Vishay Precision Group Inc

Note 1 –Background and Summary of Significant Accounting Policies

Background

Vishay Precision Group, Inc. (“VPG” or the “Company”) is a global, diversified company focused on precision measurement and sensing technologies that help power the future by bridging the physical world with the digital one. Many of our specialized sensors, weighing solutions, and measurement systems are “designed-in” by our customers, and address growing applications across a diverse array of industries and markets. Our products are marketed under brand names that we believe are characterized as having a very high level of precision and quality, and we employ an operationally diversified structure to manage our businesses.

Principles of Consolidation

The consolidated financial statements include the accounts of the individual entities in which the Company maintained a controlling financial interest. For those subsidiaries in which the Company’s ownership is less than 100 percent, the outside stockholders’ interests are shown as noncontrolling interests in the accompanying consolidated balance sheets. All transactions, accounts, and profits between individual members comprising the Company have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ significantly from those estimates.

Revenue Recognition

The Company derives substantially all of its revenue from product sales. The Company recognizes the vast majority of its sales at a point-in-time. It utilizes the core principle of recognizing revenue when the Company satisfies performance obligations as evidenced by the transfer of control of its products to the customer.

Such revenues are derived from purchase orders and/or contracts with customers. Each contract has the promise to transfer the control of the products, each of which is individually distinct and is considered the identified performance obligation. As part of the decision to enter into each contract, the Company evaluates the customer’s credit risk, but its contracts do not have any significant financing components, as payment is generally due net 30 to 60 days after delivery. In accordance with contract terms, revenue from the Company’s product sales is recognized at the time of product shipment from its facilities or delivery to the customer location, as determined by the agreed upon shipping terms.

Under the terms of some of its contracts, the Company may be required to perform certain installation services. These installation services are performed at the time of product delivery or at some point thereafter. The installation services do not significantly modify the product provided, and although the Company may be required contractually to provide these services, the installation services could be performed by a third party or the customer. Thus, these installation services are a distinct performance obligation. In most of the applicable contracts, this installation service element is immaterial in the context of the agreement. When the installation services are accounted for as a separate performance obligation, the Company allocates the transaction price to this element based on its relative standalone selling price.

Given the specialized nature of the Company's products, the Company generally does not allow product returns. Shipping and handling costs are recorded to Costs of product sold when control of the product has transferred to the customer. The Company offers standard product warranties. Warranty related costs continue to be recognized as expense when the products are sold. Sales, value added taxes and other taxes collected concurrent with revenue-producing activities are excluded from revenue. See Note 2 for further details on Revenues.

Research and Development Expenses

Research and development costs are expensed as incurred. The amount charged to expense for research and development was $20.4 million, $19.8 million, and $17.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income tax expense in the period that includes the enactment date.

The Company records net deferred tax assets to the extent it believes such assets will "more likely than not" be realized. In making this determination, the Company considers all positive and negative evidence, including historic earnings, projected future income, and cost-effective tax-planning strategies. When the Company determines that its ability to realize deferred tax assets is not "more likely than not", the Company adjusts its deferred tax asset valuation allowance, which increases income tax expense.

The Company records uncertain tax positions on the basis of a two-step process in which the Company first determines whether it is "more likely than not" that the tax positions will be sustained based on the technical merits of the position and then measures those tax positions that meet the more-likely-than-not recognition threshold. The Company recognizes the largest amount of tax benefit that isgreater than 50 percent likely to be realized upon ultimate settlement with the tax authority.

The Company recognizes interest and penalties related to unrecognized tax benefits within income tax expense in the accompanying consolidated statements of operations. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets.

Cash and Cash Equivalents

Cash and cash equivalents include demand deposits and highly liquid investments with original maturities of three months or less when purchased. Highly liquid investments with maturities greater than three months are classified as short-term investments. There were no investments classified as short-term investments at December 31, 2023 or 2022.

Allowance for Credit Losses

The Company maintains an allowance for credit losses resulting from the inability of its customers to make required payments. In determining the amount of the allowance for credit losses, the Company considers historical loss data, customer specific information, current market conditions and reasonable and supportable forecasts of future economic conditions to inform adjustments to historical loss data. The allowance for credit losses was $0.5 million and $0.7 million at December 31, 2023 and 2022, respectively. The credit loss was $0.2 million, $0.0 million, and $0.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Inventories

Inventories are stated at the lower of cost, determined by the first-in, first-out method, or market based on net realizable value. Inventories are adjusted for estimated excess and obsolescence and written down to net realizable value based upon estimates of future demand, technology developments, and market conditions.

Property and Equipment

Property and equipment are carried at cost and is depreciated principally by the straight-line method based upon the estimated useful lives of the assets. Machinery and equipment are being depreciated over useful lives ofseven tofifteen years. Buildings and building improvements are being depreciated over useful lives oftwenty toforty years or the lease term. Software is being depreciated over useful lives ofthree tofive years. Construction in progress is not depreciated until the assets are placed in service. Depreciation expense was $11.8 million, $11.5 million, and $11.7 million for the years ended December 31, 2023, 2022, and 2021, respectively, which included software depreciation expense of $0.8 million, $0.7 million, and $0.6 million for the years ended December 31, 2023, 2022, and 2021, respectively.

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. Estimating fair values requires significant judgments, estimates and assumptions including but not limited to: discount rates, future cash flows and the economic lives of trade names, technology, 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 Intangible Assets

Goodwill and indefinite-lived trademarks are tested for impairment at least annually, and whenever events or changes in circumstances occur indicating that it is "more likely than not" impairment may have been incurred. The Company has the option to first assess qualitative factors to determine whether it is "more likely than not" that the fair value of a reporting unit is less than its carrying value as a basis for determining if it is necessary to perform the quantitative goodwill impairment test. However, if the Company concludes otherwise, then it is required to perform the quantitative impairment test by calculating the fair value of the reporting unit and comparing it against its carrying value. 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 value of goodwill exceeds the reporting unit fair value.

The indefinite-lived trade names are tested for impairment either by employing the qualitative approach outlined above, or by comparing the carrying value to the fair value based on current revenue projections of the related operations, under the relief from royalty method. Any excess carrying value over the applicable fair value is recognized as impairment. Any impairment would be recognized in the reporting period in which it has been identified.

The Company's required goodwill and indefinite-lived asset annual impairment test is completed as of the first day of the fourth fiscal quarter each year. As described in Note 4 to the consolidated financial statements, the 2023 and 2022 annual impairment tests resulted in no impairment. In 2021, an impairment charge was recorded.

Definite-lived intangible assets, such as customer relationships, patents and acquired technology, non-competition agreements, and certain trade names are amortized on a straight-line method over their estimated useful lives. Patents and acquired technology are being amortized over useful lives ofseven totwenty years. Customer relationships are being amortized over useful lives offive tofifteen years. Trade names are being amortized over useful lives ofseven toten years. Non-competition agreements are being amortized over periods offive toten years. The Company continually evaluates the reasonableness of the useful lives of these assets. Additionally, the Company reviews the carrying values of these assets for possible impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable based on undiscounted estimated cash flows expected to result from its use and eventual disposition.

Impairment of Long-Lived Assets

The carrying value of long-lived assets held-and-used, other than goodwill and indefinite-lived intangible assets, is evaluated when events or changes in circumstances indicate the carrying value may not be recoverable. The carrying value of a long-lived asset group is considered impaired when the total projected undiscounted cash flows from such asset group are separately identifiable and are less than the carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset group. Fair market value is determined primarily using present value techniques based on projected cash flows from the asset group. Losses on long-lived assets held-for-sale, other than goodwill and indefinite-lived intangible assets, are determined in a similar manner, except that fair market values are reduced for disposal costs.

Foreign Currency Translation

The Company has significant operations outside of the United States. The Company's operations in Europe, Canada, and certain locations in Asia primarily generate and expend cash in local currencies, and accordingly, these subsidiaries utilize the local currency as their functional currency. The Company’s operations in Israel and certain locations in Asia primarily generate cash in U.S. dollars, and accordingly, these subsidiaries utilize the U.S. dollar as their functional currency.

For those subsidiaries where the local currency is the functional currency, assets and liabilities in the consolidated balance sheets have been translated at the rate of exchange as of the balance sheet date. Revenues and expenses are translated at the average exchange rate for the year. Translation adjustments do not impact the consolidated statements of operations and are reported as a separate component of accumulated other comprehensive loss within the statement of comprehensive income. Foreign currency transaction gains and losses are included in the results of operations.

For those foreign subsidiaries where the U.S. dollar is the functional currency, all foreign currency financial statement amounts are remeasured into U.S. dollars. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in the consolidated statements of operations.

Share-Based Compensation

Compensation costs related to share-based payments are recognized in the consolidated financial statements. The amount of compensation cost is measured based on the grant-date fair value of the equity instruments issued. For service-based awards, compensation cost is recognized over the period that an officer, employee, or non-employee director provides service in exchange for the award. The Company recognizes forfeitures as they occur. For performance based awards, the Company recognizes compensation cost for awards that are expected to vest based on whether performance criteria are expected to be met.

Leases

The Company determines if an arrangement is or contains a lease at inception or modification of such agreement. The arrangement is or contains a lease if the contract conveys the right to control the use of the identified asset for a period in exchange for consideration.

Lease right of use assets and liabilities are recognized based on the present value of future minimum lease payments over the expected term at commencement date. As the implicit rate is not determinable in most of the Company's leases, the Company's incremental borrowing rate is used as the basis to determine the present value of future lease payments. The expected lease terms include options to extend or terminate. The period which is subject to an option to extend the lease is included in the lease term if it is reasonably certain that the option will be exercised. Some of these leases contain variable payment provisions that depend on an index or rate, initially measured using the index or rate at the lease commencement date and are therefore not included in our future minimum lease payments. Variable payments are expensed in the periods incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term. The Company uses the practical expedients to exclude from balance sheet reporting leases with initial terms of 12 months or less and to exclude non-lease components from lease right of use assets and corresponding liabilities.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.

Recent Accounting Pronouncements

The Company evaluates the applicability and impact of all Accounting Standards Updates ("ASUs") issued by the Financial Accounting Standards Board ("FASB").

Recent accounting pronouncements not yet adopted:

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU also allows, in addition to the measure that is most consistent with U.S. GAAP, the disclosure of additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources. The ASU is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires disclosure of specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold. The amendment also includes other changes to improve the effectiveness of income tax disclosures, including further disaggregation of income taxes paid for individually significant jurisdictions. This ASU is effective for annual periods beginning after December 15, 2024. Adoption of this ASU should be applied on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

Note 2 –Revenues

The following table disaggregates net revenue by geographic region from contracts with customers based on net revenues generated by subsidiaries within that geographic location(in thousands):

Note 2 – Revenues (continued)

The following table disaggregates net revenue by market sector(in thousands):

Contract Assets & Liabilities

Contract assets are established when revenues are recognized prior to a contractual payment due from the customer. When a payment becomes due based on the contract terms, the Company will reduce the contract asset and record a receivable. Contract liabilities are deferred revenues that are recorded when cash payments are received or due in advance of our

Note 2 – Revenues (continued)

performance obligations. Our payment terms vary by the type and location of the products offered. The term between invoicing and when payment is due is not significant.

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

The amount of revenue recognized during the year ended December 31, 2023 that was included in the contract liability balance at December 31, 2022 was $7.3 million.

Note 3 –Acquisition Activity

Diversified Technical Systems, Inc.

On June 1, 2021, VPG completed the acquisition of California-based Diversified Technical Systems, Inc. (“DTS”), a manufacturer of data acquisition systems and sensors for product safety and testing, for a purchase price of $47.2 million. The Company used cash on hand and borrowings under its revolving credit facility to fund the purchase price under the purchase agreement. DTS reports into the Company's Measurement Systems segment. The following table summarizes the final fair values assigned to the assets and liabilities of DTS as of June 1, 2021 (in thousands):

(a) Working capital accounts include accounts receivable, inventory, prepaid expenses, accounts payable, accrued expenses, and accrued payroll.

The Company utilizes certain valuations and studies to determine the fair value of the tangible and intangible assets acquired. The estimated weighted average useful lives for the acquired technology and customer relationships are 15 years. Trade names are treated as indefinite-lived intangible assets. None of the goodwill associated with DTS is deductible for income tax purposes. The Company recorded acquisition costs associated with this transaction of $1.2 million in the second quarter of 2021, which included legal fees, appraisal fees, investments banker fees and insurance costs.

Note 4 –Goodwill and Other Intangible Assets

The Company hasfour reporting units to which goodwill is allocated: steel, on-board weighing, DSI, and DTS.

For the steel and on-board weighing goodwill reporting units, the Company performed the qualitative assessment, which included assessment of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and other entity specific events which could impact the reporting unit. Based on this review, it was determined that the fair value of each of those reporting units was in excess of its carrying value and therefore no quantitative impairment test was required.

For the DSI and DTS goodwill reporting units, the Company performed the quantitative impairment test. In estimating the fair value of our DSI and DTS reporting units 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.

The Company's required goodwill and indefinite-lived asset annual impairment test is completed as of the first day of the fourth fiscal quarter each year. In 2023, the results of the quantitative impairment test for the DSI and DTS reporting units indicated that the fair value of both reporting units exceeded their carrying values, and therefore no impairment was recognized.

Prior to 2022, the Company also had an instrumentation reporting unit. The Company's analysis in 2021 resulted in an impairment for the instrumentation reporting unit, of $1.1 million in goodwill, which represented the remainder of the goodwill balance, and $0.1 million inindefinite-lived intangible trade name.

The change in the carrying value of goodwill by segment is as follows (in thousands):

Note 4 – Goodwill and Other Intangible Assets (continued)

Intangible assets were as follows(in thousands):

Certain intangible assets are subject to foreign currency translation.

Amortization expense was $3.8 million, $3.9 million, and $3.3 million, for the years ended December 31, 2023, 2022, and 2021, respectively.

Estimated annual amortization expense for each of the next five years is as follows(in thousands):

Note 5 –Restructuring Costs

Restructuring costs reflect the cost reduction programs implemented by the Company. Restructuring costs are expensed during the period in which the Company determines it will incur those costs and all requirements for accrual are met. Because these costs are recorded based upon estimates, actual expenditures for the restructuring activities may differ from the initially recorded costs. If the initial estimates are too low or too high, the Company could be required to either record additional expense in future periods or to reverse part of the previously recorded charges.

The Company recorded restructuring costs of $1.6 million, $1.5 million, and $0.1 million during the years ended December 31, 2023, 2022, and 2021, respectively. The restructuring costs were comprised primarily of employee termination costs, including severance and statutory retirement allowances, and were incurred in connection with various cost reduction programs.

The following table summarizes the activity to date related to these programs in the accrued restructuring liability, which is comprised of the activity associated primarily with the employee termination costs. The accrued restructuring liability balance as of December 31, 2023 and 2022, respectively, is included in other accrued expenses in the accompanying consolidated balance sheets(in thousands):

Note 5 – Restructuring Costs (continued)

Note 6 –Income Taxes

For financial reporting purposes, income before taxes includes the following components(in thousands):

The expense (benefit) for income taxes is comprised of(in thousands):

A reconciliation of income tax expense (benefit) at the U.S. federal statutory income tax rate to the actual income tax provision is as follows(in thousands):

In 2023, the Company recognized deferred tax benefits of $0.2 million on net operating loss carryforwards generated in certain foreign jurisdictions, which is included in deferred tax expense (benefit) above.

The 2017 Tax Cuts and Jobs Act subjects a U.S. shareholder to tax on Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in the future years or provide for tax expense related to GILTI in the year the tax is incurred. The Company has elected to recognize tax expense related to GILTI in the year the tax is incurred.

The Company recognized approximately $22.5 million and $26.3 million of GILTI for the years ended December 31, 2023 and 2022, respectively. The U.S. tax on GILTI, net of foreign tax credits and research credits, was less than $0.1 million for each of the years ended December 31, 2023 and 2022. Any excess foreign tax credits associated with GILTI are lost and cannot be carried forward to future years.

Deferred income taxes represent the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.

Significant components of the Company’s deferred tax assets and liabilities are as follows(in thousands):

In 2015, the Company established a valuation allowance with respect to substantially all of its U.S. deferred tax assets due to uncertainty regarding the realization of these assets. Throughout 2022 and 2023, the Company reassessed its ability to realize its U.S. and other deferred tax assets by considering both positive and negative evidence regarding realization. The most significant negative evidence is continuing cumulative operating losses in the U.S. The impact of the acquisitions of Stress-Tek, Pacific Instruments, DSI and DTS was also considered in determining the realization of the U.S. deferred tax assets. Other aspects, such as operating results, additional interest expense and additional tax deductions related to the Stress-Tek acquisition, were also considered. The Company also considered positive evidence such as tax planning strategies and the projected benefits of our restructuring efforts. However, there was insufficient positive evidence to overcome the negative evidence.

In June 2021, the Company acquired DTS. DTS's opening balance sheet included $26.4 million of gross deferred tax liabilities, including $2.4 million of indefinite-lived liabilities. The acquisition contributed to a $1.6 million net reduction in valuation allowance and deferred tax benefit for the Company in 2021. In the second quarter of 2022, the Company completed the purchase accounting for the acquisition of DTS, which resulted in a $0.3 million reduction of deferred tax assets and corresponding increase in goodwill.

Overall, the cumulative losses and the acquisition impacts still indicate that realization of our U.S. deferred tax assets remains uncertain such that the Company cannot conclude that it is "more likely than not" that the deferred tax assets will be recoverable. We will continue to monitor the realization of U.S. deferred tax assets and reduce the valuation allowance if, and when, sufficient positive evidence of realization exists. At December 31, 2023 and 2022, the valuation allowance on U.S. deferred tax assets was approximately $10.9 million and $8.7 million, respectively. The net change in this valuation allowance was approximately $2.3 million, of which approximately $0.5 million related to state valuation allowances.

The change in valuation allowance related to state taxes exclusive of rate changes was $0.5 million benefit and $0.4 million expense for the years ended December 31, 2023 and 2022, respectively.

The Company also has valuation allowances of $2.2 million and $2.1 million at December 31, 2023 and 2022, respectively, with respect to certain foreign net operating loss and capital loss carryforwards.

Significant valuation allowances are as follows(in thousands):

The following table summarizes significant net operating losses, capital losses and credit carryforwards as of December 31, 2023(in thousands):

Utilization of U.S. federal net operating losses is taken into account before the GILTI deduction allowable by IRC Section 250.

Undistributed earnings of the Company’s foreign subsidiaries were approximately $277.6 million at December 31, 2023 compared to $233.2 million at December 31, 2022. As of December 31, 2023, the Company had provided for a deferred tax liability of approximately $2.1 million of withholding tax associated with unremitted earnings, including planned cash distributions of $16.6 million. Substantially all of the remaining undistributed earnings are considered to be indefinitely reinvested and accordingly no provision has been made with respect to these earnings for incremental foreign income taxes, state income taxes or foreign withholding taxes. If those earnings were distributed to the U.S., the Company could be subject to incremental foreign income taxes, state income taxes, and withholding taxes. Determination of the amount of unrecognized deferred tax liability is not practicable because of the uncertainty regarding the timing of any such distribution and the impact on existing valuation allowances. In addition to the $2.1 million, additional withholding taxes of approximately $29.2 million are estimated to be payable upon distribution of the remaining previously unremitted earnings as of December 31, 2023.

Net income taxes paid were $10.9 million, $10.8 million and $7.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company and its subsidiaries are subject to income taxes imposed by the U.S., various states, and the foreign jurisdictions in which we operate. Each jurisdiction establishes rules that set forth the years which are subject to examination by its tax authorities. While the Company believes the tax positions taken on its tax returns for each jurisdiction are supportable, they may still be challenged by the jurisdiction's tax authorities. In anticipation of such challenges, the Company has established reserves for tax-related uncertainties. These liabilities are based on the Company’s best estimate of the potential tax exposures in each respective jurisdiction. It may take a number of years for a final tax liability in a jurisdiction to be determined, particularly in the event of an audit. If an uncertain matter is determined favorably, there could be a reduction in the Company’s tax expense. An unfavorable determination could increase tax expense and could require a cash payment, including interest and penalties.

The following table summarizes changes in the Company's gross liabilities, excluding interest and penalties, associated with unrecognized tax benefits(in thousands):

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Related to the unrecognized tax benefits noted above, for the years ended December 31, 2023, 2022 and 2021, the Company accrued total penalties and interest of 0.0 million, $(0.2) million and $0.1 million, respectively. As of December 31, 2023, 2022 and 2021, accrued penalties and interest were $0.0 million, $0.0 million and $0.2 million, respectively.

Included in the balance of unrecognized tax benefits as of December 31, 2023, 2022, and 2021 is $0.8 million, $0.4 million, and $1.3 million, respectively, of tax benefits that, if recognized, would impact the effective tax rate. The Company believes that it is reasonably possible that an increase in unrecognized tax benefits related to foreign exposures of between $0.1 million and $0.2 million may be necessary in 2024. Furthermore, as of December 31, 2023, the Company does not anticipate that any of its current unrecognized tax benefits will reverse within the next calendar year due to the expiration of the statute of limitations.

The Company and its subsidiaries file U.S. federal income tax returns, as well as income tax returns in various state, local, and foreign jurisdictions. The Company files federal, state, and local income tax returns on a combined, unitary, or stand-alone basis. The statute of limitations in those jurisdictions generally ranges from 3 to 4 years. Additionally, the Company's foreign subsidiaries file income tax returns in the countries in which they have operations and the statutes of limitations in those jurisdictions generally range from 3 to 10 years.

During the fourth quarters of 2021 and 2022, the Company concluded tax examinations in Israel for one of its subsidiaries covering 2016 and 2017 through 2020, respectively. The conclusions of the audits resulted in the release of $1.4 million of reserves for uncertain tax positions, including accrued interest.

During the third quarter of 2022, the Company concluded tax examinations in Germany for two of its subsidiaries, covering the years 2017 through 2019. The conclusion of the tax examinations resulted in no significant change in tax.

During the fourth quarter of 2022, the Company concluded a tax examination in Taiwan for one of its subsidiaries, covering the year 2020. The conclusion of the tax examinations resulted in no change in tax.

During the fourth quarter of 2023, the Company received notice that an examination of 2021 and 2022 will begin in the first quarter of 2024 for one of its subsidiaries in France. The Company also concluded a tax examination in Taiwan for one of its subsidiaries, covering the year 2021. The conclusion of this tax examination resulted in no change in tax.

The Company is subject to ongoing income tax audits, administrative appeals and judicial proceedings in India spanning a number of years.

Note 7 –Long-Term Debt

Long-term debt consists of the following(in thousands):

2020 Credit Agreement

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

On May 5, 2023, the Company entered into Amendment No. 1 to Third Amended and Restated Credit Agreement (the “Credit Agreement Amendment”) amending the Third Amended and Restated Credit Agreement, dated March 20, 2020. The primary purpose of the changes made in the Credit Agreement Amendment were to update the interest rate provisions to replace LIBOR with SOFR for U.S. dollar denominated loans as well as update the other applicable reference borrowing rates for foreign currency loans which took effect on June 15, 2023. Interest payable on amounts borrowed under the 2020 Revolving Facility, taking into account the effect of the Credit Agreement Amendment, is based upon the following: (a) for revolving credit loans denominated in US Dollars, the SOFR rate plus applicable credit spread; and (b) for revolving credit loans denominated in foreign currencies, at other applicable local reference rates plus an interest margin. Depending upon the Company’s leverage ratio, an interest rate margin ranging from 1.50% to 2.75% per annum is added to the applicable SOFR rate to determine the interest payable on the SOFR loans. The Company is required to pay a quarterly fee of 0.25% per annum to 0.40% per annum on the unused portion of the 2020 Revolving Facility, which is determined based on the Company’s leverage ratio each quarter. Additional customary fees apply with respect to letters of credit.

The obligations of the Company under the 2020 Credit Agreement are secured by pledges of stock in certain domestic and foreign subsidiaries, as well as guarantees by substantially all of the Company’s domestic subsidiaries. The obligations of the Company and the guarantors under the 2020 Credit Agreement are secured by substantially all the assets (excluding real estate) of the Company and such guarantors. The 2020 Credit Agreement restricts the Company from paying cash dividends and requires the Company to comply with other customary covenants, representations, and warranties, including the maintenance of specific financial ratios. The financial maintenance covenants include an interest coverage ratio and a leverage ratio. The Company was in compliance with its financial maintenance covenants at December 31, 2023. If the Company is not in compliance with any of these covenant restrictions, the credit facility could be terminated by the lenders, and all amounts outstanding pursuant to the credit facility could become immediately payable.

Other Lines of Credit

In addition to the 2020 Revolving Facility discussed above, certain subsidiaries of the Company had committed short-term lines of credit with a foreign bank aggregating approximately$5.0 million and $5.0 million at December 31, 2023 and 2022, respectively. The Company had outstanding letters of credit under these short-term lines of credit of $2.4 million and $3.2 million at December 31, 2023 and 2022, respectively.

Note 7 – Long-Term Debt (continued)

Aggregate annual maturities of long-term debt are as follows(in thousands):

Interest paid on third-party debt was $4.0 million, $2.3 million, and $1.2 million during the years ended December 31, 2023, 2022, and 2021, respectively.

Note 8 –Stockholders’ Equity

The Company’s Class B convertible common stock carriesten votes per share. The common stock carriesone vote per share. Class B shares are transferable only to certain permitted transferees while the common stock is freely transferable. Class B shares are convertible on aone-for-one basis at any time into shares of common stock. Transfers of Class B shares other than to permitted transferees result in the automatic conversion of the Class B shares into common stock.

The Board of Directors may only declare dividends or other distributions with respect to the common stock or the Class B convertible common stock if it grants such dividends or distributions in the same amount per share with respect to the other class of stock. As discussed in Note 7, the Company is restricted from paying cash dividends. Stock dividends or distributions, on any class of stock, are payable only in shares of stock of that class. Shares of either common stock or Class B convertible common stock cannot be split, divided, or combined unless the other is also split, divided, or combined equally.

On August 8, 2022, the Board of Directors of the Company authorized the repurchase of up to 600,000 shares of the Company’s outstanding common stock (the “Stock Repurchase Plan”). The Stock Repurchase Plan was originally set to expire on August 11, 2023, and the Board authorized purchases thereunder to be made through an issuer repurchase plan adopted under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), open market purchases or private transactions, in accordance with the applicable federal securities laws, including Rule 10b-18 under the Exchange Act. On August 8, 2023, the Company announced that its Board of Directors extended the term of the previously approved stock repurchase plan to August 9, 2024. From August 8, 2022 to December 31, 2023, the Company had repurchased an aggregate of 273,626 shares of its common stock under the Stock Repurchase Plan.

The Board of Directors is authorized, without further stockholder approval, to issue from time to time up to an aggregate of 1,000,000 shares of preferred stock in one or more series. The Board of Directors may fix or alter the designation, preferences, rights and any qualification, limitations, restrictions of the shares of any series, including the dividend rights, dividend rates, conversion rights, voting rights, redemption terms and prices, liquidation preferences and the number of shares constituting any series. No shares of the Company’s preferred stock are currently outstanding.

Note 8 – Stockholders’ Equity (continued)

Other Comprehensive Income (Loss)

The cumulative balance of each component of other comprehensive income (loss) and the income tax effects allocated to each component are as follows(in thousands):

In 2022, Reclassification of foreign currency translation adjustment for gain on liquidation of a subsidiary is included in other income (expense) other (See Note 15). Reclassifications of pension and other postretirement actuarial items out of accumulated other comprehensive income (loss) are included in the computation of net periodic benefit cost (See Note 9).

Note 9 –Pensions and Other Postretirement Benefits

Defined Benefit Plans

Employees of the Company participate in various defined benefit pension and other postretirement benefit plans.

U.S. Pension Plan

The Vishay Precision Group Non-Qualified Retirement Plan, like all nonqualified plans, is considered to be unfunded. The Company maintains a nonqualified trust, referred to as a “rabbi” trust, to fund benefits under this plan. Rabbi trust assets are subject to creditor claims under certain conditions and are not the property of employees. Therefore, they are accounted for as other noncurrent assets within the consolidated balance sheets. The assets held in the rabbi trust are invested in money market funds and company-owned life insurance policies. The consolidated balance sheets include assets held in trust related to the nonqualified pension plan of $1.6 million at December 31, 2023 and $1.5 million at December 31, 2022, and the related liabilities of $2.1 million and $2.1 million at December 31, 2023 and 2022, respectively.

The Vishay Precision Group Non-Qualified Retirement Plan is frozen. Accordingly, no new employees may participate in the plan, no further participant contributions are permitted, and no further benefits accrue. Benefits accumulated prior to the freezing of the U.S. pension plan will be paid to employees upon retirement, and the Company will likely need to make additional cash contributions to the rabbi trust to fund this accumulated benefit obligation.

Non-U.S. Pension Plans

The Company provides pension and similar benefits to employees of certain non-U.S. subsidiaries consistent with local practices. Pension benefits earned are generally based on years of service and compensation during active employment.

The following table sets forth a reconciliation of the benefit obligation, plan assets, and funded status related to pension plans(in thousands):

Actuarial losses incurred in 2023 related to our U.S. and non-U.S. plans are primarily the result of the decrease discount rate assumptions used to estimate the benefit obligation as of December 31, 2023 compared to December 31, 2022. Actuarial gains incurred in 2022 related to our U.S. and non-U.S. plans are primarily the result of an increase in the discount rate assumptions used to estimate the benefit obligations as of December 31, 2022 compared to December 31, 2021.

Amounts recognized in the consolidated balance sheets consist of the following pre-tax amounts(in thousands):

Unrecognized actuarial gains and losses arise from several factors, including experience and assumption changes with respect to the obligations and from the difference between expected returns and actual returns on plan assets. Actuarial items consist of the following(in thousands):

The following table sets forth additional information regarding the projected and accumulated benefit obligations for the pension plans(in thousands):

Unrecognized gains and losses are amortized into future net periodic pension cost using the 10% corridor method over the expected remaining service life of the employee group. The following table sets forth the components of net periodic cost of pension(in thousands):

See Note 8 for the pre-tax, tax effect, and after tax amounts included in other comprehensive income during the years ended December 31, 2023, 2022, and 2021.

The following weighted-average assumptions were used to determine benefit obligations at December 31 of the respective years:

The following weighted-average assumptions were used to determine the net periodic pension costs for the years ended December 31, 2023 and 2022:

The plans’ expected return on assets is based on management’s expectation of long-term average rates of return to be achieved by the underlying investment portfolios. In establishing this assumption, management considers historical and expected returns for the asset classes in which the plans are invested, advice from pension consultants and investment advisors, and current economic and capital market conditions.

The investment mix between equity securities and fixed income securities is based upon achieving a desired return, balancing higher return, more volatile equity securities, and lower return, less volatile fixed income securities. The target allocation of plan assets approximates the actual allocation of plan assets at December 31, 2023 and 2022.

Plan assets are comprised of:

The Company maintains defined benefit retirement plans in certain of its subsidiaries. The assets of the plans are measured at fair value.

Equity securities held by the defined benefit retirement plans consist of equity securities that are valued based on quoted market prices on the last business day of the year. The fair value measurement of the equity securities is considered a Level 2 measurement within the fair value hierarchy.

Fixed income securities held by the defined benefit retirement plans consist of government bonds and corporate notes that are valued based on quoted market prices on the last business day of the year. The fair value measurement of the fixed income securities is considered a Level 2 measurement within the fair value hierarchy.

Cash held by the defined benefit retirement plans consists of deposits on account in various financial institutions. The carrying amount of the cash approximates its fair value. A summary of the Company’s pension plan assets for each fair value hierarchy level are as follows for the periods presented (see Note 16 for further description of the levels within the fair value hierarchy(in thousands)):

Estimated future benefit payments are as follows(in thousands):

The Company anticipates making contributions to its funded and unfunded pension of approximately $1.2 million during 2024.

Other Postretirement Benefit Plans

In the U.S., the Company maintains two unfunded non-pension other postretirement benefit plans (“OPEB”) which are funded as costs are incurred. These plans provide medical and death benefits to retirees.

The following table sets forth a reconciliation of the benefit obligation, plan assets, and funded status related to other postretirement benefit plans(in thousands):

Actuarial losses incurred in 2023 related to our post-retirement plans are primarily the result of the decrease discount rate assumptions used to estimate the benefit obligation as of December 31, 2023 compared to December 31, 2022. Actuarial gains incurred in 2022 related to our post-retirement plans are primarily the result of an increase in the discount rate assumptions used to estimate the benefit obligations as of December 31, 2022 compared to December 31, 2021.

Amounts recognized in the consolidated balance sheets consist of the following pre-tax amounts(in thousands):

Actuarial items consist of the following(in thousands):

Unrecognized gains and losses are amortized into future net periodic benefit cost using the 10% corridor method over the expected remaining service life of the employee group. The following table sets forth the components of net periodic benefit costs(in thousands):

See Note 8 for the pre-tax, tax effect, and after tax amounts included in other comprehensive income during the years ended December 31, 2023, 2022, and 2021.

The following weighted-average assumptions were used to determine benefit obligations at December 31 of the respective years:

The following weighted-average assumptions were used to determine the net periodic benefit costs for the years ended December 31, 2023 and 2022:

The health care trend ultimate rate is 4.04% per the terms of the plan. The impact of a one-percentage-point change in assumed health care cost trend rates on the net periodic benefit cost and postretirement benefit obligation is not material.

Estimated future benefit payments are as follows(in thousands):

As the plans are unfunded, the Company's anticipated contributions for 2024 are equal to the estimated benefit payment.

Other Retirement Obligations

The Company participates in various other defined contribution plans based on local law or custom. The Company periodically makes contributions to these plans. At December 31, 2023 and 2022, the consolidated balance sheets include $0.5 million and $0.9 million, respectively, within accrued pension and other postretirement costs related to these plans.

Most of the Company’s U.S. employees are eligible to participate in 401(k) savings plans which provide company matching under various formulas. The Company’s matching expense for the plans was $1.2 million, $1.1 million, and $1.0 million for the years ended December 31, 2023, 2022, and 2021, respectively. No material amounts are included in the consolidated balance sheets related to unfunded 401(k) contributions.

Certain key employees participate in a nonqualified deferred compensation plan, which allows these employees to defer a portion of their compensation until retirement, or elect shorter deferral periods. The accompanying consolidated balance sheets include a liability within other noncurrent liabilities related to these deferrals. The Company maintains a nonqualified trust, referred to as a “rabbi” trust, to fund payments under this plan. Rabbi trust assets are subject to creditor claims under certain conditions and are not the property of employees. Therefore, they are accounted for as other noncurrent assets within the consolidated balance sheets. The assets held in the rabbi trust are invested in money market funds and company-owned life insurance policies. The consolidated balance sheets include assets held in trust related to the nonqualified deferred compensation plan of $4.3 million and $3.9 million at December 31, 2023 and 2022 respectively, and the related liabilities of $5.6 million and $5.3 million at December 31, 2023 and 2022, respectively.

Note 10 –Share-Based Compensation

The Vishay Precision Group, Inc. 2022 Stock Incentive Plan (the "2022 plan") permits the issuance of up to 608,000 shares of common stock. At December 31, 2023, the Company had reserved 525,239 shares of common stock for future grant of equity awards (restricted stock, unrestricted stock, restricted stock units (“RSUs”), or stock options) pursuant to the 2022 Plan. If any outstanding awards are forfeited by the holder or canceled by the Company, the underlying shares would be available for re-grant to others. If shares are withheld for payment of taxes, those shares do not become available for future grant under the 2022 plan.

Restricted Stock Units

Pursuant to the 2022 plan, the Company issued RSUs to board members, executive officers, and certain employees of the Company during 2023. The amount of compensation cost related to share-based payment transactions is measured based on the grant-date fair value of the equity instruments issued. VPG determines compensation cost for RSUs based on the grant-date fair value of the underlying common stock. Compensation cost is recognized over the period that the participant provides service in exchange for the award. The Company recognizes compensation cost for RSUs that are expected to vest and for which performance criteria are expected to be met.

On February 28, 2023, and in accordance with their respective employment agreements, VPG’sthree executive officers were granted annual equity awards in the form of RSUs, of which 50% are performance-based. The awards have an aggregate target grant-date fair value of $1.9 million were comprised of 43,243 RSUs. Fifty percent of these awards will vest on January 1, 2026, subject to the executives' continued employment. The performance-based portion of the RSUs will also vest on January 1, 2026, subject to the executives' continued employment and the satisfaction of certain performance objectives relating tothree-year cumulative “adjusted free cash flow” and net earnings goals, each weighted equally.

On March 9, 2023, certain non-executive VPG employees were granted annual equity awards in the form of RSUs. Certain employees received awards, of which 75% are performance-based and certain employees received awards of which 50% are performance based. The awards have an aggregate target grant-date fair value of $0.6 million and were comprised of 14,338 RSUs. The non-performance portion of these awards (twenty-five percent for certain employees andfifty percent for certain employees) will vest on January 1, 2026, subject to the employees' continued employment. The performance-based portion of the RSUs will also vest on January 1, 2026, subject to the employees' continued employment and the satisfaction of certain performance objectives relating tothree-year cumulative earnings and cash flow goals, each weighted equally.

On May 24, 2023 and in accordance with the Company's 2017 Non-Employee Director Compensation Plan, as amended at such time, the Board of Directors approved the issuance of an aggregate of 13,923 RSUs to each of the Company's non-employee directors. The awards have an aggregate grant-date fair value of $0.5 million and will vest on the earlier of the 2024 Annual Stockholders meeting or May 24, 2024, subject to the directors' continued service on the Board of Directors.

Vesting of equity awards may be subject to acceleration under certain circumstances.

Note 10 – Share-Based Compensation (continued)

RSU activity is presented below(number of RSUs in thousands):

The fair value of the RSUs vested during 2023 was $2.7 million. Included in the 2023, 2022 and 2021 activity are RSU's forfeited as a result of performance objectives not being met. These awards are therefore available for future grants under the Plan.

RSUs with performance-based vesting criteria are expected to vest as follows(number of RSUs in thousands):

Share-Based Compensation Expense

The following table summarizes pre-tax share-based compensation expense recognized(in thousands):

Share-based compensation expense is recognized ratably over the vesting period of the awards and for RSUs with performance criteria, is recognized for RSU's that are expected to vest and for which performance criteria are expected to be met.

During 2023, a net adjustment of $0.4 million decreasing share-based compensation expense was recorded, based on the evaluation of performance objectives associated with awards granted in 2021, 2022 and 2023. It was determined that certain objectives were not likely to be fully met, necessitating a reversal of certain compensation expense associated with those awards.

During the fourth quarter of 2022, a net adjustment of $0.3 million increasing share-based compensation expense was recorded, based on the evaluation of performance objectives associated primarily with awards granted in 2020. It was determined that certain objectives, which were deemed not likely to be met in previous years, were met.

During the fourth quarter of 2021, a net adjustment of $0.5 million increasing share-based compensation expense was recorded, based on the evaluation of performance objectives associated with awards granted in 2019. It was determined that certain objectives, which were deemed not likely to be met in previous years, were met.

The total tax benefit on share-based compensation expense was $0.5 million, $0.5 million and $0.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. The deferred tax benefit on share-based compensation expense was$0.1 million, $0.2 million, and $0.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

As of December 31, 2023, the Company had $2.2 million of unrecognized share-based compensation expense related to share-based awards that will be recognized over a weighted-average period of approximately 1.5 years.

Note 11 –Commitments, Contingencies, and Concentrations

Litigation

The Company is subject to various legal proceedings that constitute ordinary, routine litigation incidental to its business. The Company is of the opinion that the disposition of these proceedings will not have a material adverse effect on its business or its financial condition, results of operations, and cash flows.

Executive Employment Agreements

The Company has employment agreements with its executive officers which outline base salary, incentive compensation, and equity-based compensation. The employment agreements with the Company's executive officers also provide for incremental compensation in the event of termination without cause or resignation for good reason.

Sources of Supplies

Although most materials incorporated in the Company’s products are available from a number of sources, certain materials are available only from a relatively limited number of suppliers.

Some of the most highly specialized materials for the Company’s sensors are sourced from a single vendor. The Company maintains a safety stock inventory of certain critical materials at its facilities.

Certain metals used in the manufacture of the Company’s products are traded on active markets, and can be subject to significant price volatility.

Market Concentrations

No single customer comprises greater than 10% of net revenues.

The vast majority of the Company’s products are used in the broad industrial market, with selected uses in military and aerospace, medical, agriculture, and construction. Within the broad industrial segment, the Company’s products serve wide applications in the waste management, bulk hauling, logging, scale manufacturing, engineering systems, pharmaceutical, oil, chemical, steel, paper, and food industries.

Credit Risk Concentrations

Financial instruments with potential credit risk consist principally of cash and cash equivalents, accounts receivable, and notes receivable. The Company maintains cash and cash equivalents with various major financial institutions. Concentrations of credit risk with respect to receivables are generally limited due to the Company’s large number of customers and their dispersion across many countries and industries. At December 31, 2023 and 2022, the Company had no significant concentrations of credit risk.

Geographic Concentrations

At December 31, 2023 and 2022, a significant percentage of the Company’s cash and cash equivalents are held outside the United States. See the following table for the percentage of cash and cash equivalents by region at December 31, 2023 and December 31, 2022:

Note 12 -Leases

The Company primarily leases office and manufacturing facilities in addition to vehicles, which have remaining terms of less thanone year tothirteen years.

Note 12 - Leases ( continued)

Leases recorded on the balance sheet consist of the following(in thousands):

Other information related to lease term and discount rate is as follows:

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

Right of use assets obtained in exchange for new operating lease liability during 2023 were $6.8 million and in 2022 were $1.2 million. The Company paid $5.1 million for its operating leases for the year ended December 31, 2023 and $5.1 million for the year ended December 31, 2022, which are included in operating cash flows on the consolidated statements of cash flows.

Undiscounted maturities of operating lease payments as of December 31, 2023 are summarized as follows(in thousands):

Note 13 –Segment and Geographic Data

VPG reports inthree reportable 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.

The chief operating decision maker ("CODM") is our chief executive officer. The evaluation of the segments performance is based on multiple performance measures including gross profits, revenues, and operating income, exclusive of certain items. Management believes that evaluating segment performance, excluding items such as restructuring and severance costs, impairment of goodwill and indefinite-lived intangible assets, acquisition costs, and other items is meaningful because they relate to occurrences or events that are outside of our core operations, and management believes that the use of these measures provides a consistent basis to evaluate our operating profitability and performance trends across comparable periods.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 1). Reporting segment assets are the owned or allocated assets used by each segment. Products are transferred between segments on a basis intended to reflect, as nearly as practicable, the market value of the products.

Note 13 – Segment and Geographic Data (continued)

The following table sets forth reporting segment information(in thousands):

The “Corporate/Other” column for segment operating income (loss) includes unallocated selling, general, and administrative expenses and certain items which management excludes from segment results when evaluating segment performance, as follows(in thousands):

Note 13 – Segment and Geographic Data (continued)

The following geographic data includes property and equipment based on physical location(in thousands):

Note 14 –Earnings Per Share

Basic earnings per share are computed using the weighted average number of common shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted average number of common shares outstanding, adjusted to include the potentially dilutive effect of restricted stock units (see Note 10), and other potentially dilutive securities.

The following table sets forth the computation of basic and diluted earnings per share attributable to VPG stockholders(in thousands, except earnings per share):

Note 15 –Additional Financial Statement Information

The caption “Other” on the consolidated statements of operations consists of the following(in thousands):

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, 2023, as compared to the prior year period, is primarily due to fluctuations in the Israeli shekel, the Canadian dollar and the British pound. The change in the dollar-shekel exchange rate resulted in a unfavorable currency exchange impact primarily related to the shekel-denominated lease liability for the Sensors facility in Israel.

Note 15 – Additional Financial Statement Information (continued)

Foreign currency exchange gains and losses represent the impact of changes in foreign currency exchange rates. The change in foreign exchange gains / (losses) for the year ended December 31, 2022, as compared to the prior year period, is primarily due to fluctuations in the Israeli shekel, the Japanese yen and the British pound. The change in the dollar-shekel exchange rate resulted in a favorable currency exchange impact primarily related to the shekel-denominated lease liability for the Sensors facility in Israel.

Pension expense represents the net periodic benefit cost excluding the service cost.

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

Israeli Severance Pay

The Israeli Severance Pay Law, 1963 ("Severance Pay Law"), specifies that employees of our Israeli subsidiary are entitled to severance payment, following the termination of their employment. Under the Severance Pay Law, the severance payment is calculated as one-month salary for each year of employment, or a portion thereof.

Part of the subsidiary's liability for severance pay is covered by the provisions of Section 14 of the Severance Pay Law ("Section 14"). Under Section 14, employees are entitled to monthly deposits, at a rate of 8.33% of their monthly salary, contributed on their behalf to their insurance funds. Payments in accordance with Section 14 release the subsidiary from any future severance payments in respect of those employees. As a result, the Company does not recognize any liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company's balance sheet.

For the subsidiary's employees in Israel who are not subject to Section 14, the Company calculated the liability for severance pay pursuant to the Severance Pay Law based on the most recent salary of these employees multiplied by the number of years of employment as of the balance sheet date. The Company recorded as expenses the increase in the severance liability, net of earnings (losses) from the related investment fund. The subsidiary's liability was partially funded by monthly payments deposited with insurers and the value of these deposits is recorded as an asset on the Company's balance sheet. Any unfunded amounts would be paid from operating funds and are covered by a provision established by the subsidiary. The accompanying consolidated balance sheets at December 31, 2023 and December 31, 2022 include a $7.1 million and $7.0 million non-current liability, respectively, associated with Israeli severance requirements in other liabilities and a $5.3 million and $5.3 million non-current asset, respectively, associated with Israeli severance requirements in other assets.

Note 16 –Fair Value Measurements

ASC Topic 820, Fair Value Measurements and Disclosures, establishes a valuation hierarchy of the inputs used to measure fair value. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Note 16 – Fair Value Measurements (continued)

Level 3: Unobservable inputs that reflect the Company’s own assumptions.

An asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following tables provide the financial assets and liabilities carried at fair value measured on a recurring basis(in thousands):

The Company maintains nonqualified trusts, referred to as “rabbi” trusts, to fund payments under deferred compensation and nonqualified pension plans. Rabbi trust assets consist primarily of marketable securities, classified as available-for-sale money market funds at December 31, 2023 and December 31, 2022, and company-owned life insurance assets. The marketable securities held in the rabbi trusts are valued using quoted market prices on the last business day of the year. The company-owned life insurance assets are valued in consultation with the Company’s insurance brokers using the value of underlying assets of the insurance contracts. The fair value measurement of cash and cash equivalents held in the rabbi trust is considered a Level 1 measurement and the measurement of the company-owned life insurance assets is considered a Level 2 measurement within the fair value hierarchy.

The fair value of the long-term debt, excluding capitalized deferred financing costs at December 31, 2023 and December 31, 2022 approximates its carrying value, as the revolving debt and term loans are reset monthly based on current market rates, plus a base rate as specified in the 2020 Credit Agreement. The fair value measurement of long-term debt is considered a Level 2 measurement.

The Company’s financial instruments include cash and cash equivalents, accounts receivable, short-term notes payable, and accounts payable. The carrying amounts for these financial instruments reported in the consolidated balance sheets approximate their fair values.

Note 17 –Related Party Transactions

Following the spin-off from Vishay Intertechnology, Inc. on July 6, 2010, VPG is an independent, publicly-traded company, and Vishay Intertechnology does not retain any ownership interest in VPG, although a common group of stockholders control a significant portion of the voting power of each company and the companies have three common board members.

Subsequent to the spin-off, VPG and Vishay Intertechnology continue to share certain manufacturing locations. VPG ownsone location in Japan at which it leases space to Vishay Intertechnology. Vishay Intertechnology ownsone location in the United States, at which it leases space to VPG. Lease receipts and payments related to the shared facilities are immaterial.