Wendy Wilson - Senior Director, Investor Relations and Corporate Communications Ziv Shoshani - Chief Executive Officer and President William Clancy - Executive Vice President and Chief Financial Officer.

John Franzreb - Sidoti.

Good day and welcome to the VPG fiscal first quarter results conference call. [Operator Instructions] I would now like to turn the conference over to Wendy Wilson. Please go ahead..

Thank you, Chad, and good morning, everyone. An audio recording will be made of the conference call today, including any questions or comments that you may contribute. By now you all should have received the earnings release and we hope you have taken the time to read through it, as it does contain important information.

You can find it including relevant non-GAAP reconciliations on our website. An audio recording will be available on the internet for a limited time and can be accessed on our website. The content of this conference call is owned by VPG and is protected by U.S. and International Copyright Law.

You may not make any recordings or other copies of this call and you may not reproduce, distribute, adapt, transmit, display or perform the contents of this conference call in total or in part without our written permission. Today's remarks are governed by the Safe Harbor provisions of the 1995 Private Securities Litigation Reform Act.

Actual results may turn out significantly better or worse than indicated by any forward-looking statements that we may make today. For a more complete discussion of the risks associated with VPG's operations, please refer to our SEC filings, especially the Form 10-K for the year ended December 31, 2014, and our other recent filings.

And now, it's my pleasure to introduce the host for today's call, Ziv Shoshani, CEO and President; and Bill Clancy, CFO.

Bill?.

Thanks, Wendy. Good morning, everyone, and thank you for joining us on our call today. I'd like to start by reviewing a couple of highlights, and then summarizing the financials. Following that, Ziv will provide his view of results and the global business environment.

Firs quarter revenues came in at $56.6 million, within our revised guidance announced on April 13. Revenues for the first quarter were negatively impacted by the strengthening of the U.S. dollar against all currencies.

This negative foreign currency impact had a $4.4 million effect compared to the first quarter last year, and had a $2.3 million effect sequentially. Adjusted diluted earnings per share were $0.05 versus $0.14 in the first quarter of fiscal 2014.

The overall negative impact of foreign exchange rates to pre-tax income for the quarter as compared to the first quarter of 2014 was $500,000 or $0.03 per diluted share. Now, a few highlights. For the quarter we reported net revenues of $56.6 million, a 7.3% decrease from $61.0 million for the prior-year period.

As I mentioned, net revenues were negatively impacted by the effect of foreign exchange rates, both year-over-year and sequentially. The consolidated adjusted gross margin for the first quarter of 2015 was 36.7% versus 36.2% for the first quarter of 2014.

As of today, we've purchased 156,000 VPG shares at a total cost of $2.4 million as part of our announced stock repurchase program. Given the diversity of end-markets that we serve, some markets are stronger, while others are weaker. And assuming a similar exchange rate impact to revenues, our overall sentiment is stable.

For this reason, we are forecasting second quarter revenues to be in a range of $56 million to $61 million. Moving on to our financial results. The year-over-year increase in gross margin for Q1 2015 is coming from manufacturing efficiencies and an increase in inventories, offset by the negative impact of exchange rates.

Our book-to-bill ratio of 1.05 was down slightly from our 1.09 book-to-bill ratio in the first quarter last year, but is up from 1.0 in the fourth quarter of 2014. The backlog was 3.1 versus 3.2 last year, and up from 2.9 in the fourth quarter of 2014.

Selling, general, administrative expenses for the quarter were $18.7 million or 33% of revenues compared to $18.7 million or 30.6% for last year's first quarter. Looking at operating margin on adjusted basis, without acquisition and restructuring costs, you can see that it's at 3.6%, a decrease from 5.5% in the first quarter last year.

Included, in other income expense, in our press release this morning, was $1 million of foreign exchange losses during the first quarter of 2015 compared to $500,000 of foreign exchange losses in the first quarter of 2014. Our operational tax rate was 18% in the first quarter. For the year, we expected to be in a range of 20% to 22%.

GAAP earnings attributable to VPG stockholders in the first quarter of 2015 was $700,000 or $0.05 per diluted share compared to GAAP net earnings attributable to VPG stockholders for the first quarter of 2014 of $1.7 million or $0.12 per diluted share.

Adjusted net earnings for the first quarter of 2015 were $700,000 or $0.05 per diluted share versus adjusted net earnings of $2 million or $0.14 per diluted share for the comparable prior-year period. A few balance sheet and cash flow items.

Total long-term debt as of December 31, 2014, and March 28, 2015, was $17.7 million and $16.2 million, respectively. Cash used in operations was $3.4 million for the first quarter of 2015 compared to $2 million of cash provided by operations for the first quarter of 2014.

Our definition of free cash flow is the amount of cash generated from operations, which is a negative $3.4 million for the first quarter of '15, in excess of our capital expenditures $1.8 million for the first quarter of '15 and net of any proceeds from the sale of any assets.

Total free cash flow for the first quarter of 2013 was a negative $5.2 million compared to $200,000 in the first quarter of 2014. The main reasons for the decrease in cash from operations included several one-time items. A $1.5 million payment related to the 2014 reorganization in Asia.

A $2.2 million inventory increase primarily from Force Sensors segment, which build up inventory in anticipation of a successful ERP system implementation in India that went live in April. We expect this inventory levels will be reduced in future periods.

We also have $1 million of other accrued expenses paid to support the expansion of the advanced sensor platform, and $900,000 of a negative exchange rate impact. Capital expenditures were $1.8 million in the first quarter compared to $1.8 million in the first quarter of last year.

We also spend in the quarter $1.2 million for our share repurchase program and $1.3 million for debt payments. Also, foreign currency had a $1.8 million negative effect on our cash balance.

We remain focus on our strategy of growing the topline to organic growth and pursuing additional acquisitions as well as improving profitability by increasing efficiencies and reducing cost.

To update our progress with our advanced sensor platform, which is part of our FTP segment, and which we developed a few years ago, revenues is up 70% year-over-year. And we expect a positive trend to continue, as we transition current customers and convert new customers to the technology. With that, let me pass further comments on to Ziv..

Thank you, Bill. Given the diversity of end-markets that we serve, some markets are stronger than others, while other end-markets are weaker. Our overall business climate is stable. The global economy has experienced a dramatic decline in oil and gas prices and a dramatic increase in the value of the U.S.

dollar in the past few months, affecting our recently reported results and demand for our product in some of our end-market. The U.S. economy came to a new halt in the first three months of the year.

With harsh spring weather, lower exports and lower oil and gas exploration, business investment spending on equipment fell at 3.4% annual rate, in large part from a nearly 40% drop in the category that includes oil and gas. Despite this, the U.S. economy appears to be relatively stable.

Europe and Japan seem to be slowly recovering, while China's economy continues to decline. Steel sector capacity utilization continued to decrease to 71.6% in March 2015, 4 percentage points lower than in March 2014 and 1.8 percentage points lower than February 2015.

Global world crude steel production in March 2015 decreased 2.7% compared to March 2014, with most regions reporting lower output on a year-over-year basis. This trend is expected to continue for the rest of the year. Looking forward, we expect the Eurozone's slow recovery to continue. The U.S.

will continue to slowly expand, based on lower energy cost, which are 50% lower than this time last year. The Chinese economy continues to decelerate, despite the government's efforts to manage the trends, and we expect Japan to slowly recover from its 2014 GDP decline.

Moving on to operational trends, let's start by comparing consolidated year-over-year and sequential results. The company's overall book-to-bill was 1.05 in the first quarter of 2015 compared to 1.09 last year, and 1.0 in the fourth quarter of 2014.

Total orders for the first quarter of 2015 were $59.3 million, down 10.7% from $66.4 million last year and down 3.4% from $61.4 million in the fourth quarter of 2014, including a negative exchange rate effect. Some details on our reporting segments.

The FTP segment had a book-to-bill ratio of 1.12 for the first quarter of 2015 compared to 1.12 for the first quarter of 2014, and 1.02 for the fourth quarter of 2014. Sequentially, orders increased by $800,000 or 3.1% from the fourth quarter of 2014, reflecting an increase primarily in the Americas and Asia, offset by Europe.

The FTP gross margin was 40.6% for Q1, up from 37.9% in Q1 last year and up from 37.6% in the fourth quarter of 2014. The FTP gross margin increased from the comparable prior-year period, was due primarily to $500,000 of volume, $400,000 of manufacturing efficiencies, offset by a negative $500,000 due to exchange rate effect.

The sequential increase in gross margin was due to $600,000 of manufacturing efficiencies, $600,000 of non-recurring fourth quarter 2014 inventory adjustments that we recorded in the fourth quarter of 2014, offset by $500,000 of lower volume and $400,000 of negative exchange rate effect.

The FTP segment backlog was 3.4 months compared to 3.3 months last year, and 3.0 months in the prior quarter. Looking at the Force Sensors segment, the book-to-bill ratio was 0.98 for Q1 compared to 1.04 in the first quarter last year, and 0.97 for the fourth quarter of 2014. Sequential orders decreased by $1.9 million or 11.3%.

This decrease came primarily from the Americas, Europe and Asia. The gross margin for this segment was 21.9% for the first quarter of 2015 versus 21.3% in the first quarter of 2014, and 22.8% in the fourth quarter of 2014.

The gross margin for the quarter increased from the comparable prior-year period, primarily due to $300,000 of manufacturing efficiencies, $400,000 increase in inventory, offset by $500,000 of negative exchange rate effect.

The sequential gross margin decreased primarily due to $800,000 of lower volume and $200,000 of negative exchange rate effect, offset by $400,000 of increased inventory and cost reduction. The Force Sensors segment backlog was 2.3 months compared to 2.5 months in the prior year and 2.1 month in Q4 of last year.

For the Weighing & Control Systems segment, the book-to-bill ratio was 1.0 for Q1 compared to 1.09 in the first quarter last year, and 1.01 for the fourth quarter. Segment backlog was 3.5 months compared to 3.8 months in last year's first quarter, and 3.5 months in the fourth quarter.

Sequentially, orders decreased by $1 million or 5.8%, primarily of fewer orders primarily in the Americas. The gross margin for this segment was 44.3% in the first quarter of 2015 versus 46.7% in the first quarter of 2014, and 44.3% in the fourth quarter of 2014.

The year-over-year decrease in gross margin is primarily due to $800,000 of negative exchange rate effect and $600,000 of lower volume in Europe and the Americas. Sequentially, gross margin was relatively flat. Let me conclude with few talks on our capital allocation process, as you know, acquisitions play a key role in our long-term growth strategy.

Despite not announcing any recent deals, I assure you it continues to be a high priority. We were engaged with several companies and have found that valuations continues to be high. We remain focus on finding opportunities that fits into our guideline of IRR in mid-teens range and deals that could be accretive within a year.

Opportunities still exist and we will provide information as we can, as we work through them. We have been active in the marketplace buying back our stock from our previously announced 500,000 share repurchase plan.

To date, we have purchased the 156,000 VPG's stock at the cost of $2.4 million and we will continue to purchase share depending on market conditions. With that, let's open the line for questions. Thank you..

[Operator Instructions] Our first question comes today from John Franzreb with Sidoti..

First, I'd like to ask a question about the cost related to the advanced sensor platform.

So I heard correctly, this $1 million, was that for the quarter? And when do you expect those cost to rollover?.

No, John, that $1 million was a payment for -- that was cash out the door for equipment that we ordered in the fourth quarter of '14. That was just cash outlay..

So how much incremental cost is FTP absorbing related to the new platform right now?.

John, as we have announced there is major, major ramp up and we have been providing information regarding the advanced sensor revenue evolution. For this year budget, we have been projecting close to 50% of the $14 million announced.

Capital spending would be allocated to the expansion of our advanced sensor line, which in principal would enable us, I would say, to double the capacity of the current strain gage capacity that we have in the company in order to capture new business..

I guess, what I'm trying to get out guys is that the gross margin and FTP was really good in spite of the fact to the incremental costs.

So I was just trying to bridge how much of that is the transfer of customers to the new product line at a higher margin? Is cost starting to roll down, incremental cost? So I'm just trying to reconcile some of those items?.

Regarding the advanced sensors, I could definitely say that the contribution margin this quarter is higher than last year's quarter due to the fact that we continue to transition product from the old platform to the new platform in conjunction with new applications that generate revenues.

I should also state that some of the smaller portion of the higher gross margin is related to a smaller inventory build up on the resistor line in order to support very few big projects that will be delivered later on this year for a telecom base station under sea projects..

And moving to the currency issues as it impacts the weighing segment, can you talk a little bit about what your expectations are for the balance of the year in weighing? It seems like that's a significant headwind at this point?.

If we are looking at the third segment, if this is what you're saying, the WCS, as you know we have quite a large exposure due to the fact that at least 40%, 45% of our revenues are coming from a Euro base in conjunction with the fact that we have also a Canadian base -- due to the Kelk acquisition, also a Canadian based currency.

In that regard, it will be harder to predict how the currency is going to fluctuate going forward, but at this point in time I can say that we do see some signs of recovery in process weighing project in Europe, in regards to higher volume in the near future.

In conjunction with that, as we have been speaking, and this is more regarding the Canadian currency, which is more related to the steel market, as we have been reporting a very, very low steel utilization, still the demand is not there.

The only sign is that India, and all countries are reducing the steel capacity except India, which have announced that this is like a national project that they would like to increase capacity. So we see more signs of activities in India coming on the steel market in the near future..

There appears to be no further questions. At this time, I would like to turn the conference back over to Wendy Wilson for any closing remarks. End of Q&A.

Thank you, Chad. And thank you everyone for dialing in today. We really appreciate your support. And we look forward to seeing you throughout the year this year as we get out on the road. And we look forward to you dialing in on our next call. Thanks, again, and have a great day..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..