Overview

VPG is a global, diversified company focused on precision measurement sensing
technologies, including specialized sensors, weighing solutions, and measurement
systems. Many of our precision measurement sensing products and solutions are
"designed-in" by our customers, and address growing applications across a
diverse array of industries and markets. 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, and we employ an operationally diversified
structure to manage our businesses.

Driven by the continued proliferation of data generated by the expanding use of
sensors across a widening array of industrial and non-industrial applications,
precision measurement technologies help ensure and deliver required levels of
quality of mission-critical or high-value data. Over the past few years, we have
seen a broadening of precision sensing applications in both our traditional
industrial markets and new markets, due to the development of higher
functionality in our customers' end products. Our precision measurement
solutions are used across a wide variety of end markets upon which we focus,
including industrial, test and measurement, transportation, steel, medical,
agriculture, avionics, military and space, and consumer product applications.
The Company has a long heritage of innovation in sensor technologies that
provide accuracy, reliability and repeatability that make our customers'
products safer, smarter, and more productive. As the functionality of customers
products increases, and they integrate more precision measurement sensors and
related systems into their solutions in order to link the mechanical and
physical world with digital control and/or response, we believe this will offer
substantial growth opportunities for our products and expertise.

Impact of COVID-19 on our business

As of March 4, 2022, 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 adversely affect the Company's business and
financial results in future periods.

Overview of financial results

In the fourth quarter of fiscal 2021, we formally adopted an operationally
diversified structure and strategy, through which each of VPG's business
segments maintains and deploys distinct go-to-market strategies, technical
expertise, capital requirements, and acquisition opportunities. We use an
operationally diversified strategy and structure to be close to our customers
and to leverage our high-level engineering expertise to optimize and enhance the
performance of our customers' solutions. We seek to maximize the performance and
value of our businesses by leveraging our accumulated experience, methodologies,
and expertise in driving operational excellence across our functional areas, as
well as in the allocation of capital and investment.

VPG reports in three product segments: Sensors segment, Weighing Solutions
segment, and Measurement Systems segment. The Sensors reporting segment is
comprised of the foil resistor and strain gage operating segments. The Weighing
Solutions segment is comprised of specialized modules and systems used to
precisely measure weight, force torque, and pressure. The Measurement Systems
reporting segment is comprised of highly specialized systems for steel
production, materials development, and safety testing.

Net revenues for the year ended December 31, 2021 were $317.9 million compared
to net revenues of $269.8 million for the year ended December 31, 2020. Net
earnings attributable to VPG stockholders for the year ended December 31, 2021
were $20.2 million, or $1.48 per diluted share, compared to $10.8 million, or
$0.79 per diluted share, for the year ended December 31, 2020.

The results of operations for the years ended December 31, 2021 and 2020 include
items affecting comparability as listed in the reconciliations below. The
reconciliations below include certain financial measures which are not
recognized in accordance with U.S. generally accepted accounting principles
("GAAP"), including adjusted gross profits, adjusted gross profit margin,
adjusted operating income, adjusted operating margin, adjusted net earnings,
adjusted net earnings per diluted share, EBITDA, and adjusted EBITDA. These
non-GAAP measures should not be viewed as an alternative to GAAP measures of
performance. Non-GAAP measures such as adjusted gross profits, adjusted gross
profit margin, adjusted operating income, adjusted operating margin, adjusted
net earnings, adjusted net earnings per diluted share, EBITDA, and adjusted
EBITDA do not have uniform definitions. These measures, as calculated by VPG,
may not be comparable to similarly titled measures used by other companies.
Management believes that these non-GAAP measures are useful to investors because
each presents what management views as our core operating results for the
relevant period. The adjustments to the applicable GAAP measures relate to
occurrences or events that are outside of our core operations, and management
believes that the use of these non-

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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.

The items affecting comparability are (dollars in thousands, except per share
amounts):

                                                                                                               Net Earnings Attributable to
                                             Gross Profit                       Operating Income                     VPG Stockholders               Diluted Earnings Per share
Fiscal Year Ended December 31,          2021               2020              2021              2020               2021               2020              2021             2020
As reported - GAAP                    125,142            104,271            27,372            22,657          $   20,221          $ 10,787          $   1.48          $ 0.79
As reported - GAAP Margins               39.4  %            38.6  %            8.6  %            8.4  %
Acquisition purchase accounting
adjustments (a)                         2,775                569             2,775               569               2,775               569              0.20            0.04
Acquisition costs (b)                                                        1,198                 -               1,198                 -              0.09               -
COVID-19 impact (c)                       (66)               434              (574)             (366)               (574)             (366)            (0.04)          (0.03)
Start-up costs (d)                      3,174                  -             3,174                 -               3,174                 -              0.23               -
Impairment of goodwill and
indefinite-lived intangibles                                                 1,223             2,440               1,223             2,440              0.09            0.18
Restructuring costs                                                             76               918                  76               918              0.01            0.07
Foreign exchange (gain)/loss (e)                                                                                     109             2,246              0.01            0.16
Less: Tax effect of reconciling
items and discrete tax items (f)                                                                                   2,596            (1,381)             0.20           (0.11)
As Adjusted - Non GAAP              $ 131,025          $ 105,274          $

35,244 $26,218 $25,606 $17,975 $1.87 $1.32
As adjusted – Non-GAAP margins

           41.2  %            39.0  %           11.1  %            9.7  %


                                                                                     Year ended
                                                                     December 31, 2021         December 31, 2020
Net earnings attributable to VPG stockholders                       $         20,221          $         10,787
Interest Expense                                                               1,230                     1,366
Income tax expense                                                             5,469                     7,509
Depreciation                                                                  11,684                    10,064
Amortization                                                                   3,312                     2,443
EBITDA                                                              $         41,916          $         32,169
EBITDA MARGIN                                                                   13.2  %                   11.9  %
Impairment of goodwill and indefinite-lived intangibles                        1,223                     2,440
Acquisition purchase accounting adjustments (a)                                2,775                       569
Acquisition costs (b)                                                          1,198                         -
Restructuring costs                                                               76                       918
COVID-19 impact (c)                                                             (574)                     (366)
Start-up costs (d)                                                             3,174                         -
Foreign exchange loss (e)                                                        109                     2,246
ADJUSTED EBITDA                                                               49,897                    37,976
ADJUSTED EBITDA MARGIN                                                          15.7  %                   14.1  %

(a) Acquisition-related accounting adjustments include fair market value adjustments associated with inventory recognized as a component of cost of goods sold.

(b) Acquisition costs related to the acquisition of DTS in 2021.

(c) The impact of COVID-19 corresponds to the net impact for the Company of the costs incurred due to the COVID-19 pandemic, net of government subsidies received.

(d) Start-up costs in 2021 are associated with the ramp-up of our new manufacturing facility in Israel.

(e)  Impact of foreign currency exchange rates on assets and liabilities. In
2020, 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 facility in Israel.

(f) Included in the discrete items for 2021 is a $1.6 million the tax benefit related to the acquisition of DTS and in 2020 is a $1.7 million tax charge related to the acquisition of DSI.

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Financial measures

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 2020 and through
the fourth quarter of 2021 (dollars in thousands):

                         4th Quarter       1st Quarter      2nd Quarter      3rd Quarter      4th Quarter
                             2020             2021             2021             2021             2021
Net revenues            $    75,445       $   70,589       $   75,339       $   81,974       $   90,017

Gross profit margin            38.1  %          40.5  %          39.6  %          38.8  %          38.7  %

End-of-period backlog   $    87,600       $  100,700       $  130,900       $  146,700       $  150,500

Book-to-bill ratio             0.93             1.21             1.40             1.21             1.06

Inventory turnover             2.86             2.67             2.64             2.55             2.82


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                                       4th Quarter          1st Quarter          2nd Quarter          3rd Quarter          4th Quarter
                                           2020                 2021                 2021                 2021                 2021
Sensors
Net revenues                          $    31,875          $    31,815          $    31,176          $    30,721          $    34,149
Gross profit margin                          37.5  %              40.3  %              38.9  %              31.1  %              32.1  %
End-of-period backlog                 $    42,800          $    47,400          $    59,200          $    70,100          $    72,900
Book-to-bill ratio                           0.93                 1.19                 1.38                 1.37                 1.11
Inventory turnover                           3.22                 3.06                 2.90                 3.14                 3.53
Weighing Solutions
Net revenues                          $    29,546          $    30,968          $    31,675          $    30,676          $    32,071
Gross profit margin                          33.3  %              38.0  %              37.2  %              37.2  %              34.0  %
End-of-period backlog                 $    31,000          $    35,700          $    41,100          $    42,600          $    41,800
Book-to-bill ratio                           1.10                 1.16                 1.16                 1.06                 0.98
Inventory turnover                           2.81                 2.89                 2.78                 2.47                 2.63
Measurement Systems
Net revenues                          $    14,024          $     7,806          $    12,488          $    20,577          $    23,797
Gross profit margin                          49.5  %              51.4  %              47.1  %              52.8  %              54.7  %
End-of-period backlog                 $    13,800          $    17,600          $    30,600          $    34,000          $    35,800
Book-to-bill ratio                           0.56                 1.48                 2.03                 1.18                 1.08
Inventory turnover                           2.26                 1.32                 1.85                 1.92                 2.18


Net revenues for the fourth quarter of 2021 increased 9.8% from the net revenues
of $82.0 million reported in the third quarter of 2021, and increased 19.3% from
$75.4 million for the comparable prior year period.

Net revenues in the Sensors segment of $34.1 million in the fourth quarter of
2021 increased 11.2% from $30.7 million in the third quarter of 2021, and
increased 7.1% from $31.9 million in the fourth quarter of 2020. The year over
year increase in revenues was primarily attributable to an increase in our sales
of precision resistors in the test and measurement and other markets, partially
offset by lower sales in the avionics, military and space market. Sequentially,
the increase in revenues reflected higher precision resistor sales in the test
and measurement and avionics, military and space markets, and an increase mainly
in our advanced sensors product line, primarily in our consumer-related markets.

Net revenues in the Weighing Solutions segment of $32.1 million in the fourth
quarter of 2021 increased 4.5% compared to revenues of $30.7 million in the
third quarter of 2021. The sequential increase in revenues was primarily
attributable to higher sales in the process weighing product lines, partially
offset by lower sales in our on-board weighing product lines. Net revenues in
the fourth quarter of 2021 increased 8.5% compared to $29.5 million in the
fourth quarter of 2020 mainly due to an increase in our OEM customers in the
construction equipment market and an increase in our process weighing product
line, partially offset by lower sales of our on-board weighing product lines.

Net revenues in the Measurement Systems segment of $23.8 million in the fourth
quarter of 2021 increased 15.6% from $20.6 million in the third quarter of 2021
and increased 69.7% from $14.0 million in the fourth quarter of 2020. The
sequential increase in revenue was primarily attributable to higher KELK steel
related sales and DTS products. The year-over-year increase in revenues was
primarily attributable to the acquisition of DTS and higher KELK and DSI
steel-related sales.

Gross profit margin for the fourth quarter of 2021 decreased by 0.1% compared to the third quarter of 2021 and increased by 0.6% compared to the fourth quarter of 2020.

Sequentially, gross profit margins improved in the Sensors and Measurement
Systems segments and decreased in the Weighing Solutions segment. In the Sensors
segment, the increase in gross profit margin was primarily due to an increase in
volume, partially offset by unfavorable foreign exchange rates, wage increases,
and labor inefficiencies. In the Weighing Solutions segment, the decline in
gross profit margin was primarily due to an unfavorable product mix, reduction
of inventory, and higher material costs, partially offset by an increase in
volume. In the Measurement Systems segment, gross profit margin increased due to
higher volume, which was partially offset by unfavorable product mix and
inventory reductions.

Compared to the fourth quarter of 2020, gross profit margins decreased in the
Sensors segment and increased in the Weighing Solutions and Measurement Systems
segments. In the Sensors segment, the decrease in gross profit margin was
primarily due

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to unfavorable foreign exchange rates, wage increases, and labor inefficiencies,
partially offset by an increase in volume. In the Weighing Solutions segment,
the increase in gross profit margin was primarily due to higher volume. In the
Measurement Systems segment, gross profit margin increased primarily due to
higher revenue coming from DTS, which was acquired on June 1, 2021.

Optimize base skill

The Company's core competencies include our innovative deep technical and
applications-specific expertise to add value to our customers' products, our
strong brands and customer relationships, our focus on operational excellence,
our ability to select and develop our management teams, and our proven M&A
strategy. We continue to optimize all aspects of our development, manufacturing
and sales processes, including by increasing our technical sales efforts;
continuing to innovate in product performance and design; and refining our
manufacturing processes.

Our Sensors segment research group developed innovations that enhance the
capability and performance of our strain gages, while simultaneously reducing
their size and power consumption as part of our advanced sensors product line.
We believe this unique foil technology will create new markets as customers
"design in" these next generation products in existing and new applications. Our
development engineering team is also responsible for creating new processes to
further automate manufacturing, and improve productivity and quality. Our
advanced sensors manufacturing technology also offers us the capability to
produce high-quality foil strain gages in a highly automated environment, which
we believe results in reduced manufacturing and lead times, improved quality and
increased margins. As a sign of our commitment to these businesses, we signed a
long-term lease for a state-of-the-art facility that has been constructed in
Israel. We fully transitioned to this facility in the third quarter of fiscal
2021.

Our design, research, and product development teams, in partnership with our
marketing teams, drive our efforts to bring innovations to market. We intend to
leverage our insights into customer demand to continually develop and roll out
new, innovative products within our existing lines and to modify our existing
core products in ways that make them more appealing, addressing changing
customer needs and industry trends in terms of form, fit, and function.

We also seek to achieve significant production cost savings through the
transfer, expansion, and construction of manufacturing operations in countries
such as India, China, and Israel, where we can benefit from improved
efficiencies or available tax and other government-sponsored incentives. In the
past several years, we incurred restructuring expense related to closing and
downsizing of facilities as part of the manufacturing transitions of our load
cell products to facilities in India and China, which marked key milestones in
our ongoing strategic initiatives to align and consolidate our manufacturing
footprint.

Acquisition Strategy

We expect to continue to make strategic acquisitions where opportunities present
themselves to grow and expand our segments. Historically, our growth and
acquisition strategy had been largely focused on vertical product integration,
using our foil strain gages in our load cell products, and incorporating those
products into our weighing solutions. In recent years, we widened our
acquisition strategy to include a broader set of precision measurement systems
and product companies.

We expect to expand our expertise, and our acquisition focus, outside our
traditional vertical approach to other precision measurement solutions,
including in the fields of measurement of force, weight, pressure, torque, tilt,
motion, and acceleration. We believe acquired businesses will benefit from
improvements we implement to reduce redundant functions and from our current
global manufacturing and distribution footprint.

Research and development

Research and development will continue to play a key role in our efforts to introduce innovative products to generate new sales and improve profitability. We plan to continue to expand our position as a leading supplier of precision sheet technology products. We believe that our R&D efforts should provide us with a variety of opportunities to leverage technology, products and our manufacturing base to ultimately improve our financial performance. The amount allocated to cumulative research and development expenses $17.2 million, $12.6 millionand $12.1 million for the years ended December 31, 20212020 and 2019, 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.

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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 $0.1 million, $0.9 million, and $2.3
million during the years ended December 31, 2021, 2020, and 2019, respectively.
In 2021 and 2020, 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.

Foreign subsidiaries that use the local currency as their 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 subsidiaries whose local currency is the functional currency, revenues and expenses are converted at the average exchange rate for the year. While the translation of income and expenditure into we dollars has no direct impact on the consolidated statements of income, the conversion effectively increases or decreases the we the dollar equivalent of revenues generated and expenses incurred in such foreign currencies.

Foreign subsidiaries that use the we The dollar as a 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.

Exchange rate effects on transactions

For the year ended December 31, 2021, exchange rate impacts increased net
revenues by $5.3 million and increased costs of products sold and selling,
general, and administrative expenses by $8.7 million. For the year ended
December 31, 2020, exchange rate impacts increased net revenues by $0.9 million
and increased costs of products sold and selling, general, and administrative
expenses by $2.8 million.

Significant Accounting Policies and Estimates

Our significant accounting policies are summarized in Note 1 to our consolidated financial statements. Here we identify a number of policies that involve significant management judgments or estimates.

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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. Different valuations approaches are used to value different
types of intangible assets. The Company primarily uses the income approach in
the valuation of intangible assets. The income approach to valuation is based on
the present value of future cash flows attributable to each identifiable
intangible asset. This approach to valuation requires management to make
significant estimates and assumptions including but not limited to: discount
rates, future cash flows and the economic lives of trade names, technology, and
customer relationships. These estimates are based on historical experience and
information obtained from the management of the acquired companies, and are
inherently uncertain.
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.

At the beginning of 2021, we had five reporting units to which goodwill was
allocated: steel, on-board weighing, instrumentation, DSI, and DTS. 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.

During the second quarter of 2021, due to updated financial projections, we
performed a quantitative impairment test on our instrumentation reporting unit's
goodwill and indefinite-lived intangible trade name. Based on this review, we
recorded an impairment charge which eliminated that remaining goodwill
associated with this reporting unit and reduced the value of the
indefinite-lived trade-name.

For the DSI goodwill reporting unit, the Company performed the quantitative
impairment test. In estimating the fair value of our DSI reporting unit the
Company used 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 goodwill and indefinite-lived trade name allocated the DTS goodwill
reporting unit is still provisional as of December 31, 2021 and therefore will
be tested in the following year's annuals impairment test.

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 post-employment 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

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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 88% of our
retirement obligations at December 31, 2021. 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.

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, 2021, 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
$22.5 million would be payable upon the distribution of the balance of our
previously unremitted earnings at December 31, 2021. 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 income tax information is included in Note 6 to our Consolidated Financial Statements.

                                     - 34 -

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Results of operations – Years ended December 31, 20212020 and 2019

Results of operations by business segment for the years ended December 31, 2020 and 2019 have been restated to reflect the new reporting segments, as described in section 7. Overview of financial results.

The captions for the income statement as a percentage of net income and effective tax rates were as follows:

                                                            Years ended December 31,
                                                          2021                2020        2019
Costs of products sold                                           60.6  %     61.4  %     60.7  %
Gross profit                                                     39.4  %     38.6  %     39.3  %
Selling, general, and administrative expenses                    30.0  %     29.0  %     28.0  %
Operating income                                                  8.6  %      8.4  %     10.1  %
Income before taxes                                               8.2  %      6.8  %      9.3  %
Net earnings                                                      6.4  %      4.0  %      7.9  %
Net earnings attributable to VPG stockholders                     6.4  %      4.0  %      7.8  %

Effective tax rate                                               21.1  %     41.0  %     15.7  %


Net Revenues

Net revenues were as follows (in thousands of dollars):

                                                Years ended December 31,
                                           2021            2020           2019
Net revenues                           $ 317,919       $ 269,812       $ 283,958
Change versus prior year               $  48,107       $ (14,146)

Percentage change from prior year 17.8% (5.0)%

The variations in net income are attributable to the following items:

                                     2021 vs. 2020      2020 vs. 2019
Change attributable to:
Change in volume                             7.8  %           (10.0) %
Change in average selling prices             0.5  %             0.3  %
Foreign currency effects                     2.4  %             0.2  %
Acquisitions                                 7.1  %             4.5  %

Net change                                  17.8  %            (5.0) %


During the year ended December 31, 2021, net revenues increased 17.8% over the
prior year. Volume increased across all reporting segments, with the most
significant increase coming from the industrial weighing, transportation, and
other markets in the Weighing Solutions reporting segment. Net revenues in the
Measurement Systems segment increased mainly due to the acquisition of DTS on
June 1, 2021.

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 the Weighing
Solutions reporting segment, the transportation market and KELK for the steel
market in the Measurement Systems reporting segment, and the precision resistor
foil for the test and measurement market in the Sensors reporting segment. This
was partially offset by an increase in revenues attributable to the addition of
DSI in the Measurement Systems reporting segment.


                                     - 35 -

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Gross margin

Gross margin as a percentage of net revenue was as follows:

                                  Years ended December 31,
                                2021                2020        2019
Gross profit margin                    39.4  %     38.6  %     39.3  %


The gross profit margin for the year ended December 31, 2021 increased 0.8% over
the prior year. The increase in gross profit margin was primarily due to
improved gross profit margins in the Weighing Solutions and Measurement Systems
reporting segments, partially offset by decreased gross profit margins in the
Sensors reporting segment, which were impacted by start-up costs association
with the new manufacturing facility in Israel.

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 Weighing Solutions and Measurement Systems reporting segments, and
negative impacts of foreign currency exchange rates of $1.0 million, partially
offset by manufacturing efficiencies, primarily from the Sensors reporting
segment.

segments

The revenue and gross profit margin analysis for our reportable segments is shown below.

Sensors

The net revenues of the Sensors segment were as follows (in thousands of dollars):

                                                Years ended December 31,
                                           2021            2020           2019
Net revenues                           $ 127,861       $ 120,754       $ 121,827
Change versus prior year               $   7,107       $  (1,073)

Percentage change from previous year 5.9% (0.9)%

Changes in the Sensors segment’s net revenues are attributable to the following items:

                                    2021 vs. 2020      2020 vs. 2019
Change attributable to:
Change in volume                            4.5  %            (1.8) %
Change in average selling prices            0.8  %             0.4  %
Foreign currency effects                    0.6  %             0.5  %

Net change                                  5.9  %            (0.9) %


For the year ended December 31, 2021, net revenues increased 5.9% as compared to
the prior year, due to increases in our net revenues from the advanced sensors
product line, primarily in our test and measurement and general industrial
markets and in net revenues from our precision resistor products in the test and
measurement market. These increases were partially offset by declines in net
revenues from our precision resistor products in our avionics, military and
space market and net revenues from strain gage products in our other markets.

For the year ended December 31, 2020, net revenues decreased 0.9% 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 Sensors segment was as
follows:

                                    Years ended December 31,
                                  2021                2020        2019
Gross profit margin                      35.6  %     39.3  %     40.4  %


                                     - 36 -
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For the year ended December 31, 2021, the gross profit margin decreased 3.7% as
compared to the prior year primarily due to manufacturing inefficiencies with
the start-up up our new production facility in Israel.

For the year ended December 31, 2020, the gross profit margin decreased 1.1% 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.

Weighing Solutions

Net revenues of the Weighing Solutions segment were as follows (dollars in
thousands):

                                               Years ended December 31,
                                          2021            2020           2019
Net revenues                          $ 125,390       $ 101,386       $ 119,854
Change versus prior year              $  24,004       $ (18,468)

Percentage change from previous year 23.7% (15.4)%


Changes in Weighing Solutions segment net revenues were attributable to the
following:

                                     2021 vs. 2020      2020 vs. 2019
Change attributable to:
Change in volume                            19.5  %           (15.7) %
Change in average selling prices             0.3  %             0.0  %
Foreign currency effects                     3.9  %             0.3  %

Net change                                  23.7  %           (15.4) %


For the year ended December 31, 2021, net revenues increased 23.7% from the
prior year reflecting improved volume in our force sensors products, which were
significantly impacted in 2020 by production limitations due to the COVID-19
pandemic. During 2020, our manufacturing facility in India operated at partial
capacity as a result of government mandated restrictions until July 1, 2020,
when restrictions were lifted. Our on-board weighing products also contributed
higher volume mainly in the transportation market.

For the year ended December 31, 2020, net revenues decreased 15.4% 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 Weighing Solutions segment
was as follows:

                                  Years ended December 31,
                                2021                2020        2019
Gross profit margin                    36.6  %     31.8  %     33.9  %


For the year ended December 31, 2021, the gross profit margin increased 4.8% as
compared to the prior year primarily due to improved volume in our force sensors
and on-board weighing products.

For the year ended December 31, 2020, the gross profit margin decreased 2.1% as
compared to the prior year primarily due to volume declines resulting from the
government mandated restrictions, partially offset by cost savings initiatives.

Measurement systems

Net revenues of the Measurement Systems segment were as follows (dollars in
thousands):

                                               Years ended December 31,
                                          2021           2020           2019
Net revenues                           $ 64,668       $ 47,672       $ 42,277
Change versus prior year               $ 16,996       $  5,395

Percentage change from previous year 35.7% 12.8%

                                     - 37 -

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Changes in Measurement Systems segment net revenues were attributable to the
following:

                                     2021 vs. 2020      2020 vs. 2019
Change attributable to:
Change in volume                             1.5  %           (17.8) %
Change in average selling prices             0.3  %             0.5  %
Foreign currency effects                     4.3  %            (0.3) %
Acquisitions                                29.6  %            30.4  %

Net change                                  35.7  %            12.8  %


For the year ended December 31, 2021, net revenues increased 35.7% as compared
to the prior year. The revenues generated by DTS in our transportation market
and steel-related sales from DSI were partially offset by lower KELK
steel-related sales and lower Pacific-related sales in our avionics, military
and space market.

For the year ended December 31, 2020, net revenues increased 12.8% as compared
to the prior year. The revenues generated by DSI were partially offset by lower
volume KELK steel-related sales.

Gross profit as a percentage of net revenues for the Measurement Systems segment
was as follows:

                                  Years ended December 31,
                                2021                2020        2019
Gross profit margin                    52.2  %     51.4  %     51.5  %


For the year ended December 31, 2021, the gross profit margin increased 0.8%
from the prior year. Volume improvements partially offset the negative impacts
of the purchase accounting adjustments recorded in 2021 in connection with the
DTS acquisition.

For the year ended December 31, 2020, the gross profit margin decreased 0.1%
from the prior year. Volume declines 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):

                                            Years ended December 31,
                                       2021           2020           2019
Total SG&A expenses                 $ 95,273       $ 78,256       $ 79,622

as a percentage of net revenues 30.0% 29.0% 28.0%


SG&A expenses for the year ended December 31, 2021 increased $17.0 million as
compared to the prior year due to SG&A expenses related to the acquisition of
DTS, higher personnel costs and unfavorable foreign currency exchange rate
impacts, mainly from the Israeli shekel.

SG&A expenses for the year ended December 31, 2020 decreased $1.4 million as
compared to 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 Good will and Indefinite life intangible assets

For the year ended December 31, 2021, as a result of our interim impairment test
performed on goodwill and indefinite-lived intangible assets, we recorded a $1.2
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,
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. For the year ended December 31, 2019, there
was no impairment on goodwill and indefinite-lived intangible assets.
                                     - 38 -

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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 $0.1 million, $0.9 million, and $2.3
million during the years ended December 31, 2021, 2020, and 2019 respectively.
In 2021 and 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.

Acquisition Costs

For the year ended December 31, 2021, we recorded acquisition costs in our
consolidated statements of operations of $1.2 million in connection with the
acquisition of DTS. 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 $1.2 million, $1.4 million and $1.5
million for the years ended December 31, 2021, 2020, and 2019, respectively.
Interest expense was lower in 2021 compared to 2020 mainly due to more favorable
borrowing rates during 2021. Interest expense in 2020 was lower as 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 “Other” line of the consolidated statements of income (in thousands):

                              Years ended December 31,
                                 2021                 2020        Change
Foreign exchange loss   $      (110)               $ (2,246)     $ 2,136
Interest income                 252                     246            6
Pension expense                (468)                   (738)         270
Other                            96                    (244)         340
                        $      (230)               $ (2,982)     $ 2,752


Foreign currency exchange gains and losses represent the impact of changes in
foreign currency exchange rates. The change in foreign exchange gains / (losses)
for the year ended December 31, 2021, as compared to the prior year period, is
primarily due to fluctuations in the Israeli shekel. Additionally in 2021, there
were favorable foreign exchange impacts from the Japanese yen and the Canadian
dollar.


                                     - 39 -
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                              Years ended December 31,
                                 2020                 2019         Change
Foreign exchange loss   $      (2,246)             $ (1,638)     $   (608)
Interest income                   246                   622          (376)
Pension expense                  (738)                 (643)          (95)
Other                            (244)                  958        (1,202)
                        $      (2,982)             $   (701)     $ (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)
for the year ended December 31, 2020, as compared to the prior year period, was
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 Sensors 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, 2021 was 21.1%, as
compared to 41.0% for the year ended December 31, 2020 and 15.7% for the year
ended December 31, 2019. Our effective tax rate was lower in 2021 compared to
2020 primarily due to changes in valuation allowances as result of the
completion of purchase accounting of DSI in 2020 and the acquisition of DTS in
2021. Our effective tax rate in 2020 was higher as compared to 2019 primarily
due to a net increase in valuation allowance on deferred tax assets as a result
of our acquisition of DSI, 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 2021
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:

2021

•8.1% increase related to the effects of foreign operations primarily related to
the difference between the U.S. statutory rate and foreign tax rates.
•4.6% decrease related to a decrease in valuation allowance, primarily as a
result of the acquisition of DTS
•1.5% decrease related to state income taxes
•1.3% decrease related to specialty tax credits
2020
•13.4% increase related to an increase in valuation allowance, primarily a
result of the completion of purchase accounting for DSI
•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.

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 DSI
•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.
                                     - 40 -

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Financial position, 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, 2020 for a comparison
of the year ended December 31, 2020 to the year ended December 31, 2019.

We believe that our current cash and cash equivalents, credit facilities, and
projected cash from operations will be sufficient to meet our liquidity needs
for at least the next 12 months.

On March 20, 2020, the Company entered into a Third Amended and Restated Credit
Agreement (the "2020 Credit Agreement") among the Company, the lenders named
therein, Citizens Bank, National Association and Wells Fargo Bank, National
Association as joint lead arrangers and JPMorgan Chase Bank, National
Association as agent for such lenders (the "Agent"), pursuant to which the terms
of the Company's multi-currency, secured credit facility were revised to provide
a secured revolving facility (the "2020 Revolving Facility") in an aggregate
principal amount of $75.0 million, with a sublimit of $10.0 million which can be
used for letters of credit for the account of the Company or its subsidiaries
that are parties to the Credit Agreement. The proceeds of the 2020 Revolving
Facility may be used on an ongoing basis for working capital and general
corporate purposes. The aggregate principal amount of the 2020 Revolving
Facility may be increased by a maximum of $25.0 million upon the request of the
Company, subject to the terms of the 2020 Credit Agreement. The 2020 Credit
Agreement terminates on March 20, 2025.

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, 2021. 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 consisted of zero interest rate
debt held by one of our Japanese subsidiaries which was fully paid off in 2021.
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, 2021 was $33.5 million
as compared to $35.3 million for the year ended December 31, 2020. Our net cash
used in investing activities for the year ended December 31, 2021 was $64.0
million, which includes $47.2 million for the purchase of DTS, compared to $21.8
million for the year ended December 31, 2020. Our net cash provided by financing
activities for the year ended December 31, 2021 was $18.8 million which includes
the borrowing on the 2020 credit facility for the acquisition of DTS, as
compared to net cash used for financing activities of $5.0 million for the year
ended December 31, 2020.

Approximately 87% and 90% of our cash and cash equivalents balance at
December 31, 2021 and 2020, respectively, were held by our non-we subsidiaries. See the following table for the percentage of cash and cash equivalents, by region, at December 31, 2021 and December 31, 2020:

                                     - 41 -

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                       December 31,
                     2021          2020
Asia                     24  %      18  %
United States            13  %      10  %
Israel                   25  %      26  %
Europe                   18  %      16  %
United Kingdom           12  %      18  %
Canada                    8  %      12  %
Total                   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, 2021, to be indefinitely reinvested.

For the year ended December 31, 2021, we generated adjusted free cash flow of
$16.7 million. We define "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 ($33.5 million) in excess of our capital
expenditures ($17.1 million) and net of proceeds from the sale of assets ($0.2
million).

The following table summarizes the components of net cash as at December 31, 2021
and to December 31, 2020 (in thousands):

                                                            December 31,
                                                         2021          2020
Cash and cash equivalents                             $ 84,335      $ 98,438

Third-party debt, including current and long-term
Revolving debt                                          61,000        

41,000

Third-party debt held by Japanese subsidiary                 -            18
Deferred financing costs                                  (286)         (374)
Total third-party debt                                  60,714        40,644
Net cash                                              $ 23,621      $ 57,794


Measurements such as "adjusted free cash flow" and "net cash" do not have
uniform definitions and are not recognized in accordance with U.S. GAAP. Such
measures should not be viewed as alternatives to GAAP measures of performance or
liquidity. However, management believes that "adjusted free cash flow" is a
meaningful measure of our ability to fund acquisitions, and that an analysis of
"net cash" assists investors in understanding aspects of our cash and debt
management. These measures, as calculated by us, may not be comparable to
similarly titled measures used by other companies.

Our financial condition as of December 31, 2021 is strong, with a current ratio
(current assets to current liabilities) of 3.6 to 1.0, as compared to a current
ratio of 4.7 to 1.0 at December 31, 2020.

Cash paid for property and equipment for the year ended December 31, 2021 and
December 31, 2020 was $17.1 million and $22.9 million, respectively. Capital
spending for 2021 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 2020.
Capital expenditures for 2022 are expected to be approximately $32.4 million,
which includes approximately $11.8

                                     - 42 -

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million euros in capital goods for capacity expansion in the Sensors reporting segment and planned construction projects of approximately $13.7 million for capacity expansion, primarily in Asia.

From December 31, 2021 and 2020, we had no off-balance sheet arrangements.

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.

Forward-Looking Statements

From time to time, information provided by us, including, but not limited to,
statements in this Annual Report on Form 10-K for the fiscal year ended December
31, 2021, or other statements made by or on our behalf, may contain or
constitute "forward-looking" information within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements involve a number of
risks, uncertainties, and contingencies, many of which are beyond our control,
which may cause actual results, performance, or achievements to differ
materially from those anticipated.

Such statements (including those regarding our new corporate strategy), are
based on current expectations only, and are subject to certain risks,
uncertainties, and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, expected, estimated,
or projected. Among the factors that could cause actual results to materially
differ include: general business and economic conditions; impact of inflation,
global labor and supply chain challenges; difficulties or delays in identifying,
negotiating and completing acquisitions and integrating acquired companies; the
inability to realize anticipated synergies and expansion possibilities;
difficulties in new product development; changes in competition and technology
in the markets that we serve and the mix of our products required to address
these changes; changes in foreign currency exchange rates; political, economic,
health (including the COVID-19 pandemic) and military instability in the
countries in which we operate; difficulties in implementing our cost reduction
strategies, such as underutilization of production facilities, labor unrest or
legal challenges to our lay-off or termination plans, operation of redundant
facilities due to difficulties in transferring production to achieve
efficiencies; significant developments from the recent and potential changes in
tariffs and trade regulation; our efforts and efforts by governmental
authorities to mitigate the COVID-19 pandemic, such as travel bans,
shelter-in-place orders and business closures and the related impact on resource
allocations, manufacturing and supply chains; the Company's status as a
"critical", "essential" or "life-sustaining" business in light of COVID-19
business closure laws, orders and guidance being challenged by a governmental
body or other applicable authority; the Company's ability to execute its
business continuity, operational and budget plans in light of the COVID-19
pandemic; and other factors affecting our operations, markets, products,
services, and prices that are set forth in this Annual Report on Form 10-K for
the fiscal year ended December 31, 2021. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.

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