Impact of COVID-19 on Our Business

July 2, Three months ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

July 2, Six fiscal months ended July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

As Adjusted - Non GAAP $ 73,922 $ 60,461 $ 21,369 $ 15,317 $ 15,982 $ 10,868

(a) Acquisition purchase accounting adjustments include fair market value adjustments associated with inventory recorded as a component of costs of products sold.

(b) COVID-19 impact is the net impact to the Company of costs incurred as a result of the COVID-19 pandemic, net of government subsidies received.

(c) Start-up costs in 2022 and 2021 are associated with the ramp up of our new manufacturing facility in Israel.

(d) Impact of foreign currency exchange rates on assets and liabilities.

The quarter-to-quarter trends in these financial metrics can also be an important indicator of the likely direction of our business. The following tables show net revenues, gross profit margin, end-of-period backlog, book-to-bill ratio, and inventory turnover for our business as a whole and by segment during the five quarters beginning with the second quarter of 2021 through the second quarter of 2022 (dollars in thousands):

Overall gross profit margin in the second quarter of 2022 increased 1.9% as compared to the first quarter of 2022 and increased 2.5% from the second quarter of 2021.

Compared to the second quarter of 2021, the Sensors and Measurement Systems reporting segments had higher gross profit margins, while the Weighing Solutions reporting segment gross profit margin was lower.

Research and development will continue to play a key role in our efforts to introduce innovative products to generate new sales and to improve profitability. We expect to continue to expand our position as a leading supplier of precision foil technology products. We believe our R&D efforts should provide us with a variety of opportunities to leverage technology, products, and our manufacturing base in order to ultimately improve our financial performance.

Foreign Subsidiaries which use the Local Currency as the Functional Currency

Foreign Subsidiaries which use the U.S. Dollar as the Functional Currency

Effects of Foreign Exchange Rate on Operations

For the six fiscal months ended July 2, 2022, exchange rates decreased net revenues by $5.5 million, and decreased costs of products sold and selling, general, and administrative expenses by $3.4 million, when compared to the comparable prior year period.

Statement of operations' captions as a percentage of net revenues and the effective tax rates were as follows:

Net revenues were as follows (dollars in thousands):

Changes in net revenues were attributable to the following:

Gross profit as a percentage of net revenues was as follows:

Analysis of revenues and gross profit margins for each of our reportable segments is provided below.

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

Changes in Sensors segment net revenues were attributable to the following:

The gross profit margin increased 1.6% for the six fiscal months ended July 2, 2022 as compared to the comparable prior year period. Volume increases were mostly offset by impacts from charges related to start-up costs in our new advanced sensors facility, wage increase, and labor inefficiencies.

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

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

Selling, General, and Administrative Expenses

Selling, general, and administrative ("SG&A") expenses are summarized as follows (dollars in thousands):

SG&A expenses for the six fiscal months ended July 2, 2022 increased $7.9 million compared to the comparable prior year periods with $6.1 million of the increase driven by SG&A expenses from DTS. The remaining increase is from additional SG&A expenses related to wage increases, commissions, and other costs.

Impairment of Goodwill and Indefinite-lived Intangible Assets

For the fiscal quarter and six fiscal months ended July 3, 2021, as a result of our interim impairment test, 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.

The following table analyzes the components of the line "Other" on the consolidated condensed statements of operations (in thousands):

Financial Condition, Liquidity, and Capital Resources

Approximately 92% and 87% of our cash and cash equivalents balance at July 2, 2022 and December 31, 2021, respectively, was held by our non-U.S. subsidiaries.

See the following table for the percentage of cash and cash equivalents, by region, at July 2, 2022 and December 31, 2021:

The following table summarizes the components of net cash at July 2, 2022 and December 31, 2021 (in thousands):

Cash paid for property and equipment for the six fiscal months ended July 2, 2022 was $8.8 million compared to $8.3 million in the comparable prior year period.

As of July 2, 2022 and December 31, 2021, we did not have any off-balance sheet arrangements.

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