.
Compared to the third fiscal quarter of 2022, the Weighing Solutions reporting segments had higher gross profit margins, while the Sensors and Measurement Systems reporting segments gross profit margins were lower.
The Sensors reporting segment had a lower gross profit margin due to lower volume and temporary labor inefficiencies, partially offset by favorable foreign currency exchange rates and cost reduction programs. The Weighing Solutions reporting segment increase in gross profit margin as compared to 2022 was primarily due to cost reductions, lower logistics costs, and favorable foreign currency rates, which offset the impact of lower volume. In the Measurement Systems reporting segment, the gross profit margin was lower as compared to the third fiscal quarter of 2022 primarily due to higher volume and higher average selling prices and lower purchase accounting adjustments being offset by higher labor costs.
Optimize Core Competence
The Company’s core competencies include our innovative deep technical and applications-specific expertise to add value to our customers' products, our strong brands and customer relationships, our focus on operational excellence, our ability to select and develop our management teams, and our proven M&A strategy. We continue to optimize all aspects of our development, manufacturing and sales processes, including by increasing our technical sales efforts; continuing to innovate in product performance and design; and refining our manufacturing processes.
Our Sensors segment research group developed innovations that enhance the capability and performance of our strain gages, while simultaneously reducing their size and power consumption as part of our advanced sensors product line. We believe this unique foil technology will create new markets as customers “design in” these next generation products in existing and new applications. Our development engineering team is also responsible for creating new processes to further automate manufacturing, and improve productivity and quality. Our advanced sensors manufacturing technology also offers us the capability to produce high-quality foil strain gages in a highly automated environment, which we believe results in reduced manufacturing and lead times, improved quality, and increased margins. As a sign of our commitment to these businesses, we signed a long-term lease for a state-of-the-art facility that has been constructed in Israel. We fully transitioned to this facility in the third quarter of fiscal 2021.
Our design, research, and product development teams, in partnership with our marketing teams, drive our efforts to bring innovations to market. We intend to leverage our insights into customer demand to continually develop and roll out new, innovative products within our existing lines and to modify our existing core products in ways that make them more appealing, addressing changing customer needs and industry trends in terms of form, fit, and function.
We also seek to achieve significant production cost savings through the transfer, expansion, and construction of manufacturing operations in countries such as India, Japan, and Israel, where we can benefit from improved efficiencies or available tax and other government-sponsored incentives. In the past several years, we incurred restructuring expense related to closing and downsizing of facilities as part of the manufacturing transitions of our load cell products to facilities in India and China, which marked key milestones in our ongoing strategic initiatives to align and consolidate our manufacturing footprint.
Acquisition Strategy
We expect to continue to make strategic acquisitions where opportunities present themselves to grow and expand our segments. Historically, our growth and acquisition strategy had been largely focused on vertical product integration, using our foil strain gages in our load cell products, and incorporating those products into our weighing solutions. In recent years, we widened our acquisition strategy to include a broader set of precision measurement systems and product companies.
We expect to expand our expertise, and our acquisition focus, outside our traditional vertical approach to other precision measurement solutions, including in the fields of measurement of force, weight, pressure, torque, tilt, motion, and acceleration. We believe acquired businesses will benefit from improvements we implement to reduce redundant functions and from our current global manufacturing and distribution footprint.
Research and Development
Research and development will continue to play a key role in our efforts to introduce innovative products to generate new sales and to improve profitability. We expect to continue to expand our position as a leading supplier of precision foil technology products. We believe our R&D efforts should provide us with a variety of opportunities to leverage technology, products, and our manufacturing base in order to ultimately improve our financial performance.
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Cost Management
To be successful, we believe we must seek new strategies for controlling operating costs. Through automation in our plants, we believe we can optimize our capital and labor resources in production, inventory management, quality control, and warehousing. We are in the process of moving some manufacturing to more cost effective locations. This may enable us to become more efficient and cost competitive, and also maintain tighter controls of the operation.
Production transfers, facility consolidations, and other long-term cost-cutting measures require us to initially incur significant severance and other exit costs. We are realizing the benefits of our restructuring through lower labor costs and other operating expenses, and expect to continue reaping these benefits in future periods. However, these programs to improve our profitability also involve certain risks which could materially impact our future operating results, as further detailed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 1, 2023.
We are evaluating plans to further reduce our costs by consolidating additional manufacturing operations. These plans may require us to incur restructuring and severance costs in future periods. While streamlining and reducing fixed overhead, we are exercising caution so that we will not negatively impact our customer service or our ability to further develop products and processes.
Goodwill
We test the goodwill in each of our reporting units for impairment at least annually, as of the first day of our fourth quarter, and whenever events or changes in circumstances occur indicating that a possible impairment may have been incurred. Determining whether to test goodwill for impairment, and the application of goodwill impairment tests, require significant management judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit. Changes in these estimates could materially affect the determination of fair value for each reporting unit. A slowdown or deferral of orders for a business, with which we have goodwill associated, could impact our valuation of that goodwill.
Foreign Currency
We are exposed to foreign currency exchange rate risks, particularly due to transactions in currencies other than the functional currencies of certain subsidiaries. U.S. GAAP requires that entities identify the “functional currency” of each of their subsidiaries and measure all elements of the financial statements in that functional currency. A subsidiary’s functional currency is the currency of the primary economic environment in which it operates. In cases where a subsidiary is relatively self-contained within a particular country, the local currency is generally deemed to be the functional currency. However, a foreign subsidiary that is a direct and integral component or extension of the parent company’s operations generally would have the parent company’s currency as its functional currency. We have subsidiaries that fall into each of these categories.
Foreign Subsidiaries which use the Local Currency as the Functional Currency
Our operations in Europe, Canada, and certain locations in Asia primarily generate and expend cash using local currencies, and accordingly, these subsidiaries utilize the local currency as their functional currency. For those subsidiaries where the local currency is the functional currency, assets and liabilities in the consolidated condensed balance sheets have been translated at the rate of exchange as of the balance sheet date. Translation adjustments do not impact the results of operations and are reported as a separate component of equity.
For those subsidiaries where the local currency is the functional currency, revenues and expenses are translated at the average exchange rate for the period. While the translation of revenues and expenses into U.S. dollars does not directly impact the consolidated condensed statement of operations, the translation effectively increases or decreases the U.S. dollar equivalent of revenues generated and expenses incurred in those foreign currencies.
Foreign Subsidiaries which use the U.S. Dollar as the Functional Currency
Our operations in Israel and certain locations in Asia primarily generate cash in U.S. dollars, and accordingly, these subsidiaries utilize the U.S. dollar as their functional currency. For those foreign subsidiaries where the U.S. dollar is the functional currency, all foreign currency financial statement amounts are remeasured into U.S. dollars. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in the results of operations. While these subsidiaries transact most business in U.S. dollars, they may have significant costs, particularly related to payroll, which are incurred in the local currency and significant lease assets and liabilities.
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Effects of Foreign Currency Exchange Rate on Operations
For the fiscal quarter ended September 30, 2023, exchange rates increased net revenues by $0.5 million, and decreased costs of products sold and selling, general, and administrative expenses by $1.6 million, when compared to the comparable prior year period.
For the nine fiscal months ended September 30, 2023, exchange rates decreased net revenues by $2.7 million, and decreased costs of products sold and selling, general, and administrative expenses by $7.6 million, when compared to the comparable prior year period.

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Results of Operations
Statement of operations’ captions as a percentage of net revenues and the effective tax rates were as follows:
Fiscal quarter endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Costs of products sold58.1 %58.6 %57.9 %58.7 %
Gross profit41.9 %41.4 %42.1 %41.3 %
Selling, general, and administrative expenses30.9 %28.1 %30.3 %29.2 %
Operating income9.6 %13.2 %11.3 %11.5 %
Income before taxes10.2 %13.8 %11.2 %12.9 %
Net earnings7.4 %11.3 %8.2 %10.4 %
Net earnings attributable to VPG stockholders7.3 %11.2 %8.1 %10.2 %
Effective tax rate27.6 %18.6 %27.0 %19.4 %
Net Revenues
Net revenues were as follows (dollars in thousands):
Fiscal quarter endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Net revenues$85,854 $90,057 $265,520 $266,340 
Change versus comparable prior year period
$(4,203)$(820)
Percentage change versus prior year period
(4.7)%(0.3)%
Changes in net revenues were attributable to the following:
vs. prior year
quarter
vs. prior year-
to-date
Change attributable to:
Change in volume(6.2)%(0.8)%
Change in average selling prices1.2 %1.5 %
Foreign currency effects0.3 %(1.0)%
Net change(4.7)%(0.3)%
During the fiscal quarter and nine fiscal months ended September 30, 2023, net revenues decreased 4.7% and 0.3%, respectively, as compared to the comparable prior year periods. For the fiscal quarter period, decreased volume, primarily from the Sensors and Weighing Solutions reporting segments, was partially offset by higher volume in the Measurement Systems reporting segment. For the nine fiscal month period, higher volume in the Measurement Systems reporting segment was completely offset by lower volume in the Sensors and Weighing Solutions reporting segments.
Gross Profit Margin
Gross profit as a percentage of net revenues was as follows:
Fiscal quarter endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Gross profit margin41.9 %41.4 %42.1 %41.3 %
The gross profit margin for the fiscal quarter and nine fiscal months ended September 30, 2023 increased 0.5% and 0.8%, respectively, as compared to the comparable prior year periods. For the fiscal quarter period, the Weighing Solutions reporting segments had higher gross profit margins, while the Sensors and Measurement Systems reporting segments gross profit margins
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were lower. For the nine fiscal month period, the Weighing Solutions and Measurement Systems reporting segments had higher gross profit margin, while the Sensors reporting segment had lower gross profit margin.

Segments
Analysis of revenues and gross profit margins for each of our reportable segments is provided below.
Sensors
Net revenues of the Sensors segment were as follows (dollars in thousands):
Fiscal quarter endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Net revenues$32,532 $37,879 $105,524 $115,909 
Change versus comparable prior year period
$(5,347)$(10,385)
Percentage change versus prior year period
(14.1)%(9.0)%
Changes in Sensors segment net revenues were attributable to the following:
vs. prior year
quarter
vs. prior year-
to-date
Change attributable to:
Change in volume(15.5)%(8.9)%
Change in average selling prices0.9 %0.9 %
Foreign currency effects0.5 %(1.0)%
Net change(14.1)%(9.0)%
Net revenues decreased 14.1% and 9.0% for the fiscal quarter and nine fiscal months ended September 30, 2023, respectively, as compared to the comparable prior year periods. The decrease in revenues was primarily attributable to lower sales of precision resistors in the Test and Measurement market, and lower sales of advanced sensors products primarily in our Other markets (mainly for consumer applications), partially offset by increases in precision resistor sales in the AMS market.
Gross profit as a percentage of net revenues for the Sensors segment was as follows:
Fiscal quarter endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Gross profit margin35.9 %40.5 %39.2 %40.9 %
The gross profit margin decreased 4.6% and 1.7% for the fiscal quarter and nine fiscal months ended September 30, 2023, respectively, when compared to the comparable prior year periods due to lower volume and temporary labor inefficiencies, partially offset by favorable foreign currency exchange rates and cost reduction programs.
Weighing Solutions
Net revenues of the Weighing Solutions segment were as follows (dollars in thousands):
Fiscal quarter endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Net revenues
$28,970 $31,399 $92,090 $92,626 
Change versus comparable prior year period
$(2,429)$(536)
Percentage change versus prior year period
(7.7)%(0.6)%
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Changes in Weighing Solutions segment net revenues were attributable to the following:
vs. prior year
quarter
vs. prior year-
to-date
Change attributable to:
Change in volume(9.4)%(2.0)%
Change in average selling prices0.9 %1.8 %
Foreign currency effects0.8 %(0.4)%
Net change(7.7)%(0.6)%
Net revenues decreased 7.7% for the fiscal quarter ended September 30, 2023, as compared to the comparable prior year period. The decrease in revenues were mainly attributable to lower sales of load cells in our Other markets for precision agriculture and construction applications and lower sales of load cells in our Industrial Weighing market, partially offset by increased sales in the Transportation market.
Net revenues decreased 0.6% for the nine fiscal months ended September 30, 2023 as compared to the comparable prior year period. Increased sales of load cells in our Other markets for precision agriculture and construction applications and transducer systems in our Industrial Weighing market were offset by lower sales of our load cell products in our Industrial weighing market.
Gross profit as a percentage of net revenues for the Weighing Solutions segment was as follows:
Fiscal quarter endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Gross profit margin38.7 %33.3 %37.4 %34.7 %
The gross profit margin for the fiscal quarter and nine fiscal months ended September 30, 2023 increased 5.4% and 2.7%, respectively, as compared to the comparable prior year periods primarily due to cost reductions, lower logistics costs, and favorable foreign currency rates, which offset the impact of lower volume.
Measurement Systems
Net revenues of the Measurement Systems segment were as follows (dollars in thousands):
Fiscal quarter endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Net revenues$24,352 $20,779 $67,906 $57,805 
Change versus comparable prior year period
$3,573 $10,101 
Percentage change versus prior year period
17.2 %17.5 %
Changes in Measurement Systems segment net revenues were attributable to the following:
vs. prior year
quarter
vs. prior year-
to-date
Change attributable to:
Change in volume15.8 %17.5 %
Change in average selling prices1.9 %1.9 %
Foreign currency effects(0.5)%(1.9)%
Net change17.2 %17.5 %
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Net revenues increased 17.2% for the fiscal quarter ended September 30, 2023 as compared to the comparable prior year period, and increased 17.5% for the nine fiscal months ended September 30, 2023 as compared to the comparable prior year period. For the fiscal quarter period, the increase was primarily attributable to increased revenue in the Steel market and higher sales of DTS products in the AMS market. For the nine fiscal month period, the increase was primarily attributable to increased revenue in the Steel market.
Gross profit as a percentage of net revenues for the Measurement Systems segment were as follows:
Fiscal quarter endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Gross profit margin53.6 %55.5 %53.1 %52.5 %
The gross profit margin for the fiscal quarter and nine fiscal month ended September 30, 2023 decreased by 1.9% and increased by 0.6%, respectively, compared to the comparable prior year periods. For the fiscal quarter period, the decrease was primarily due to higher volume and higher average selling prices and lower purchase accounting adjustments, being offset by higher labor costs. For the nine fiscal month period, the higher volume and higher average selling prices and lower purchase accounting adjustments were only partially offset by the higher labor costs.
Selling, General, and Administrative Expenses
Selling, general, and administrative (“SG&A”) expenses are summarized as follows (dollars in thousands):
Fiscal quarter endedNine fiscal months ended
September 30, 2023October 1, 2022September 30, 2023October 1, 2022
Total SG&A expenses$26,558 $25,271 $80,472 $77,824 
As a percentage of net revenues30.9 %28.1 %30.3 %29.2 %
SG&A expenses for the fiscal quarter and nine fiscal months ended September 30, 2023 increased $1.3 million and $2.6 million, respectively, compared to the comparable prior year periods due to increases in wages, travel costs, commissions and other fees, partially offset by favorable foreign currency exchange rate impacts.
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 $1.2 million and $0.2 million of restructuring costs during the fiscal quarter ended September 30, 2023 and October 1, 2022, respectively, and $1.4 million and $1.3 million of restructuring costs during the nine fiscal months ended September 30, 2023 and October 1, 2022, respectively. Restructuring costs were comprised primarily of employee termination costs, including severance and statutory retirement allowances, in connection with various cost reduction programs.
Other Income (Expense)
Interest expense for the fiscal quarter and nine fiscal months ended September 30, 2023 was higher when compared with the comparable prior year periods mainly due to higher borrowing rates in 2023.
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The following table analyzes the components of the line “Other” on the consolidated condensed statements of operations (in thousands):
Fiscal quarter ended
September 30, 2023October 1, 2022Change
Foreign currency exchange gain$1,283 $1,261 $22 
Interest income543 91 452 
Pension expense(72)(81)
Other(83)(48)(35)
$1,671 $1,223 $448 
Nine fiscal months ended
September 30, 2023October 1, 2022Change
Foreign currency exchange gain$2,138 $5,195 $(3,057)
Interest income1,265 235 1,030 
Pension expense(217)(261)44 
Other(221)(163)(58)
$2,965 $5,006 $(2,041)
Foreign currency exchange gains represent the impact of changes in foreign currency exchange rates. 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, was largely due to exposure to currency fluctuations with the Israeli shekel, the Canadian dollar, the EURO and the British pound.
For the fiscal quarter and nine fiscal months ended October 1, 2022, the change in foreign exchange gains and losses during the periods, as compared to the prior year periods, was largely due to exposure to currency fluctuations with the Israeli shekel, the Japanese yen, the Canadian dollar, and the British pound. The change in the dollar-shekel exchange rate resulted in a favorable foreign exchange impact primarily related to the shekel-denominated lease liability for the Sensors facility in Israel.
Included in Other for the fiscal quarter and nine fiscal months ended October 1, 2022 was a $0.2 million loss on the liquidation of two of the Company's European subsidiaries.
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 for the fiscal quarter ended September 30, 2023 was 27.6% compared to 18.6% for the fiscal quarter ended October 1, 2022. The effective tax rate for the fiscal quarter ended September 30, 2023 was higher than the prior year period primarily due to changes in the mix of worldwide income and an increase in our valuation allowance on deferred tax assets. The effective tax rate for the nine fiscal months ended September 30, 2023 was 27.0% compared to 19.4% for the nine fiscal months ended October 1, 2022. The effective tax rate for the nine fiscal months ended September 30, 2023 was higher than the prior year period primarily due to changes in the mix of worldwide income and an increase 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.
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Financial Condition, Liquidity, and Capital Resources
We believe that our current cash and cash equivalents, credit facilities and projected cash from operations will be sufficient to meet our liquidity needs for at least the next 12 months.
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.
On May 5, 2023, the Company entered into Amendment No. 1 to Third Amended and Restated Credit Agreement (the “Credit Agreement Amendment”), by and among the Company, the lenders named therein, Citizens Bank, National Association and Wells Fargo Bank, National Association as joint lead arrangers and the Agent, as agent for such lenders. The Credit Agreement Amendment amended the 2020 Credit Agreement. 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 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.
The obligations of the Company under the 2020 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 2020 Credit Agreement are secured by substantially all the assets (excluding real estate) of the Company and such guarantors. The 2020 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 specific financial ratios. The financial maintenance covenants include an interest coverage ratio and a leverage ratio. The Company was in compliance with its financial maintenance covenants at September 30, 2023. If the Company is not in compliance with any of these covenant restrictions, the credit facility could be terminated by the lenders, and all amounts outstanding pursuant to the credit facility could become immediately payable.
Our business has historically generated significant cash flow. For the nine fiscal months ended September 30, 2023, cash provided by operating activities was $27.1 million compared to $20.5 million in the comparable prior year period. Our net cash used in investing activities for the nine fiscal months ended September 30, 2023 was lower compared to the prior year period mainly due to lower capital spending. Our net cash used in financing activities for the nine fiscal months ended September 30, 2023 was higher when compared with the prior year period mainly due to a repayment on our revolving credit facility of $7.0 million during the third quarter of 2023.
Approximately 91% and 83% of our cash and cash equivalents balance at September 30, 2023 and December 31, 2022, respectively, was held by our non-U.S. subsidiaries.
See the following table for the percentage of cash and cash equivalents, by region, at September 30, 2023 and December 31, 2022:
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September 30, 2023December 31, 2022
Israel41 %28 %
Asia16 %27 %
Europe15 %13 %
United States9 %17 %
United Kingdom10 %10 %
Canada9 %%
100 %100 %
We earn a significant amount of our operating income outside the United States, the majority of which is deemed to be indefinitely reinvested in foreign jurisdictions. As a result, as discussed above, a significant portion of our cash and short-term investments are held by foreign subsidiaries. The Company will continue to evaluate its cash needs, however we currently do not intend, nor do we foresee a need, to repatriate funds in excess of what is already planned. The Company will evaluate the possibility of repatriating future cash provided such repatriation can be accomplished in a tax efficient manner. In addition, we expect existing domestic cash, short-term investments, and cash flows from operations to continue to be sufficient to fund our domestic operating activities and cash commitments for investing and financing activities, such as debt repayment and capital expenditures, for at least the next 12 months and thereafter for the foreseeable future.
If we should require more capital in the United States than is generated by our domestic operations, for example, to fund significant discretionary activities, such as business acquisitions, we could elect to repatriate future earnings from foreign jurisdictions or raise capital in the United States through debt or equity issuances. These alternatives could result in higher tax expense, increased interest expense, or dilution of our earnings. We consider the majority of the undistributed earnings of our foreign subsidiaries, as of September 30, 2023, to be indefinitely reinvested.
Adjusted free cash flow generated during the nine fiscal months ended September 30, 2023 was $17.3 million. We refer to the amount of cash provided by operating activities ($27.1 million) in excess of our capital expenditures ($9.8 million) and net of proceeds from the sale of assets ($0.0 million) as “adjusted free cash flow.”
The following table summarizes the components of net cash at September 30, 2023 and December 31, 2022 (in thousands):
September 30, 2023December 31, 2022
Cash and cash equivalents$94,632 $88,562 
Third-party debt, including current and long-term:
Revolving debt54,000 61,000 
Deferred financing costs(173)(201)
Total third-party debt53,827 60,799 
Net cash$40,805 $27,763 
Measurements such as “adjusted free cash flow” and “net cash" do not have uniform definitions and are not recognized in accordance with U.S. GAAP. Such measures should not be viewed as alternatives to GAAP measures of performance or liquidity. However, management believes that “adjusted free cash flow” is a meaningful measure of our ability to fund acquisitions, and that an analysis of “net cash” assists investors in understanding aspects of our cash and debt management. These measures, as calculated by us, may not be comparable to similarly titled measures used by other companies.
Our financial condition as of September 30, 2023 remains strong, with a current ratio (current assets to current liabilities) of 4.3 to 1.0, as compared to a ratio of 3.9 to 1.0 at December 31, 2022.
Cash paid for property and equipment for the nine fiscal months ended September 30, 2023 was $9.8 million compared to $15.5 million in the comparable prior year period.
As of September 30, 2023 and December 31, 2022, we did not have any off-balance sheet arrangements.
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Safe Harbor Statement
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 or constitute "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; impact of inflation; potential issues respecting the United States federal government debt ceiling; global labor and supply chain challenges; difficulties or delays in identifying, negotiating and completing acquisitions and integrating acquired companies; 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; political, economic, and health (including pandemics) instabilities; instability caused by military hostilities in the countries in which we operate (including Israel); difficulties in implementing our cost reduction strategies, such as underutilization of production facilities, labor unrest or legal challenges to our lay-off or termination plans, operation of redundant facilities due to difficulties in transferring production to achieve efficiencies; compliance issues under applicable laws, such as export control laws, including the outcome of our voluntary self-disclosure of export control non-compliance; significant developments from the recent and potential changes in tariffs and trade regulation; our efforts and efforts by governmental authorities to mitigate the COVID-19 pandemic, such as travel bans, shelter-in-place orders and business closures and the related impact on resource allocations, manufacturing and supply chains; our status as a “critical”, “essential” or “life-sustaining” business in light of COVID-19 business closure laws, orders and guidance being challenged by a governmental body or other applicable authority; our ability to execute our new corporate strategy and business continuity, operational and budget plans; 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, 2022. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this report or as of the dates otherwise indicated in such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.


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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the market risks previously disclosed in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023.
Item 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act are: (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our CEO and CFO, believes that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must consider the benefits of controls relative to their costs. Inherent limitations within a control system include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. While the design of any system of controls is to provide reasonable assurance of the effectiveness of disclosure controls, such design is also based in part upon certain assumptions about the likelihood of future events, and such assumptions, while reasonable, may not take into account all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and may not be prevented or detected.
Changes in Internal Control over Financial Reporting
During our last fiscal quarter ended September 30, 2023, there was no change in our internal control over financial reporting that materially affected, or is reasonable likely to materially affect, internal control over financial reporting.



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PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is subject to various legal proceedings that constitute ordinary, routine litigation incidental to its business. The Company believes that the foregoing matters will not have a material adverse effect on the Company’s business or its financial condition, results of operations, and cash flows.
Item 1A. RISK FACTORS
In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023. There have been no material changes in reported risk factors from the information reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information about repurchases of the Company's common stock during the three-month period ended September 30, 2023.

Total Number of Shares Purchased (a)Average Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number of Shares that May Yet Be Purchased Under the Plans (a)
July 2, 2023 - August 2, 2023— — — 502,475 
August 3, 2023 - September 3, 20235,646 $34.79 5,646 496,829 
September 4, 2023- September 30, 202317,248 33.574 17,248 479,581 
Total22,894 22,894 479,581 
(a) 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, and the Board authorized purchases thereunder to be made through an issuer repurchase plan adopted under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), open market purchases or private transactions, in accordance with the applicable federal securities laws, including Rule 10b-18 under the Exchange Act. 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 September 30, 2023, the Company had repurchased an aggregate of 120,419 shares under the Stock Repurchase Plan.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 5. OTHER INFORMATION
During the fiscal quarter ended September 30, 2023, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).
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Item 6. EXHIBITS
31.1      
31.2      
32.1      
32.2      
101      Interactive Data File (Quarterly Report on Form 10-Q, for the quarterly period ended September 30, 2023, furnished in XBRL (eXtensible Business Reporting Language).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
VISHAY PRECISION GROUP, INC.
 
/s/ William M. Clancy
William M. Clancy
Executive Vice President and Chief Financial Officer
(as a duly authorized officer and principal financial and accounting officer)
Date: November 7, 2023

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