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CTS Announces Second Quarter 2020 Results

Adapting to New Market Conditions

/EIN News/ -- LISLE, Ill., July 31, 2020 (GLOBE NEWSWIRE) -- CTS Corporation (NYSE: CTS) today announced second quarter 2020 results.

  • Sales were $84.2 million, down 30% year-over-year. Sales to transportation customers declined 53%, and sales to other end markets grew 14%. Excluding $5.4 million in sales from the QTI acquisition, sales to other end markets grew 1%.
  • Net earnings were $4.9 million or $0.15 per diluted share versus $11.9 million or $0.36 last year.
  • Adjusted diluted EPS was $0.16.
  • Free cash flow was $9.1 million, and at quarter-end, we were net cash positive.
  • New business wins were $105 million.

“I am grateful to our teams around the globe for their resilience and care for our customers and partners in this unprecedented downturn. We are adapting our cost structure due to the prolonged impact of COVID-19,” said Kieran O’Sullivan, CEO of CTS Corporation. “We received new business awards in some promising areas. Our focus remains on key strategic growth investments. We are making progress on our diversification into non-transportation markets and continue to position the business for the opportunities ahead of us.”

2020 Guidance

Due to ongoing market uncertainties, management is not providing revenue or earnings guidance at this time.

Conference Call

As previously announced, the Company has scheduled a conference call at 11:00 a.m. (EDT) today to discuss the second quarter financial results. The dial-in number is 800-309-1256 (720-543-0314, if calling from outside the U.S.). The passcode is 290044. There will be a replay of the conference call from 2:00 p.m. (EDT) today through 2:00 p.m. (EST) on Friday, August 14, 2020. The telephone number for the replay is 888-203-1112 (719-457-0820, if calling from outside the U.S.). The replay passcode is 7215300. A live audio webcast of the conference call will be available and can be accessed directly from the Investors section of the website of CTS Corporation at www.ctscorp.com.

About CTS

CTS (NYSE: CTS) is a leading designer and manufacturer of products that Sense, Connect, and Move. The company manufactures sensors, actuators, and electronic components in North America, Europe, and Asia, and provides engineered products to customers in the aerospace/defense, industrial, medical, telecommunications/IT, and transportation markets.

For more information, visit www.ctscorp.com.

Safe Harbor

This document contains statements that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, any financial or other guidance, statements that reflect our current expectations concerning future results and events, and any other statements that are not based solely on historical fact. Forward-looking statements are based on management's expectations, certain assumptions and currently available information. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. These forward-looking statements are made subject to certain risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from those presented in the forward-looking statements. Many of these, and other, risks and uncertainties are discussed in further detail in Item 1A. of CTS’ Annual Report on Form 10-K. We undertake no obligation to publicly update our forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.

Contact

Ashish Agrawal
Vice President and Chief Financial Officer

CTS Corporation
4925 Indiana Avenue
Lisle, IL 60532
USA

Telephone: +1 (630) 577-8800
E-mail: ashish.agrawal@ctscorp.com


CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands of dollars, except per share amounts)

  Three Months Ended   Six Months Ended
  June 30,   June 30,   June 30,   June 30,
  2020   2019   2020   2019
Net sales $ 84,197     $ 120,684     $ 187,272     $ 238,308  
Cost of goods sold 57,630     79,480     127,806     156,490  
Gross Margin 26,567     41,204     59,466     81,818  
Selling, general and administrative expenses 14,668     17,036     31,427     34,597  
Research and development expenses 5,522     6,257     12,930     13,048  
Restructuring charges 135     911     375     2,995  
Gain on sale of assets     (83 )       (122 )
Operating earnings 6,242     17,083     14,734     31,300  
Other (expense) income:              
Interest expense (909 )   (467 )   (1,760 )   (933 )
Interest income 304     440     635     872  
Other income (expense), net 256     (1,107 )   (1,726 )   (1,010 )
Total other (expense), net (349 )   (1,134 )   (2,851 )   (1,071 )
Earnings before income taxes 5,893     15,949     11,883     30,229  
Income tax expense 1,036     4,006     3,218     6,867  
Net earnings $ 4,857     $ 11,943     $ 8,665     $ 23,362  
Earnings per share:              
Basic $ 0.15     $ 0.36     $ 0.27     $ 0.71  
Diluted $ 0.15     $ 0.36     $ 0.27     $ 0.70  
               
Basic weighted – average common shares outstanding: 32,262     32,799     32,364     32,803  
Effect of dilutive securities 242     406     284     422  
Diluted weighted – average common shares outstanding: 32,504     33,205     32,648     33,225  
               
Cash dividends declared per share $ 0.04     $ 0.04     $ 0.08     $ 0.08  



CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)

  (Unaudited)    
  June 30,   December 31,
  2020   2019
ASSETS      
Current Assets      
Cash and cash equivalents $ 145,981     $ 100,241  
Accounts receivable, net 59,798     78,008  
Inventories, net 44,266     42,237  
Other current assets 14,750     16,992  
Total current assets 264,795     237,478  
Property, plant and equipment, net 99,349     105,038  
Operating lease assets, net 24,369     24,644  
Other Assets      
Prepaid pension asset 64,104     62,082  
Goodwill 106,056     106,056  
Other intangible assets, net 80,622     85,215  
Deferred income taxes 21,278     19,795  
Other 2,816     3,046  
Total other assets 274,876     276,194  
Total Assets $ 663,389     $ 643,354  
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current Liabilities      
Accounts payable $ 32,820     $ 48,219  
Operating lease obligations 3,051     2,787  
Accrued payroll and benefits 8,725     9,564  
Accrued expenses and other liabilities 33,175     36,378  
Total current liabilities 77,771     96,948  
Long-term debt 141,300     99,700  
Long-term operating lease obligations 24,473     24,926  
Long-term pension obligations 6,504     6,632  
Deferred income taxes 6,303     5,637  
Other long-term obligations 6,146     4,292  
Total Liabilities 262,497     238,135  
Commitments and Contingencies      
Shareholders’ Equity      
Common stock 310,953     307,932  
Additional contributed capital 39,775     43,689  
Retained earnings 515,841     509,766  
Accumulated other comprehensive loss (93,155 )   (91,726 )
Total shareholders’ equity before treasury stock 773,414     769,661  
Treasury stock (372,522 )   (364,442 )
Total shareholders’ equity 400,892     405,219  
Total Liabilities and Shareholders’ Equity $ 663,389     $ 643,354  



CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION - UNAUDITED

Earnings Per Share

The following table reconciles GAAP diluted earnings per share to adjusted diluted earnings per share for the Company:

  Three Months Ended   Six Months Ended
  June 30, 2020   June 30, 2019   June 30, 2020   June 30, 2019
GAAP diluted earnings per share $ 0.15     $ 0.36     $ 0.27     $ 0.70  
               
Tax affected charges to reported diluted earnings per share:              
Restructuring charges 0.01     0.02     0.01     0.07  
Foreign currency (gain) loss (0.03 )   0.02     0.01     0.01  
Non-cash pension expense 0.01         0.02     0.01  
Environmental charges 0.02         0.02      
Discrete tax items         0.02      
Adjusted diluted earnings per share $ 0.16     $ 0.40     $ 0.35     $ 0.79  



Additional Information

The following table includes other financial information not presented in the preceding financial statements.

  Three Months Ended   Six Months Ended
  June 30, 2020   June 30, 2019   June 30, 2020   June 30, 2019
Depreciation and amortization expense $ 6,611     $ 5,995     $ 13,143     $ 11,919  
Stock-based compensation expense $ 817     $ 1,579     $ 1,045     $ 2,793  


Non-GAAP Financial Measures

Adjusted earnings per share is a non-GAAP financial measure. The most directly comparable GAAP financial measure is diluted earnings per share.

CTS adjusts for these items because they are discrete events, which have a significant impact on comparable GAAP financial measures and could distort an evaluation of our normal operating performance.

CTS uses an adjusted earnings per share measure to evaluate overall performance, establish plans and perform strategic analysis. Using this measure avoids distortion in the evaluation of operating results by eliminating the impact of events which are not related to normal operating performance. Because this measure is based on the exclusion or inclusion of specific items, they may not be comparable to measures used by other companies which have similar titles. CTS' management compensates for this limitation when performing peer comparisons by evaluating both GAAP and non-GAAP financial measures reported by peer companies. CTS believes that this measure is useful to its management, investors and stakeholders in that it:

  • provides a meaningful measure of CTS' operating performance,
  • reflects the results used by management in making decisions about the business, and
  • helps review and project CTS' performance over time.

We recommend that investors consider both actual and adjusted measures in evaluating the performance of CTS with peer companies.

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