UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
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)
Delaware
(State or other jurisdiction of organization
incorporation or organization)
27-0986328
(IRS employer identification no.)
3 Great Valley Parkway, Suite 150
Malvern, PA 19355
(Address of principal executive offices)
484-321-5300
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.10 par value
(Title of class)
VPG
(Trading Symbol)
New York Stock Exchange
(Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Note – Checking the box above will not relieve any registrant required to file reports under Section 13 or 15(d) of the Exchange Act from their obligations under
those Sections.
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. 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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 definition of “accelerated filer”, “large accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of
the Act. (Check one):
Large accelerated filer
Non-accelerated filer
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
The aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the common stock was last sold as of the last
business day of the registrant’s most recently completed second fiscal quarter ($22.27 on June 27, 2020), assuming conversion of all of its Class B convertible
common stock held by non-affiliates into common stock of the registrant, was $283,256,000. There is no non-voting stock outstanding.
As of March 11, 2021, the registrant had 12,587,191 shares of its common stock and 1,022,887 shares of its Class B convertible common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement, which will be filed within 120 days of December 31, 2020, are incorporated by reference into Part
III of this Annual Report on Form 10-K.
Dear Stockholders:
From the Chairman of the Board
The resilience and dedication of the VPG team as well as the performance we achieved in a year in which the world
faced the worst pandemic in more than 100 years made me very proud. Through the challenges and uncertainty
presented by the pandemic, we implemented strict workplace protective measures, while continuing to focus on our
customer commitments.
Our 2020 sales declined from the prior year, reflecting the impacts of the pandemic on many of our customers and
the effect of government restrictions on our operation in India, although our sales increased in several other end
markets. We also continued to invest in VPG’s future growth and profitability and to execute on our long-term
strategic initiatives, including completing the initial phases of a project to expand our production capability for our
Advanced Sensor products. We expect this project to be completed in 2021 and to give us the needed capacity to
support Advanced Sensors’ long-term growth.
Our strong balance sheet, cash flow and capital allocation strategy served us well during the pandemic, and provide
us with the means to continue our strategic investments to grow organically and to find additional attractive, high-
quality businesses to enhance the VPG platform.
As the world continues to recover from the human, economic, and social impacts of the pandemic, we are very
confident about the prospects ahead for VPG. Our sensors and sensors-based products and systems continue to make
a difference in a myriad of applications that stretch across an array of industries.
I want to thank our customers, vendors, strategic business partners and stockholders for their continued support as
well as all members of the VPG family for their hard work and dedication.
Sincerely,
Marc Zandman
Chairman of the Board
Dear Stockholders:
From the President and CEO
Despite the challenges presented by the global pandemic, we achieved solid results for 2020 reflecting the strength
of our business model, the diversity of our end markets, and the execution of our strategic initiatives.
For the full year of 2020, we achieved sales of $269.8 million, operating income of $22.7 million, or 8.4% of revenue,
and diluted EPS of $0.79. On an adjusted basis, we recorded an operating margin of 9.7%, EBITDA of $38.0 million,
and diluted EPS of $1.32. We also generated $35.3 million in cash from operations.
These results do not adequately reflect the many accomplishments we achieved this past year. To outline some of
these: first, we responded quickly and decisively to the challenges of the pandemic, as we put in place measures to
protect our employees and our customers. These measures included workplace distancing and enabling employees
to work remotely if their jobs permitted it, restricting travel, as well as cost controls such as salary freezes.
Second, with the exception of our Force Sensors' operation, we continued to operate throughout the crisis, and were
able to seamlessly serve our customers around the world.
Third, when a government-imposed lock-down in India significantly impacted our operation, we overcame numerous
challenges to return to full production by the end of the third quarter.
Fourth, we continued to implement our long-term strategies and investments, which include our Advanced Sensors,
TruckWeigh/VanWeigh, and Force Sensors’ OEM growth initiatives, as well as our cost and efficiency programs
across the organization. We were particularly pleased with the sales performance in our Advanced Sensors business
which grew 41% in 2020 compared to 2019, as we moved forward with adding additional manufacturing capacity to
support future growth of this business.
For 2021, we are continuing to execute our long-term growth and cost-savings initiatives. We are encouraged by the
progress being made around the world regarding vaccinations and bringing the rate of COVID infections down. While
there is much more to do, and there are many risks still remaining before the pandemic is fully under control, we
believe that as the world and our markets return to normal we have the foundation and ongoing customer opportunities
to achieve a year of growth and execution across our businesses.
Beyond our core business, we also continue to look for attractive acquisition opportunities to add additional high-
quality, strategic businesses to the VPG platform that will further accelerate our growth and profitability.
Most importantly, I want to express our appreciation to the VPG employees and our customers around the world for
their dedication and support during a turbulent and challenging 2020. As we continue to execute on our long-term
strategic initiatives, we are excited about what lies ahead and the potential for enhancing stockholder value.
Sincerely,
Ziv Shoshani
President and Chief Executive Officer
Note: See our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and investor presentations on our website
for reconciliations of financial measures presented under accounting principles generally accepted in the United States of America
(“GAAP”) to non-GAAP financial measures.
Vishay Precision Group, Inc.
Form 10-K for the year ended December 31, 2020
CONTENTS
PART I
Item 1. Business Description
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity
Securities
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Party Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
SIGNATURES
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the years ended December 31, 2020, 2019, 2018
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019, 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019, 2018
Consolidated Statements of Equity for the years ended December 31, 2020, 2019, 2018
Notes to Consolidated Financial Statements
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Item 1. BUSINESS DESCRIPTION
General
PART I
Vishay Precision Group, Inc. (“VPG,” the “Company,” “we,” “us” or “our”) is an internationally recognized designer,
manufacturer and marketer of sensors, and sensor-based measurement systems, as well as specialty resistors and strain gages
based upon our proprietary technology. We provide precision products and solutions, many of which are “designed-in” by our
customers, specializing in the growing markets of stress, force, weight, pressure, and current measurements. A significant
portion of our products and solutions are primarily based upon our proprietary foil technology and are produced as part of our
vertically integrated structure. We believe this strategy results in higher quality, more cost effective and focused solutions for
our customers. Our products are marketed under a variety of brand names that we believe are characterized as having a very
high level of precision and quality. Our global operations enable us to produce a wide variety of products in strategically
effective geographic locations that also optimize our resources for specific technologies, sensors, assemblies, and systems.
The Company also has a long heritage of innovation in precision foil resistors, foil strain gages, and sensors that convert
mechanical inputs into an electronic signal for display, processing, interpretation, or control by our instrumentation and systems
products. Our advanced sensor product line continues this heritage by offering high-quality foil strain gages produced in a
proprietary, highly automated environment. Precision sensors are essential to the accurate measurement, resolution and display
of force, weight, pressure, torque, tilt, motion, or acceleration, especially in the legal-for-trade, commercial, and industrial
marketplaces. This expertise served as a foundation for our expansion into strain gage instrumentation, load cells, transducers,
weighing modules, and complete systems for process control and on-board weighing. Although our products are typically used
in the industrial market, our advanced sensors have been used in a consumer electronics product and are being evaluated for
other non-industrial applications.
The precision sensor market is integral to the development of intelligent products across a wide variety of end markets upon
which we focus, including medical, agricultural, transportation, industrial, avionics, military, and space applications. We
believe that as original equipment manufacturers (“OEMs”) continue a drive to make products “smarter,” they will integrate
more sensors and related systems into their solutions to link the mechanical/physical world with digital control and/or response.
We believe this offers a substantial growth opportunity for our products and expertise.
Our History
In 1962, Dr. Felix Zandman founded Vishay Intertechnology Inc. (“Vishay Intertechnology”) to develop and manufacture the
first generation of Bulk Metal® foil resistors and later, foil strain gages.
Resistors are basic components used in all forms of electronic circuitry to adjust and regulate levels of voltage and current.
They vary widely in precision and cost, and are manufactured from numerous materials and in many forms. Bulk Metal foil
resistors, developed by Dr. Zandman in the 1950’s, are the most precise and stable type of resistors currently available. A strain
gage is a resistive sensor that is attached to the surface of an object to determine the surface strain caused by an applied force.
Beginning in the 1960’s, Vishay Intertechnology established itself as a technical and market leader in precision foil resistors,
and foil strain gages. These innovations were the genesis of the foil technology that is a unique strategic competitive advantage
of VPG. The subsequent innovations and advancement of foil resistance and strain gage technology opened the door to
numerous commercial applications, such as force sensors and control systems on a vertical market basis.
On July 6, 2010, Vishay Intertechnology spun off its precision measurement and foil technology businesses through a tax-free
stock dividend of VPG stock to Vishay Intertechnology’s stockholders, and we became a publicly-traded company. In the
decade prior to the spin-off, Vishay Intertechnology expanded our sensor and measurement business through acquisitions,
extending our business from its initial focus on precision foil resistors and foil strain gages to include an array of sensor-based
solutions. These solutions include transducers/load cells, which are force sensors combining strain gages and the metallic
structures to which they are bonded; load cell modules that utilize electronic instrumentation and software for measuring the
load cell output; and measurement instrumentation and complete systems for process control and on-board weighing.
In 2013, we completed our first acquisition as an independent public company when we acquired substantially all of the assets
of the George Kelk Corporation ("KELK"). KELK engineers, designs and manufactures highly accurate optical and electronic
roll force measurement and control equipment primarily used by metals rolling mills and mining applications throughout the
world. As a part of our acquisition, we acquired a leased manufacturing, engineering, sales, and administrative facility in
Toronto, Canada.
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On December 30, 2015, we completed the acquisition of Stress-Tek, Inc. ("Stress-Tek") based in Kent, Washington. Stress-Tek
designs and manufactures state-of-the-art, rugged and reliable strain gage-based load cells and force measurement systems.
Stress-Tek primarily operates in North America, where their sensors and display systems are used in a wide range of industries,
predominantly in transportation and trucking, for timber, refuse, aggregate, mining, and general trucking applications. Stress-
Tek products are marketed under the Vulcan brand as part of the VPG Onboard Weighing offerings for our Weighing and
Control Systems reporting segment. As a part of the Stress-Tek acquisition, we acquired ownership of a manufacturing,
engineering, sales, administrative, and warehouse facility in Kent, Washington.
On April 6, 2016, we completed the acquisition of Pacific Instruments, Inc. ("Pacific Instruments") based in Concord,
California. Pacific Instruments designs and manufactures high-performance signal conditioning, data acquisition and control
systems and has extensive experience integrating these systems. Pacific Instruments sells primarily to the aerospace,
commercial aviation and defense markets in the United States. Pacific Instruments products expanded the offerings of our Foil
Technology Products reporting segment, which already offered data acquisition systems, primarily in the field of strain
measurement. As a result of our acquisition, we acquired a leased manufacturing, engineering, sales and administrative facility
in Concord, California.
On November 1, 2019, we completed the acquisition of New York-based Dynamic Systems Inc. ("DSI"), a provider of
specialized dynamic thermal-mechanical test and simulation systems used to develop new metal alloys and optimize production
processes. DSI is an established, high margin business, with a strong brand and has the largest installed base of products of its
type in the world, according to market estimates. DSI expands our position in the steel market and offers opportunities for
growth by leveraging our sales capabilities and market presence, and by expanding DSI’s product line to address new
opportunities. DSI will report into the Company's Weighing and Control Systems segment.
Our acquisitions added to our strong, diverse, global manufacturing, sales and distribution network, which includes facilities in
Canada, China, France, Germany, India, Israel, Japan, Sweden, Taiwan, the United Kingdom, and the United States.
We were incorporated in Delaware on August 28, 2009. Our principal executive offices are located at 3 Great Valley Parkway,
Suite 150, Malvern, PA 19355. Our main telephone number is 484-321-5300.
Leverage Global Brand
While our acquisitions provided us an array of strong brand names, in addition to our historical resistor and strain gage brands,
we believe the continued success of our strategy is best served by the establishment of a strong overall global brand. The
“VPG” brand leverages the strength of these historical brands under the umbrella of a unified, globally recognizable VPG
name. We continue to broaden and emphasize the VPG brand in the markets we serve under the following brands for each of
our business segments:
Foil Technology Products
VPG Foil Resistors
- Alpha Electronics
- Powertron
- Vishay Foil Resistors
Micro-Measurements
Pacific Instruments
Key Business Vision and Strategies
Force Sensors
VPG Transducers
- Celtron
- Revere
- Sensortronics
- Tedea-Huntleigh
Weighing and Control Systems
BLH Nobel
KELK
VPG Onboard Weighing
Dynamic Systems Inc.
Our vision is to be the leading provider of sensors, and sensor-based systems with the highest precision, quality, value, and
service for measuring force (weight, pressure, torque, acceleration) and current. As part of that vision, we are a leading
provider of foil specialty resistors and strain gages, which are particularly effective in precision measurement applications.
Our strategy is to achieve corporate growth and shareholder value by expanding our existing product portfolio organically, as
well as by acquiring complementary precision measurement products. Specifically, we are focused on the following strategic
initiatives:
Optimize Core Competence
The Company’s core competency and key value proposition is providing customers with proprietary foil technology products
and precision measurement sensors and sensor-based systems. Our foil technology resistors and strain gages are recognized as
global market leading products that provide high precision and high stability over extreme temperature ranges, and long life.
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Our force sensor products and our weighing and control systems products are also certified to meet some of the highest levels
of precision measurements of force, weight, pressure, torque, tilt, motion, and acceleration. 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 foil technology 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 which has been constructed in Israel. Our administrative personnel have
moved to the new facility, and we have begun the transition of our advanced sensors business to that facility.
We also seek to achieve significant production cost savings through the transfer, expansion, and construction of manufacturing
operations in countries such as India, China, and Israel, where we can benefit from lower labor costs, improved efficiencies, or
available tax and other government-sponsored incentives. For example, in 2019 we incurred restructuring expense related to
closing and downsizing of facilities as part of the manufacturing transitions of our force sensor products to facilities in India
and China, which marked key milestones in our ongoing strategic initiatives to align and consolidate our manufacturing
footprint.
Organic Growth
Our product portfolio is focused, to a significant extent, on specialty products serving niche markets. The development of
specialty products requires us to form long-term relationships with our customers. Our specialty products are usually designed,
or engineered, to meet unique specifications for OEMs. This often results in our customers creating a non-standard part number
used solely to designate our product on their bill of materials. We call this customer activity a “design win.” This activity may
create organic growth as the OEM customer begins to order increasing quantities to meet their production requirements, with
little or no opportunity to purchase a similar part from competing suppliers. The “design in” time for these initiatives is
typically 12 to 24 months.
We expect to continue to use our research and development, engineering, and product marketing resources to introduce new and
innovative specialty products. An example of our success in this regard is the recent acceptance and growth of our on-board
vehicle weighing solution incorporating microelectromechanical systems ("MEMS") technology. Our ability to react to
changing customer needs, emerging markets, and industry trends will continue to be a key to our success.
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.
Growth from Acquisitions
We expect to continue to make strategic acquisitions where opportunities present themselves to grow our segments.
Historically, our growth and acquisition strategy has been largely focused on vertical product integration, using our foil strain
gages in our force sensor products, and incorporating those products into our weighing and control systems. The acquisitions of
Stress-Tek and KELK, each of which employ our foil strain gages to manufacture load cells for their systems, continued this
strategy. Additionally, the KELK acquisition resulted in the acquisition of certain optical sensor technology. The Pacific
Instruments acquisition significantly broadened our existing data acquisition offerings and opened new markets for us. Our
most recent acquisition, DSI, expands our position in the steel market. We expect to expand our expertise, and our acquisition
focus, outside our traditional vertical approach to other precision sensor solutions 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.
Product Segments
Foil Technology Products
The Foil Technology Products ("FTP") segment includes our foil resistor and strain gage operating segments. Foil resistor
products offer superior precision, stability, and reliability. Our resistor portfolio encompasses a wide variety of configurations
and packages designed to meet the requirements of even the most demanding applications. Typical applications for foil
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resistors include high end test equipment and electronics for the aviation, military and space, semiconductor, process control, oil
and gas, and medical markets. Typical applications for strain gages, which include advanced sensor gages, are stress analysis
for structural testing in the aviation, military and space, infrastructure, and construction markets, along with force measurement
and weighing markets. Our innovative advanced sensors product line enhances the capability and performance of our strain
gages, while simultaneously reducing their size and power consumption. This segment also includes our data acquisition
systems business.
The products in these segments are primarily based on our resistive foil technology, which continues to evolve and enables
many products in both segments to be suited for new and varied applications.
The manufacturing of the foil material is a critical and common component of the Company’s strain gage and precision foil
resistor operating segments, and as a result, we experience synergies between our foil resistor and strain gage operating
segments. The production cycles for foil resistors and strain gages are similar and many of the same raw materials are utilized
in the manufacturing processes for both operating segments. The foil resistor and strain gage products require a similar level of
labor and capital. However, the advanced sensors’ manufacturing technology offers us the capability to produce high-quality
foil strain gages in a highly automated environment, which we believe results in reduced manufacturing costs and lead times,
higher quality, and increased margins.
Our Pacific Instruments business offers a broad range of high performance signal conditioning, data acquisition and control
systems, many of which reach customers outside our traditional commercial customer base, such as U.S. government related
customers.
A significant portion of products from the strain gage operating segment are sold to third parties as “standard catalog items”;
the remainder of this operating segment's products are sold as non-standard and/or custom products to third parties and to our
Force Sensors segment.
Force Sensors
The Force Sensors segment includes a broad line of load cells and force measurement transducers that are offered as precision
sensors for industrial and commercial use. Typical applications for force sensors are in construction machinery (for stability
control, overload protection), agricultural equipment (for precision force measurement), and medical devices (such as hospital
beds and medication dosing). The heavy equipment market has begun to adopt force sensors technology as process control and
equipment control features for their products. These sensors use our foil technology products, which serve as sensing elements
and components within each unit. Further integration of our load cells technology is also offered as part of our weighing
module products, which provide customers with a complete sensor assembly that may be used within a wide variety of digital
transducers.
A majority of products from the Force Sensors segment are sold to third parties as “standard catalog items,” but a growing
sector of this segment’s products are sold as non-standard and/or custom products to third parties. In addition, we sell products
from this segment to our Weighing and Control Systems segment as well as to OEM manufacturers. Our sales teams act as
direct sales channels (field application engineers (“FAEs”)) utilizing the primary customer interface relating to initial design
specifications, development of prototypes, and pricing/delivery of this segment’s products. Distributors are also used for those
customers that desire standard products.
Weighing and Control Systems
The Weighing and Control Systems segment designs and manufactures complete systems comprised of mainly load cells and
instrumentation for weighing and force control/measurement for a variety of uses, including process weighing, steel
manufacturing, on-board weighing and overload monitoring. Typical applications for our weighing and control systems
products are: process weighing of chemicals, food and pharmaceuticals; aircraft and truck weighing and overload protections;
weight, force and process optimization and simulation in steel and paper mills; and force measurement for offshore oil and gas
exploration.
Other major components that comprise our systems are: load cells, electronic displays; optical gages; laser systems; signal
processors; MEMS sensors; cabling; system software; and communication software/hardware. The end use for the majority of
these products is the precision measurement of force, weight, pressure, torque, tilt, motion, and acceleration. FAEs are utilized
as the primary customer interface relating to initial design specifications, development of prototypes, and pricing/delivery of
this segment’s products. Distributors and sales agents are also used, as appropriate, to market, sell, and support certain products
in this segment.
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Products
Our precision sensor and sensor-based systems include products such as load cells, transducers, weighing modules, and
complete systems for process control and on-board weighing applications. Our precision foil resistors and strain gages are
based on our proprietary foil technology, which we invented. We manufacture and sell high precision foil resistors, foil strain
gages, and data acquisition systems.
Our product portfolio includes:
•
•
•
•
Foil resistors – Foil resistors are the most precise and stable type of resistors currently available. Resistors are basic
components used in all forms of electronic circuitry to adjust and regulate levels of voltage and current. Our current
sense resistors were developed with a low absolute TCR and Kelvin connections to meet the demand of stable resistive
products
Our foil resistors are used in applications requiring a high degree of precision and stability, such as in the following
market segments: Avionics/Military/Aerospace applications, Precision Weighing, Medical applications, Test &
Measurements/ Semiconductors, Oil & Gas and Process Control. We sell our foil resistors under the Vishay Foil
Resistors, Alpha Electronics, and Powertron brands, including under our well-known Bulk Metal® trademark. The
ultra-precision technology also provides extremely low temperature coefficient resistance and exceptional long term
stability through temperature extremes. To complement our extensive portfolio of high-performance foil resistors, we
also offer decade boxes, standard resistors, exceptional precision thin film and power resistors including special
construction configurations to meet the requirements of high temperature applications. We have a road map of new
technology products to meet the required needs of our customers.
Foil strain gages – Strain gages, including our advanced sensors, are resistive sensors that are attached to the surface
of an object to determine the surface strain caused by an applied force. Typical uses of strain gages include test and
measurement applications where the strength of the object is the main consideration and the object under test is a
structural component in a machine or device, such as an automobile, an aircraft, or a highway bridge. Strain gages are
also used inside precision transducers where the magnitude of an applied force is the focus of the measurement. A
variety of physical measurements can be made using strain gages attached to metal components including force,
weight, pressure, displacement, and acceleration. We sell our strain gages under the well-known Micro-Measurements
brand.
Transducers, load cells, and modules – A transducer is mounted on a structure that is subjected to weight or other
forces, such as the platform of an industrial scale. The term “load cell” is primarily used to describe transducers used
in weighing applications. Strain-gage based transducers consist of one or more strain gages bonded to a metallic
support. The change in resistance of the strain gages in response to deformation of the transducer by the applied load is
detected by electronic instrumentation. Transducers are manufactured with different designs and configurations
depending on their application and the type of stress or strain to be measured; for example, weight or tension. We
produce both analog and digital transducers. Modules are transducers combined with a mounting and with external
features, such as instruments and cables, and are used for weighing and control applications. We sell our load cells
and modules under the overall VPG Transducers name as we continue to transition from the previously used Celtron,
Revere, Sensortronics, and Tedea-Huntleigh brands.
Data acquisition systems – Data acquisition systems, which include instruments to measure, process, digitize, display,
and record the output of our strain gages, transducers, and other sensor or sensor-based systems as well as deliver
information to control systems. Our acquisition of Pacific Instruments significantly expanded our previous
instruments offerings.
• Weighing and control systems – Weighing and control systems are integrated systems for the detection and
measurement of weight and other types of force, primarily for use in industrial applications. These include systems to
control process weighing in food, chemical, and pharmaceutical plants; force measurement systems used to control
web tension in paper mills, roller force in steel mills, and cable tension in winch controls; on-board weighing systems
installed in logging and waste-handling trucks; and special scale systems used for aircraft weighing and portable truck
weighing. Our mechanical and thermal simulators are used for testing and developing various types of metals. With
our acquisition of Stress-Tek, we enhanced and broadened our on-board weighing offerings with products that are
recognized for high quality in their markets. With our acquisition of KELK, we added certain optical gages for control
systems and enhanced our other product offerings for process control in the steel mill industry. With the acquisition of
DSI, we broadened our offerings to the steel mill industry and to materials testing labs. We sell our systems under a
variety of brand names including BLH Nobel, KELK, Gleeble, and VPG Onboard Weighing.
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Qualifications and Specifications
Certain of our products must be qualified or approved under various military and aerospace specifications and other standards.
We have qualified certain of our foil resistor and sensor products under various military specifications approved and monitored
by the United States Defense Logistics Agency (“DLA”), under certain European military specifications, and various aerospace
standards approved by the U.S. National Aeronautics and Space Administration (“NASA”) and the European Space Agency
(“ESA”).
Qualification and specification levels are based in part upon the rate of failure of products. We must continuously perform tests
on our products, and report the results for qualified products to the qualifying organization. If a product fails to meet the
requirements for the applicable classification level, the product’s classification may be suspended or reduced to a lower level.
During the time that the classification is suspended or reduced, net revenues and earnings attributable to that product may be
adversely affected.
Certain of our load cell and instrumentation products are approved by the National Type Evaluation Program (“NTEP”) and
International Organization of Legal Metrology (“OIML”). Many of our weighing systems must also meet these standards to
make them usable for legal-for-trade weighing applications. Products and systems that are to be used in hazardous areas, where
explosive atmospheres might exist, must comply with special safety standards, such as the European Atmosphère Explosible
(“ATEX”) Standard and the U.S. Factory Mutual (“FM”) Standard. Our load cell manufacturing sites undergo periodic audits
by regulatory authorities in order to verify compliance with standard requirements and to extend product approvals.
Manufacturing Operations
Our principal manufacturing facilities are located in Israel, the United States, Canada, India, the People’s Republic of China,
Germany, and Japan. We also have manufacturing facilities in Sweden, the United Kingdom, the Republic of China (Taiwan),
and France. Over the past several years, we have invested substantial resources to increase capacity and to enhance automation
in our plants, which we believe will further reduce production costs.
We have quality management systems at all of our major manufacturing facilities approved under the ISO 9001 Quality
Management Systems Standard. ISO 9001 is a comprehensive set of quality program standards developed by the International
Organization for Standardization ("ISO"). The quality management system in our major foil resistors manufacturing site is
certified against Aerospace Standard AS9100.
To maintain our cost competitiveness, we are pursuing our strategic initiatives to shift manufacturing emphasis to more
advanced automation in higher-labor-cost regions and to relocate production to regions with skilled workforces and relatively
lower labor costs. See additional information in Item 7 “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Cost Management” related to our restructuring efforts.
Sources of Supplies
Although most materials incorporated in our products are available from a number of sources, certain materials are available
only from a relatively limited number of suppliers. The principal materials used in our products include various metallic foil
alloys, aluminum, stainless steel, tool steel, plastics, and for a few products, gold. Some of the most highly specialized materials
for our sensors are sourced from a single vendor. We maintain a safety stock inventory of certain critical materials at our
facilities. We are taking steps to determine the use, source, and origin of any tin, tantalum, tungsten, or gold in our global
product portfolio and, if appropriate, would work with our suppliers to remediate issues and source more responsibly.
A significant portion of our Force Sensors and Weighing and Control Systems segment products are based on strain gages
produced by our Foil Technology Products segment.
Inventory and Backlog
We manufacture both standardized products and those designed and produced to meet customer specifications. We maintain an
inventory of standardized components, and monitor the backlog of outstanding orders for our products.
We include in our backlog only open orders that have been released by the customer for shipment in the next twelve months.
Many of our customers for strain gages, load cells, and foil resistors encounter uncertain and changing demand for their
products. They typically order products from us based on their forecasts. If the customers' business needs change, they may
cancel or reschedule the shipments that are included in our backlog, in many instances without the payment of any penalty.
Therefore, the backlog at any point in time is not necessarily indicative of the results to be expected for future periods.
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Customers and Marketing
Our customer base is diversified in terms of industry, geographic region, and range of product needs. No single customer
comprises greater than 10% of net revenues. The vast majority of our products are used in the broad industrial market, with
selected uses in the military and aerospace, medical, agricultural, steel, and construction sectors. Within the broad industrial
market, our products serve a wide variety of applications in waste management, bulk hauling, logging, scales manufacturing,
engineering systems, pharmaceutical, oil, chemical, steel, paper, and food industries.
Many of our products have historically been sold by dedicated sales forces, consisting mainly of FAEs focusing on specific
market segments or specific customers. The FAEs help identify the products in our portfolio that best meet the needs of our
customers and provide technical and applications support. Their in-depth knowledge of customer needs is a key factor in new
product design and future research and development initiatives.
Competition
Our competitive success depends on our ability to maintain a competitive advantage on the basis of superior product capability
and performance, product quality, know-how, proprietary data, market knowledge, service capability, and business reputation.
Price competitiveness can be an important factor, especially within our Force Sensors segment. Our sales and marketing
programs offer our customers a broad range of world-class precision technologies, and superior global sales and support.
Competition in the markets where we sell the bulk of our products is extremely fragmented, both geographically and by
application. To our knowledge, there are no competitors with the same product mix and proprietary technology as ours. Our
competitors range from very small, local companies to large, international companies with greater financial resources than us.
Our foil resistors and our foil strain gages are based on our proprietary technology. Competitors try to compete in this market
using different technology to offer functionally equivalent products. Examples of competition in our Foil Technology Products
segment includes KOA, Bourns, Vishay Intertechnology, TT Electronics, Susumu, Isabellenhute, Caddock and Flat Dashi for
foil resistors, and HBK, an operating company of Spectris, Tokyo Sokki Kenkyujo Co., Ltd (TML), Kyowa and Zemic for foil
strain gages. Competitors in our Force Sensors segment include HBK, Zemic, Utilcell, and Flintec. Competitors in our
Weighing and Control Systems segment include Hardy Instruments and Mettler-Toledo for process weighing; ABB, Siemens,
Haehne, Dalian, IMS and Fuji for steel mill systems; and Air-Weigh, Vehicle Weighing Systems, MOBA, and AMCS for
onboard weighing.
Research and Development
Many of our products, manufacturing techniques, and technologies have been invented, designed, and developed by our
engineers and scientists. Special proprietary resistive metal foil is the most important material in both our foil resistors and our
foil strain gages, and our research and development activities related to foil materials are an important linkage between these
two products.
We maintain strategically placed design centers for each of our business segments where proximity to customers enables us to
more easily monitor and satisfy the needs of local markets. These design centers are located in the United States, Israel, Canada,
Sweden, Japan, the United Kingdom, and Germany.
We also maintain research and development staff, and promote programs at a number of our production facilities to develop
new products and new applications of existing products, and to improve manufacturing techniques. This decentralized system
encourages individualized product development at specific manufacturing facilities that occasionally has applications at other
facilities.
Our research and development staff and our sales force are closely linked. Our sales force is comprised of individuals with an
engineering background who can help meet the needs of our customers for technical and applications support. This in-depth
knowledge of customer needs and specifications is a key factor in future research and development initiatives.
Research and development will continue to play a key role in our efforts to introduce innovative products for 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 and, ultimately, our financial performance. To that end, we expect to sustain or increase our R&D
expenditures in order to fill the product development pipeline and lay the foundation for future sales growth.
Patents and Licenses
We have made a significant investment in securing intellectual property protection for our technology and products. We seek to
protect our technology by, among other things, filing patent applications for technology considered important to the
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development of our business. Although we have numerous United States and foreign patents covering certain of our products
and manufacturing processes, no particular patent is considered individually material to our business. We also rely upon trade
secrets, unpatented know-how, and continuing technological innovation.
Our ability to compete effectively with other companies depends, in part, on our ability to maintain the proprietary nature of our
technology. Although we have been awarded, have filed applications for, or have obtained numerous patents in the United
States and other countries, there can be no assurance concerning the degree of protection afforded by these patents, or the
likelihood that pending patents will be issued.
We require all of our technical, research and development, sales and marketing, and management employees, and most
consultants and other advisors to execute confidentiality agreements upon the commencement of employment, or consulting
relationships with us. These agreements provide that all confidential information developed, or made known to the entity or
individual during the course of the entity’s or individual’s relationship with us, is to be kept confidential and not disclosed to
third parties except in specific circumstances. Substantially all of our technical, research and development, sales and marketing,
and management employees have entered into agreements providing for the assignment to us of rights to inventions made by
them while employed by us.
Environmental, Health and Safety
We have an Environmental, Health and Safety Policy that commits us to achieve health and safety for employees and protection
of the environment, to maintain compliance with applicable environmental, health and safety laws, to promote proper
management of hazardous materials, and to minimize the hazardous materials generated in the course of our operations. In
addition, our manufacturing operations are subject to various regional, federal, state, and local laws restricting discharge of
materials into the environment. Since we are subject to Environmental, Health and Safety laws worldwide we incur capital and
operating expenditures and other costs to comply. We are not involved in any pending or threatened proceedings that would
require curtailment of our operations.
The Company is in the process of designing, evaluating, and implementing a corporate Environmental, Social and Governance
("ESG") program and intends to complete a materiality assessment, scorecard and short and long-term objectives with
deliverables starting in the second quarter of 2022.
Human Capital
As of December 31, 2020, we employed approximately 2,300 total employees, substantially all of which were full-time
employees. Approximately 87% of our employees were located outside the United States. Our future success is substantially
dependent on our ability to attract and retain highly qualified technical and administrative personnel. Some of our employees
outside the United States are members of trade unions.
We support worldwide employment and promotion of diversity to innovate and drive long-term value, by continuous
monitoring of compensation and benefits to assure competitiveness, while implementing a worldwide talent strategy that
includes workforce planning and succession planning.
The impact of COVID-19 on our operations has been mitigated through the issuance of Guidelines for Manufacturing Safety,
Travel Safety and Personal Protective Equipment sourcing to ensure employee and visitor, contractor safety and continuity of
operations. We have had no employee strikes or work stoppages due to labor disputes and we consider our relationship with
employees to be generally good, however, no assurance can be given that labor unrest or strikes will not occur. We continue to
support employee’s rights to collective bargaining and other recognized employee interests to organize.
Information about our Executive Officers
The following table sets forth certain information regarding our executive officers as of March 11, 2021:
Name
Ziv Shoshani
William M. Clancy
Amir Tal
Age
54
58
51
Positions
Chief Executive Officer, President, and Director
Executive Vice President and Chief Financial Officer
Senior Vice President and Chief Accounting Officer
Ziv Shoshani is our Chief Executive Officer and President, and also serves on the board of directors. Mr. Shoshani was Chief
Operating Officer of Vishay Intertechnology from January 1, 2007 to November 1, 2009. During 2006, he was Deputy Chief
Operating Officer of Vishay Intertechnology. Mr. Shoshani was Executive Vice President of Vishay Intertechnology from 2000
to 2009 with various areas of responsibility, including Executive Vice President of the Capacitors and the Resistors businesses,
as well as heading the Measurements Group and Foil Divisions. Mr. Shoshani had been employed by Vishay Intertechnology
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since 1995. He continues to serve on the Vishay Intertechnology board of directors. Mr. Shoshani is a nephew of the late Dr.
Felix Zandman, the founder of Vishay Intertechnology.
William M. Clancy is our Executive Vice President and Chief Financial Officer. Mr. Clancy was Corporate Controller of
Vishay Intertechnology from 1993 until November 1, 2009. He became a Vice President of Vishay Intertechnology in 2001 and
a Senior Vice President of Vishay Intertechnology in 2005. Mr. Clancy served as Corporate Secretary of Vishay
Intertechnology from 2006 to 2009. From June 16, 2000 until May 16, 2005 (the date Vishay Intertechnology acquired the
noncontrolling interest in Siliconix incorporated), Mr. Clancy served as the principal accounting officer of Siliconix. Mr.
Clancy had been employed by Vishay Intertechnology since 1988. Mr. Clancy is a licensed CPA in Pennsylvania.
Amir Tal is our Senior Vice President and Chief Accounting Officer. Mr. Tal was appointed by the board of directors to such
position effective February 5, 2020. He served as the Company’s Senior Vice President, Finance from March 2017 until
February 2020. From July 2010 to February 2017, Mr. Tal served as the Company’s Vice President Operational Controller and
Regional Controller Israel. Mr. Tal holds a bachelor’s degree in economics and business administration from the University of
Haifa and an MBA from Bar Ilan University.
Company Information and Website
We began filing annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange
Commission (“SEC”) under the Securities Exchange Act of 1934 after our spin-off from Vishay Intertechnology on July 6,
2010. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information
regarding issuers, including us, that file electronically with the SEC. The public can obtain any documents that we file with the
SEC at www.sec.gov.
In addition, our company website can be found on the Internet at www.vpgsensors.com. The website contains information
about us and our operations. Copies of each of our filings with the SEC on Form 10-K, Form 10-Q, and Form 8-K, and all
amendments to those reports, can be viewed and downloaded free of charge as soon as reasonably practicable after the reports
and amendments are electronically filed with or furnished to the SEC. To view the reports, access http://ir.vpgsensors.com and
click on “SEC Filings”/ “Documents.”
The following corporate governance related documents are also available on our website:
•
•
•
•
•
•
Compensation Committee Charter
Nominating and Corporate Governance Committee Charter
Audit Committee Charter
Code of Business Conduct and Ethics
Code of Ethics Applicable to the Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer or
Controller
Corporate Governance Principles
To view these documents, access http://ir.vpgsensors.com and click on “Corporate Governance.”
To view our Ethics Program Reporting Procedures, access http:/www.vpgsensors.com/company and click on “Ethics.”
We are not incorporating by reference into this Annual Report on Form 10-K any material from our website.
Any of the above documents can also be obtained in print by any stockholder, upon request to our Investor Relations
Department at the following address:
Corporate Investor Relations
Vishay Precision Group, Inc.
3 Great Valley Parkway, Suite 150
Malvern, PA 19355
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Item 1A. RISK FACTORS
You should carefully consider the following risks and other information in this Form 10-K in evaluating our company and
common stock. Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we
currently deem immaterial, could materially and adversely affect our business, results of operations or financial condition, and
could also adversely affect the trading price of our common stock.
Risks Related to Our Business
The COVID-19 outbreak has adversely impacted and could continue to adversely impact our results of operations.
The impact of the COVID-19 outbreak and the spread of the novel coronavirus on a global basis have adversely affected and
are likely to continue to adversely affect our business in a number of respects, although the further extent, nature and timing of
such impact cannot be predicted at this time. The COVID-19 outbreak has led countries around the world, as well as most states
in the U.S., to implement restrictions relating to the operation of almost all types of businesses. The closure standards vary from
jurisdiction to jurisdiction, but they typically require all but “critical”, “essential” or “life-sustaining” businesses to close all
offices and facilities. We believe, based on the various standards published to date, that our businesses meet the requisite
standards to remain open, at least partially, in all jurisdictions in which we operate, although there is no assurance that our
decision to remain open will not be challenged. As of the date of this filing, all of our manufacturing and other facilities are
operating at adequate capacity while following procedures designed to prevent the spread of the virus, such as social distancing,
reduced personnel and staggered shifts. Changing standards regarding what type of facilities are permitted to remain open, as
well as evolving interpretations of existing standards, in both the United States and around the globe, could result in the closure
of some or all of our facilities.
To date, our supply chain has not experienced significant disruptions, and at this time we do not anticipate any such significant
disruptions in the near term. However, our suppliers could be required by government authorities to temporarily cease
operations in accordance with the various restrictions discussed above, might be limited in their production capacity due to
complying with restrictions relating to the operation of businesses during the COVID-19 pandemic, or could suffer their own
supply chain disruptions, impacting their ability to continue to supply us with the quantity of materials required by us.
If as a result of the COVID-19 outbreak governments take additional protective actions, or extend the time period for existing
protective actions, or the distribution and administration of the vaccines for COVID-19 are delayed or prolonged, such actions
or events may have a material adverse impact on our business and operating results. This could include closures of our facilities
or the closure of the facilities of our customers, suppliers, or other vendors in our supply chain. Any disruption of our supply
chain or the businesses of our customers could adversely impact our business and results of operations. In addition, the
widespread public health crisis caused by the COVID-19 outbreak has adversely impacted the economies and financial markets
worldwide, resulting in an economic downturn that has adversely impacted many businesses, including ours. The extent and
duration of the impact on the global economy and financial markets from COVID-19 is difficult to predict, and the extent to
which the COVID-19 will negatively affect us and the duration of any potential business disruption is uncertain. The impact to
our business and results of operation will depend to a large extent on future developments and new information that may
emerge regarding the duration and severity of the COVID-19 outbreak and the actions taken by authorities and other entities to
contain COVID-19 or treat its impact, and the impact of such actions, all of which are beyond our control. These potential
impacts, while uncertain, could adversely affect our operating results.
We face intense competition in our business.
We face various degrees and types of competition throughout the world in our different businesses. In some cases our products
compete directly with those of third party competitors. In other cases, competition in one segment, such as in our Weighing and
Control Systems segment, may affect not only the sales of our systems within that segment, but also sales of products that we
incorporate in those systems from other segments, such as load cells and strain gages.
We are a leading supplier of foil resistors and foil strain gages. Foil resistors and foil strain gages are also produced by
competitors, principally located in China. We believe that our foil technology products provide superior performance relative to
our competitors, but that could change if our competitors succeed in developing and introducing innovative competitive
offerings. Also, our foil strain gages compete with other types of strain gages, such as semiconductor strain gages, which we do
not manufacture. We believe that other types of strain gages are not as reliable or stable as our foil strain gages, but that could
change as the technology for these other products continues to evolve. If our competitors are able to improve the quality,
performance, or pricing of their products relative to our offerings, our results of operations could be adversely affected.
The market for transducer/load cell products is highly fragmented and very competitive. Our load cell modules and systems
face competition from numerous other load cell module and systems manufacturers. Competition for modules and systems is
most often based on customer relationships, product reliability, technical performance, and the ability to anticipate and satisfy
customer needs for specific design configurations. Many other manufacturers have more experience in particular geographic
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markets and specific applications than we do, and may be better positioned to compete in these areas. We cannot assure you that
we will be able to successfully grow our business in the face of these competitive challenges.
Our vertical product integration exposes us to certain risks.
Our business structure emphasizes vertical product integration. For example our force sensor business is significant customer
(by volume) for our strain gages. While we believe this has been, and will continue to be, a sound business structure, vertical
product integration and the resulting interdependencies of our divisions exposes us to certain risks. As a consequence of our
vertical integration, our force sensors business may compete with certain of our customers and potential customers for strain
gages while our systems business may compete with certain of our customers and potential customers for force sensors, who,
for that reason, may elect not to do business with us.
To remain successful, we must continue to innovate, and our investments in new technologies may not prove successful.
Our future operating results depend on our ability to continually develop, introduce, and market new and innovative products,
to modify existing products, to respond to technological change, and to customize certain products to meet customer
requirements. There are numerous risks inherent in this process, including the risks that we will be unable to anticipate the
direction of technological change, that customers may be unwilling, or unable, to adopt the new products or methods of using
them, that we will be unable to develop and market new products and applications in a timely fashion to satisfy customer
demands, or that such products will experience quality or other qualification issues with our customers as they, and we, gain
experience with qualifying them and using them. If this occurs, we could lose customers and experience adverse effects on our
financial condition and results of operations.
We may not be successful in future acquisitions or other strategic transaction endeavors, if any, which could have an adverse
effect on our business and results of operations.
Historically, we expanded our business in part by completing acquisitions, and an important element of our business strategy
continues to be expansion through acquisition. We cannot assure that we will identify, have the financial capabilities to execute,
and/or successfully complete strategic transactions with suitable partners in the future. We also cannot assure that any such
transactions that we do complete in the future will be successful.
Such transactions, including our acquisition of DSI in November 2019, involve a number of risks, including the following:
•
•
•
•
•
•
•
we may incur substantial costs, including advisory fees and diversion of management attention, in evaluating a potential
transaction;
we may be unable to achieve the anticipated benefits from the transaction;
we may have difficulty integrating the operations, personnel and culture of an acquired business, and may have difficulty
retaining the key personnel of the acquired business;
we may have difficulty enforcing restrictive covenants against the seller of the acquired business or former employees or
other personnel of the acquired business;
we may have difficulty incorporating acquired technologies or products into our existing solutions;
our ongoing business and management's attention may be disrupted or diverted by transition or integration issues, and the
complexity of managing geographically and culturally diverse locations; and
we may lose customers of those companies, or may lose our customers due to the change in control or for other reasons.
The factors noted above could have a material adverse effect on our business, results of operations, and financial condition or
cash flows, particularly in the case of a larger acquisition. From time to time, we may enter into negotiations for acquisitions or
investments that are not ultimately consummated. These negotiations could result in significant diversion of management time,
as well as out-of-pocket costs.
Future acquisitions may require us to incur or issue additional indebtedness or issue additional equity.
If we were to undertake future substantial acquisitions for cash, these acquisitions would likely need to be financed in part
through bank borrowings, or the issuance of public or private debt. This acquisition financing would likely adversely affect
certain credit metrics. Our revolving credit facilities require us to obtain the lenders’ consent for certain additional debt
financing and to comply with other covenants, including the application of specific financial ratios. We cannot assure that the
necessary acquisition financing would be available to us on acceptable terms, if and when, required. If we were to make an
acquisition with equity, the acquisition may have a dilutive effect on the interests of the holders of our common stock.
We may experience difficulties, delays, or unexpected costs in completing our cost reduction programs.
To remain competitive, particularly when business conditions are difficult, we sometimes take steps to reduce our cost structure
by restructuring our existing businesses to achieve efficiencies, eliminate redundant functions, facilities and staff positions, and
move operations, where possible, to reduce labor or other costs.
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We may not realize, in full or in part, the anticipated benefits of these programs without encountering difficulties, which may
include complications in the transfer of production knowledge, loss of key employees and/or customers, and the disruption of
ongoing business. Any of these difficulties could delay and/or undermine our ability to realize the benefits of these cost
reduction programs, as well as potentially adversely affecting our customer relationships and operations.
Our business is cyclical, and in periods of increased economic strength, we may experience intense demand for our products. If
our cost reduction programs and related restructuring result in us not being able to satisfy our customer’s demand for products
during a rising economy, and our competitors sufficiently expand production, we could lose customers and/or market share.
These losses could have an adverse effect on our operations, financial condition, and results of operations.
We may encounter difficulties in the implementation or operation of new enterprise resource planning systems.
We have implemented, and continue to implement, new enterprise resource planning (“ERP”) systems in different parts of our
business. ERP systems are integral to our ability to accurately and efficiently manage our manufacturing and sales activities,
and provide critical business information to management. The implementation of an ERP system may cause us to incur
additional costs, shipment delays, and related customer dissatisfaction; expend employee (including Company management)
time and attention; and otherwise burden our internal resources. Any difficulties we encounter with the implementation or
successful operation of an ERP system could damage the effectiveness of our business processes and could adversely impact
our ability to accurately and effectively forecast and manage sales demand, manage our supply chain, and report management
information on an accurate and timely basis, any of which could have a material adverse effect on our business and results of
operations.
Our success is dependent upon our ability to protect our proprietary technology and other intellectual property.
We rely on a combination of the protections provided by applicable patent, trademark, copyright, and trade secret laws, as well
as on confidentiality procedures and other contractual arrangements, to establish and protect our rights in our technology, and
related materials and information. We enter into agreements with our customers and distributors. These agreements contain
confidentiality and non-disclosure provisions, a limited warranty covering our products, and indemnification for the customer
from infringement actions related to our products.
Despite our efforts, it may be possible for others to copy portions of our products, reverse engineer them, or obtain and use
information that we regard as proprietary, all of which could adversely affect our competitive position. Furthermore, there can
be no assurance that our competitors will not independently develop technology similar to ours. The laws of certain countries in
which we manufacture do not protect our intellectual property ("IP") rights to the same extent as the laws of the United States.
In the Office of the United States Trade Representative (“USTR”) annual "Special 301" Report released in April 2020, the
adequacy and effectiveness of intellectual property protection in a number of foreign countries were analyzed.
A number of countries in which we manufacture or do business in are identified in the report as being on the Priority Watch
List or the Watch List. In China, for instance, the USTR is concerned about the urgent need to remediate a range of IP-related
concerns, including trade secret theft, online piracy and counterfeiting, the high-volume manufacture and export of counterfeit
goods, technology transfer requirements imposed as a condition to access the Chinese market, the mandatory application of
adverse terms to foreign IP licensors, and IP ownership and research and development localization requirements. Structural
impediments to administrative, civil, and criminal IP enforcement are also problematic. The USTR also expressed concern that
in India there is a lack of sufficient measurable improvements to its IP framework on long standing and new challenges that
have negatively affected U.S. right holders over the past year. Other countries in which we do business were also identified
because of problems in intellectual property enforcement. The absence of harmonized intellectual property protection laws and
effective enforcement makes it difficult to ensure consistent respect for patent, trade secret, and other intellectual property rights
on a worldwide basis. As a result, it is possible that we will not be able to enforce our rights against third parties that
misappropriate our proprietary technology in those countries.
The success of our business is highly dependent on maintenance of intellectual property rights.
The unauthorized use of our IP rights may increase the cost of protecting these rights or reduce our revenues. We seek to
protect trade secrets and our other proprietary technology, in part, by requiring each of our employees to enter into non-
disclosure and IP assignment agreements. In these agreements, the employee agrees to maintain the confidentiality of all of our
proprietary information and, subject to certain exceptions, to assign to us all rights in any proprietary information or technology
made, or contributed, by the employee during his or her employment. Generally, we do not enter into non-compete
arrangements with our employees, with the exception of certain executives and, in some cases, one or more of the principals of
the businesses that we acquire.
All of these types of agreements may be breached or be found unenforceable, and we may not have an adequate remedy for any
such breach of, or inability to enforce, these agreements. We may initiate, or be subject to, claims or litigation for infringement
of proprietary rights, or to establish the validity of our proprietary rights, which could result in significant expense to us, cause
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product shipment delays, require us to enter royalty or licensing agreements, and divert the efforts of our technical and
management personnel from productive tasks, whether or not such litigation were determined in our favor.
We may be exposed to product liability claims.
While our agreements with our customers and distributors typically contain provisions designed to limit our exposure to
potential material product liability claims, including appropriate warranty, indemnification, damages waiver, and limitation of
liability provisions, it is possible that such provisions may not be effective under the laws of some jurisdictions, thus exposing
us to substantial liability. Moreover, defending a suit, regardless of its merits, could entail substantial expense, and require the
time and attention of key management personnel. If product liability claims are brought against us, the costs associated with
defending such claims may adversely affect our results of operations and future cash flows.
We must expend significant resources to obtain design wins without assurance that we will be successful.
In many cases, we must initiate communication with our customers, and convince the customer that our products and systems
will offer solutions for its business that are technically superior and more cost effective compared to their existing
arrangements. To do so, we must often expend significant financial and human resources to develop technologically compelling
products or systems with no guarantee that they will be adopted by our customers. The non-recurring engineering (“NRE”)
costs for product development in these cases could be substantial, and may adversely affect our profitability if we are unable to
recover these costs.
Also, customers will often require a lengthy period of on-site testing before committing to purchase a product or system, during
which period we will not receive material revenue from the customer. While a design win for our products and systems may
result in a long period of recurring revenue during which we hope to recover our costs, we must often internally finance our
development costs over significant time periods. If our products or systems fail to gain acceptance with our customers, we will
be forced to absorb any NRE costs, which could adversely affect our business if these costs are substantial.
The long development times for certain of our products and systems may result in unpredictable fluctuations in revenue and
results of operations.
Our force sensor products, and weighing and control systems, often have long product development cycles, both to develop the
product or system and to secure customer acceptance following what may be a lengthy on-site testing period. During product
development and testing, we may incur substantial costs without corresponding revenues. If our custom product or system is
ultimately accepted by the customer, we may then begin to realize substantial revenues from our development efforts.
In particular, our weighing and control systems can be priced for several hundred thousand dollars per unit, so that a contract to
acquire one or more units can materially contribute to our revenues during the period or periods that we are permitted to
recognize the contract revenues for accounting purposes. The nature of our weighing and control products and systems, and in
particular, the products and systems manufactured by the steel business, may therefore result in substantial fluctuations in our
operating results, including revenues and profitability, from period to period, even though there has been no fundamental
change in our business or its prospects. Further, customers may request a delay in shipping a product they have ordered due to
changes in their business needs, which may delay the revenue recognition for the product until shipment occurs. This may
make it difficult for investors to undertake period-to-period comparisons of our performance. Also, the fluctuating nature of key
components of our revenues may limit the visibility of our management regarding performance in future periods, and make it
more difficult for our management to provide guidance to our investors.
We may not have adequate facilities to satisfy future increases in demand for our products.
Our business is cyclical and in periods of a rising economy, we may experience intense demand for our products. During such
periods, we may have difficulty expanding our manufacturing capacity to satisfy demand. Factors which could limit such
expansion include delays in procurement of manufacturing equipment, shortages of skilled personnel, and physical constraints
on expansion at our facilities. If we are unable to meet our customers’ requirements and our competitors sufficiently expand
production, we could lose customers and/or market share. These losses could have an adverse effect on our financial condition
and results of operations. Also, capacity that we add during upturns in the business cycle may result in excess capacity during
periods when demand for our products recedes, resulting in inefficient use of capital, adversely affecting our business.
The nature of the market for our products may render them particularly susceptible to downturns in the economic environment.
Our products are designed to replace and provide superior functionality over existing product infrastructure utilized by our
customers. Often, it is only after introductory demonstrations by our sales and engineering teams that our customers come to
appreciate the advantages of our products and systems, and the long-term benefits of their adoption. An economic downturn or
extended period of economic uncertainty may make customers less receptive to adopting new technological solutions at our
suggestion - even ones with demonstrated operational and financial advantages. During these periods, customers may defer, or
even cancel, orders for products and systems for which they have previously contracted, or given indications of interest.
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Also, because our business is concentrated largely in the industrial sector, we do not benefit from countervailing fluctuations in
consumer demand. As a result, our business may be more significantly affected by the consequences of a general economic
slowdown than other segments of our industry, and may also take longer to recover from the effects of a slowdown.
Our backlog is subject to customer cancellation.
Many of the orders that comprise our backlog may be canceled by our customers without penalty. Our customers, particularly
for our foil technology products, often cancel orders when business is weak and inventories are excessive, a situation that we
have previously experienced during periods of economic slowdown. Therefore, we cannot be certain that the amount of our
backlog accurately forecasts the level of orders that will ultimately be delivered. Our results of operations could be adversely
impacted if customers cancel a material portion of orders in our backlog.
The complexity of our sophisticated weighing and control systems may require costly corrections if design flaws are found.
Our weighing and control systems combine sophisticated electronic hardware and computer software. We believe that the
sophistication of our systems contributes to their competitive advantage over similar products offered by other system
integrators. We go to substantial lengths to assure that our systems are free of design flaws when they are delivered to our
customers for installation and testing. However, due to the systems’ complexity, design flaws may occur and require correction.
If the requisite corrections are substantial, or difficult to implement due to the systems’ complexity, we may not be able to
recover the costs of correction and retesting, with the result that our profit margins on these systems could be substantially
reduced, or even negated by losses, and our results of operations could be materially and adversely affected.
Our results are sensitive to raw material availability, quality, and cost.
Although most materials incorporated in our products are available from a number of sources, certain materials are available
only from a relatively limited number of suppliers. We generally maintain a supply of strategic raw materials for continuity and
risk management. Our customers would need significant advance notification to qualify alternative materials, if we had to use
them. Alternative suppliers are available worldwide for most of our raw materials, but significant time (up to 12 months) would
be required to qualify new suppliers and establish efficient production scheduling.
Certain metals used in the manufacture of our products are traded on active markets, and can be subject to significant price
volatility.
Our results of operations may be materially and adversely affected if we have difficulty obtaining certain raw materials, if the
quality of available raw materials deteriorates, if there are significant price changes for these raw materials, or if compliance
with the laws and regulations described below proves costly and time-consuming. For periods in which the prices of these raw
materials are rising, we may be unable to pass on the increased cost to our customers, which would result in decreased margins
for the products in which they are used. For periods in which the prices are declining, we may be required to write down our
inventory carrying cost of these raw materials, since we record our inventory at the lower of cost or market. Depending on the
extent of the difference between market price and our carrying cost, this write-down could have a material adverse effect on our
net earnings. We also may need to record losses for adverse purchase commitments for these materials in periods of declining
prices.
Pursuant to the SEC’s “conflict minerals” rules, reporting companies that determine that certain metals, dubbed “conflict
minerals” by the SEC (which include tantalum, gold, tin, and tungsten sourced from the Democratic Republic of the Congo or
adjoining countries), are necessary to the functionality or production of a product they manufacture, or contract to have
manufactured, must file a specialized disclosure form with the SEC. We use raw materials that are subject to conflict minerals
rules. The compliance with the SEC's related disclosure requirements may affect the sourcing and availability of minerals used
in the manufacture of our products. Also, because our supply chain is complex, we may face reputational challenges with our
customers and other stakeholders if we are unable to materially verify the origins of all "in scope" metals used in our products.
Our product sales may be adversely affected by changes in product classification levels under various qualification and
specification standards.
Certain of our products must be qualified or approved under various military and aerospace specifications and other standards.
We have qualified certain of our foil resistor products under various military specifications approved and monitored by the
DLA, and under certain European military specifications, and various aerospace standards approved by NASA and the ESA.
Qualification and specification levels are based in part upon product failure rate. We must continuously perform tests on our
products, and for products that are qualified, the results of these tests must be reported to the qualifying organization. Certain of
our force sensor products are approved by the NTEP and OIML. Our on-board weighing systems must meet approved standards
to make them legal-for-trade. If a product fails to meet the requirements for the applicable classification level or other
approval, the product’s classification or approval may be suspended or reduced to a lower level. During the time that the
classification is suspended or reduced to a lower level, net revenues and earnings attributable to that product may be adversely
affected.
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Failure to maintain effective internal control over financial reporting could adversely affect our ability to meet our reporting
requirements.
Effective internal control over financial reporting is necessary for us to provide reasonable assurance with respect to our
financial reports, and to effectively prevent fraud. Internal control over financial reporting may not prevent or detect
misstatements because of inherent limitations, including the possibility of human error, the circumvention or overriding of
controls, or fraud. Therefore, even effective internal control over financial reporting can provide only reasonable assurance with
respect to the preparation and fair presentation of financial statements. If we cannot provide reasonable assurance with respect
to our financial reports and effectively prevent fraud, our operating results could be harmed. In the past, we experienced a
material weakness in our internal control over financial reporting related to deficiencies in our internal control structure arising
out of our significant change in size, complexity and structure due to multiple restructurings and acquisitions. We have since
remediated the material weakness through updates to our control activities documentation and process in numerous locations
and improved processes related to monitoring of the design and effectiveness of internal controls. If we fail to maintain the
effectiveness of our internal control over financial reporting, including any failure to implement required new or improved
controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, we could
fail to meet our reporting obligations, and there could be a material adverse effect on our stock price.
Future changes in our environmental liability and compliance obligations may harm our ability to operate or increase costs.
Our manufacturing operations, products and/or packaging are subject to environmental laws and regulations governing air
emissions, wastewater discharges, the handling, disposal, and remediation of hazardous substances, wastes, and certain
chemicals used or generated in our manufacturing processes, workplace health and safety labeling, or other notifications with
respect to the content, or other aspects of our processes, products or packaging, restrictions on the use of certain materials in or
on design aspects of our products or packaging, and responsibility for disposal of products or packaging. New liabilities could
arise, and we may have unavoidably inherited certain pre-existing environmental liabilities, generally based on successor
liability doctrines. Although we have never been involved in any environmental matter that has had a material adverse impact
on our overall operations, there can be no assurance that in connection with any past or future operation, acquisition or
otherwise, we will not be obligated to address environmental matters that could have a material adverse impact on our
operations. In addition, more stringent environmental regulations may be enacted in the future, and we cannot presently
determine the modifications, if any, in our operations that any such future regulations might require, or the cost of compliance
with these regulations.
Our credit facilities subject us to financial and operating restrictions.
We maintain a revolving credit facility with banks that we use, or may use, for working capital, acquisition financing, and other
purposes. This credit facility subjects us to certain restrictions which may affect, and in some cases significantly limit or
prohibit, among other things, our ability to:
borrow additional funds;
pay dividends or make other distributions;
repurchase our common stock;
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complete acquisitions;
engage in transactions with affiliates or subsidiaries; or
create liens on our assets.
Our credit facility requires us to maintain certain financial ratios. If we fail to comply with the covenant restrictions contained
in the credit facility, that failure could result in termination of the facility, and all amounts outstanding could become
immediately payable.
A significant portion of our cash and cash equivalents and short-term investments balances are held by our non-U.S.
subsidiaries.
We generate a significant amount of cash and profits from our non-U.S. subsidiaries. As of December 31, 2020, $88.8 million
of our cash and cash equivalents and short-term investments were held by subsidiaries outside of the United States. Any
repatriation of such funds could incur local withholding tax in the source and intervening foreign jurisdictions. These amounts
could also be subject to certain U.S. state taxes.
Changes in our tax rate or exposure to additional income tax liabilities could affect our profitability. In addition, audits by tax
authorities could result in additional tax payments for prior periods.
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We are subject to income taxes in the U.S. and in various foreign jurisdictions. Domestic and international tax liabilities are
subject to the allocation of income among various tax jurisdictions. Our effective tax rate can be affected by changes in the mix
of earnings in countries with differing statutory tax rates (including as a result of business acquisitions and dispositions),
changes in the valuation of deferred tax assets and liabilities, accruals related to contingent tax liabilities, the results of audits
and examinations of previously filed tax returns, and changes in tax laws.
Any of these factors may adversely affect our tax rate and decrease our profitability. The amount of income taxes we pay is
subject to audit by U.S. federal, state, local, and foreign tax authorities. If these tax audits result in assessments, our future
results may be unfavorably impacted.
As a global business, we have a complex tax structure, and there is a risk that the tax authorities will disagree with our transfer
pricing.
We are subject to complex transfer pricing regulations in the U.S. and foreign countries in which we operate. Transfer pricing
regulations generally require that transactions between related companies be determined comparable to transactions on an arm’s
length basis and that contemporaneous documentation be maintained to support the pricing used. Although transfer pricing
standards are generally similar in many of the countries in which we operate, there is still a relatively high degree of uncertainty
and inherent subjectivity in complying with these requirements. This topic has received additional scrutiny in recent years,
including the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting project. To the
extent that any tax authority disagrees with our transfer pricing practices, we could incur significant costs to defend our position
and could be subject to significant additional tax liabilities, interest, and penalties.
We may not be able to realize our deferred tax assets which would adversely impact tax expense in future periods.
We regularly assess the ability to realize deferred tax assets in each jurisdiction in which we operate based on a number of
factors, including historic operating results, estimates of future earnings, the economic environment, the nature and character of
the income, and the existence of cost effective tax planning strategies. This assessment requires significant judgment. If we
determine that deferred tax assets are not "more likely than not" to be realized, we record a valuation allowance to reduce
deferred tax assets to a level that is expected to be realized. If we subsequently determine that realization becomes "more likely
than not", a valuation allowance will be reversed. Any increase or decrease in our valuation allowances could have a significant
impact on our financial results.
We use the mark Vishay under license from Vishay Intertechnology, which could result in product and market confusion.
We use the mark Vishay as part of our name and in connection with many of our products. Our use of the Vishay mark is
governed by an agreement between us and Vishay Intertechnology, giving us a perpetual, royalty-free, worldwide license for
the use of the mark. We believe that it is important that we continue the use of the Vishay name, to a certain extent, in order to
benefit from the reputation of the Vishay brand, which was first used in connection with our foil resistors and strain gages when
Vishay Intertechnology was founded over 50 years ago.
There are risks associated with our use of the Vishay mark, however, both for us and for Vishay Intertechnology. Because both
we, and Vishay Intertechnology, use the Vishay mark, confusion could arise in the market regarding the products offered by the
two companies, and there could be a misplaced perception of our continuing to be associated with Vishay Intertechnology.
Also, any negative publicity associated with one of the two companies in the future could adversely affect the public image of
the other. Finally, Vishay Intertechnology will have the right to terminate the license agreement, in certain extreme
circumstances, if we are in material and repeated breach of the terms of the agreement, which would likely have an adverse
effect on us and our business.
Risks relating to our operations outside the United States
We attempt to improve profitability by operating in countries in which manufacturing efficiencies may be achieved, but the shift
of operations to these regions may entail considerable expense.
Our strategy is aimed at achieving significant production cost savings through the transfer and expansion of manufacturing
operations to and in countries in which we have existing capacity, as well as countries with lower production costs or other
benefits, such as India. During this process, we may experience under-utilization of certain plants and factories in higher-cost
regions, and capacity constraints in plants and factories located in lower-cost regions. Also, we may experience delays in the
expected transition from a higher-cost location to a lower-cost one that results in greater than expected use of the higher-cost
facility. This transitional utilization may result initially in production inefficiencies and higher costs. These costs include those
associated with compensation in connection with workforce reductions and plant closings in the higher-cost regions, start-up
expenses, manufacturing and construction delays, and increased depreciation costs in connection with the initiation or
expansion of production in lower-cost regions. In addition, as we implement transfers of certain of our operations, we may
experience strikes or other types of labor unrest as a result of layoffs or termination of our employees in higher-cost countries.
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In connection with the transfer of manufacturing operations to lower-cost countries, and upgrading of existing facilities in
higher-cost countries, we are also increasing the level of automation in our plants to optimize our capital and labor resources in
production, inventory management, quality control, and warehousing. Although we have substantial experience with
automation in several of our plants in higher-cost countries, there are risks in automating plants which previously did not use a
significant amount of automation, including the possibility of inefficiencies and higher operating costs in the transition from
manual to automated operations. If the transition extends longer than anticipated, we could suffer product yield inefficiencies,
contributing to higher product costs and increasing the time it will take for us to achieve a return on our investment in the
capital equipment involved in the automation process. Furthermore, any layoffs or termination of our employees as a result of
increased automation may lead to strikes or other types of labor unrest. If we experience these types of inefficiencies, they
could have an adverse effect on our operating results, customer relationships, and financial condition.
We conduct a significant amount of business in the European Union, including in England, and our operations may be affected
by the departure of the United Kingdom from the European Union.
On June 23, 2016, the citizens of the United Kingdom approved a referendum to leave the European Union (“Brexit”), which
led to significant market volatility around the world, as well as political, economic and legal uncertainty. In addition, the Brexit
vote triggered a devaluing of the pound sterling relative to the euro and the U.S. dollar, and in Europe we generally sell our
products and incur expense in local currencies including the pound sterling and the euro, but incur exchange rate gains and
losses for U.S. dollar denominated assets and liabilities including intercompany and third-party accounts receivables and
payables. This exposure to movements in foreign currency exchange rates relative to some of these U.S. dollar denominated
balances may result in an adverse impact on our results of operations.
The long-term nature of the United Kingdom’s relationship with the European Union is unclear and there is considerable
uncertainty when any relationship will be agreed and established. Withdrawal from the European Union is controversial in the
United Kingdom notwithstanding the 2016 vote. In January 2020, the United Kingdom and the European Union approved of an
agreement between the United Kingdom and the European Union, and the United Kingdom officially departed from the
European Union. On February 1, 2020, the United Kingdom entered into a transition and implementation period, during which
all European Union laws regulations, court decisions, trading agreements and other obligations continue to apply to the United
Kingdom. As of January 1, 2021, the United Kingdom and the European Union entered into a Trade and Cooperation
Agreement that included a Free Trade Agreement. At this stage, it is uncertain what the effects of the Trade and Cooperation
Agreement will be on our United Kingdom and European operations in fiscal 2021 and beyond, and it is possible that the Trade
and Cooperation Agreement or other agreements entered into between the United Kingdom and other jurisdictions could impair
our ability to transaction business in the United Kingdom or countries in the European Union.
Significant developments from the recent and potential changes in tariffs, trade regulation or other restrictions may adversely
impact our business, financial condition and results of operations.
We have manufacturing operations in China, Europe, Canada, Israel and the United States, as well as in other countries.
Significant tariffs or other restrictions which are placed on Chinese, European, Canadian or Israeli imports to the United States,
or any related counter-measures which are taken by the countries involved, may materially harm our revenues and results of
operations. Examples of past actions are Section 232 tariffs on steel and aluminum product imports announced by the U.S.
Department of Commerce in March 2018, and Section 301 tariffs on certain products that originate in China announced by the
United States Trade Representative that first started in June 2018 and now are in four separate lists with varying tariff increases.
These tariffs, or other changes in U.S. trade policy, could trigger retaliatory actions by affected countries. Certain foreign
governments have instituted or are considering imposing trade sanctions on certain U.S. goods. We cannot predict future trade
policy or the terms of any renegotiated trade agreements and their impacts on our business. The adoption and expansion of trade
restrictions, the occurrence of a trade war, or other governmental actions related to tariffs, quotas, duties, taxes or trade
agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, and our
suppliers, which in turn could adversely impact our business, financial condition and results of operations.
We are subject to the risks of political, economic, health, and military instability in countries outside the United States in which
we operate.
Some of our products are produced in Israel, India, China, and other countries which are particularly subject to risks of political,
economic, health and military instability. This instability could result in wars, riots, nationalization of industry, currency
fluctuations, and labor unrest or unavailability. These conditions could have an adverse impact on our ability to manufacture,
ship and operate in these regions and, depending on the extent and severity of these conditions, could result in a reduction in
customer orders and sales to certain regions and end-markets and materially and adversely affect our overall financial condition
and operating results.
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We have principal manufacturing facilities and operations located in Israel. Accordingly, our business will be directly
influenced by the political, economic and military conditions affecting Israel at any given time. Since the establishment of the
State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries. We have never
experienced any material interruption in our operations attributable to these factors, in spite of several Middle East crises,
including wars. A change in the security and political situation in Israel and in the economy could have a material adverse effect
on our business, operating results and financial condition.
Operational difficulties, including those associated with our new facility in Israel, could adversely impact our business.
In 2019, we entered into a long-term lease for a newly-constructed 121,400 square foot facility in Israel, as part of a strategic
initiative to expand the manufacturing capacity of our advance sensors product line. We have begun to transition certain of our
manufacturing operations in Israel into this facility, and we expect to complete this transition in 2021. Any delay in
transitioning our operations could adversely affect our future business and results of operations. We cannot guarantee that the
consolidation of operations in Israel will be completed successfully, without delays or on the terms that we currently expect.
We are subject to foreign currency exchange rate risks which may impact our results of operations.
We are exposed to foreign currency exchange rate risks, particularly due to market values of transactions in currencies other
than the functional currencies of certain subsidiaries.
Our significant foreign subsidiaries are located in the United Kingdom, Canada, Germany, Israel, Japan, and India. Our
operations in Europe, Canada and certain locations in Asia primarily generate and expend cash in local currencies. Our
operations in Israel and certain locations in Asia primarily generate cash in U.S. dollars, but these subsidiaries also have
significant transactions in local currencies. Our exposure to foreign currency exchange rate risk is more pronounced in
situations such as our operations in Canada, India, Israel, and China - where costs, such as production labor costs are
predominantly paid in local currencies while the sales revenue for those products is predominantly denominated in U.S. dollars.
As of December 31, 2020, we did not have in place any arrangements to mitigate or hedge against exposures relating to
fluctuations in foreign currency exchange rate.
A change in the mix of the currencies in which we transact our business could have a material effect on results of operations.
Furthermore, the timing of cash receipts and disbursements could have a material effect on our results of operations,
particularly if there are significant changes in exchange rates in a short period of time.
Our global operations are subject to extensive anti-corruption laws and other regulations.
The U.S. Foreign Corrupt Practices and similar foreign anti-corruption laws generally prohibit companies and their
intermediaries from making improper payments or providing anything of value to improperly influence foreign government
officials for the purpose of obtaining or retaining business, or obtaining an unfair advantage. Recent years have seen a
substantial increase in the global enforcement of anti-corruption laws. Our continued operation and expansion outside the
United States, including in developing countries, could increase the risk of such violations under other regulations relating to
limitations on or licenses required for sales made to customers located in certain countries. Violations of these laws may result
in severe criminal or civil sanctions, could disrupt our business, and result in a material adverse effect on our reputation,
business and results of operations or financial condition.
Risks Relating to Our Common Stock
The holders of Class B convertible common stock have effective voting control of our company.
We have two classes of common stock: common stock and Class B convertible common stock. The holders of common stock
are entitled to one vote for each share held, while the holders of Class B convertible common stock are entitled to 10 votes for
each share held. The ownership of Class B convertible common stock is highly concentrated, and holders of Class B
convertible common stock effectively can cause the election of directors and the approval/or disapproval of other matters
requiring stockholder approval. Mrs. Ruta Zandman, the wife of the late founder of our technology, Dr. Felix Zandman,
controls the voting of, solely or on a shared basis with Marc Zandman (the Chairman of our Board of Directors) and Ziv
Shoshani (our Chief Executive Officer and a member of our Board of Directors), approximately 76.9% of our Class B
convertible common stock, representing 34.5% of the total voting power of our capital stock as of December 31, 2020. Holders
of our Class B convertible common stock may act in ways that are contrary to, or not in the best interests of, holders of our
common stock. The voting rights of the holders of our Class B convertible common stock effectively give such holders the
ability to prevent transactions that would result in a change in control of us, including transactions in which holders of our
common stock might otherwise receive a premium for their shares over the then-current market price.
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Certain provisions of our certificate of incorporation and bylaws may reduce the likelihood of any unsolicited acquisition
proposal or potential change of control that you might consider favorable.
Our bylaws contain provisions that could be considered “anti-takeover” provisions because they make it harder for a third party
to acquire us without the consent of our incumbent board of directors. Under these by-law provisions:
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stockholders may not change the size of the board of directors or, except in limited circumstances, fill vacancies on the
board of directors;
stockholders may not call special meetings of stockholders;
stockholders must comply with advance notice provisions for nominating directors or presenting other proposals at
stockholder meetings; and
our Board of Directors, may without stockholder approval, issue preferred shares and determine their rights and terms,
including voting rights, or adopt a stockholder rights plan.
These provisions could have the effect of discouraging an unsolicited acquisition proposal or delaying, deferring, or preventing
a change of control transaction that might involve a premium price or otherwise be considered favorable by our stockholders.
General Risk Factors
We might require additional capital to support business growth and this capital might not be available.
We intend to continue to make investments to support our business growth and may require additional funds to respond to
business challenges or opportunities, including the need to develop new offerings or enhance our existing offerings, enhance
our operating infrastructure, or acquire complementary businesses and technologies. Accordingly, we may need to engage in
equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or
convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue
could have rights, preferences, and privileges superior to those of holders of our common stock. Any debt financing secured by
us in the future could involve additional restrictive covenants relating to our capital raising activities and other financial and
operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities,
including potential acquisitions.
In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain
adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business
growth and to respond to business challenges could be significantly limited.
Our future success is substantially dependent on our ability to attract and retain highly qualified technical, managerial,
marketing, finance, and administrative personnel.
The competitive environment of our business requires us to attract and retain highly qualified personnel to develop
technological innovations and bring them to market on a timely basis. Our complex operations also require us to attract and
retain highly qualified administrative personnel in functions such as legal, tax, accounting, business development, financial
reporting, and treasury. The market for personnel with such qualifications is highly competitive. We have not entered into
employment or non-competition agreements with many of our key personnel.
The loss of the services of, or the failure to effectively recruit, qualified personnel, including for key executive positions, could
have a material adverse effect on our business.
We are exposed to, and may be adversely affected by, interruptions to our computer and information technology systems and
sophisticated cyber-attacks.
We rely on our information technology systems and networks in connection with many of our business activities. Some of these
networks and systems are managed by third party service providers and are not under our direct control. Our operations
routinely involve receiving, storing, processing, and transmitting sensitive information pertaining to our business, customers,
suppliers, employees, and other sensitive matters. Any cyber incidents could materially disrupt operational systems; result in
loss of trade secrets or other proprietary or competitively sensitive information; compromise personally identifiable information
regarding customers or employees; and jeopardize the security of our facilities. Because techniques used to obtain unauthorized
access, or to sabotage systems, change frequently and generally are not recognized until they are launched against a target, we
may be unable to anticipate these techniques, or to implement adequate preventative measures. Information technology security
threats, including security breaches, computer malware, and other cyber-attacks are increasing in both frequency and
sophistication, and could create financial liability, subject us to legal or regulatory sanctions, or damage our reputation with
customers, suppliers, and other stakeholders. We continuously seek to maintain a robust program of information security and
controls, but the impact of a material information technology event could have a material adverse effect on our competitive
position, reputation, results of operations, financial condition, and cash flows.
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Interruptions in our information technology systems could adversely affect our business.
We rely on the efficient and uninterrupted operation of complex information technology systems and networks to operate our
business. Any significant system or network disruption, including, but not limited to, new system implementations, computer
viruses, security breaches, facility issues or energy blackouts could have a material adverse impact on our operations and results
of operations. Such network disruption could result in a loss of the confidentiality of our intellectual property or the release of
sensitive competitive information or customer or employee personal data. Any loss of such information could harm our
competitive position, result in a loss of customer confidence, and cause us to incur significant costs to remedy the damages
caused by the disruptions or security breaches. We have implemented protective measures to prevent against and limit the
effects of system or network disruptions, but there can be no assurance that such measures will be sufficient to prevent or limit
the damage from any future disruptions and any such disruption could have a material adverse impact on our business and
results of operations.
Third-party service providers, such as subcontractors, distributors and vendors have access to certain portions of our sensitive
data. In the event that these service providers do not properly safeguard our data that they hold, security breaches and loss of
our data could result. Any such loss of data by our third-party service providers could have a material adverse impact on our
business and results of operations.
Unexpected events, such as a natural disaster, could disrupt our operations and adversely affect our results of operations.
We have manufacturing and other facilities in countries around the world. Unexpected events, including fires or explosions at
facilities; natural disasters, such as flooding, hurricanes, and earthquakes; war or terrorist activities; civil unrest; unplanned
outages; supply or labor disruptions; and failures of equipment or systems at any of our facilities could adversely affect our
results of operation. If adverse conditions were to arise with respect to any of our facilities as a result of a natural disaster or
other unexpected event, they may result in customer disruption, physical damage to one or more key operating facilities, the
temporary closure of one or more key operating facilities, the temporary disruptions of information systems, and/or an adverse
effect on our results of operations.
Our stock price could become more volatile and investments could lose value.
The market price of our common stock, and the number of shares traded each day, has experienced significant fluctuations and
may continue to fluctuate significantly. The market price for our common stock may be affected by a number of factors,
including, but not limited to:
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shortfalls in our expected net revenue, earnings or key performance metrics;
changes in recommendations or estimates by securities analysts;
the announcement of new products by us or our competitors;
quarterly variations in our or our competitors’ results of operations;
a change in our dividend or stock repurchase activities;
developments in our industry or changes in the market for technology stocks;
changes in rules or regulations applicable to our business; and
other factors, including economic instability, COVID-19 and changes in political or market conditions.
A significant drop in our stock price could expose us to costly and time consuming litigation, which could result in substantial
costs, and divert management’s attention and resources, resulting in an adverse effect on our business.
Also, given our market capitalization and trading volume fluctuations, it is possible that there will be less market and
institutional interest in our shares, and that we will not attract substantial coverage in the analyst community. As a result, the
trading market for our shares may be less liquid, making it more difficult for investors to dispose of their shares at favorable
prices, and investors may have less independent information and analysis available to them concerning our company.
Your percentage ownership of our common stock may be diluted in the future.
Your percentage ownership of our common stock may be diluted in the future because of equity awards that we expect will be
granted to our directors, officers, and employees. The Vishay Precision Group, Inc. 2010 Stock Incentive Program provides for
the grant of equity-based awards, including restricted stock, restricted stock units, stock options, and other equity-based awards
to our directors, officers, and other employees, advisors and consultants.
- 22 -
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
Our business has approximately 19 principal locations. Our facilities include owned locations and locations leased from third
parties. The principal locations, along with available space including administrative offices, are listed below:
Owned Locations
Wendell, North Carolina USA
Chennai, India (a)
Holon, Israel
Reporting segment
Foil Technology Products
Force Sensors
Foil Technology Products
Bradford, United Kingdom
Weighing and Control Systems
Kent, Washington
Akita, Japan (b)
Poestenkill, New York
Chartres, France
Weighing and Control Systems
Foil Technology Products
Weighing and Control Systems
Force Sensors
Basingstoke, United Kingdom
Force Sensors/Foil Technology Products
Third-Party Leased Locations
Modi'in, Israel
Toronto, Canada
Foil Technology Products
Weighing and Control Systems
Tianjin, People’s Republic of China
Force Sensors
Omer, Israel
Holon, Israel
Concord, California USA
Foil Technology Products
Foil Technology Products
Foil Technology Products
Taipei, Republic of China (Taiwan)
Force Sensors/Weighing and Control Systems
Teltow, Germany
Degerfors, Sweden
Foil Technology Products
Weighing and Control Systems
Malvern, Pennsylvania USA
Corporate
Approx. Available
Space (square feet)
147,000
129,000
97,000
75,000
47,000
46,000
32,000
11,000
11,000
121,400
65,000
34,000
24,000
18,000
16,000
13,000
11,000
10,000
8,000
(a) The Chennai building is owned and the land is held under a 99 year lease (which began in 2012).
(b) A facility on the campus is leased to Vishay Intertechnology. Approximate available space reported above excludes the area leased.
In the opinion of management, our properties and equipment generally are in good operating condition and are adequate for our
present needs. We do not anticipate difficulty in renewing leases as they expire, or in finding alternative facilities.
Our corporate headquarters are located at 3 Great Valley Parkway, Suite 150, Malvern, PA 19355.
Item 3. LEGAL PROCEEDINGS
We are subject to various legal proceedings that constitute ordinary, routine litigation incidental to our business. In our opinion,
the disposition of these proceedings will not have a material adverse effect on our business or our financial condition, results of
operations, and cash flows.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
- 23 -
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the New York Stock Exchange under the symbol VPG. The Board of Directors may only declare
dividends or other distributions with respect to the common stock or the Class B convertible common stock if it grants such
dividends or distributions in the same amount, per share, with respect to the other class of stock. Stock dividends or
distributions, on any class of stock, are payable only in shares of stock of that class. Shares of either common stock or Class B
convertible common stock cannot be split, divided, or combined unless the other is also split, divided, or combined equally.
Holders of record of our common stock totaled approximately 718 at March 11, 2021.
We have two classes of common stock: common stock and Class B convertible common stock. The holders of common stock
are entitled to one vote for each share held, while the holders of Class B convertible common stock are entitled to 10 votes for
each share held. At March 11, 2021 we had outstanding 1,022,887 shares of Class B convertible common stock, par value $0.10
per share. Currently, the holders of VPG’s Class B convertible common stock hold approximately 45.0% of the voting power of
our Company. Mrs. Ruta Zandman, the wife of the late founder of our technology, Dr. Felix Zandman, controls, or shares
control of, the voting of approximately 76.9% of our Class B convertible common stock, representing 34.5% of the total voting
power of our capital stock as of December 31, 2020.
- 24 -
Stock Performance Graph
The graph and table below compare the cumulative total stockholder return on the Company’s common stock over a sixty
month period, with the returns on the Russell 2000 Stock Index, and a peer group of companies selected by our management.
The peer group is made up of six publicly held manufacturers of sensors, sensor-based equipment, and sensor-based systems.
Management believes that the product offerings of the peer group companies are more similar to our product offerings than
those of the companies contained in any published industry index. The return of each peer issuer has been weighted according
to the respective issuer’s stock market capitalization. The graph and table assume that $100 had been invested at December 31,
2015, and that all dividends were reinvested. The graph and table are not necessarily indicative of future investment
performance.
Vishay Precision Group, Inc.
Cumulative $
Russell 2000 Index
Peer Group *
Cumulative $
Cumulative $
100.00
100.00
100.00
166.96
121.31
106.32
222.17
139.08
144.30
267.05
123.76
129.39
300.36
155.35
171.90
278.09
186.36
214.17
12/31/15
12/31/16
12/31/17
12/31/18
12/31/19
12/31/20
*The management selected peer group includes: MTS Systems, Kyowa Electronic Instruments, Mettler – Toledo, Spectris, Sensata Technologies, CTS Corp.
Item 6. [Reserved]
- 25 -
Comparison of Cumulative Total ReturnAssumes Initial Investment of $100December 2020Vishay Precision Group, Inc.Russell 2000 IndexPeer Group12/31/1512/31/1612/31/1712/31/1812/31/1912/31/2050.00100.00150.00200.00250.00300.00350.00
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
VPG is an internationally recognized designer, manufacturer and marketer of sensors, and sensor-based measurement systems,
as well as specialty resistors and strain gages based upon our proprietary technology. We provide precision products and
solutions, many of which are “designed-in” by our customers, specializing in the growing markets of stress, force, weight,
pressure, and current measurements. A significant portion of our products and solutions are primarily based upon our
proprietary foil technology and are produced as part of our vertically integrated structure. We believe this strategy results in
higher quality, more cost effective and focused solutions for our customers. Our products are marketed under a variety of brand
names that we believe are characterized as having a very high level of precision and quality. Our global operations enable us to
produce a wide variety of products in strategically effective geographic locations that also optimize our resources for specific
technologies, sensors, assemblies, and systems.
The Company also has a long heritage of innovation in precision foil resistors, foil strain gages, and sensors that convert
mechanical inputs into an electronic signal for display, processing, interpretation, or control by our instrumentation and systems
products. Our advanced sensor product line continues this heritage by offering high-quality foil strain gages produced in a
proprietary, highly automated environment. Precision sensors are essential to the accurate measurement, resolution and display
of force, weight, pressure, torque, tilt, motion, or acceleration, especially in the legal-for-trade, commercial, and industrial
marketplaces. This expertise served as a foundation for our expansion into strain gage instrumentation, load cells, transducers,
weighing modules, and complete systems for process control and on-board weighing. Although our products are typically used
in the industrial market, our advanced sensors have been used in a consumer electronics product and are being evaluated for
other non-industrial applications.
The precision sensor market is integral to the development of intelligent products across a wide variety of end markets upon
which we focus, including medical, agricultural, transportation, industrial, avionics, military, and space applications. We
believe that as original equipment manufacturers (“OEMs”) continue a drive to make products “smarter,” they will integrate
more sensors and related systems into their solutions to link the mechanical/physical world with digital control and/or response.
We believe this offers a substantial growth opportunity for our products and expertise.
Impact of COVID-19 on our Business
As the COVID-19 pandemic began to unfold around the world, the Company took measures to protect its employees and
customers. Those measures included suspending business travel, enabling certain employees to work from home, implementing
workplace distancing, and adjusting work shifts to minimize employees’ contact with other employees. While the majority of
the Company’s operations were able to operate despite the impacts from the COVID-19 pandemic, the Company’s Force
Sensors manufacturing facility in India had operated at partial capacity as a result of government-mandated restrictions. The
Company received approval from the Indian government to operate its facility without limitations on July 1, 2020, and since
that date, has been operating at pre-pandemic capacity.
As of March 11, 2021, all of the Company’s facilities are operating without limitations with the Company implementing
COVID-19 best practices with respect to working conditions and enabling some employees to work remotely where possible.
Nonetheless, given the impacts to date and the ongoing uncertainty concerning the magnitude of the impact and duration of the
COVID-19 pandemic, the ongoing economic disruption may continue to adversely affect the Company’s business and financial
results.
Overview of Financial Results
VPG reports in three product segments: the Foil Technology Products segment, the Force Sensors segment, and the Weighing
and Control Systems segment. The Foil Technology Products reporting segment is comprised of the foil resistor and strain gage
operating segments. The Force Sensors reporting segment is comprised of transducers, load cells, and modules. The Weighing
and Control Systems reporting segment is comprised of complete systems which include load cells and instrumentation for
weighing, force control and force measurement for a variety of uses such as process control and on-board weighing
applications.
Net revenues for the year ended December 31, 2020 were $269.8 million compared to net revenues of $284.0 million for the
year ended December 31, 2019. Net earnings attributable to VPG stockholders for the year ended December 31, 2020 were
$10.8 million, or $0.79 per diluted share, compared to $22.2 million, or $1.63 per diluted share, for the year ended
December 31, 2019.
- 26 -
The results of operations for the years ended December 31, 2020 and 2019 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, and adjusted net earnings per diluted share. 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, and adjusted net earnings per diluted share 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.
Beginning in the fourth quarter of 2020, the Company has determined to include the impact of foreign currency exchange rates
on its assets and liabilities in certain of its non-GAAP measures for its current and comparative periods.
The items affecting comparability are (dollars in thousands, except per share amounts):
Gross Profit
Operating Income
Net Earnings
Attributable to VPG
Stockholders
Diluted Earnings Per
share
Fiscal Year Ended December 31,
2020
2019
2020
2019
2020
2019
2020
2019
As reported - GAAP
104,271
111,617
22,657
28,648
$ 10,787 $ 22,188 $
0.79 $
1.63
As reported - GAAP Margins
38.6 %
39.3 %
8.4 %
10.1 %
Acquisition purchase accounting
adjustments (a)
Acquisition costs (b)
COVID-19 impact (c)
Executive Severance costs (d)
Impairment of goodwill and indefinite-lived
intangibles
Restructuring costs
Foreign exchange (gain)/loss (e)
Less: Tax effect of reconciling items and
discrete tax items (f)
569
1,254
434
—
569
—
(366)
—
2,440
918
1,254
443
—
611
—
2,293
569
—
(366)
—
2,440
918
2,246
1,254
443
—
611
—
2,293
1,638
0.04
—
(0.03)
—
0.18
0.07
0.16
(1,381)
4,102
(0.11)
As Adjusted - Non GAAP
$ 105,274
$ 112,871
$ 26,218
$ 33,249
$ 17,975 $ 24,325 $
1.32 $
As Adjusted - Non GAAP Margins
39.0 %
39.7 %
9.7 %
11.7 %
0.09
0.03
0.04
—
0.17
0.12
0.29
1.79
(a) Acquisition purchase accounting adjustments include fair market value adjustments associated with inventory recorded as a component of costs of
products sold.
(b) Acquisition costs associated with the acquisition of DSI in 2019.
(c) COVID-19 impact is the net impact to the Company of costs incurred as a result of the COVID-19 pandemic, net of government subsidies received.
(d) Severance costs associated with the resignation of an executive officer of the Company in 2019.
(e)
Impact of foreign currency exchange rates on assets and liabilities. The change in the dollar-shekel exchange rate, particularly in the fourth quarter of
2020, resulted in an unfavorable foreign exchange impact primarily related to the shekel-denominated lease liability for a new Foil Technology Products
facility in Israel.
(f)
Included in the discrete items for 2020 is a $1.7 million tax expense related to the acquisition of DSI, and in 2019, a $3.4 million tax benefit primarily
related to the acquisition of DSI.
- 27 -
Financial Metrics
We utilize several financial measures and metrics to evaluate the 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 gross profit shown 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 clearly 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, the backlog is not necessarily indicative of the results to be 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 product that we ship during that period. A book-to-bill ratio that is greater than one
indicates that demand is higher than current revenues and manufacturing capacities, and it indicates that we may generate
increasing revenues in future periods. Conversely, a book-to-bill ratio that is less than one is an indicator of lower demand
compared to existing revenues and current capacities and may foretell declining sales.
We focus on our inventory turnover as a measure of how well we are managing 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 table shows net revenues, gross profit margin, the end-of-period backlog, the book-to-bill ratio, and the inventory
turnover for our business as a whole during the five quarters beginning with the fourth quarter of 2019 and through the fourth
quarter of 2020 (dollars in thousands):
Net revenues
$
69,142
$
67,696
$
59,146
$
67,525
$
75,445
4th Quarter
2019
1st Quarter
2020
2nd Quarter
2020
3rd Quarter
2020
4th Quarter
2020
Gross profit margin
35.0 %
37.0 %
39.1 %
40.5 %
38.1 %
End-of-period backlog
$
90,900
$
94,300
$
92,900
$
90,800
$
87,600
Book-to-bill ratio
Inventory turnover
1.15
2.72
1.08
2.58
0.95
2.20
0.95
2.38
0.93
2.86
- 28 -
Foil Technology Products
Net revenues
Gross profit margin
End-of-period backlog
Book-to-bill ratio
Inventory turnover
Force Sensors
Net revenues
Gross profit margin
End-of-period backlog
Book-to-bill ratio
Inventory turnover
Weighing and Control Systems
Net revenues
Gross profit margin
End-of-period backlog
Book-to-bill ratio
Inventory turnover
4th Quarter
2019
1st Quarter
2020
2nd Quarter
2020
3rd Quarter
2020
4th Quarter
2020
$
$
$
$
$
$
$
$
$
$
$
$
29,636
34.9 %
44,600
1.18
2.66
15,059
24.2 %
17,100
1.11
2.43
24,447
41.6 %
29,200
1.15
3.10
$
$
$
$
$
$
30,477
36.7 %
51,700
1.25
2.74
14,695
24.3 %
16,900
1.02
2.64
22,524
45.7 %
25,700
0.90
2.31
$
$
$
$
$
$
31,785
41.8 %
47,500
0.85
2.58
8,916
11.6 %
22,300
1.58
2.02
18,445
47.6 %
23,100
0.82
1.81
$
$
$
$
$
$
32,906
41.1 %
48,500
1.01
2.63
13,862
30.5 %
21,300
0.90
2.28
20,757
46.2 %
21,000
0.88
2.13
36,477
38.4 %
43,700
0.84
3.05
16,251
29.1 %
24,700
1.18
2.74
22,717
44.0 %
19,200
0.88
2.67
Net revenues for the fourth quarter of 2020 increased 11.7% from the net revenues of $67.5 million reported in the third quarter
of 2020, and increased 9.1% from $69.1 million for the comparable prior year period.
Net revenues in the Foil Technology Products segment of $36.5 million in the fourth quarter of 2020 increased 10.9% from
$32.9 million in the third quarter of 2020, and increased 23.1% from $29.6 million in the fourth quarter of 2019. The sequential
and year over year increases in revenues was primarily attributable to an increase in our advanced sensors product line primarily
in our consumer-related markets and higher sales of precision resistors and our Pacific Instruments product line in the avionics,
military and space market. Sequentially, the increase in revenue reflected higher precision resistor sales in the test and
measurement market, an increase in our Pacific Instruments product line in the avionics, military and space market, and an
increase in our advanced sensors product line primarily in our consumer-related markets.
Net revenues in the Force Sensors segment of $16.3 million in the fourth quarter of 2020 increased 17.2% compared to
revenues of $13.9 million in the third quarter of 2020. The sequential increase in revenues, which was attributable to higher
sales in the precision agriculture and industrial weighing markets, reflected the return to full production capability at the end of
the third quarter of the Force Sensors operations that had been constrained due to the COVID-19 pandemic.Net revenues in the
fourth quarter of 2020 increased 7.9% compared to $15.1 million in the fourth quarter of 2019 mainly due to an increase in our
OEM customers in the precision agriculture market, partially offset by lower sales in the industrial weighing market.
Net revenues in the Weighing and Control Systems segment of $22.7 million in the fourth quarter of 2020 increased 9.4% from
$20.8 million in the third quarter of 2020 and decreased 7.1% from $24.4 million in the fourth quarter of 2019. The sequential
increase in revenue was primarily attributable to our onboard weighing products for the transportation market and an increase in
our process weighing business. The year-over-year decrease in revenues was primarily attributable lower KELK and DSI steel-
related sales and lower sales in our process weighing business, partially offset by an increase in our onboard weighing products
for the transportation market.
The gross profit margin for the fourth quarter of 2020 decreased 2.4% compared to the third quarter of 2020, and increased
3.1% from the fourth quarter of 2019.
Sequentially, gross profit margins declined in all reporting segments. In the Foil Technology Products segment, the decline in
gross profit margin was primarily due to manufacturing inefficiencies, unfavorable product mix and one-time inventory
adjustments, partially offset by an increase in volume. In the Force Sensors segment, the decline in gross profit margin was
primarily due to a reduction of inventory, partially offset by an increase in volume. In the Weighing and Control System
segment, gross profit margin decreased due to unfavorable product mix and inventory reductions, partially offset by higher
volume.
- 29 -
Compared to the fourth quarter of 2019, gross profit margins increased in all reporting segments. In the Foil Technology
Products segment, the increase in gross profit margin was primarily due to higher volume. In the Force Sensors segment, the
increase in gross profit margin was primarily due to higher volume, structural cost savings initiatives, an increase in inventories
and a positive impact of foreign exchange, partially offset by a reduction of export grants. In the Weighing and Control
Systems segment, gross profit margin increased due to recording of purchase accounting adjustments related to the DSI
acquisition and the impact of COVID-19 subsidies. Excluding those adjustments, the gross profit margin declined 4.8%
primarily due to lower volume and an unfavorable product mix.
Optimize Core Competence
The Company’s core competency and key value proposition is providing customers with proprietary foil technology products
and precision measurement sensors and sensor-based systems. Our foil technology resistors and strain gages are recognized as
global market leading products that provide high precision and high stability over extreme temperature ranges, and long life.
Our force sensor products and our weighing and control systems products are also certified to meet some of the highest levels
of precision measurements of force, weight, pressure, torque, tilt, motion, and acceleration. 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 foil technology 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 which has been constructed in Israel. Our administrative personnel have
moved to the new facility, and we have begun the transition of our advanced sensors business to that facility.
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, China, and Israel, where we can benefit from lower labor costs, improved efficiencies, or
available tax and other government-sponsored incentives. For example, in 2019 we incurred restructuring expense related to
closing and downsizing of facilities as part of the manufacturing transitions of our force sensor products to facilities in India
and China, which marked key milestones in our ongoing strategic initiatives to align and consolidate our manufacturing
footprint.
- 30 -
Acquisition Strategy
We expect to continue to make strategic acquisitions where opportunities present themselves to grow our segments.
Historically, our growth and acquisition strategy has been largely focused on vertical product integration, using our foil strain
gages in our force sensor products, and incorporating those products into our weighing and control systems. The acquisitions of
Stress-Tek and KELK, each of which employ our foil strain gages to manufacture load cells for their systems, continued this
strategy. Additionally, the KELK acquisition resulted in the acquisition of certain optical sensor technology. The Pacific
Instruments acquisition significantly broadened our existing data acquisition offerings and opened new markets for us. Our
most recent acquisition, DSI, expands our position in the steel market. We expect to expand our expertise, and our acquisition
focus, outside our traditional vertical approach to other precision sensor solutions 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. The amount charged to expense for research
and development aggregated $12.6 million, $12.1 million, and $11.8 million for the years ended December 31, 2020, 2019, and
2018, respectively.
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 this Annual Report on Form 10-K.
The Company recorded restructuring costs of $0.9 million, $2.3 million, and $0.3 million during the years ended December 31,
2020, 2019, and 2018, respectively. In 2020 and 2018, restructuring costs were comprised primarily of employee termination
costs, including severance and statutory retirement allowances. In 2019, restructuring costs included $1.2 million of employee
termination costs, including severance and statutory retirement allowances incurred in connection with various cost reduction
programs, and $1.1 million of other exit costs associated with the closure and downsizing of facilities as part of the
manufacturing transitions of the Company's force sensors products to facilities in India and China.
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.
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.
- 31 -
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 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 year. While the translation of revenues and expenses into U.S. dollars does not directly impact the
consolidated statements 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.
Effects of Foreign Exchange Rate on Operations
For the year ended December 31, 2020, exchange rate impacts increased net revenues by $0.9 million, increased costs of
products sold and selling, general, and administrative expenses by $2.8 million, and decreased net earnings by $1.9 million or
$0.13 per diluted share, when compared to the prior year. Refer to Item 7. “Overview” in our Annual Report on Form 10-K for
the year ended December 31, 2019 for a comparison of the year ended December 31, 2019 and the year ended December 31,
2018, which comparison is hereby incorporated by reference.
Off-Balance Sheet Arrangements
As of December 31, 2020 and 2019, we did not have any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our significant accounting policies are summarized in Note 1 to our consolidated financial statements. We identify here a
number of policies that entail significant judgments or estimates by management.
Inventories
We value our inventories at the lower of cost or market, with cost determined under the first-in, first-out method, and market
based upon net realizable value. The valuation of our inventories requires management to make costing and market estimates.
For work in process goods, we are required to estimate the cost to completion of the products and the prices at which we will be
able to sell the products. For finished goods, we must assess the prices at which we believe the inventory can be sold.
Inventories are also adjusted for estimated obsolescence and written down to net realizable value based upon estimates of future
demand, technology developments, and market conditions.
Business Combinations
The Company allocates the purchase price of an acquired company, including when applicable, the fair value of contingent
consideration between tangible and intangible assets acquired and liabilities assumed from the acquired businesses based on
estimated fair values, with any residual of the purchase price recorded as goodwill. Third party appraisal firms and other
consultants are engaged to assist management in determining the fair values of certain assets acquired and liabilities assumed.
Estimating fair values requires significant judgments, estimates and assumptions, including but not limited to: discount rates,
future cash flows and the economic lives of trade names, technology, customer relationships, property, plant and equipment, as
well as income taxes. These estimates are based on historical experience and information obtained from the management of the
acquired companies, and are inherently uncertain.
- 32 -
Goodwill and Other Indefinite-lived Intangible Assets
Goodwill and indefinite-lived trademarks are tested for impairment at least annually, and whenever events or changes in
circumstances occur indicating that it is "more likely than not" impairment may have been incurred. We have the option to first
assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its
carrying amount as a basis for determining if it is necessary to perform the quantitative goodwill impairment test. However, if
we conclude otherwise, then we are required to perform the quantitative impairment test by calculating the fair value of the
reporting unit and comparing it against its carrying amount.
We have four reporting units to which goodwill is allocated: steel, on-board weighing, instrumentation, and DSI. For the steel
and on-board weighing goodwill reporting units, we performed the qualitative assessment, which included assessment of
macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and other entity
specific events which could impact the reporting unit. Based on this review, it was determined that the fair value of each of
those reporting units was in excess of its carrying value and therefore no quantitative impairment test was required.
For the instrumentation and DSI goodwill reporting units, we performed the quantitative impairment test. In estimating the fair
value of our instrumentation and DSI reporting units we use the income approach. We further use the market approach to
evaluate the estimated fair value of the reporting units that was obtained by using the income approach. The income approach to
valuation requires management to make significant estimates and assumptions related to future revenues, profitability, working
capital requirements and selection of discount rate and long term growth rate. Changes in these estimates and assumptions could
have a significant impact on the fair value of the reporting units. If the fair value exceeds the carrying value, no further
evaluation is required and no impairment loss is recognized. An impairment charge would be recognized to the extent the
carrying amount of goodwill exceeds the reporting unit fair value.
The indefinite-lived trade names are tested for impairment either by employing the qualitative approach outlined above, or by
comparing the carrying value to the fair value based on current revenue projections of the related operations, under the relief
from royalty method. Any excess carrying value over the applicable fair value is recognized as impairment. Any impairment
would be recognized in the reporting period in which it has been identified.
Pension and Other Postretirement Benefits
Accounting for defined benefit pension and other postretirement plans involves numerous assumptions and estimates. The
discount rate at which obligations could effectively be settled and the expected long-term rate of return on plan assets are two
critical assumptions in measuring the cost and benefit obligations of our pension and other postretirement benefit plans. Other
important assumptions include the anticipated rate of future increases in compensation levels, estimated mortality, and for
postretirement medical plans, increases or trends in health care costs. Management reviews these assumptions at least annually.
We use independent actuaries to assist us in formulating assumptions and making estimates. These assumptions are updated
periodically to reflect the actual experience and expectations on a plan-specific basis, as appropriate.
Our defined benefit plans are concentrated in the United States, Japan and the United Kingdom. Plans in these countries
comprise approximately 87% of our retirement obligations at December 31, 2020. We utilize published long-term high-quality
bond indices to determine the discount rate at the measurement date. We utilize bond yields at various maturity dates to reflect
the timing of expected future benefit payments. We believe the discount rates selected are the rates at which these obligations
could effectively be settled.
For benefit plans which are funded, we establish strategic asset allocation percentage targets and appropriate benchmarks for
significant asset classes with the aim of achieving a prudent balance between return and risk. We set the expected long-term rate
of return based on the expected long-term average rates of return to be achieved by the underlying investment portfolios. In
establishing this rate, we consider historical and expected returns for the asset classes in which the plans are invested, advice
from pension consultants and investment advisors, and current economic and capital market conditions. The expected return on
plan assets is incorporated into the computation of pension expense. The difference between this expected return and the actual
return on plan assets is deferred.
We believe that the current assumptions used to estimate plan obligations and annual expense are appropriate in the current
economic environment. However, if economic conditions change, we may be inclined to change some of our assumptions, and
the resulting change could have a material impact on the consolidated statements of operations and on the consolidated balance
sheets.
- 33 -
Income Taxes
We are subject to income taxes in the United States and numerous foreign jurisdictions. Our annual effective tax rate is based
on pre-tax earnings, statutory tax rates and enacted tax laws. Significant judgments and estimates must be made in determining
our consolidated income tax expense as presented in our financial statements.
We must assess the likelihood that we will realize deferred tax assets which requires significant judgment. If we determine that
deferred tax assets are not "more likely than not" to be realized, we record a valuation allowance to reduce deferred tax assets to
a level that is expected to be realized. If we subsequently determine that realization of a deferred tax asset becomes "more
likely than not", the valuation allowance will be reversed. Any change in valuation allowances could have a significant impact
on our financial results.
The calculation of our tax liabilities involves an assessment of uncertainties in the application of complex tax laws and
regulations in multiple jurisdictions. We record a benefit from an uncertain tax position when it is "more likely than not" that a
tax return position will be sustained upon examination, including resolutions of any related appeals or litigation based on the
technical merits of the position. If the position is not "more likely than not" to be sustained, a liability for the tax return position
is established. We adjust the liability when our judgment changes as a result of the evaluation of new information. The
ultimate tax due in a jurisdiction may result in a payment that is materially different from our most recent estimate of the
liability. Further judgment is required in determining whether an uncertain tax position is effectively settled. Any change in the
analysis will impact income tax expense.
We consider the earnings of most of our non-U.S. subsidiaries to be indefinitely invested outside the United States based on our
estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our plans for
reinvestment of foreign subsidiary earnings. As a result of the Tax Cut and Jobs Act, in 2017 the Company had recorded a
deferred tax liability of approximately $1.8 million of withholding tax associated with a planned distribution of approximately
$25.5 million of previously unremitted earnings. As of December 31, 2020, the planned distribution amount is approximately
$14.1 million with a remaining deferred tax liability of approximately $1.5 million. In addition, we estimate that additional
withholding taxes of approximately $18.0 million would be payable upon the distribution of the balance of our previously
unremitted earnings at December 31, 2020. If we decide to distribute any portion of the balance of our unremitted earnings to
the United States from a foreign country, we would adjust our income tax provision in the period we determine that the earnings
are no longer indefinitely invested outside the United States.
Additional information about income taxes is included in Note 6 to our consolidated financial statements.
- 34 -
Results of Operations – Years Ended December 31, 2020, and 2019
Refer to Item 7. “Results of Operations - Years Ended December 31, 2019, and 2018 in our Annual Report on Form 10-K for
the year ended December 31, 2019 for a comparison of the year ended December 31, 2019 to the year ended December 31,
2018.
Statement of operations’ captions as a percentage of net revenues and the effective tax rates were as follows:
Costs of products sold
Gross profit
Selling, general, and administrative expenses
Operating income
Income before taxes
Net earnings
Net earnings attributable to VPG stockholders
Effective tax rate
Net Revenues
Net revenues were as follows (dollars in thousands):
Net revenues
Change versus prior year
Percentage change versus prior year
Changes in net revenues were attributable to the following:
Change attributable to:
Change in volume
Change in average selling prices
Foreign currency effects
Acquisitions
Net change
Years ended December 31,
2020
2019
61.4 %
38.6 %
29.0 %
8.4 %
6.8 %
4.0 %
4.0 %
60.7 %
39.3 %
28.0 %
10.1 %
9.3 %
7.9 %
7.8 %
41.0 %
15.7 %
Years ended December 31,
2020
2019
$ 269,812
$
283,958
$
(14,146)
(5.0) %
2020 vs. 2019
(10.0) %
0.3 %
0.2 %
4.5 %
(5.0) %
During the year ended December 31, 2020, net revenues decreased 5.0% over the prior year. Volume decreased across all
reporting segments, with the most significant declines coming from the industrial weighing market in Force Sensor reporting
segment, transportation market and KELK for the steel market in the Weighing and Control Systems reporting segment, and the
precision resistor foil for the test and measurement market in the Foil Technology Products reporting segment. This was
partially offset by an increase in revenues attributable to the addition of DSI.
- 35 -
Gross Profit Margin
Gross profit as a percentage of net revenues was as follows:
Gross profit margin
Years ended December 31,
2020
2019
38.6 %
39.3 %
The gross profit margin for the year ended December 31, 2020 decreased 0.7% over the prior year. The reduction in gross
profit margin was primarily due to lower volume in the Force Sensors and Weighing and Control Systems reporting segments,
and negative impacts of foreign currency exchange rates of $1.0 million, partially offset by manufacturing efficiencies,
primarily from the Foil Technology Products reporting segment.
Segments
Analysis of revenues and gross profit margins for our reportable segments is provided below.
Foil Technology Products
Net revenues of the Foil Technology Products segment were as follows (dollars in thousands):
Net revenues
Change versus prior year
Percentage change versus prior year
Years ended December 31,
2020
2019
$ 131,645
$
131,803
$
(158)
(0.1) %
Changes in Foil Technology Products segment net revenues were attributable to the following:
Change attributable to:
Change in volume
Change in average selling prices
Foreign currency effects
Net change
2020 vs. 2019
(1.1) %
0.5 %
0.5 %
(0.1) %
For the year ended December 31, 2020, net revenues decreased 0.1% as compared to the prior year. Increases in our net
revenues from the advanced sensors product line, primarily in our consumer-related markets, and net revenues from our
precision resistor products in the avionics, military and space market, were offset by declines in net revenues from our precision
resistor products in the test and measurement market and net revenues from strain gage products in our general industrial
market.
Gross profit as a percentage of net revenues for the Foil Technology Products segment was as follows:
Gross profit margin
Years ended December 31,
2020
2019
39.5 %
40.4 %
For the year ended December 31, 2020, the gross profit margin decreased 0.9% as compared to the prior year primarily due to
lower volume from products in the test and measurement and general industrial market segments, unfavorable product mix and
negative impacts from foreign currency exchange rates, primarily from the Israeli shekel.
- 36 -
Force Sensors
Net revenues of the Force Sensors segment were as follows (dollars in thousands):
Net revenues
Change versus prior year
Percentage change versus prior year
Changes in Force Sensors segment net revenues were attributable to the following:
Change attributable to:
Change in volume
Change in average selling prices
Foreign currency effects
Net change
Years ended December 31,
2020
2019
53,724
$
64,357
(10,633)
(16.5) %
$
$
2020 vs. 2019
(16.5) %
(0.2) %
0.2 %
(16.5) %
For the year ended December 31, 2020, net revenues decreased 16.5% from the prior year mainly reflecting the impact of the
COVID-19 pandemic on our India facility, where production was limited. The manufacturing facility in India operated at
partial capacity as a result of government mandated restrictions until July 1, 2020, when restrictions were lifted. By the end of
the third quarter of 2020, the facility was back to running at pre-pandemic capacity.
Gross profit as a percentage of net revenues for the Force Sensors segment was as follows:
Gross profit margin
Years ended December 31,
2020
2019
25.3 %
28.0 %
For the year ended December 31, 2020, the gross profit margin decreased 2.7% when compared to the prior year primarily due
to volume declines resulting from the government mandated restrictions, partially offset by cost savings initiatives.
Weighing and Control Systems
Net revenues of the Weighing and Control Systems segment were as follows (dollars in thousands):
Net revenues
Change versus prior year
Percentage change versus prior year
Years ended December 31,
2020
2019
84,443
$
87,798
(3,355)
(3.8) %
$
$
Changes in Weighing and Control Systems segment net revenues were attributable to the following:
Change attributable to:
Change in volume
Change in average selling prices
Foreign currency effects
Acquisitions
Net change
2020 vs. 2019
(19.3) %
0.1 %
0.2 %
15.2 %
(3.8) %
For the year ended December 31, 2020, net revenues decreased 3.8% when compared to the prior year. The revenues generated
by DSI were offset by lower volume from our onboard weighing products for the transportation market in Europe and lower
KELK steel-related sales.
- 37 -
Gross profit as a percentage of net revenues for the Weighing and Control Systems segment was as follows:
Gross profit margin
Years ended December 31,
2020
2019
45.8 %
45.9 %
For the year ended December 31, 2020, the gross profit margin decreased 0.1% from the prior year. Volume declines and
unfavorable product mix were partially offset by government subsidies received in Canada, which resulted in gross profit
margin remaining fairly flat compared to the prior year. We also recorded less purchase accounting adjustments in 2020 as
compared to 2019, which had a positive impact to the gross profit margin.
Selling, General, and Administrative Expenses
Selling, general, and administrative (“SG&A”) expenses were as follows (dollars in thousands):
Total SG&A expenses
as a percentage of net revenues
Years ended December 31,
2020
2019
$
78,256
$
79,622
29.0 %
28.0 %
SG&A expenses for the year ended December 31, 2020 decreased $1.4 million versus the prior year due to lower travel costs,
personnel costs, commissions, and professional fees, partially offset by SG&A expenses related to DSI, and unfavorable foreign
currency exchange rate impacts, mainly from the Israeli shekel.
Impairment of Goodwill and Indefinite-lived Intangible Assets
For the year ended December 31, 2020, as a result of our required annual impairment test performed on goodwill and indefinite-
lived intangible assets, we recorded a $2.4 million pre-tax, non-cash impairment charge which reduced the carrying value of our
goodwill and indefinite-lived intangible assets. See our critical accounting policies and Note 4 for further discussion. For the
year ended December 31, 2019, there were no impairment charges recorded as a result of our annual impairment test.
Executive Severance Costs
During 2019, the Company recorded $0.6 million of severance costs associated with the resignation of an executive officer of
the Company. The severance costs consisted of payments and other benefits as specified in the executive officers resignation
agreement.
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 to either record additional
expense in future periods, or to reverse part of the previously recorded charges.
The Company recorded restructuring costs of $0.9 million and $2.3 million during the years ended December 31, 2020 and
2019, respectively. In 2020, 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. In 2019,
restructuring costs included $1.2 million of employee termination costs, including severance and statutory retirement
allowances incurred in connection with various cost reduction programs, and $1.1 million of other exit costs associated with the
closure and downsizing of facilities as part of the manufacturing transitions of the Company's force sensors products to facilities
in India and China.
- 38 -
Acquisition Costs
There were no acquisition costs recorded in our consolidated statements of operations for the year ended December 31, 2020.
For the year ended December 31, 2019, we recorded acquisition costs in our consolidated statements of operations of $0.4
million in connection with the acquisitions of DSI.
Other Income (Expense)
Interest Expense
The Company recorded interest expense of $1.4 million and $1.5 million for the years ended December 31, 2020 and 2019,
respectively. Interest expense was lower in 2020 compared to 2019, mainly due to the lower debt balances during 2020 and the
favorable borrowing rates negotiated with the 2020 Restated and Amended Revolving Credit Facility in March 2020.
Other
The following table analyzes the components of the line “Other” on the consolidated statements of operations (in thousands):
Years ended December 31,
2020
2019
Change
Foreign exchange gain/(loss)
$
(2,246) $
(1,638) $
Interest income
Pension expense
Other
246
(738)
(244)
622
(643)
958
$
(2,982) $
(701) $
(608)
(376)
(95)
(1,202)
(2,281)
Foreign currency exchange gains and losses represent the impact of changes in foreign currency exchange rates. The change in
foreign exchange gains / (losses) during the period, as compared to the prior year period, is primarily due to fluctuations in the
Israeli shekel. The change in the dollar-shekel exchange rate, particularly in the fourth quarter of 2020, resulted in an
unfavorable foreign exchange impact primarily related to the shekel-denominated lease liability for a new Foil Technology
Products facility in Israel.
Included within Other, for the year ended December 31, 2019, is net proceeds of $0.8 million related to a liquidation of a
foreign subsidiary.
Income Taxes
Our effective tax rate for the year ended December 31, 2020 was 41.0%, compared to 15.7% for the year ended December 31,
2019. Our effective tax rate was higher in 2020 compared to 2019 primarily due to a net increase in valuation allowance on
deferred tax assets as a result of our acquisition of Dynamic Systems, Inc., reserves for impairment of certain intangible assets,
foreign currency, and changes in the geographical mix of income.
We reassessed our ability to realize our U.S. deferred tax assets during 2020 and have concluded that realization of those
deferred tax assets is still not "more likely than not". Our tax rate is affected by recurring items, such as tax rates in foreign
jurisdictions as compared to the U.S. federal statutory tax rate, and the relative amount of income earned in each jurisdiction.
The tax rate is also impacted by discrete items that vary from year to year and may not be indicative of the tax rate on
continuing operations. The following items had the most significant impact on the difference between the statutory U.S. federal
income tax rate and our effective tax rate:
2020
•
•
•
•
•
•
13.4% increase related to an increase in valuation allowance, primarily a result of the completion of purchase
accounting for Dynamic Systems, Inc.
5.8% increase related to the loss of the benefit of current year U.S. net operating loss as a result of the Tax Cuts and
Jobs Act ("2017 Tax Act") enacted on December 22, 2017 and the effects of GILTI.
4.0% increase related to the effects of foreign operations primarily related to the difference between the U.S. statutory
rate and foreign tax rates.
2.8% increase related to the impairment of certain intangible assets.
1.9% decrease related to foreign currency primarily attributable to our operations in China, India, Israel and Taiwan.
1.4% decrease related to specialty tax credits.
- 39 -
2019
•
•
•
•
•
4.4% decrease related to foreign currency primarily attributable to our operations in Israel and India.
2.4% decrease related to a reduction in valuation allowance. This reduction was primarily a result of the acquisition
of Dynamic Systems, Inc.
1.4% decrease related to stock compensation.
2.5% increase related to changes in reserves for uncertain tax positions.
3.7% increase related to the loss of the benefit of current year U.S. net operating loss as a result of the 2017 Tax Act
and the effects of GILTI.
Additional information about income taxes is included in Note 6 to our consolidated financial statements.
Financial Condition, Liquidity, and Capital Resources
Refer to Item 7. “Financial Condition, Liquidity, and Capital Resources” in our Annual Report on Form 10-K for the year
ended December 31, 2019 for a comparison of the year ended December 31, 2019 to the year ended December 31, 2018.
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 for working capital and general corporate
purposes, and a portion of such proceeds was used to refinance the Company’s existing revolving credit facility in the amount
of $34.0 million and the Company’s existing term loans as follows: (1) the “2015 U.S. Closing Date Term Facility” in an
aggregate principal amount of $2.0 million; and (2) the "2015 U.S. Delayed Draw Term Facility" in an aggregate principal
amount of $5.0 million. 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. The 2020 Credit Agreement replaced the 2015 Credit Agreement.
Interest payable on amounts borrowed under the 2020 Revolving Facility is based upon, at the Company’s option, (1) the
greatest of: the Agent’s prime rate, the Federal Funds rate, or a LIBOR floor (the “Base Rate”), or (2) LIBOR or CDOR plus a
specified margin. An interest margin of 0.25% is added to Base Rate loans. 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 LIBOR or CDOR rate to determine the
interest payable on the LIBOR or CDOR 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 December 31, 2020. 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 other long-term debt is not significant and consists of debt held by one of our Japanese subsidiaries of approximately $0.0
million at December 31, 2020 and $0.1 million at December 31, 2019. The debt is payable monthly over the next 1 year at a
zero interest rate.
See Note 7 to our consolidated financial statements for additional details.
Our business has historically generated significant cash flow. Our cash provided by operating activities for the year ended
December 31, 2020 was $35.3 million as compared to $30.9 million for the year ended December 31, 2019. Our net cash used
in investing activities for the year ended December 31, 2020 was $21.8 million, comprised mainly of capital spending as
- 40 -
compared to $51.1 million for the year ended December 31, 2019, which included the purchase of DSI for $40 million. Our net
cash used for financing activities for the year ended December 31, 2020 was $5.0 million which reflects the repayment of the
Canadian term loans and the conversion of the US term loans to revolver under the 2020 credit facility, as compared to net cash
provided by financing activities of $16.5 million for the year ended December 31, 2019, which reflects the higher borrowings
on the revolving credit facility which were used to fund the purchase of DSI.
Approximately 90% of our cash and cash equivalents balance at December 31, 2020 and 2019, respectively, was held by our
non-U.S. subsidiaries. See the following table for the percentage of cash and cash equivalents, by region, at December 31, 2020
and December 31, 2019:
Asia
United States
Israel
Europe
United Kingdom
Canada
Total
December 31,
2020
2019
18 %
10 %
26 %
16 %
18 %
12 %
23 %
7 %
28 %
14 %
17 %
11 %
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 the 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 December 31, 2020, to be indefinitely reinvested.
For the year ended December 31, 2020, we generated adjusted free cash flow of $13.3 million. We refer to “adjusted free cash
flow,” a measure which management uses to evaluate our ability to fund acquisitions, as the amount of cash provided by
operating activities ($35.3 million) in excess of our capital expenditures ($22.9 million) and net of proceeds from the sale of
assets ($0.9 million).
The following table summarizes the components of net cash at December 31, 2020 and at December 31, 2019 (in thousands):
Cash and cash equivalents
Third-party debt, including current and long-term
Term loans
Revolving debt
Third-party debt held by Japanese subsidiary
Deferred financing costs
Total third-party debt
Net cash
December 31,
2020
2019
$
98,438 $
86,910
$
— $
41,000
18
(374)
(356)
98,794 $
$
10,496
34,000
149
(112)
44,533
42,377
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
- 41 -
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 December 31, 2020 is strong, with a current ratio (current assets to current liabilities) of 4.7 to 1.0,
as compared to a current ratio of 2.4 to 1.0 at December 31, 2019.
Cash paid for property and equipment for the year ended December 31, 2020 and December 31, 2019 was $22.9 million and
$11.2 million, respectively. Capital spending for 2020 was comprised of building projects related to capacity expansion in
Israel and other projects related to the normal maintenance of business, cost reduction programs, and some carryover projects
from 2019. Capital expenditures for 2021 are expected to be approximately $26.1 million, which includes capital equipment
for capacity expansion in the Foil Technology Products reporting segment and expected building projects of approximately $6.1
million for capacity expansion in Israel and Asia.
Inflation
Normally, inflation does not have a significant impact on our operations as our products are not generally sold on long-term
contracts. Consequently, we can adjust our selling prices, to the extent permitted by competition, to reflect cost increases caused
by inflation.
Recent Accounting Pronouncements
See Note 1 to our consolidated financial statements for a discussion of recent accounting pronouncements.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain financial risks, including fluctuations in foreign currency exchange rates, interest rates, and
commodity prices. We manage our exposure to these market risks through internally established policies and procedures. Our
policies do not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which
there are no underlying exposures. We do not use financial instruments for trading purposes and we are not a party to any
leveraged derivatives. We monitor our underlying market risk exposures on an ongoing basis and believe that we can modify or
adapt our strategies as needed.
Interest Rate Risk
We are exposed to changes in interest rates as a result of our borrowing activities and our cash balances.
The Company entered into a third amended and restated revolving credit facility on March 20, 2020. Interest payable on the
facility is based upon the Agent’s prime rate, the Federal Funds rate or LIBOR, plus a spread. At December 31, 2020, the
Company has $41.0 million borrowings outstanding under the revolving credit facility.
At December 31, 2020, we have $98.4 million of cash and cash equivalents, which accrue interest at various variable rates.
Based on the debt and cash positions at December 31, 2020 and 2019, we would expect a 50 basis point increase or decrease in
interest rates to increase or decrease our annualized net earnings by $0.2 million and $0.1 million in 2020 and 2019,
respectively.
See Note 7 to our consolidated financial statements for additional information about our long-term debt.
Foreign Exchange Risk
We are exposed to foreign currency exchange rate risks, particularly due to market values of transactions in currencies other
than the functional currencies of certain subsidiaries. Our significant foreign currency exposures are to the British pound,
Canadian dollar, Chinese renminbi, euro, Indian rupee, Israeli shekel, Japanese yen, Swedish krona, and Taiwanese dollar.
Our operations in Europe, Canada, and certain locations in Asia primarily generate and expend cash in local currencies. Our
operations in Israel and certain locations in Asia primarily generate cash in U.S. dollars, but these subsidiaries also have
significant transactions in local currencies. Our exposure to foreign currency risk is mitigated to the extent that the costs
incurred and the revenues earned in a particular currency offset one another. Our exposure to foreign currency risk, with respect
to expenses, is more pronounced in Israel and India because the percentage of expenses denominated in Israeli shekels and
Indian rupee to total expenses is much greater than the percentage of sales denominated in Israeli shekels and Indian rupee to
total sales. Therefore, if the Israeli shekel and Indian rupee strengthen against all or most of our other major currencies, our
operating profit is reduced. We also have a higher percentage of British pound-denominated sales than expenses. Therefore,
when the British pound strengthens against all or most of our other major currencies, our operating profit is increased.
- 42 -
We have performed a sensitivity analysis as of December 31, 2020 and 2019, respectively, using a model that measures the
change in the values arising from a hypothetical 10% adverse movement in foreign currency exchange rates relative to the U.S.
dollar, with all other variables held constant. The foreign currency exchange rates we used were based on market rates in effect
at December 31, 2020 and 2019, respectively. The sensitivity analysis indicated that a hypothetical 10% adverse movement in
foreign currency exchange rates would impact our net earnings by approximately $2.3 million and $2.7 million for the years
ended December 31, 2020 and December 31, 2019, respectively, although individual line items in our consolidated statements
of operations could be materially affected. For example, a 10% weakening in all foreign currencies would increase the U.S.
dollar equivalent of operating income generated in foreign currencies, which would be offset by foreign exchange losses of our
foreign subsidiaries that have significant transactions in U.S. dollars or have the U.S. dollar as their functional currency.
A change in the mix of the currencies in which we transact our business could have a material effect on the estimated impact of
the hypothetical 10% movement in the value of the U.S. dollar. Furthermore, the timing of cash receipts and disbursements
could result in materially different actual results versus the hypothetical 10% movement in the value of the U.S. dollar,
particularly if there are significant changes in exchange rates in a short period of time.
Commodity Price Risk
Although most materials incorporated in our products are available from a number of sources, certain materials are available
only from a relatively limited number of suppliers.
Some of the most highly specialized materials for our sensors are sourced from a single vendor. We maintain a safety stock
inventory of certain critical materials at our facilities.
Certain metals used in the manufacture of our products are traded on active markets, and can be subject to significant price
volatility.
Our results of operations may be materially and adversely affected if we have difficulty obtaining these raw materials, the
quality of available raw materials deteriorates, or there are significant price changes for these raw materials. For periods in
which the prices of these raw materials are rising, we may be unable to pass on the increased cost to our customers which would
result in decreased margins for the products in which they are used. For periods in which the prices are declining, we may be
required to write down our inventory carrying cost of these raw materials, since we record our inventory at the lower of cost or
market. Depending on the extent of the difference between market price and our carrying cost, this write-down could have a
material adverse effect on our net earnings. We also may need to record losses for adverse purchase commitments for these
materials in periods of declining prices.
We estimate that a 10% increase or decrease in the costs of raw materials subject to commodity price risk would decrease or
increase our net earnings by $1.5 million and $1.2 million for the years ended December 31, 2020 and December 31, 2019,
respectively, assuming that such changes in our costs have no impact on the selling prices of our products, and that we have no
pending commitments to purchase metals at fixed prices.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item are included herein, commencing on page F-1 of this report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. 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 annual 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.
- 43 -
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 Controls over Financial Reporting
There were no changes in our internal control over financial reporting during our last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management,
including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting as
of December 31, 2020 based on the 2013 framework set forth in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded
that our internal control over financial reporting was effective as of December 31, 2020.
Brightman Almagor Zohar & Co., a firm in the Deloitte Global Network, has issued an attestation report on the effectiveness of
our internal control over financial reporting, as stated in their report which is set forth on the next page.
- 44 -
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Vishay Precision Group, Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Vishay Precision Group, Inc. (the “Company”) as of December
31, 2020, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal
Control-Integrated Framework (2013) issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the 2020 consolidated financial statements of the Company and our report dated March 11, 2021 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Brightman Almagor Zohar & Co,
A Firm in the Deloitte Global Network
Tel Aviv, Israel
March 11,2021
- 45 -
Item 9B. OTHER INFORMATION
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Certain information required under this Item with respect to our Executive Officers is contained under the heading “Executive
Officers” in Item 1 hereof. Other information required under this Item will be contained under the heading “Nominees for
Election as Directors” in our definitive proxy statement for the Company’s 2021 Annual Meeting of Stockholders, which will
be filed within 120 days of December 31, 2020, our most recent fiscal year end, and is incorporated herein by reference.
The Company has adopted codes of conduct that constitute “codes of ethics” as that term is defined in paragraph (b) of Item
406 of Regulation S-K and that apply to the Company’s principal executive officer, principal financial officer, principal
accounting officer or controller, and to any persons performing similar functions. Such codes of conduct are posted on the
Company’s internet website, the address of which is www.vpgsensors.com.
Item 11. EXECUTIVE COMPENSATION
Information required under this Item will be contained in our definitive proxy statement for the Company’s 2021 Annual
Meeting of Stockholders, which will be filed within 120 days of December 31, 2020, our most recent fiscal year end, and is
incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information required under this Item will be contained in our definitive proxy statement for the Company’s 2021 Annual
Meeting of Stockholders, which will be filed within 120 days of December 31, 2020, our most recent fiscal year end, and is
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Information required under this Item will be contained in our definitive proxy statement for the Company’s 2021 Annual
Meeting of Stockholders, which will be filed within 120 days of December 31, 2020, our most recent fiscal year end, and is
incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information required under this Item will be contained in our definitive proxy statement for the Company’s 2021 Annual
Meeting of Stockholders, which will be filed within 120 days of December 31, 2020, our most recent fiscal year end, and is
incorporated herein by reference.
- 46 -
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
(a) Documents Filed as part of Form 10-K
i)
Financial Statements
The Consolidated Financial Statements for the year ended December 31, 2020 are filed herewith. See index to
the Consolidated Financial Statements on page F-1 of this report.
ii)
Financial Statement Schedules
All financial statement schedules for which provision is made in the applicable accounting regulation of the
Securities and Exchange Commission are not required under the related instructions or are inapplicable and
therefore have been omitted.
iii)
Exhibits
Description
Stock Purchase Agreement, dated November 1, 2019, by and among Vishay Precision Group, Inc., DSI Holdings
DE Inc., the sellers identified therein, and HCI Equity Partners III, L.P., not individually but solely in its capacity
as the representative of the Sellers (previously filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed with the SEC on November 4, 2019 and incorporated herein by reference).
Amended and Restated Certificate of Incorporation of Vishay Precision Group, Inc., effective June 25, 2010
(previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 1, 2010
and incorporated herein by reference).
Amendment no. 1 to Amended and Restated Certificate of Incorporation of Vishay Precision Group, Inc., effective
June 2, 2011 (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on
June 6, 2011 and incorporated herein by reference).
Second Amended and Restated Bylaws of Vishay Precision Group, Inc., adopted as of June 2, 2011 (previously
filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on June 6, 2011 and
incorporated herein by reference).
Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
(previously filed as an exhibit to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 11,
2020 and incorporated herein by reference).
Master Separation and Distribution Agreement, dated June 22, 2010, between Vishay Precision Group, Inc. and
Vishay Intertechnology, Inc. (previously filed as an exhibit to the Registrant’s Form 10 Registration Statement of
Vishay Precision Group, Inc., filed with the Securities and Exchange Commission on June 22, 2010 and
incorporated herein by reference).
Employee Matters Agreement, dated June 22, 2010, by and among Vishay Intertechnology, Inc. and Vishay
Precision Group, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the
SEC on June 23, 2010 and incorporated herein by reference).
Tax Matters Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Intertechnology,
Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7,
2010 and incorporated herein by reference).
Trademark License Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay
Intertechnology, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the
SEC on July 7, 2010 and incorporated herein by reference).
Supply Agreement, dated July 6, 2010, between Vishay Advanced Technology, Ltd. and Vishay Dale Electronics,
Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7,
2010 and incorporated herein by reference).
Patent License Agreement, dated July 6, 2010, between Vishay Precision Group, Inc. and Vishay Dale
Electronics, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC
on July 7, 2010 and incorporated herein by reference).
Supply Agreement, dated July 6, 2010, between Vishay Dale Electronics, Inc. and Vishay Advanced Technology,
Ltd. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7,
2010 and incorporated herein by reference).
Lease Agreement, dated July 4, 2010, between Vishay Advanced Technology, Ltd. and V.I.E.C. Ltd. (previously
filed as an exhibit to the Registrant's Current Report on Form 8-K filed with the SEC on July 7, 2010 and
incorporated herein by reference).
- 47 -
Exhibit
No.
2.1
3.1
3.2
3.3
4.1
10.1
10.2
10.3
10.4
10.5
10.6*
10.7*
10.8*
Exhibit
No.
10.9*
10.10*
10.11
10.12*
10.13
10.14
10.15†
10.16
10.17†
10.18†
10.19†
10.20†
10.21†
10.22†
10.23†
10.24†
10.25
10.26
10.27†
Description
Supply Agreement, dated July 6, 2010, between Vishay Measurements Group, Inc. and Vishay S.A. (previously
filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and
incorporated herein by reference).
Manufacturing Agreement, dated July 6, 2010, between Vishay S.A. and Vishay Precision Foil GmbH (previously
filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and
incorporated herein by reference).
Intellectual Property License Agreement, dated July 6, 2010, between Vishay S.A. and Vishay Precision Foil
GmbH (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July
7, 2010 and incorporated herein by reference).
Supply Agreement, dated July 6, 2010, between Vishay Precision Foil GmbH and Vishay S.A. (previously filed as
an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated
herein by reference).
Intellectual Property License Agreement, dated July 6, 2010, between Vishay S.A. and Vishay Measurements
Group, Inc. (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on
July 7, 2010 and incorporated herein by reference).
Lease Agreement, between Alpha Electronics Corp. and Vishay Japan Co., Ltd. (previously filed as an exhibit to
the Registrant’s Current Report on Form 8-K filed with the SEC on July 7, 2010 and incorporated herein by
reference).
Amended and Restated 2010 Vishay Stock Incentive Program, adopted as of June 2, 2011 (previously filed as an
exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on June 6, 2011 and incorporated
herein by reference).
Lease Agreement between Vishay Advanced Technologies Ltd and Mega Or Holdings Ltd, dated February 17,
2019 (previously filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on
January 19, 2019 and incorporated herein by reference).
Form of Stock Option Award Agreement (previously filed as an exhibit to the Registrant’s Quarterly Report on
Form 10-Q filed with the SEC on November 12, 2010 and incorporated herein by reference).
Form of Restricted Stock Unit Award Agreement for Director Grants (previously filed as an exhibit to the
Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 12, 2010 and incorporated herein by
reference).
Form of Restricted Stock Unit Award Agreement for Employee Grants (previously filed as an exhibit to the
Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 12, 2010 and incorporated herein by
reference).
Employment Agreement, dated November 17, 2010, by and among Vishay Advanced Technology and Ziv
Shoshani (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on
November 23, 2010 and incorporated herein by reference).
Employment Agreement, dated November 17, 2010, by and among Vishay Precision Group, Inc. and William M.
Clancy (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on
November 23, 2010 and incorporated herein by reference).
Amendment to Employment Agreement, dated December 8, 2011 by and among Vishay Advanced Technologies,
Ltd. and Ziv Shoshani (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the
SEC on December 13, 2011 and incorporated herein by reference).
Amendment to Employment Agreement, dated December 8, 2011 by and among Vishay Precision Group, Inc. and
William M. Clancy (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the
SEC on December 13, 2011 and incorporated herein by reference).
Form of Performance Restricted Stock Unit Award Agreement for Employee Grants (previously filed as an exhibit
to the Registrant’s Current Report on Form 10-K filed with the SEC on March 12, 2013 and incorporated herein
by reference).
Lease Agreement, between George Kelk Corporation and Anndale Properties Limited (and its successors), dated
January 30, 1996 and as amended as of January 17, 2011 (previously filed as an exhibit to the Registrant’s
Quarterly Report on Form 10-Q filed with SEC on May 8, 2013 and incorporated herein by reference).
Vishay Precision Group, Inc. 2010 Stock Incentive Program, as Amended and Restated Effective May 21, 2013
(previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on May 22,
2013 and incorporated herein by reference).
Amendment to Employment Agreement, dated November 7, 2013 by and among Vishay Advanced Technologies,
Ltd. and Ziv Shoshani (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the
SEC on November 12, 2013 and incorporated herein by reference).
- 48 -
Exhibit
No.
10.28†
10.29
10.30
10.31
10.32
10.33†
10.34†
10.35
Description
Amendment to Employment Agreement, dated November 7, 2013 by and among Vishay Precision Group, Inc. and
William Clancy (previously filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC
on November 12, 2013 and incorporated herein by reference).
Lease agreement, dated January 26, 2014, by and among between Vishay Advanced Technologies, Inc. and Tefen
Enterprises Ltd. (previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the
SEC on May 7, 2014 and incorporated herein by reference).
Stock Purchase Agreement, dated December 14, 2015, by and among VPG Systems U.S., Inc., Stress-Tek, Inc.,
the shareholders of Stress-Tek, Inc., and Keith Reichow, as Representative (previously filed as an exhibit to the
Registrant’s Current Report on Form 8-K filed with the SEC on December 15, 2015 and incorporated herein by
reference).
Third Amended and Restated Credit Agreement, dated March 20, 2020, by and among Vishay Precision Group,
Inc., the lenders party thereto, Citizens Bank, National Association, Wells Fargo Bank, National Association, and
JPMorgan Chase Bank, National Association (previously filed as Exhibit 10.1 to the Registrant’s Current Report
on Form 8-K filed with the SEC on March 23, 2020 and incorporated herein by reference).
Stock Purchase Agreement, dated March 30, 2016, by and among Vishay Precision Group, Inc., Pacific
Instruments, Inc., the shareholders of Pacific Instruments, Inc., John Hueckel and Norman Hueckel as Owners,
and John Hueckel, as Representative (previously filed as an exhibit to the Registrant's Current Report on Form 8-
K filed with the SEC on April 5, 2016 and incorporated herein by reference).
Form of Indemnification Agreement with directors (previously filed as an exhibit to the Registrant's Quarterly
Report on Form 10-Q filed with the SEC on May 11, 2016 and incorporated herein by reference).
Employment Agreement, dated March 15, 2020, by and between Vishay Advanced Technologies, Ltd. and Amir
Tal (previously filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May
5, 2020 and incorporated herein by reference).
Lease agreement, dated July 7, 2016, by and among between Vishay Advanced Technologies, Ltd. and Marshee
Estates & Investments Ltd. (previously filed as an exhibit to the Registrant's Current Report on Form 10-K filed
with the SEC on March 16, 2016 and incorporated herein by reference).
10.36† Amendment to Employment Agreement, dated May 8, 2017, by and among Vishay Precision Group, Inc. and
William M. Clancy (previously filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with
the SEC on May 9, 2017 and incorporated herein by reference).
10.37† Amendment to Employment Agreement, dated August 7, 2017, by and among Vishay Advanced Technologies,
Ltd. and Ziv Shoshani (previously filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed
with the SEC on August 8, 2017 and incorporated herein by reference).
10.38† Vishay Precision Group, Inc. 2017 Non-Employee Director Compensation Plan (previously filed as Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q filed with the SEC on May 9, 2018 and incorporated herein by
reference).
10.39† Amendment to Employment Agreement,dated March 10, 2019, by and among Vishay Advanced Technologies
Ltd. and Ziv Shoshani (previously filed as Exhibit 10.45 to the Registrant's Annual Report on Form 10-K filed
with the SEC on March 14, 2019 and incorporated herein by reference).
10.40† Amendment to Employment Agreement, dated March 11, 2019, by and among Vishay Precision Group, Inc. and
William Clancy (previously filed as Exhibit 10.46 to the Registrant's Annual Report on Form 10-K filed with the
SEC on March 14, 2019 and incorporated herein by reference).
16.1
21.1
23.1
23.2
31.1
31.2
32.1
32.2
Letter of Ernst & Young LLP, dated May 31, 2019 (previously filed as Exhibit 16.1 to the Registrant’s Current
Report on Form 8-K filed with the SEC on May 31, 2019 and incorporated herein by reference).
List of Subsidiaries.
Consent of Brightman Almagor Zohar & Co, a Firm in the Deloitte Global Network, relating to the Registrant’s
financial statements.
Consent of Ernst & Young LLP relating to the Registrant’s financial statements.
Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Ziv Shoshani, Chief Executive Officer.
Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - William M. Clancy, Chief Financial Officer.
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 - Ziv Shoshani, Chief Executive Officer.
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 - William M. Clancy, Chief Financial Officer.
- 49 -
Exhibit
No.
101
Description
Interactive Data File (Annual Report on Form 10-K, for the year ended December 31, 2020, furnished in XBRL
(eXtensible Business Reporting Language)).
* Confidential treatment has been accorded to certain portions of this Exhibit. Omitted portions have been filed separately with
the Securities and Exchange Commission.
† Denotes a management contract or compensatory plan, contract or arrangement.
Item 16. FORM 10-K SUMMARY
None.
- 50 -
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
Date: March 11, 2021
VISHAY PRECISION GROUP, INC.
By:
/s/ Ziv Shoshani
Ziv Shoshani
President and Chief Executive Officer
POWER OF ATTORNEY
Vishay Precision Group, Inc., a Delaware corporation, and each person whose signature appears below constitutes and appoints
each of Ziv Shoshani and William M. Clancy, and either of them, such person’s true and lawful attorney-in-fact, with full
power of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities,
to sign on such person’s behalf, individually and in each capacity stated below, any and all amendments to this Annual Report
on Form 10-K and other documents in connection therewith, and to file the same and all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them,
full power and authority to do and perform each and every act and thing necessary or desirable to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in person, thereby ratifying and confirming all that
said attorneys-in-fact, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Form 10-K has been signed by the
following persons on behalf of the Registrant in the capacities and on the date indicated below.
Signature
/s/ Ziv Shoshani
Ziv Shoshani
Title
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ William M. Clancy
William M. Clancy
Executive Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Marc Zandman
Marc Zandman
/s/ Saul V. Reibstein
Saul V. Reibstein
/s/ Timothy V. Talbert
Timothy V. Talbert
/s/ Janet Clarke
Janet Clarke
/s/ Bruce Lerner
Bruce Lerner
/s/ Wesley Cummins
Wesley Cummins
Director
Director
Director
Director
Director
Director
- 51 -
Date
March 11, 2021
March 11, 2021
March 11, 2021
March 11, 2021
March 11, 2021
March 11, 2021
March 11, 2021
March 11, 2021
Vishay Precision Group, Inc.
Index to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
F- 2
F- 5
F- 7
F- 8
F- 9
F- 10
F- 11
F-1
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Vishay Precision Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Vishay Precision Group, Inc. (the "Company") as of
December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, equity, and cash flows
for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the
period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated March 11, 2021, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates
Goodwill and Indefinite-lived Intangible Assets – Instrumentation and DSI Reporting Units — Refer to Note 4 to the
Financial Statements
Critical Audit Matter Description
The Company's quantitative goodwill and indefinite-lived intangible assets impairment test involves the comparison of the fair
value of each reporting unit or asset to its carrying value.
In estimating the fair value of the Instrumentation and DSI reporting units, the Company used the income approach to evaluate
the estimated fair value of the reporting units. The income approach to valuation requires management to make significant
estimates and assumptions related to future revenues, profitability, working capital requirements and selection of discount and
long term growth rates. Changes in these estimates and assumptions could have a significant impact on the fair value of the
reporting units. In estimating the fair value of the indefinite-lived trade names, the Company compares the carrying value to the
fair value based on current revenue projections of the related operations, under the relief from royalty method. Any excess
carrying value over the applicable fair value is recognized as impairment.
F-2
During 2020, the Company recognized an impairment loss of $2.4 million for the Instrumentation reporting unit’s goodwill and
indefinite-lived trade name. After considering the impact of the impairment charges, the carrying amount of goodwill and
indefinite-lived trade name as of December 31, 2020, is $1.1 million and $0.4 million, respectively.
The carrying amount of goodwill and indefinite-lived trade name as of December 31, 2020, for the DSI reporting unit is $16.9
million and $3.3 million, respectively. The fair value of the DSI reporting unit and indefinite-lived trade name exceeds the
carrying value by approximately 12% and 16%, respectively.
We identified goodwill and indefinite-lived trade names for the Instrumentation and DSI reporting units as a critical audit
matter because of the significant judgments made by management to estimate fair value and the sensitivity to changes in
management estimates and assumptions. This required a high degree of auditor judgment and an increased extent of effort,
including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of
management’s estimates and assumptions related to forecasts of future revenues, profitability, working capital requirements and
selection of the discount and long term growth rates.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to forecasts of future revenues, profitability, working capital requirements and selection of
discount and long term growth rates used by management to estimate the fair value of the Instrumentation and DSI reporting
units and indefinite-lived trade names included the following, among others:
• We tested the effectiveness of controls over management’s impairment evaluation, including those over the
determination of the fair value of the Instrumentation and DSI reporting units and indefinite-lived trade names, such as
controls related to management’s forecasts of future revenues, profitability, working capital requirements and selection
of discount and long term growth rates.
• We evaluated management’s ability to accurately forecast operating performance by comparing actual results to
management’s historical forecasts.
• We evaluated the reasonableness of management’s forecasts of future revenues, profitability and working capital
requirements by comparing the forecasts to:
– Historical revenues, profitability and working capital requirements.
– Internal communications to management and the Board of Directors.
• With the assistance of our fair value specialists, we evaluated the valuation methodologies and the reasonableness of
the discount and long term growth rates, including testing the underlying source information and the mathematical
accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount and
long term growth rates selected by management.
/s/ Brightman Almagor Zohar & Co.
A Firm in the Deloitte Global Network
Tel Aviv, Israel
March 11, 2021
We have served as the Company’s auditor since 2019.
F-3
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Vishay Precision Group, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of operations, comprehensive income, equity and cash flows of
Vishay Precision Group, Inc. (the Company) for the year ended December 31, 2018, and the related notes (collectively referred
to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the results of operations of the Company and its cash flows for the year ended December 31, 2018, in
conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We served as the Company’s auditor from 2009 to 2019.
Philadelphia, Pennsylvania
March 14, 2019
F-4
VISHAY PRECISION GROUP, INC.
Consolidated Balance Sheets
(In thousands, except share amounts)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net of allowances for credit losses of $879 and $555, respectively
Inventories:
Raw materials
Work in process
Finished goods
Inventories
Prepaid expenses and other current assets
Total current assets
Property and equipment, at cost:
Land
Buildings and improvements
Machinery and equipment
Software
Construction in progress
Accumulated depreciation
Property and equipment, net
Goodwill
Intangible assets, net
Operating lease right-of-use assets
Other assets
Total assets
December 31,
2020
December 31,
2019
$
98,438 $
45,339
21,894
21,534
18,920
62,348
15,761
221,886
4,282
67,581
115,717
10,026
6,341
(128,931)
75,016
31,105
32,039
21,788
20,053
401,887 $
$
86,910
43,198
21,701
23,128
22,066
66,895
15,558
212,561
4,243
52,708
111,492
9,384
2,485
(119,042)
61,270
35,018
34,198
8,691
18,675
370,413
Continues on the following page
F-5
VISHAY PRECISION GROUP, INC.
Consolidated Balance Sheets (continued)
(In thousands, except share amounts)
Liabilities and equity
Current liabilities:
Trade accounts payable
Payroll and related expenses
Other accrued expenses
Income taxes
Current portion of operating lease liabilities
Current portion of long-term debt
Total current liabilities
Long-term debt, less current portion
Deferred income taxes
Operating lease liabilities
Other liabilities
Accrued pension and other postretirement costs
Total liabilities
Commitments and contingencies
Equity:
December 31,
2020
December 31,
2019
$
10,487 $
17,595
13,843
1,593
4,011
18
47,547
40,626
3,403
19,504
16,263
16,687
144,030
8,869
16,312
16,126
261
2,827
44,516
88,911
17
3,478
5,811
14,775
15,669
128,661
Preferred stock, par value $1.00 per share: authorized - 1,000,000 shares; none issued
Common stock, par value $0.10 per share: authorized - 25,000,000 shares;
12,552,439 shares outstanding as of December 31, 2020 and 12,500,006 shares
outstanding as of December 31, 2019
Class B convertible common stock, par value $0.10 per share: authorized - 3,000,000
shares; 1,022,887 shares outstanding as of December 31, 2020 and December 31,
2019
Treasury stock, at cost - 619.667 shares held at December 31, 2020 and
December 31, 2019
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Total Vishay Precision Group, Inc. stockholders' equity
Noncontrolling interests
Total equity
Total liabilities and equity
$
—
—
1,317
1,312
103
103
(8,765)
197,764
100,075
(32,671)
257,823
34
257,857
401,887 $
(8,765)
197,125
89,288
(37,703)
241,360
392
241,752
370,413
See accompanying notes.
F-6
Years ended December 31,
2019
2020
2018
$
269,812 $
283,958 $
165,541
104,271
172,341
111,617
78,256
—
2,440
—
918
22,657
79,622
443
—
611
2,293
28,648
299,794
178,527
121,267
80,935
—
2,820
—
289
37,223
(1,366)
(2,982)
(4,348)
(1,507)
(701)
(2,208)
(1,738)
(1,496)
(3,234)
18,309
26,440
33,989
7,509
4,145
10,344
10,800
13
22,295
107
23,645
(1)
10,787 $
22,188 $
23,646
0.80 $
0.79 $
1.64 $
1.63 $
1.76
1.75
13,566
13,623
13,515
13,597
13,439
13,535
VISHAY PRECISION GROUP, INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
Net revenues
Costs of products sold
Gross profit
Selling, general, and administrative expenses
Acquisition costs
Impairment of goodwill and indefinite-lived intangibles
Executive severance costs
Restructuring costs
Operating income
Other income (expense):
Interest expense
Other
Other expenses - net
Income before taxes
Income tax expense
Net earnings
Less: net earnings (loss) attributable to noncontrolling interests
Net earnings attributable to VPG stockholders
Basic earnings per share attributable to VPG stockholders
Diluted earnings per share attributable to VPG stockholders
$
$
$
Weighted average shares outstanding - basic
Weighted average shares outstanding - diluted
See accompanying notes.
F-7
VISHAY PRECISION GROUP, INC.
Consolidated Statements of Comprehensive Income
(In thousands)
Net earnings
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment
Pension and other postretirement actuarial items
Other comprehensive income (loss)
Years ended December 31,
2019
2020
2018
$
10,800 $
22,295 $
23,645
5,169
(137)
5,032
558
(796)
(238)
(3,929)
1,914
(2,015)
Comprehensive income
15,832
22,057
21,630
Less: comprehensive income (loss) attributable to noncontrolling interests
13
107
(1)
Comprehensive income attributable to VPG stockholders
$
15,819 $
21,950 $
21,631
See accompanying notes.
F-8
VISHAY PRECISION GROUP, INC.
Consolidated Statements of Cash Flows
(In thousands)
Operating activities
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Impairment of goodwill and indefinite-lived intangibles
Depreciation and amortization
Loss from extinguishment of debt
(Gain) loss on disposal of property and equipment
Reclassification of foreign currency translation adjustment related to
disposal of subsidiary
Share-based compensation expense
Inventory write-offs for obsolescence
Deferred income taxes
Other
Net changes in operating assets and liabilities, net of acquisition:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Trade accounts payable
Other current liabilities
Net cash provided by operating activities
Investing activities
Capital expenditures
Proceeds from sale of property and equipment
Purchase of business
Net cash used in investing activities
Financing activities
Principal payments on long-term debt
Debt issuance costs
Proceeds from revolving facility
Payments on revolving facility
Purchase of non-controlling interest
Distributions to noncontrolling interests
Payments of employee taxes on certain share-based arrangements
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure of investing transactions:
Capital expenditures purchased
Capital expenditures accrued but not yet paid
Supplemental disclosure of financing transactions:
Conversion of exchangeable notes to common stock
See accompanying notes.
$
$
$
$
F-9
Years ended December 31,
2019
2020
2018
$
10,800 $
22,295 $
23,645
2,440
12,507
30
(130)
—
1,387
2,525
1,153
1,735
—
11,795
—
34
(827)
1,336
2,588
(2,556)
358
(753)
11,369
2,986
67
59
507
35,313
(22,949)
983
156
(21,810)
(3,493)
(402)
—
—
(253)
(70)
(813)
(619)
(5,087)
(2,273)
(7,481)
30,932
(11,196)
615
(40,481)
(51,062)
—
22,000
—
—
(52)
(854)
3,056
11,528
86,910
405
(3,249)
90,159
98,438 $
86,910 $
(24,327) $
2,561 $
(10,529) $
1,183
2,820
10,631
—
(120)
—
1,799
1,876
1,011
819
(7,757)
(5,095)
588
(819)
5,981
35,379
(14,521)
132
—
(14,389)
—
22,000
(19,000)
—
(109)
(801)
(3,513)
(1,610)
15,867
74,292
90,159
(13,239)
(4,618)
(5,603)
— $
— $
(2,794)
Net cash (used in) provided by financing activities
(5,031)
16,476
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Vishay Precision Group, Inc.
Notes to Consolidated Financial Statements
Note 1 – Background and Summary of Significant Accounting Policies
Background
Vishay Precision Group, Inc. (“VPG” or the “Company”) is an internationally recognized designer, manufacturer and marketer
of sensors, and sensor-based measurement systems, as well as specialty resistors and strain gages based upon the Company's
proprietary technology. The Company provides precision products and solutions, many of which are “designed-in” by its
customers, specializing in the growing markets of stress, force, weight, pressure, and current measurements.
Principles of Consolidation
The consolidated financial statements include the accounts of the individual entities in which the Company maintained a
controlling financial interest. For those subsidiaries in which the Company’s ownership is less than 100 percent, the outside
stockholders’ interests are shown as noncontrolling interests in the accompanying consolidated balance sheets.
All transactions, accounts, and profits between individual members comprising the Company have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ significantly from those estimates.
Revenue Recognition
The Company derives substantially all of its revenue from product sales. The Company recognizes the vast majority of its sales
at a point-in-time. It utilizes the core principle of recognizing revenue when the Company satisfies performance obligations as
evidenced by the transfer of control of its products to the customer.
Such revenues are derived from purchase orders and/or contracts with customers. Each contract has the promise to transfer the
control of the products, each of which is individually distinct and is considered the identified performance obligation. As part of
the decision to enter into each contract, the Company evaluates the customer’s credit risk, but its contracts do not have any
significant financing components, as payment is generally due net 30 to 60 days after delivery. In accordance with contract
terms, revenue from the Company’s product sales is recognized at the time of product shipment from its facilities or delivery to
the customer location, as determined by the agreed upon shipping terms.
Under the terms of some of its contracts, the Company may be required to perform certain installation services. These
installation services are performed at the time of product delivery or at some point thereafter. The installation services do not
significantly modify the product provided, and although the Company may be required contractually to provide these services,
the installation services could be performed by a third party or the customer. Thus, these installation services are a distinct
performance obligation. In most of the applicable contracts, this installation service element is immaterial in the context of the
agreement. When the installation services are accounted for as a separate performance obligation, the Company allocates the
transaction price to this element based on its relative standalone selling price.
Given the specialized nature of the Company's products, the Company generally does not allow product returns. Shipping and
handling costs are recorded to Costs of product sold when control of the product has transferred to the customer. The Company
offers standard product warranties. Warranty related costs continue to be recognized as expense when the products are sold.
Sales, value add and other taxes collected concurrent with revenue-producing activities are excluded from revenue. See Note 2
for further details on Revenues.
Research and Development Expenses
Research and development costs are expensed as incurred. The amount charged to expense for research and development was
$12.6 million, $12.1 million, and $11.8 million for the years ended December 31, 2020, 2019, and 2018, respectively.
F-11
Note 1 – Background and Summary of Significant Accounting Policies (continued)
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.
Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and
tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income tax expense in the period that
includes the enactment date.
The Company records net deferred tax assets to the extent it believes such assets will "more likely than not" be realized. In
making this determination, the Company considers all positive and negative evidence, including historic earnings, projected
future income, and cost-effective tax-planning strategies. When the Company determines that its ability to realize deferred tax
assets is not "more likely than not", the Company adjusts its deferred tax asset valuation allowance, which increases income tax
expense.
The Company records uncertain tax positions on the basis of a two-step process in which the Company first determines whether
it is "more likely than not" that the tax positions will be sustained based on the technical merits of the position and then
measures those tax positions that meet the more-likely-than-not recognition threshold. The Company recognizes the largest
amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the tax authority.
The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense in the
accompanying consolidated statements of operations. Accrued interest and penalties are included within the related tax liability
line in the consolidated balance sheets.
On December 22, 2017, the SEC staff issued SAB 118 to address the application of U.S. GAAP in situations when a registrant
does not have all the necessary information available to prepare and analyze the accounting treatment for the proper recognition
of the tax impact of the 2017 Tax Act. In accordance with SAB 118 guidance, the Company had recorded the provisional tax
impacts related to the deemed distribution of foreign earnings and the expense for the revaluation of deferred tax assets and
liabilities in its consolidated financial statements for the year ended December 31, 2017. In accordance with SAB 118, the
financial reporting impact of the 2017 Tax Act was completed in the fourth quarter of 2018 resulting in a net increase in tax
expense of $0.8 million.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits and highly liquid investments with original maturities of three months or
less when purchased. Highly liquid investments with maturities greater than three months are classified as short-term
investments. There were no investments classified as short-term investments at December 31, 2020 or 2019.
Allowance for Credit Losses
The Company maintains an allowance for credit losses resulting from the inability of its customers to make required payments.
In determining the amount of the allowance for credit losses, the Company considers historical loss data, customer specific
information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform
adjustments to historical loss data. The allowance for credit losses was $0.9 million and $0.6 million at December 31, 2020 and
2019, respectively. The credit loss was $0.3 million, $0.1 million, and $0.0 million for the years ended December 31, 2020,
2019, and 2018, respectively.
Inventories
Inventories are stated at the lower of cost, determined by the first-in, first-out method, or market based on net realizable value.
Inventories are adjusted for estimated excess and obsolescence and written down to net realizable value based upon estimates of
future demand, technology developments, and market conditions.
Property and Equipment
Property and equipment is carried at cost and is depreciated principally by the straight-line method based upon the estimated
useful lives of the assets. Machinery and equipment are being depreciated over useful lives of seven to fifteen years. Buildings
and building improvements are being depreciated over useful lives of twenty to forty years or the lease term. Software is being
depreciated over useful lives of three to five years. Construction in progress is not depreciated until the assets are placed in
service. Depreciation expense was $10.1 million, $10.1 million, and $8.9 million for the years ended December 31, 2020, 2019,
and 2018, respectively, which included software depreciation expense of $0.7 million, $0.6 million, and $0.5 million for the
years ended December 31, 2020, 2019, and 2018, respectively.
F-12
Note 1 – Background and Summary of Significant Accounting Policies (continued)
Business Combinations
The Company allocates the purchase price of an acquired company, including when applicable, the fair value of contingent
consideration between tangible and intangible assets acquired and liabilities assumed from the acquired businesses based on
estimated fair values, with any residual of the purchase price recorded as goodwill. Third party appraisal firms and other
consultants are engaged to assist management in determining the fair values of certain assets acquired and liabilities assumed.
Estimating fair values requires significant judgments, estimates and assumptions, including but not limited to: discount rates,
future cash flows and the economic lives of trade names, technology, customer relationships, property, plant and equipment, as
well as income taxes. These estimates are based on historical experience and information obtained from the management of the
acquired companies, and are inherently uncertain.
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived trademarks are tested for impairment at least annually, and whenever events or changes in
circumstances occur indicating that it is "more likely than not" impairment may have been incurred. The Company has the
option to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is
less than its carrying amount as a basis for determining if it is necessary to perform the quantitative goodwill impairment test.
However, if the Company concludes otherwise, then it is required to perform the quantitative impairment test by calculating the
fair value of the reporting unit and comparing it against its carrying amount. If the fair value exceeds the carrying value, no
further evaluation is required and no impairment loss is recognized. An impairment charge would be recognized to the extent
the carrying amount of goodwill exceeds the reporting unit fair value.
The indefinite-lived trade names are tested for impairment either by employing the qualitative approach outlined above, or by
comparing the carrying value to the fair value based on current revenue projections of the related operations, under the relief
from royalty method. Any excess carrying value over the applicable fair value is recognized as impairment. Any impairment
would be recognized in the reporting period in which it has been identified.
The Company's required goodwill and indefinite-lived asset annual impairment test is completed as of the first day of the fourth
fiscal quarter each year. As more fully described in Note 4 to the consolidated financial statements, the 2020 annual
impairment test resulted in an impairment charge in the fourth quarter of 2020. The 2019 annual impairment test resulted in no
impairment. The 2018 annual impairment test resulted in an impairment charge in the fourth quarter of 2018.
Definite-lived intangible assets, such as customer relationships, patents and acquired technology, non-competition agreements,
and certain trade names are amortized on a straight-line method over their estimated useful lives. Patents and acquired
technology are being amortized over useful lives of seven to twenty years. Customer relationships are being amortized over
useful lives of five to fifteen years. Trade names are being amortized over useful lives of seven to ten years. Non-competition
agreements are being amortized over periods of five to ten years. The Company continually evaluates the reasonableness of the
useful lives of these assets. Additionally, the Company reviews the carrying values of these assets for possible impairment
whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable based on
undiscounted estimated cash flows expected to result from its use and eventual disposition.
Impairment of Long-Lived Assets
The carrying value of long-lived assets held-and-used, other than goodwill and indefinite-lived intangible assets, is evaluated
when events or changes in circumstances indicate the carrying value may not be recoverable. The carrying value of a long-lived
asset group is considered impaired when the total projected undiscounted cash flows from such asset group are separately
identifiable and are less than the carrying value. In that event, a loss is recognized based on the amount by which the carrying
value exceeds the fair market value of the long-lived asset group. Fair market value is determined primarily using present value
techniques based on projected cash flows from the asset group. Losses on long-lived assets held-for-sale, other than goodwill
and indefinite-lived intangible assets, are determined in a similar manner, except that fair market values are reduced for disposal
costs.
Foreign Currency Translation
The Company has significant operations outside of the United States. The Company's operations in Europe, Canada, and certain
locations in Asia primarily generate and expend cash in local currencies, and accordingly, these subsidiaries utilize the local
currency as their functional currency. The Company’s 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.
F-13
Note 1 – Background and Summary of Significant Accounting Policies (continued)
For those subsidiaries where the local currency is the functional currency, assets and liabilities in the consolidated balance
sheets have been translated at the rate of exchange as of the balance sheet date. Revenues and expenses are translated at the
average exchange rate for the year. Translation adjustments do not impact the consolidated statements of operations and are
reported as a separate component of accumulated other comprehensive loss within the statement of comprehensive income.
Foreign currency transaction gains and losses are included in the results of operations.
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 consolidated statements of operations.
Share-Based Compensation
Compensation costs related to share-based payments are recognized in the consolidated financial statements. The amount of
compensation cost is measured based on the grant-date fair value of the equity instruments issued. For service-based awards,
compensation cost is recognized over the period that an officer, employee, or non-employee director provides service in
exchange for the award. The Company recognizes forfeitures as they occur. For performance based awards, the Company
recognizes compensation cost for awards that are expected to vest based on whether performance criteria are expected to be
met. For options and restricted stock units subject to graded vesting, the Company recognizes expense over the service period
for each separately vesting portion of the award as if the award was comprised of multiple awards.
Leases
The Company determines if an arrangement is or contains a lease at inception or modification of such agreement. The
arrangement is or contains a lease if the contract conveys the right to control the use of the identified asset for a period in
exchange for consideration.
Lease right of use assets and liabilities are recognized based on the present value of future minimum lease payments over the
expected term at commencement date. As the implicit rate is not determinable in most of the Company's leases, the Company's
incremental borrowing rate is used as the basis to determine the present value of future lease payments. The expected lease
terms include options to extend or terminate. The period which is subject to an option to extend the lease is included in the lease
term if it is reasonably certain that the option will be exercised. Some of these leases contain variable payment provisions that
depend on an index or rate, initially measured using the index or rate at the lease commencement date and are therefore not
included in our future minimum lease payments. Variable payments are expensed in the periods incurred. Lease expense for
minimum lease payments is recognized on a straight-line basis over the expected lease term. The Company uses the practical
expedients to exclude from balance sheet reporting leases with initial terms of 12 months or less and to exclude non-lease
components from lease right of use assets and corresponding liabilities.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded
when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably
estimated.
Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”),
which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU
2016-13, and subsequent related amendments to ASU 2016-13, replace the existing incurred loss impairment model with an
expected loss model that requires the use of forward-looking information to calculate credit loss estimates. The Company
adopted this ASU, effective January 1, 2020, using the modified retrospective approach, and the effect on the Company's
consolidated condensed financial statements and related disclosures was not material.
In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurements (Topic 820)." This ASU modifies the
disclosures on fair value measurements by removing the requirements to disclose the amount and reasons for transfers between
Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. The ASU expands the disclosure
requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in
other comprehensive income. The Company adopted this ASU effective January 1, 2020, and the effect on the Company's
disclosures in its consolidated financial statements was not material.
F-14
Note 1 – Background and Summary of Significant Accounting Policies (continued)
In August 2018, the FASB issued ASU No. 2018-14, "Disclosure Framework - Changes to the Disclosure Requirements for
Defined Benefit Plans." This ASU amends Accounting Standards Codification ("ASC") 715 to add, remove and clarify
disclosure requirements related to defined benefit and pension and other postretirement plans. The Company adopted this ASU
effective January 1, 2020, and determined that the effect on the Company's disclosures in its consolidated financial statements
was not material.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. ASU 2019-12, "Simplifying the Accounting for Income Taxes". This ASU
amends Accounting Standards Codification ("ASC") 740 by removing certain exceptions to the general principles, clarifying
and amending existing guidance. This guidance is effective for fiscal years, and interim periods within those years, beginning
after December 15, 2020 and early adoption is permitted. The Company has not yet adopted this ASU.
Note 2 – Revenues
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):
United States
United Kingdom
Other Europe
Israel
Asia
Canada
United States
United Kingdom
Other Europe
Israel
Asia
Canada
United States
United Kingdom
Other Europe
Israel
Asia
Canada
Foil Technology
Products
Year Ended December 31, 2020
Force
Sensors
Weighing and
Control Systems
Total
$
49,713 $
27,699 $
30,849 $
3,276
30,046
21,432
27,178
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8,491
9,020
384
8,130
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11,375
15,618
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8,122
18,479
131,645 $
53,724 $
84,443 $
Foil Technology
Products
Year Ended December 31, 2019
Force
Sensors
Weighing and
Control Systems
Total
56,393 $
33,695 $
24,227 $
3,181
32,328
12,401
27,500
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10,450
10,811
415
8,986
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16,860
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8,331
22,804
131,803 $
64,357 $
87,798 $
Foil Technology
Products
Year Ended December 31, 2018
Force
Sensors
Weighing and
Control Systems
Total
61,132 $
3,666
31,431
11,028
33,752
—
141,009 $
39,955 $
11,787
10,678
517
10,249
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F-15
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14,296
18,741
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21,302
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$
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23,142
54,684
21,816
43,430
18,479
269,812
114,315
29,207
59,999
12,816
44,817
22,804
283,958
124,905
29,749
60,850
11,545
51,443
21,302
299,794
Note 2 – Revenues (continued)
The following table disaggregates net revenue by market sector (in thousands):
Test & Measurement
Avionics, Military & Space
Transportation
Other Markets
Industrial Weighing
General Industrial
Steel
Contract Assets & Liabilities
Years Ended December 31,
2020
2019
2018
$
53,633 $
64,982 $
32,607
29,483
58,256
43,441
15,351
37,041
23,653
36,914
50,169
54,678
20,466
33,096
72,728
29,221
39,107
48,665
59,214
24,696
26,163
$
269,812 $
283,958 $
299,794
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):
December 31, 2019
December 31, 2020
Increase ( decrease)
Contract Asset
Unbilled Revenue
Contract Liability
Accrued Customer Advances
$
$
$
3,937 $
3,605 $
(332) $
4,561
2,873
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The amount of revenue recognized during the year ended December 31, 2020 that was included in the contract liability balance
at December 31, 2019 was $4.2 million.
Practical Expedients
The Company does not disclose the value of unsatisfied performance obligations for contracts that have a duration of one year
or less and for contracts that are substantially complete. The Company treats shipping and handling activities as fulfillment
costs.
F-16
Note 3 – Acquisition Activity
Dynamic Systems Inc.
On November 1, 2019, VPG completed the acquisition of New York-based Dynamic Systems Inc. ("DSI"), a provider of
specialized dynamic thermal-mechanical test and simulation systems used to develop new metal alloys and optimize production
processes, for a purchase price of $40.3 million, subject to customary adjustments. During the second quarter of 2020, the
Company received $0.2 million from escrow as a purchase price adjustment, resulting in a reduction of goodwill. Additionally,
it was determined that an earn out, which was part of the purchase price, was not achieved. DSI reports into the Company's
Weighing and Control Systems segment. The following table summarizes the final fair values assigned to the assets and
liabilities of DSI as of November 1, 2019 (in thousands):
November 1, 2019
Adjustments
Adjusted
Working capital (a)
Property and equipment
Long-term deferred income tax liability
Non-Controlling interest
Intangible assets:
Patents and acquired technology
Customer relationships
Trade names
Total intangible assets
Fair value of acquired identifiable assets and
liabilities
Purchase price
Goodwill
$
6,874 $
1,727
(4,321)
(299)
10,250
4,344
3,300
17,894
21,875
40,481
$
18,606 $
(134) $
1,678
—
1,544
(156)
(1,700) $
6,740
1,727
(2,643)
(299)
10,250
4,344
3,300
17,894
23,419
40,325
16,906
(a) Working capital accounts include accounts receivable, inventory, prepaid expenses, accounts payable, accrued expenses, and accrued payroll.
The fair value of the contingent consideration is zero. The weighted average useful lives for the patents and acquired
technology and customer relationships are 16 years, and 15 years, respectively. Most of the goodwill associated with DSI is
deductible for income tax purposes.
The Company recorded acquisition costs of associated with this transaction in its consolidated statements of operation as
follows (in thousands):
Accounting and legal fees
Appraisal fees
Other
Year ended
December 31, 2019
$
$
214
13
216
443
F-17
Note 3 – Acquisition Activity ( continued)
Following are the supplemental consolidated financial results for the Company on an unaudited pro forma basis, as if the DSI
acquisition had been consummated on January 1, 2019 (unaudited):
Pro forma net revenues
Pro forma net earnings attributable to VPG stockholders
Pro forma basic earnings per share attributable to VPG stockholders
Pro forma diluted earnings per share attributable to VPG stockholders
Note 4 – Goodwill and Other Intangible Assets
Year ended December 31,
2019
$
$
$
$
298,085
25,737
1.90
1.89
The Company has four reporting units to which goodwill is allocated: steel, on-board weighing, instrumentation, and DSI. For
the steel and on-board weighing goodwill reporting units, the Company performed the qualitative assessment, which included
assessment of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and
other entity specific events which could impact the reporting unit. Based on this review, it was determined that the fair value of
each of those reporting units was in excess of its carrying value and therefore no quantitative impairment test was required.
For the instrumentation and DSI goodwill reporting units, the Company performed the quantitative impairment test. In
estimating the fair value of our instrumentation and DSI reporting units the Company used the income approach. It further uses
the market approach to evaluate the estimated fair value of the reporting units that was obtained by using the income approach.
The income approach to valuation requires management to make significant estimates and assumptions related to future
revenues, profitability, working capital requirements and selection of discount rate and long term growth rate. Changes in these
estimates and assumptions could have a significant impact on the fair value of the reporting units.
The Company's required goodwill and indefinite-lived asset annual impairment test is completed as of the first day of the fourth
fiscal quarter each year. In 2020, the results of the quantitative impairment test for the DSI reporting unit indicated no
impairment, with the fair value exceeding the carrying value by approximately 12% for goodwill and 16% for the indefinite-
lived trade name.
The results of the quantitative impairment test for the instrumentation reporting unit's goodwill and indefinite-lived trade name
indicated an impairment, and in the fourth quarter of 2020, the Company recognized a non-cash impairment loss of
$2.4 million. The impairment was driven mainly by changes in forecasted projections including a slower growth rate in
revenues. After considering the impact of the impairment charges, the carrying amount of goodwill and indefinite-lived trade
names as of December 31, 2020 was $1.1 million and $0.4 million, respectively.
The Company's analysis in 2019 resulted in the fair value exceeding the carrying value for all reporting units. In 2019, the
Company did not recognize an impairment for the instrumentation reporting unit, as the fair value exceeded its carrying value
by approximately 12%.
During 2018, the Company recognized a non-cash impairment loss associated with the goodwill and indefinite lived intangible
assets in the instrumentation reporting unit of $2.5 million. The impairment was primarily from lower margins on the
forecasted projections due to product mix. The impairment test for the remaining reporting units resulted in the fair value
exceeding the carrying value, passing the quantitative impairment test.
The change in the carrying amount of goodwill by segment is as follows (in thousands):
F-18
Note 4 – Goodwill and Other Intangible Assets (continued)
Total
Weighing and Control Systems Segment
Stress-Tek
DSI
Acquisition
Acquisition
KELK
Acquisition
Foil Technology
Products
Segment
Pacific
Instruments
Balance at January 1, 2019
$
16,141 $
6,288
$
6,311
$
3,542
Goodwill acquired
Foreign currency translation adjustment
Balance at December 31, 2019
Adjustments to purchase price
Impairment charges
18,606
271
35,018
(1,700)
(2,416)
Foreign currency translation adjustment
203
—
18,606
271
6,559
—
—
167
—
18,606
(1,700)
—
36
—
—
6,311
—
—
—
Balance at December 31, 2020
$
31,105 $
6,726 $
16,942
$
6,311
$
—
—
3,542
—
(2,416)
—
1,126
Intangible assets were as follows (in thousands):
Intangible assets subject to amortization
(Definite-lived):
Patents and acquired technology
Customer relationships
Trade names
Non-competition agreements
Accumulated amortization:
Patents and acquired technology
Customer relationships
Trade names
Non-competition agreements
December 31,
2020
2019
$
19,804 $
26,061
1,747
12,259
59,871
(5,895)
(13,363)
(1,747)
(12,250)
(33,255)
19,504
25,690
1,690
11,745
58,629
(4,718)
(11,727)
(1,690)
(11,717)
(29,852)
Net intangible assets subject to amortization
$
26,616 $
28,777
Intangible assets not subject to amortization
(Indefinite-lived):
Trade names
5,423
$
32,039 $
5,421
34,198
Certain intangible assets are subject to foreign currency translation.
Amortization expense was $2.4 million, $1.7 million, and $1.7 million, for the years ended December 31, 2020, 2019, and
2018, respectively.
Estimated annual amortization expense for each of the next five years is as follows (in thousands):
2021
2022
2023
2024
2025
$
2,452
2,451
2,343
2,308
2,308
F-19
Note 5 – 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 to either record additional
expense in future periods or to reverse part of the previously recorded charges.
The Company recorded restructuring costs of $0.9 million, $2.3 million, and $0.3 million during the years ended December 31,
2020, 2019, and 2018, respectively. In 2020 and 2018, 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. In 2019, restructuring costs included $1.2 million of employee termination costs, including severance and statutory
retirement allowances incurred in connection with various cost reduction programs, and $1.1 million of other exit costs,
including asset write downs and an impairment of a right of use asset associated with the closure and downsizing of facilities as
part of the manufacturing transitions of the Company's force sensors products to facilities in India and China.
The following table summarizes the activity to date related to these programs in the accrued restructuring liability, which is
comprised of the activity associated primarily with the employee termination costs. The accrued restructuring liability balance
as of December 31, 2020 and 2019, respectively, is included in other accrued expenses in the accompanying consolidated
balance sheets (in thousands):
Balance at beginning of year
Restructuring charges
Adjustment for adoption of ASU 2016-02
Cash payments
Foreign currency translation
Balance at end of year
December 31,
2020
2019
$
604 $
918
—
(1,458)
(1)
63
$
159
1,559
(69)
(1,064)
19
604
F-20
Note 6 – Income Taxes
For financial reporting purposes, income before taxes includes the following components (in thousands):
$
$
$
Domestic
Foreign
The expense (benefit) for income taxes is comprised of (in thousands):
Current:
Federal
State and local
Foreign
Deferred:
Federal
State and local
Foreign
Years ended December 31,
2019
2020
2018
(9,476) $
(7,405) $
(7,897)
27,785
33,845
18,309 $
26,440 $
41,886
33,989
Years ended December 31,
2019
2020
2018
106 $
(18)
6,268
6,356
1,718
(422)
(143)
1,153
453 $
(130)
6,378
6,701
(2,638)
(123)
205
(2,556)
189
162
8,982
9,333
197
(35)
849
1,011
10,344
Total income tax expense
$
7,509 $
4,145 $
A reconciliation of income tax expense (benefit) at the U.S. federal statutory income tax rate to the actual income tax provision
is as follows (in thousands):
Tax at statutory rate
State income taxes, net of U.S. federal tax benefit
Effect of foreign operations
Change in valuation allowance
Change in unrecognized tax benefits, net
Impairment of goodwill
Specialty tax credits
Statutory rate changes
Effect of foreign exchange
Loss of benefit of U.S. net operating loss (a)
Excess tax benefits related to share based compensation (a)
2017 Tax Act:
Effects of U.S. tax reform
Change in valuation allowance
Other
Total income tax expense
Years ended December 31,
2019
2020
2018
$
3,845 $
5,553 $
7,138
(176)
729
2,448
(32)
507
(249)
(119)
(346)
1,064
(168)
—
—
(21)
(109)
(646)
650
—
(176)
(249)
(1,152)
967
(357)
—
—
6
7,509 $
(315)
4,145 $
$
89
611
498
258
525
(295)
272
321
—
—
(135)
945
117
10,344
F-21
Note 6 – Income Taxes (continued)
(a) Amounts for 2018 are included in Other and fell below the 5% threshold.
On December 22, 2017, the SEC staff issued SAB 118 which provides for a measurement period of one year from the
enactment date to finalize the accounting for effects of the 2017 Tax Act. Consistent with that guidance, the Company had
provisionally determined the tax cost of the one-time transition tax under the 2017 Tax Act to be approximately $2.2 million. In
accordance with SAB 118, the financial reporting impact of the 2017 Tax Act was completed in the fourth quarter of 2018
resulting in a net $0.8 million increase in tax expense caused by a decrease in the transition tax and an increase in the valuation
allowance.
The 2017 Tax Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign
subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an
entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to
reverse as GILTI in the future years or provide for tax expense related to GILTI in the year the tax is incurred. The Company
has elected to recognize tax expense related to GILTI in the year the tax is incurred.
The Company recognized approximately $14.3 million and $12.9 million of GILTI income for the years ended December 31,
2020 and 2019, respectively. The U.S. tax on the GILTI income was fully offset by foreign tax credits associated with GILTI
and U.S. operating losses exclusive of GILTI. Any excess foreign tax credits associated with GILTI are lost and cannot be
carried forward to future years. The Company would have generated a net operating loss for U.S. federal income tax purposes
but for the effects of the GILTI provision.
Deferred income taxes represent the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts for income tax purposes.
Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
Deferred tax assets:
Pension and other postretirement costs
Inventories
Net operating/capital loss and interest carryforwards
Tax credit carryforwards
Deferred compensation
Other accruals and reserves
Book over tax depreciation
Total gross deferred tax assets
Less: valuation allowance
Deferred tax liabilities:
Tax over book depreciation
Investment in subsidiary
Intangible assets, including tax deductible goodwill
Total gross deferred tax liabilities
December 31,
2020
2019
$
4,296 $
2,327
13,082
1,994
2,930
3,420
93
28,142
(16,946)
11,196
—
(1,927)
(5,657)
(7,584)
3,770
2,095
11,895
1,431
2,865
3,362
—
25,418
(14,867)
10,551
(290)
(1,845)
(5,745)
(7,880)
Net deferred tax assets
$
3,612 $
2,671
In 2015, the Company established a valuation allowance with respect to substantially all of its U.S. deferred tax assets due to
uncertainty regarding the realization of these assets. Throughout 2019 and 2020, the Company reassessed its ability to realize its
U.S. and other deferred tax assets by considering both positive and negative evidence regarding realization. The most
significant negative evidence is continuing cumulative operating losses in the U.S. The impact of the acquisitions of Stress-Tek,
Pacific Instruments and DSI was also considered in determining the realization of the U.S. deferred tax assets. Other aspects,
such as operating results, additional interest expense and additional tax deductions related to the Stress-Tek acquisition, were
also considered. The Company also considered positive evidence such as tax planning strategies and the projected benefits of
our restructuring efforts. However, there was insufficient positive evidence to overcome the negative evidence.
F-22
Note 6 – Income Taxes (continued)
In November 2019, the Company acquired Dynamic Systems, Inc. ("DSI"), a U.S. company. DSI's opening balance sheet
included $17 million of gross deferred tax liabilities, including $4.1 million of indefinite-lived liabilities. The acquisition
contributed to a $2.5 million net reduction in valuation allowance and current tax benefit for the Company in 2019. In the fourth
quarter of 2020, the Company completed the purchase accounting for the acquisition of DSI, which resulted in the recognition
of additional deferred tax assets of $1.7 million and a corresponding increase in valuation allowance.
Overall, the cumulative losses and the acquisition impacts still indicate that realization of our U.S. deferred tax assets remains
uncertain such that the Company cannot conclude that it is "more likely than not" that the deferred tax assets will be
recoverable. We will continue to monitor the realization of U.S. deferred tax assets and reduce the valuation allowance if, and
when, sufficient positive evidence of realization exists. At December 31, 2020 and 2019, the valuation allowance on U.S.
deferred tax assets was approximately $14.9 million and $11.8 million, respectively. The net change in valuation allowance
was approximately $3.2 million.
The valuation allowance related to state taxes was $0.7 million and $0.8 million expense for the years ended December 31,
2020 and 2019, respectively.
The Company also has valuation allowances of $2.0 million and $3.1 million at December 31, 2020 and 2019, respectively,
with respect to certain foreign net operating loss and capital loss carryforwards.
Significant valuation allowances are as follows (in thousands):
Jurisdiction
U.S. federal
U.S. state (net of U.S. federal tax benefit)
Israel - capital losses
December 31,
2020
2019
$
5,816 $
9,090
1,390
3,395
8,411
2,457
The following table summarizes significant net operating losses and credit carryforwards as of December 31, 2020 (in
thousands):
Jurisdiction
U.S. federal net operating losses
U.S. federal net operating loss
U.S. federal interest expense carryover
U.S. foreign tax credit
U.S. state net operating losses
Israel capital losses
December 31,
2020
Expiring
$
5,548 No expiration
315
2036
5,191 No expiration
1,734
2026 - 2040
102,090
2024 - 2040
6,042 No expiration
The U.S. federal net operating losses shown above are pre-acquisition losses of DSI. The utilization of these losses is limited to
$765 thousand per year pursuant to Internal Revenue Code ("IRC") Section 382. In addition, utilization of U.S. federal net
operating losses is taken into account before the GILTI deduction allowable by IRC Section 250.
Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $178.2 million at December 31, 2020
compared to $159.0 million at December 31, 2019. As a result of the 2017 Tax Act, in 2017 the Company had provided for a
deferred tax liability of approximately $1.8 million of withholding tax associated with a planned cash distribution of
approximately $25.5 million. As of December 31, 2020, other than the planned cash distribution of $14.1 million, substantially
all of the remaining undistributed earnings are considered to be indefinitely reinvested and accordingly no provision has been
made with respect to these earnings for incremental foreign income taxes, state income taxes or foreign withholding taxes. If
those earnings were distributed to the U.S., the Company could be subject to incremental foreign income taxes, state income
taxes, and withholding taxes. Determination of the amount of unrecognized deferred tax liability is not practicable because of
the uncertainty regarding the timing of any such distribution and the impact on existing valuation allowances. In addition to the
$1.5 million, additional withholding taxes of approximately $18.0 million are estimated to be payable upon remittance of the
remaining previously unremitted earnings as of December 31, 2020.
F-23
Note 6 – Income Taxes (continued)
Net income taxes paid were $4.3 million, $11.1 million, and $7.3 million for the years ended December 31, 2020, 2019, and
2018, respectively.
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.
The following table summarizes changes in the Company's gross liabilities, excluding interest and penalties, associated with
unrecognized tax benefits (in thousands):
Balance at beginning of year
Addition based on tax positions related to current year
Addition based on tax positions related to prior years
Reduction based on tax positions related to prior years
Currency translation adjustments
Reduction for settled tax examinations
Reduction for payments made
Reduction for lapses of statute of limitations
Balance at end of year
December 31,
2020
2019
2018
$
1,355 $
912 $
51
—
(57)
92
(73)
(22)
(102)
144
668
(32)
3
—
(134)
(206)
$
1,244 $
1,355 $
823
189
182
(98)
(28)
—
—
(156)
912
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax
expense. Related to the unrecognized tax benefits noted above, for the years ended December 31, 2020, December 31, 2019 and
December 31, 2018, the Company accrued total penalties and interest of $0.0 million, $0.0 million and $0.1 million,
respectively. As of December 31, 2020, December 31, 2019 and December 31, 2018, accrued penalties and interest were $0.1
million, $0.1 million and $0.1 million, respectively.
Included in the balance of unrecognized tax benefits as of December 31, 2020, 2019, and 2018 is $1.2 million, $1.4 million, and
$0.9 million, respectively, of tax benefits that, if recognized, would impact the effective tax rate. The Company believes that it
is reasonably possible that an increase in unrecognized tax benefits related to foreign exposures of between $0.1 million and
$0.2 million may be necessary in 2020. As of December 31, 2020, the Company anticipates that it is reasonably possible that it
will reverse less than $0.1 million of its current unrecognized tax benefits within the next calendar year due to the expiration of
the statute of limitations in certain jurisdictions. None of the unrecognized tax benefits the Company expects to reverse in 2021
due to statute lapses are covered by the Tax Matters Agreement.
The Company and its subsidiaries file U.S. federal income tax returns, as well as income tax returns in various state, local, and
foreign jurisdictions. The Company files federal, state, and local income tax returns on a combined, unitary, or stand-alone
basis. The statute of limitations in those jurisdictions generally ranges from 3 to 4 years. Additionally, the Company's foreign
subsidiaries file income tax returns in the countries in which they have operations and the statutes of limitations in those
jurisdictions generally range from 3 to 10 years.
During the fourth quarter of 2020, the Company concluded a tax examination in Israel for one of its subsidiaries covering 2015.
The conclusion of the audit resulted in no significant change in tax and a release of $0.1 million of reserves for uncertain tax
positions for that year, including accrued interest.
During the second and third quarters of 2019, the Company concluded tax examinations in Taiwan and Belgium, respectively,
for two of its subsidiaries, covering the years 2016 and 2017. The conclusion of the tax examinations resulted in no significant
change in tax. During the fourth quarter of 2018, the Company concluded a tax examination in Germany for one of its
subsidiaries, covering the years 2015 and 2016. The conclusion of the tax examination resulted in no significant change in tax.
The Company is subject to ongoing income tax audits, administrative appeals and judicial proceedings in India spanning a
number of years.
F-24
Note 7 – Long-Term Debt
Long-term debt consists of the following (in thousands):
2020 Credit Agreement - Revolving Facility
2015 Credit Agreement - Revolving Facility
2015 Credit Agreement - U.S. Closing Date Term Facility
2015 Credit Agreement - U.S. Delayed Draw Term Facility
2015 Credit Agreement - Canadian Term Facility
Other debt
Deferred financing costs
Less: current portion
2020 Credit Agreement
December 31,
2020
2019
$
41,000 $
—
—
—
—
18
(374)
40,644
18
$
40,626 $
—
34,000
2,038
4,982
3,476
149
(112)
44,533
44,516
17
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 for working capital and general corporate
purposes, and a portion of such proceeds was used to refinance the Company’s existing revolving credit facility in the amount
of $34.0 million and the Company’s existing term loans as follows: (1) the “2015 U.S. Closing Date Term Facility” in an
aggregate principal amount of $2.0 million; and (2) the "2015 U.S. Delayed Draw Term Facility" in an aggregate principal
amount of $5.0 million. 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. The 2020 Credit Agreement replaced the 2015 Credit Agreement.
Interest payable on amounts borrowed under the 2020 Revolving Facility is based upon, at the Company’s option, (1) the
greatest of: the Agent’s prime rate, the Federal Funds rate, or a LIBOR floor (the “Base Rate”), or (2) LIBOR or CDOR plus a
specified margin. An interest margin of 0.25% is added to Base Rate loans. 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 LIBOR or CDOR rate to determine the
interest payable on the LIBOR or CDOR 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 December 31, 2020. 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.
Other Lines of Credit
In addition to the 2020 Revolving Facility discussed above, certain subsidiaries of the Company had committed short-term lines
of credit with a foreign bank aggregating approximately $3.0 million and $3.0 million at December 31, 2020 and 2019,
respectively. The Company had outstanding letters of credit under these short-term lines of credit of $0.4 million and $0.9
million at December 31, 2020 and 2019, respectively.
F-25
Note 7 – Long-Term Debt (continued)
Other Debt
Other debt consists of debt held by VPG’s Japanese subsidiary and is payable monthly over the next 1 year at a zero interest
rate.
Aggregate annual maturities of long-term debt are as follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
$
18
—
—
—
41,000
—
Interest paid on third-party debt was $1.3 million, $1.4 million, and $1.6 million during the years ended December 31, 2020,
2019, and 2018, respectively.
Note 8 – Stockholders’ Equity
The Company’s Class B convertible common stock carries ten votes per share. The common stock carries one vote per share.
Class B shares are transferable only to certain permitted transferees while the common stock is freely transferable. Class B
shares are convertible on a one-for-one basis at any time into shares of common stock. Transfers of Class B shares other than to
permitted transferees result in the automatic conversion of the Class B shares into common stock.
The Board of Directors may only declare dividends or other distributions with respect to the common stock or the Class B
convertible common stock if it grants such dividends or distributions in the same amount per share with respect to the other
class of stock. As discussed in Note 7, the Company is restricted from paying cash dividends. Stock dividends or distributions,
on any class of stock, are payable only in shares of stock of that class. Shares of either common stock or Class B convertible
common stock cannot be split, divided, or combined unless the other is also split, divided, or combined equally.
The Board of Directors is authorized, without further stockholder approval, to issue from time to time up to an aggregate of
1,000,000 shares of preferred stock in one or more series. The Board of Directors may fix or alter the designation, preferences,
rights and any qualification, limitations, restrictions of the shares of any series, including the dividend rights, dividend rates,
conversion rights, voting rights, redemption terms and prices, liquidation preferences and the number of shares constituting any
series. No shares of the Company’s preferred stock are currently outstanding.
F-26
Note 8 – Stockholders’ Equity (continued)
Other Comprehensive Income (Loss)
The cumulative balance of each component of other comprehensive income (loss) and the income tax effects allocated to each
component are as follows (in thousands):
Beginning
Balance
Before-
Tax
Amount
Tax
Effect
Net-of-
Tax
Amount
Ending
Balance
December 31, 2018
Pension and other postretirement actuarial items
Reclassification adjustment for recognition of actuarial
items
$
(8,060) $
1,392 $
(18) $
1,374 $
(6,686)
685
(145)
540
540
Foreign currency translation adjustment
(27,390)
(3,857)
(72)
(3,929)
(31,319)
$ (35,450) $
(1,780) $
(235) $
(2,015) $ (37,465)
December 31, 2019
Pension and other postretirement actuarial items
Reclassification adjustment for recognition of actuarial
items
Foreign currency translation adjustment
Reclassification adjustment for foreign currency
translation
December 31, 2020
Pension and other postretirement actuarial items
Reclassification adjustment for recognition of actuarial
items
Foreign currency translation adjustment
$
(6,146) $
(1,310) $
194 $
(1,116) $
(7,262)
359
(39)
320
320
(31,319)
(290)
21
(269)
(31,588)
$
827
827
827
$ (37,465) $
(414) $
176 $
(238) $ (37,703)
$
(6,942) $
(920) $
319 $
(601) $
(7,543)
537
(30,761)
$ (37,703) $
5,070
4,687 $
(73)
99
345 $
464
464
5,169
(25,592)
5,032 $ (32,671)
In 2019, Reclassification of foreign currency translation adjustment for gain on liquidation of a subsidiary is included in other
income (expense) other (See Note 15). 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 9).
Note 9 – Pensions and Other Postretirement Benefits
Defined Benefit Plans
Employees of the Company participate in various defined benefit pension and other postretirement benefit plans.
U.S. Pension Plan
The Vishay Precision Group Non-Qualified Retirement Plan, like all nonqualified plans, is considered to be unfunded. The
Company maintains a nonqualified trust, referred to as a “rabbi” trust, to fund benefits under this plan. Rabbi trust assets are
subject to creditor claims under certain conditions and are not the property of employees. Therefore, they are accounted for as
other noncurrent assets within the consolidated balance sheets. The assets held in the rabbi trust are invested in money market
funds and company-owned life insurance policies. The consolidated balance sheets include assets held in trust related to the
nonqualified pension plan of $1.9 million at December 31, 2020 and $1.7 million at December 31, 2019, and the related
liabilities of $2.7 million and $2.4 million at December 31, 2020 and 2019, respectively.
The Vishay Precision Group Non-Qualified Retirement Plan is frozen. Accordingly, no new employees may participate in the
plan, no further participant contributions are permitted, and no further benefits accrue. Benefits accumulated prior to the
freezing of the U.S. pension plan will be paid to employees upon retirement, and the Company will likely need to make
additional cash contributions to the rabbi trust to fund this accumulated benefit obligation.
Non-U.S. Pension Plans
The Company provides pension and similar benefits to employees of certain non-U.S. subsidiaries consistent with local
practices. Pension benefits earned are generally based on years of service and compensation during active employment.
F-27
Note 9 – Pensions and Other Postretirement Benefits (continued)
In 2018, the Company undertook several measures to de-risk the UK pension plan. The first measure was to freeze the plan,
with no new participants permitted and no further benefits accrue. The second measure was to execute an enhanced transfer
value exercise to transfer pension benefits outside of the plan. As a result, the Company incurred $0.7 million of expense
related to these de-risking measures.
The following table sets forth a reconciliation of the benefit obligation, plan assets, and funded status related to pension plans
(in thousands):
Change in benefit obligation:
Benefit obligation at beginning of year
$
2,414 $
24,857 $
2,160 $
21,762
December 31, 2020
U.S.
Plans
Non-U.S.
Plans
December 31, 2019
U.S.
Plans
Non-U.S.
Plans
Service cost (adjusted for actual employee contributions)
Interest cost
Actuarial (gains) losses
Benefits paid
Curtailments and settlements
Plan amendments and other
Currency translation
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Company contributions
Benefits paid
Curtailments and settlements
Currency translation
Fair value of plan assets at end of year
Funded status at end of year
—
70
338
(75)
—
—
—
402
442
1,863
(659)
(95)
—
1,278
—
85
248
(79)
—
—
—
336
535
1,922
(777)
(25)
573
531
2,747 $
28,088 $
2,414 $
24,857
— $
16,420 $
— $
—
75
734
919
—
79
(75)
(659)
(79)
—
—
—
743
—
—
14,501
1,338
953
(777)
(25)
430
— $
18,157 $
— $
16,420
(2,747) $
(9,931) $
(2,414) $
(8,437)
$
$
$
$
Actuarial losses incurred in 2020 related to our U.S. and non-U.S. plans are primarily the result of a decrease in the discount
rate assumptions used to estimate the benefit obligations as of December 31, 2020 compared to December 31, 2019. Actuarial
losses incurred in 2019 related to our U.S. and non-U.S. plans are primarily the result of a decrease in the discount rate
assumptions used to estimate the benefit obligations as of December 31, 2019 compared to December 31, 2018.
Amounts recognized in the consolidated balance sheets consist of the following pre-tax amounts (in thousands):
Other accrued expenses
Accrued pension and other postretirement costs
Accumulated other comprehensive loss
December 31, 2020
U.S.
Plans
Non-U.S.
Plans
December 31, 2019
U.S.
Plans
Non-U.S.
Plans
$
$
$
$
(105) $
(240) $
(98) $
(2,642) $
(9,691) $
(2,316) $
823 $
(1,924) $
9,068 $
(863) $
594 $
(1,820) $
(325)
(8,112)
5,969
(2,468)
Unrecognized actuarial gains and losses arise from several factors, including experience and assumption changes with respect to
the obligations and from the difference between expected returns and actual returns on plan assets. Actuarial items consist of
the following (in thousands):
F-28
Note 9 – Pensions and Other Postretirement Benefits (continued)
Unrecognized net actuarial loss
Unrecognized prior service cost
Unamortized transition obligation
December 31, 2020
U.S.
Plans
Non-U.S.
Plans
December 31, 2019
U.S.
Plans
Non-U.S.
Plans
$
$
823 $
9,008 $
594 $
5,906
—
—
60
—
—
—
62
1
823 $
9,068 $
594 $
5,969
The following table sets forth additional information regarding the projected and accumulated benefit obligations for the
pension plans (in thousands):
Accumulated benefit obligation, all plans
Plans for which the accumulated benefit obligation exceeds plan assets:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Accumulated benefit obligation, all plans
Plans for which the accumulated benefit obligation exceeds plan assets:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
December 31, 2020
U.S.
Plans
Non-U.S.
Plans
2,747
$
25,148
2,747
2,747
—
$
$
$
25,107
24,099
16,259
December 31, 2019
U.S.
Plans
Non-U.S.
Plans
2,414
$
23,686
2,414
2,414
—
$
$
$
23,386
22,743
14,983
$
$
$
$
$
$
Unrecognized gains and losses are amortized into future net periodic pension cost using the 10% corridor method over the
expected remaining service life of the employee group. The following table sets forth the components of net periodic cost of
pension (in thousands):
2020
Years ended December 31,
2019
2018
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
Annual service cost
$
— $
402 $
— $
336 $
— $
Less: employee contributions
Net service cost
Interest cost
Expected return on plan assets
Amortization of actuarial losses
Amortization of transition obligation
Curtailment and settlement losses
—
—
70
—
109
—
—
—
402
442
(442)
286
5
—
—
—
85
—
38
—
—
—
336
535
(517)
164
1
—
—
—
76
—
70
—
—
498
21
477
610
(549)
437
1
708
Net periodic benefit cost
$
179 $
693 $
123 $
519 $
146 $
1,684
See Note 8 for the pre-tax, tax effect, and after tax amounts included in other comprehensive income during the years ended
December 31, 2020, 2019, and 2018.
F-29
Note 9 – Pensions and Other Postretirement Benefits (continued)
The following weighted-average assumptions were used to determine benefit obligations at December 31 of the respective
years:
Discount rate
Rate of compensation increase
Expected return on plan assets
2020
2019
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
2.11 %
N/A
N/A
1.29 %
2.77%
2.66 %
2.97 %
N/A
N/A
1.86 %
1.20%
3.56 %
The following weighted-average assumptions were used to determine the net periodic pension costs for the years ended
December 31, 2020 and 2019:
Discount rate
Rate of compensation increase
Expected return on plan assets
2020
2019
U.S.
Plans
Non-U.S.
Plans
U.S.
Plans
Non-U.S.
Plans
2.97 %
N/A
N/A
1.86 %
1.20%
3.56 %
3.99 %
N/A
N/A
2.47 %
3.08 %
2.70 %
The plans’ expected return on assets is based on management’s expectation of long-term average rates of return to be achieved
by the underlying investment portfolios. In establishing this assumption, management considers historical and expected returns
for the asset classes in which the plans are invested, advice from pension consultants and investment advisors, and current
economic and capital market conditions.
The investment mix between equity securities and fixed income securities is based upon achieving a desired return, balancing
higher return, more volatile equity securities, and lower return, less volatile fixed income securities. The target allocation of
plan assets approximates the actual allocation of plan assets at December 31, 2020 and 2019.
Plan assets are comprised of:
Equity securities
Fixed income securities
Cash and cash equivalents
Total
December 31, 2020
U.S.
Plans
Non-U.S.
Plans
December 31, 2019
U.S.
Plans
Non-U.S.
Plans
—
—
—
—
48 %
39 %
13 %
100 %
—
—
—
—
48 %
42 %
10 %
100 %
The Company maintains defined benefit retirement plans in certain of its subsidiaries. The assets of the plans are measured at
fair value.
Equity securities held by the defined benefit retirement plans consist of equity securities that are valued based on quoted market
prices on the last business day of the year. The fair value measurement of the equity securities is considered a Level 2
measurement within the fair value hierarchy.
Fixed income securities held by the defined benefit retirement plans consist of government bonds and corporate notes that are
valued based on quoted market prices on the last business day of the year. The fair value measurement of the fixed income
securities is considered a Level 2 measurement within the fair value hierarchy.
Cash held by the defined benefit retirement plans consists of deposits on account in various financial institutions. The carrying
amount of the cash approximates its fair value. A summary of the Company’s pension plan assets for each fair value hierarchy
level are as follows for the periods presented (see Note 16 for further description of the levels within the fair value hierarchy (in
thousands)):
F-30
Note 9 – Pensions and Other Postretirement Benefits (continued)
As of December 31, 2020
Defined benefit pension plan assets
Equity securities
Fixed income securities
Cash and cash equivalents
As of December 31, 2019
Defined benefit pension plan assets
Equity securities
Fixed income securities
Cash and cash equivalents
Fair value measurements at reporting date
using:
Level 2
Inputs
Level 1
Inputs
Level 3
Inputs
Total Fair
Value
$
8,779 $
— $
8,779 $
7,700
1,678
—
1,678
7,700
—
$
18,157 $
1,678 $
16,479 $
—
—
—
—
Fair value measurements at reporting date
using:
Level 2
Inputs
Level 1
Inputs
Level 3
Inputs
Total Fair
Value
$
7,796 $
— $
7,796 $
7,703
921
—
921
7,703
—
$
16,420 $
921 $
15,499 $
—
—
—
—
Estimated future benefit payments are as follows (in thousands):
2021
2022
2023
2024
2025
2025 - 2028
US Pension
Plans
Non-US
Plans
$
105 $
106
135
134
135
757
1,068
784
1,334
853
1,358
4,993
The Company anticipates making contributions to its funded and unfunded pension of approximately $1.4 million during 2021.
Other Postretirement Benefit Plans
In the U.S., the Company maintains two unfunded non-pension other postretirement benefit plans (“OPEB”) which are funded
as costs are incurred. These plans provide medical and death benefits to retirees.
F-31
Note 9 – Pensions and Other Postretirement Benefits (continued)
The following table sets forth a reconciliation of the benefit obligation, plan assets, and funded status related to other
postretirement benefit plans (in thousands):
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost (adjusted for actual employee contributions)
Interest cost
Contributions by participants
Actuarial gains
Benefits paid
Plan amendments and other
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Company contributions
Contributions by participants
Benefits paid
Fair value of plan assets at end of year
Funded status at end of year
OPEB Plans
December 31,
2020
2019
$
4,633
$
4,645
123
133
25
(1,498)
(249)
410
126
180
—
(131)
(187)
—
$
$
$
$
3,577
$
4,633
—
224
25
(249)
—
(3,577)
$
$
$
—
187
—
(187)
—
(4,633)
Actuarial gains incurred in 2020 related to our post-retirement plans are primarily the result of a prior year adjustment of $763,
changes in medical claims and age variance assumptions, net of a decrease in the discount rate assumptions used to estimate the
benefit obligations as of December 31, 2020 compared to December 31, 2019. Actuarial gains incurred in 2019 related to our
post-retirement plans are primarily the result of a decrease in the discount rate assumptions used to estimate the benefit
obligations as of December 31, 2019 compared to December 31, 2018.
Amounts recognized in the consolidated balance sheets consist of the following pre-tax amounts (in thousands):
Other accrued expenses
Accrued pension and other postretirement costs
Accumulated other comprehensive loss
Actuarial items consist of the following (in thousands):
Unrecognized net actuarial loss
OPEB Plans
December 31,
2020
2019
(266)
(3,311)
583
(2,994)
$
$
$
$
(290)
(4,343)
1,808
(2,825)
OPEB Plans
December 31,
2020
2019
583
583
$
$
1,808
1,808
$
$
$
$
$
$
Unrecognized gains and losses are amortized into future net periodic benefit cost using the 10% corridor method over the
expected remaining service life of the employee group. The following table sets forth the components of net periodic benefit
costs (in thousands):
F-32
Note 9 – Pensions and Other Postretirement Benefits (continued)
Net service cost
Interest cost
Amortization of actuarial losses
Net periodic benefit cost
OPEB Plans
Years ended December 31,
2020
OPEB
Plans
2019
OPEB
Plans
2018
OPEB
Plans
123
133
137
393
$
126
180
156
462
$
108
152
177
437
$
See Note 8 for the pre-tax, tax effect, and after tax amounts included in other comprehensive income during the years ended
December 31, 2020, 2019, and 2018.
The following weighted-average assumptions were used to determine benefit obligations at December 31 of the respective
years:
Discount rate
OPEB Plans
December 31,
2020
2019
1.99 %
2.97 %
The following weighted-average assumptions were used to determine the net periodic benefit costs for the years ended
December 31, 2020 and 2019:
Discount rate
Health care trend rate
OPEB Plans
December 31,
2020
2019
2.97 %
5.40 %
3.99 %
5.27 %
The health care trend ultimate rate is 4.04% per the terms of the plan. The impact of a one-percentage-point change in assumed
health care cost trend rates on the net periodic benefit cost and postretirement benefit obligation is not material.
Estimated future benefit payments are as follows (in thousands):
2021
2022
2023
2024
2025
2025 - 2028
OPEB
Plans
266
240
197
221
210
1,044
$
$
$
$
$
$
As the plans are unfunded, the Company's anticipated contributions for 2021 are equal to the estimated benefit payment.
F-33
Note 9 – Pensions and Other Postretirement Benefits (continued)
Other Retirement Obligations
The Company participates in various other defined contribution plans based on local law or custom. The Company periodically
makes contributions to these plans. At December 31, 2020 and 2019, the consolidated balance sheets include $1.0 million and
$0.9 million, respectively, within accrued pension and other postretirement costs related to these plans.
Most of the Company’s U.S. employees are eligible to participate in 401(k) savings plans which provide company matching
under various formulas. The Company’s matching expense for the plans was $0.8 million, $0.7 million, and $0.7 million for the
years ended December 31, 2020, 2019, and 2018, respectively. No material amounts are included in the consolidated balance
sheets related to unfunded 401(k) contributions.
Certain key employees participate in a nonqualified deferred compensation plan, which allows these employees to defer a
portion of their compensation until retirement, or elect shorter deferral periods. The accompanying consolidated balance sheets
include a liability within other noncurrent liabilities related to these deferrals. The Company maintains a nonqualified trust,
referred to as a “rabbi” trust, to fund payments under this plan. Rabbi trust assets are subject to creditor claims under certain
conditions and are not the property of employees. Therefore, they are accounted for as other noncurrent assets within the
consolidated balance sheets. The assets held in the rabbi trust are invested in money market funds and company-owned life
insurance policies. The consolidated balance sheets include assets held in trust related to the nonqualified deferred
compensation plan of $3.7 million at December 31, 2020 and $3.5 million at December 31, 2019, and the related liabilities of
$5.4 million and $4.9 million at December 31, 2020 and 2019, respectively.
Note 10 – Share-Based Compensation
The Amended and Restated Vishay Precision Group, Inc. Stock Incentive Plan (as amended and restated, the “Plan”) permits
the issuance of up to 1,000,000 shares of common stock. At December 31, 2020, the Company had reserved 371,637 shares of
common stock for future grant of equity awards (restricted stock, unrestricted stock, restricted stock units (“RSUs”), or stock
options). If any outstanding awards are forfeited by the holder, the underlying shares would be available for future grants under
the Plan.
Restricted Stock Units
Pursuant to the Plan, the Company issued RSUs to board members, executive officers, and certain employees of the Company
during 2020. 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. Compensation cost is recognized over the period that the participant provides service in
exchange for the award. The Company recognizes compensation cost for RSUs that are expected to vest and for which
performance criteria are expected to be met.
On March 5, 2020, VPG’s three current executive officers were granted annual equity awards in the form of RSUs, of which
75% are performance-based. The awards have an aggregate target grant-date fair value of $1.2 million were comprised of
44,269 RSUs. Twenty-five percent of these awards will vest on January 1, 2023, subject to the executives' continued
employment. The performance-based portion of the RSUs will also vest on January 1, 2023, 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. The awards issued in 2019 and 2018 have similar allocations and vesting
criteria.
On March 16, 2020, certain VPG employees were granted annual equity awards in the form of RSUs, of which 75% are
performance-based. The awards have an aggregate target grant-date fair value of $0.4 million and were comprised of 18,940
RSUs. Twenty-five percent of these awards will vest on January 1, 2023 subject to the employees' continued employment. The
performance-based portion of the RSUs will also vest on January 1, 2023, subject to the employee's continued employment and
the satisfaction of certain performance objectives relating to three-year cumulative earnings goals and cash flow goals.
On May 21, 2020, the Board of Directors approved the issuance of an aggregate of 15,564 RSUs to the independent board
members of the Board of Directors and to the non-executive Chairman of the Board of Directors. The awards have an
aggregate grant-date fair value of $0.3 million and will vest on the earlier of the 2021 Annual Stockholders meeting or May 21,
2021, subject to the directors' continued service on the Board of Directors.
Vesting of equity awards may be subject to acceleration under certain circumstances.
F-34
Note 10 – Share-Based Compensation (continued)
RSU activity is presented below (number of RSUs in thousands):
2020
Years ended December 31,
2019
2018
Number
of
RSUs
Weighted
Average
Grant-date
Fair Value
Number
of
RSUs
Weighted
Average
Grant-date
Fair Value
Number
of
RSUs
Weighted
Average
Grant-date
Fair Value
212 $
79
(81)
(5)
205 $
25.97
24.16
19.02
15.75
28.23
265 $
73
(75)
(51)
212 $
17.64
35.27
15.27
11.49
25.97
417 $
74
(86)
(140)
265 $
14.57
28.20
16.75
14.70
17.64
Outstanding:
Beginning of year
Granted
Vested
Forfeited
End of year
The fair value of the RSUs vested during 2020 is $2.3 million. Included in the 2020, 2019 and 2018 activity are RSU's
forfeited as a result of performance objectives not being met. These awards are therefore available for future grants under the
Plan.
RSUs with performance-based vesting criteria are expected to vest as follows (number of RSUs in thousands):
Vesting Date
Expected to Vest
January 1, 2021
January 1, 2022
January 1, 2023
Share-Based Compensation Expense
46
1
4
Not Expected to Vest
3
47
43
Total
49
48
47
The following table summarizes pre-tax share-based compensation expense recognized (in thousands):
Restricted stock units
Years ended December 31,
2020
2019
2018
$
1,387 $
1,336 $
1,799
Share-based compensation expense is recognized ratably over the vesting period of the awards and for RSUs with performance
criteria, is recognized for RSU's that are expected to vest and for which performance criteria are expected to be met.
During the fourth quarter of 2020, a net adjustment reducing share-based compensation expense by $0.1 million was recorded,
based on the evaluation of performance objectives associated with awards granted in 2018, 2019 and 2020. It was determined
that certain objectives were not likely to be fully met, necessitating a reversal of certain compensation expense associated with
those awards. This was partially offset by additional share based compensation expense being recorded for certain objectives
being fully met, which had been reversed in the prior year.
During 2019, it was determined that certain performance objectives associated with awards granted in 2017, 2018 and 2019
were not likely to be fully met, necessitating a reversal of certain compensation expense associated with those awards. As a net
result, adjustments decreasing share based compensation expense totaling $0.8 million were recorded during the year based on
anticipated performance levels.
The deferred tax benefit on share-based compensation expense was $0.0 million, $0.1 million, and $0.0 million for the years
ended December 31, 2020, 2019, and 2018, respectively.
As of December 31, 2020, the Company had $0.8 million of unrecognized share-based compensation expense related to share-
based awards that will be recognized over a weighted-average period of approximately 1.3 years.
Note 11 – Commitments, Contingencies, and Concentrations
Litigation
The Company is subject to various legal proceedings that constitute ordinary, routine litigation incidental to its business. The
Company is of the opinion that the disposition of these proceedings will not have a material adverse effect on its business or its
financial condition, results of operations, and cash flows.
F-35
Note 11 – Commitments, Contingencies, and Concentrations (continued)
Executive Employment Agreements
The Company has employment agreements with its executive officers which outline base salary, incentive compensation, and
equity-based compensation. The employment agreements with the Company's executive officers also provide for incremental
compensation in the event of termination without cause or resignation for good reason.
Sources of Supplies
Although most materials incorporated in the Company’s products are available from a number of sources, certain materials are
available only from a relatively limited number of suppliers.
Some of the most highly specialized materials for the Company’s sensors are sourced from a single vendor. The Company
maintains a safety stock inventory of certain critical materials at its facilities.
Certain metals used in the manufacture of the Company’s products are traded on active markets, and can be subject to
significant price volatility.
Market Concentrations
No single customer comprises greater than 10% of net revenues.
The vast majority of the Company’s products are used in the broad industrial market, with selected uses in military and
aerospace, medical, agriculture, and construction. Within the broad industrial segment, the Company’s products serve wide
applications in the waste management, bulk hauling, logging, scale manufacturing, engineering systems, pharmaceutical, oil,
chemical, steel, paper, and food industries.
Credit Risk Concentrations
Financial instruments with potential credit risk consist principally of cash and cash equivalents, accounts receivable, and notes
receivable. The Company maintains cash and cash equivalents with various major financial institutions. Concentrations of
credit risk with respect to receivables are generally limited due to the Company’s large number of customers and their
dispersion across many countries and industries. At December 31, 2020 and 2019, the Company had no significant
concentrations of credit risk.
Geographic Concentrations
At December 31, 2020 and 2019, a significant percentage of the Company’s cash and cash equivalents are held outside the
United States. See the following table for the percentage of cash and cash equivalents by region at December 31, 2020 and
December 31, 2019:
Asia
United States
Israel
Europe
United Kingdom
Canada
Total
December 31,
2020
2019
18 %
10 %
26 %
16 %
18 %
12 %
23 %
7 %
28 %
14 %
17 %
11 %
100 %
100 %
F-36
Note 12 - Leases
The Company primarily leases office and manufacturing facilities in addition to vehicles, which have remaining terms of less
than one year to twelve years. The Company has no finance leases. In 2019, one of the Company's indirect wholly-owned
subsidiaries entered into a lease agreement as tenant related to a property in Israel. The facility was made available to the
Company during the second quarter of 2020, at which time the Company established an operating right of use asset and
operating lease liability, with a lease term of 12.5 years, of $14.4 million, in accordance with the terms of the lease agreement.
Leases recorded on the balance sheet consist of the following (in thousands):
Leases
Assets
Operating lease right of use asset
Liabilities
Operating lease - current
Operating lease - non-current
Other information related to lease term and discount rate is as follows:
Operating leases weighted average remaining lease term (in years)
Operating leases weighted average discount rate
The components of lease expense are as follows (in thousands):
Operating lease cost
Variable lease cost
Short-term lease cost
Total lease cost
$
$
$
December 31,
2020
December 31,
2019
21,788 $
8,691
4,011 $
19,504 $
2,827
5,811
December 31, 2020
9.1 years
3.59 %
Year Ended
December 31, 2020
December 31, 2019
$
$
4,389 $
—
124
4,513 $
3,376
44
87
3,507
Right of use assets obtained in exchange for new operating lease liability during 2020 were $16.3 million and in 2019 were $0.3
million. The Company paid $4.0 million for its operating leases for the year ended December 31, 2020 and $3.4 million for the
year ended December 31, 2019, which are included in operating cash flows on the consolidated statements of cash flows.
Undiscounted maturities of operating lease payments as of December 31, 2020 are summarized as follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total future minimum lease payments
Less: amount representing interest
Present value of future minimum lease payments
$
$
$
4,435
3,704
3,177
2,617
2,172
11,132
27,237
(3,722)
23,515
Rent expense on operating leases prior to adoption of ASC 842 was $3.6 million for the year ended December 31, 2018.
F-37
Note 13 – Segment and Geographic Data
VPG reports in three product segments: the Foil Technology Products segment, the Force Sensors segment, and the Weighing
and Control Systems segment. The Foil Technology Products reporting segment is comprised of the foil resistor and strain gage
operating segments. The Force Sensors reporting segment is comprised of transducers, load cells, and modules. The Weighing
and Control Systems reporting segment is comprised of complete systems which include load cells and instrumentation for
weighing, force control and force measurement for a variety of uses such as process control and on-board weighing
applications.
VPG evaluates reporting segment performance 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, and other items is meaningful because it provides insight with respect to the intrinsic
operating results of VPG. The accounting policies of the segments are the same as those described in the summary of
significant accounting policies (see Note 1). Reporting segment assets are the owned or allocated assets used by each segment.
Products are transferred between segments on a basis intended to reflect, as nearly as practicable, the market value of the
products.
38
Note 13 – Segment and Geographic Data (continued)
The following table sets forth reporting segment information (in thousands):
2020
Net third-party revenues
Intersegment revenues
Gross profit
Segment operating income (loss)
Impairment of goodwill and indefinite-lived intangibles
Restructuring costs
Depreciation and amortization expense
Capital expenditures
Total assets
2019
Net third-party revenues
Intersegment revenues
Gross profit
Segment operating income (loss)
Acquisition costs
Executive severance costs
Restructuring costs
Depreciation and amortization expense
Capital expenditures
Total assets
2018
Net third-party revenues
Intersegment revenues
Gross profit
Segment operating income (loss)
Impairment of goodwill and indefinite-lived intangibles
Restructuring costs
Depreciation and amortization expense
Capital expenditures
Total assets
Foil
Technology
Products
Force
Sensors
Weighing
and
Control
Systems
Corporate/
Other
Total
$ 131,645 $ 53,724 $ 84,443 $
— $ 269,812
3,183
52,025
29,870
2,440
572
5,840
22,032
—
13,582
4,756
—
108
2,367
1,211
446
(3,629)
—
38,664
18,768
—
104,271
(30,737)
22,657
—
156
2,964
1,071
—
82
1,336
13
2,440
918
12,507
24,327
157,120
63,461
157,840
23,466
401,887
$ 131,803 $ 64,357 $ 87,798 $
— $ 283,958
4,067
53,292
29,873
—
—
86
5,870
7,011
1,068
18,022
8,643
—
—
2,041
2,442
2,237
463
(5,598)
—
40,303
21,058
443
—
—
2,200
1,243
—
111,617
(30,926)
28,648
—
611
166
1,283
38
443
611
2,293
11,795
10,529
116,920
75,885
158,597
19,011
370,413
$ 141,009 $ 73,186 $ 85,599 $
— $ 299,794
3,878
61,562
38,404
2,820
—
5,173
9,239
1,365
20,001
10,514
—
289
2,323
2,483
577
(5,820)
—
39,704
20,508
—
—
2,121
1,370
—
121,267
(32,203)
37,223
—
—
1,014
147
2,820
289
10,631
13,239
132,918
82,637
95,954
14,874
326,383
F-39
Note 13 – Segment and Geographic Data (continued)
The “Corporate/Other” column for segment operating income (loss) includes unallocated selling, general, and administrative
expenses and certain items which management excludes from segment results when evaluating segment performance, as
follows (in thousands):
Years ended December 31,
2019
2020
2018
Unallocated selling, general, and administrative expenses
$
(27,379) $
(27,579) $
(29,094)
Acquisition costs
Impairment of goodwill and indefinite-lived intangibles
Executive severance costs
Restructuring costs
—
(2,440)
—
(918)
(443)
—
(611)
(2,293)
—
(2,820)
—
(289)
$
(30,737) $
(30,926) $
(32,203)
The following geographic data includes property and equipment based on physical location (in thousands):
Property and Equipment - Net
United States
United Kingdom
Other Europe
Israel
Asia
Canada and Other
December 31,
2020
2019
$
11,036 $
12,009
4,153
1,813
38,339
17,953
1,722
$
75,016 $
4,011
1,498
22,903
19,118
1,731
61,270
F-40
Note 14 – Earnings Per Share
Basic earnings per share are computed using the weighted average number of common shares outstanding during the periods
presented. Diluted earnings per share is computed using the weighted average number of common shares outstanding, adjusted
to include the potentially dilutive effect of stock options and restricted stock units (see Note 10), and other potentially dilutive
securities.
The following table sets forth the computation of basic and diluted earnings per share attributable to VPG stockholders (in
thousands, except earnings per share):
Numerator:
Numerator for basic earnings per share:
Net earnings attributable to VPG stockholders
Adjustment to the numerator for net earnings:
Interest savings assuming conversion of dilutive exchangeable notes,
net of tax
Numerator for diluted earnings per share:
Net earnings attributable to VPG stockholders
Denominator:
Denominator for basic earnings per share:
Weighted average shares
Effect of dilutive securities:
Exchangeable notes
Restricted stock units
Dilutive potential common shares
Denominator for diluted earnings per share:
Adjusted weighted average shares
Basic earnings per share attributable to VPG stockholders
Diluted earnings per share attributable to VPG stockholders
Note 15 – Additional Financial Statement Information
Years ended December 31,
2019
2020
2018
$
10,787 $
22,188 $
23,646
—
—
6
$
10,787 $
22,188 $
23,652
13,566
13,515
13,439
—
57
57
—
82
82
22
74
96
13,623
13,597
13,535
$
$
0.80 $
1.64 $
1.76
0.79 $
1.63 $
1.75
The caption “Other” on the consolidated statements of operations consists of the following (in thousands):
Foreign exchange loss
Interest income
Pension expense
Other
Years ended December 31,
2019
2020
2018
$
(2,246) $
(1,638) $
246
(738)
(244)
622
(643)
958
(279)
506
(1,682)
(41)
$
(2,982) $
(701) $
(1,496)
F-41
Note 15 – Additional Financial Statement Information (continued)
Foreign currency exchange gains and losses represent the impact of changes in foreign currency exchange rates. The change in
foreign exchange gains / (losses) during the period, as compared to the prior year period, is primarily due to fluctuations in the
Israeli shekel. The change in the dollar-shekel exchange rate, particularly in the fourth quarter of 2020, resulted in an
unfavorable foreign exchange impact primarily related to the shekel-denominated lease liability for a new Foil Technology
Products facility in Israel.
Pension expense represents the net periodic benefit cost excluding the service cost. In 2018, the Company recognized a
settlement loss of $0.7 million related to measures taken to de-risk the UK pension schemes as discussed in Note 9 to the
consolidated financial statements.
Included in Other for the year ended December 31, 2019, is a one-time $0.8 million gain on liquidation of one of the Company's
subsidiaries.
Other accrued expenses consist of the following (in thousands):
Customer advance payments
Accrued restructuring
Goods received, not yet invoiced
Accrued taxes, other than income taxes
Accrued commissions
Accrued professional fees
Other
Israeli Severance Pay
December 31,
2020
2019
$
2,873 $
63
2,553
1,223
2,144
638
4,349
4,561
604
1,561
1,167
2,149
1,082
5,002
$
13,843 $
16,126
The Israeli Severance Pay Law, 1963 ("Severance Pay Law"), specifies that employees of our Israeli subsidiary are entitled to
severance payment, following the termination of their employment. Under the Severance Pay Law, the severance payment is
calculated as one month salary for each year of employment, or a portion thereof.
Part of the subsidiary's liability for severance pay is covered by the provisions of Section 14 of the Severance Pay Law
("Section 14"). Under Section 14, employees are entitled to monthly deposits, at a rate of 8.33% of their monthly salary,
contributed on their behalf to their insurance funds. Payments in accordance with Section 14 release the subsidiary from any
future severance payments in respect of those employees. As a result, the Company does not recognize any liability for
severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company's balance
sheet.
For the subsidiary's employees in Israel who are not subject to Section 14, the Company calculated the liability for severance
pay pursuant to the Severance Pay Law based on the most recent salary of these employees multiplied by the number of years
of employment as of the balance sheet date. The Company recorded as expenses the increase in the severance liability, net of
earnings (losses) from the related investment fund. The subsidiary's liability was partially funded by monthly payments
deposited with insurers and the value of these deposits is recorded as an asset on the Company's balance sheet. Any unfunded
amounts would be paid from operating funds and are covered by a provision established by the subsidiary. The accompanying
consolidated balance sheets at December 31, 2020 and December 31, 2019 include a $8.3 million and $8.0 million liability,
respectively, associated with Israeli severance requirements in other liabilities.
Executive Severance
During the second fiscal quarter of 2019, the Company recorded $0.6 million of severance costs associated with the resignation
of an executive officer of the Company. The severance costs consisted of payments and other benefits as specified in the
executive officer's separation agreement.
F-42
Note 16 – Fair Value Measurements
ASC Topic 820, Fair Value Measurements and Disclosures, 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 tables provide the financial assets and liabilities carried at fair value measured on a recurring basis (in
thousands):
As of December 31, 2020
Assets:
Assets held in rabbi trusts
As of December 31, 2019
Assets:
Assets held in rabbi trusts
Fair value measurements at reporting date
using:
Level 2
Inputs
Level 1
Inputs
Level 3
Inputs
Total Fair
Value
$
5,601 $
61 $
5,540 $
—
Fair value measurements at reporting date
using:
Level 2
Inputs
Level 1
Inputs
Level 3
Inputs
Total Fair
Value
$
5,169 $
53 $
5,116 $
—
The Company maintains nonqualified trusts, referred to as “rabbi” trusts, to fund payments under deferred compensation and
nonqualified pension plans. Rabbi trust assets consist primarily of marketable securities, classified as available-for-sale money
market funds at December 31, 2020 and December 31, 2019, 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 year. 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 marketable securities held in the rabbi trust is 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 December 31, 2020 and December 31,
2019 approximates its carrying value, as the revolving debt and term loans are reset monthly based on current market rates, plus
a base rate as specified in the 2020 Credit Agreement. The fair value measurement of long-term debt is considered a Level 2
measurement.
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 balance sheets approximate
their fair values.
F-43
Note 17 – Related Party Transactions
Until July 6, 2010, VPG was part of Vishay Intertechnology, and the assets and liabilities consisted of those that Vishay
Intertechnology attributed to its precision measurement and foil resistor businesses. Following the spin-off on July 6, 2010,
VPG is an independent, publicly-traded company, and Vishay Intertechnology does not retain any ownership interest in VPG,
although a common group of stockholders control a significant portion of the voting power of each company and the companies
have three common board members.
Subsequent to the spin-off, VPG and Vishay Intertechnology continue to share certain manufacturing locations. VPG owns one
location in Japan at which it leases space to Vishay Intertechnology. Vishay Intertechnology owns one location in the United
States, at which it leases space to VPG. Lease receipts and payments related to the shared facilities are immaterial.
Note 18 – Subsequent Events
Executive RSU grant
On March 4 2021, VPG’s three current executive officers were granted annual equity awards in the form of RSUs, of which
50% are performance-based and 50% are time-based. The awards have an aggregate target grant-date fair value of $1.7 million
and were comprised of 52,486 RSUs. The time-based awards will vest on January 1, 2024, subject to the executives continued
employment. The performance-based awards will also vest on January 1, 2024, 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.
F-44
Note: Name of Subsidiaries are indented under name of its parent. Subsidiaries are wholly owned unless otherwise noted.
(Director's or other share required by statute in foreign jurisdictions and totaling less than 1% of equity are omitted).
SUBSIDIARIES OF THE REGISTRANT
EXHIBIT 21.1
Vishay Precision Foil, Inc.
Vishay Precision Foil GmbH
Vishay Measurements Group GmbH
Powertron GmbH
Vishay Measurements Group, Inc.
Vishay Transducers, Ltd. (a)
Vishay Transducers India Private Limited
Pharos de Costa Rica, S.A.
Vishay Celtron Technologies, Inc.
Vishay Precision España S.L.
Vishay Precision Asia Investments Pte., Ltd.
Vishay Precision Measurement Trading (Shanghai) Co., Ltd.
Vishay Celtron (Tianjin) Technologies Co., Ltd.
Vishay Precision Foil K.K.
Alpha Electronics Corp.
Pacific Instruments, Inc.
DSI Holdings DE Inc.
Dynamic Systems Inc.
DSI Europe GmbH
Vishay Precision Israel Ltd.
Vishay Measurements Group UK Ltd.
Vishay Advanced Technologies Ltd.
Vishay Precision Transducers India Private Limited
Vishay Measurements Group France S.A.S.
SCI Vijafranc
VPG Systems UK, Ltd.
Vishay Precision Group Canada ULC (b)
Vishay PM Onboard (Ireland) Limited
Vishay Waste Collections Systems B.V.
Vishay Waste Collections Systems NV
Vishay PME France SARL
Vishay PM Onboard Limited
Vishay Nobel AB
Vishay Nobel AS
(a)
(b)
Registrant has a direct ownership interest of 62% in Vishay Transducers, Ltd.
VPG Systems UK, Ltd. owns 80% and Vishay Transducers, Ltd. owns 20% of Vishay Precision Group Canada ULC
Delaware
Germany
Germany
Germany
Delaware
Delaware
India
Costa Rica
Taiwan
Spain
Singapore
China
China
Japan
Japan
California
Delaware
New York
Germany
Israel
England and Wales
Israel
India
France
France
England and Wales
Canada
Ireland
Netherlands
Belgium
France
England and Wales
Sweden
Norway
CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
EXHIBIT 23.1
We consent to the incorporation by reference in Registration Statement Nos. 333-168256, 333-187211 and 333-196245 on
Form S-8 of our reports dated March 11, 2021, relating to the financial statements of Vishay Precision Group, Inc. (the
"Company") and the effectiveness of the Company’s internal control over financial reporting appearing in this Annual Report
on Form 10-K for the year ended December 31, 2020.
Brightman Almagor Zohar & Co.
A Firm in the Deloitte Global Network
Tel Aviv, Israel
March 11, 2021
Exhibit 23.2
We consent to the incorporation by reference in the following Registration Statements:
Consent of Independent Registered Public Accounting Firm
1) Registration Statement (Form S-8 No. 333-168256) pertaining to the Vishay Precision Group, Inc. 2010 Stock
Incentive Program,
2) Registration Statement (Form S-8 No. 333-187211) pertaining to the Vishay Precision Group, Inc. Deferred
Compensation Plan, and
3) Registration Statement (Form S-8 No. 333-196245) pertaining to the Vishay Precision Group, Inc. 2010 Stock
Incentive Program (as amended);
of our report dated March 14, 2019, with respect to the consolidated financial statements of Vishay Precision Group, Inc.
included in this Annual Report (Form 10-K) of Vishay Precision Group, Inc. for the year ended December 31, 2020.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
March 11, 2021
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.1
I, Ziv Shoshani, certify that:
1.
I have reviewed this Form 10-K of Vishay Precision Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Dated: March 11, 2021
/s/ Ziv Shoshani
Ziv Shoshani
Chief Executive Officer
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.2
I, William M. Clancy, certify that:
1.
I have reviewed this Form 10-K of Vishay Precision Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Dated: March 11, 2021
/s/ William M. Clancy
William M. Clancy
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report of Vishay Precision Group, Inc. (the “Company”) on Form 10-K for the fiscal year ended
December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ziv Shoshani,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 11, 2021
/s/ Ziv Shoshani
Ziv Shoshani
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the Annual Report of Vishay Precision Group, Inc. (the “Company”) on Form 10-K for the fiscal year ended
December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William M.
Clancy, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 11, 2021
/s/ William M. Clancy
William M. Clancy
Chief Financial Officer
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Vishay Precision Group, Inc.
Three Great Valley Parkway, Suite 150
Malvern, PA 19355
Phone: 484-321-5300
Fax: 484-321-5301
BR92835K-0321-10K