CTS Announces Second Quarter 2015 Results

Solid Earnings; Strong New Business Awards

ELKHART, Ind.--()--CTS Corporation (NYSE: CTS) today announced second quarter 2015 results.

  • Sales were $100.1 million, down 2.8% compared to the second quarter of 2014, driven primarily by an unfavorable currency impact of $2.1 million as the US Dollar appreciated against the Euro.
  • GAAP earnings were $19.1 million, or $0.57 per diluted share, compared to $6.4 million, or $0.19 per diluted share from continuing operations in the second quarter of 2014.
  • GAAP earnings include one-time favorable tax items of $0.32 and restructuring-related charges of $0.05 per diluted share.
  • Adjusted EPS was $0.30, compared to $0.25 in the second quarter of 2014.

Second quarter sales to automotive customers declined $2.8 million year-over-year primarily due to unfavorable currency impact of $2.1 million. Sales of electronic components were essentially flat year-over-year. CTS received $169 million in new business awards in the second quarter, bringing the year-to-date new business awards to $361 million.

“We delivered solid earnings even though sales remain soft,” said Kieran O’Sullivan, CEO of CTS Corporation. “We continue to make progress with our strategy to simplify, focus and drive growth in products that sense, connect and move. We achieved strong new business awards again in the second quarter. We expect to complete our transition from Canada as planned during the second half. After this transition, we will have eleven global manufacturing locations, down from twenty at the end of 2012.”

2015 Guidance

Management is revising its guidance for full year 2015 sales to the range of $390 to $405 million, which includes the unfavorable currency impact at current rates. Adjusted earnings per diluted share are expected to be in the range of $0.95 to $1.05.

Conference Call

As previously announced, the Company has scheduled a conference call on Tuesday, July 28 2015 at 11:00 a.m. (EDT). The dial-in number for the conference call is 888-505-4375 (719-785-1765, if calling from outside the U.S.). The conference I.D. number is 6768906. There will be a replay of the conference call from 2:00 p.m. (EDT) on Tuesday, July 28, 2015 through 2:00 p.m. (EDT) on Tuesday, August 11, 2015. The telephone number for the replay is 888-203-1112 (719-457-0820, if calling from outside the U.S.). The access code is 6768906. Also, please note that a live audio webcast of the conference call will be available and can be accessed directly from the website of CTS Corporation www.ctscorp.com.

About CTS

CTS is a leading designer and manufacturer of electronic components and sensors to OEMs in the automotive, communications, medical, defense and aerospace, industrial and computer markets. CTS manufactures products in North America, Europe and Asia. CTS' stock is traded on the NYSE under the ticker symbol "CTS.”

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. Examples of factors that may affect future operating results and financial condition include, but are not limited to: changes in the economy generally and in respect to the businesses in which CTS operates; unanticipated issues in integrating acquisitions; the results of actions to reposition our businesses; rapid technological change; general market conditions in the automotive, communications, and computer industries, as well as conditions in the industrial, defense and aerospace, and medical markets; reliance on key customers; unanticipated natural disasters or other events; the ability to protect our intellectual property; pricing pressures and demand for our products; unanticipated developments that could occur with respect to contingencies such as litigation and environmental matters as well as any product liability claims; and risks associated with our international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks. Many of these, and other, risks and uncertainties are discussed in further detail in Item 1A. of the 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.

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands, except per share amounts)
             
Three Months Ended Six Months Ended
June 28, June 29, June 28, June 29,
2015 2014 2015 2014
 
Net sales $ 100,071 $ 102,980 $ 198,382 $ 203,686
 
Costs and expenses:
Cost of goods sold 66,698 69,157 132,873 139,248
Selling, general and administrative expenses 15,224 15,813 30,935 29,454
Research and development expenses 5,487 5,332 10,686 10,958
Restructuring and impairment charges   2,118     2,733     2,856     3,236  
 
Operating earnings 10,544 9,945 21,032 20,790
 
Other (expense) income :
Interest expense (653 ) (582 ) (1,241 ) (1,195 )
Interest income 853 688 1,641 1,252
Other   115     (409 )   (1,569 )   (2,180 )
Total other (expense) income   315     (303 )   (1,169 )   (2,123 )
 
Earnings before income taxes 10,859 9,642 19,863 18,667
 
Income tax expense (benefit)   (8,221 )   3,281     (5,504 )   7,226  
 
 
Net earnings $ 19,080   $ 6,361   $ 25,367   $ 11,441  
 
Net earnings per share:
Basic $ 0.58 $ 0.19 $ 0.76 $ 0.34
 
Diluted $ 0.57 $ 0.19 $ 0.75 $ 0.33
 
Cash dividends declared per share $ 0.040   $ 0.040   $ 0.080   $ 0.080  
 
Average common shares outstanding:
Basic 33,080 33,741 33,243 33,725
 
Diluted 33,551 34,208 33,740 34,244
 
CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION
       
 
 

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 28, June 29, June 28, June 29,
2015 2014 2015 2014
 
GAAP diluted earnings per share $ 0.57 $ 0.19 $ 0.75 $ 0.33
 
Tax affected charges to reported diluted earnings per share:
Restructuring and related charges 0.05 0.07 0.07 0.10
Increase in the recognition of uncertain tax benefits 0.15 - 0.15 -
Change in treatment of certain foreign taxes (0.47 ) - (0.47 ) -
Tax asset write-off related to restructuring   -     (0.01 )   -     0.01
Adjusted diluted earnings per share $ 0.30   $ 0.25   $ 0.50   $ 0.44
 
 

Additional Information

 
The following table includes other financial information not presented in the preceding financial statements.
 
Three Months Ended Six Months Ended
$ In thousands June 28, June 29, June 28, June 29,

Expense

2015 2014 2015 2014
Depreciation and Amortization $ 4,028 $ 4,153 $ 8,093 $ 8,401
Equity Based Compensation $ 842 $ 400 $ 2,362 $ 1,179
 

OTHER SUPPLEMENTAL INFORMATION
(continued)

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.

CTS Corporation and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In thousands of dollars)
       
June 28, December 31,
2015 2014
 
Cash and cash equivalents $ 146,791 $ 134,508
Accounts receivable, net 63,046 56,894
Inventories 30,424 27,887
Other current assets   21,400     21,112  
Total current assets   261,661     240,401  
 
Property, plant and equipment, net 70,166 71,414
Other Assets
Prepaid pension asset 36,563 32,099
Goodwill 32,047 32,047
Indefinite-lived intangible asset 690 690
Other intangible assets, net 33,945 35,902
Deferred income taxes 53,088 43,120
Other   1,110     1,253  
Total other assets   157,443     145,111  
Total Assets $ 489,270   $ 456,926  
 
 
 
 
Accounts payable $ 45,724 $ 43,343
Accrued payroll and benefits 10,364 11,283
Accrued liabilities   27,395     25,356  
Total current liabilities   83,483     79,982  
 
Long-term debt 88,700 75,000
Post retirement obligations 2,908 3,049
Other long-term obligations 8,647 9,106
Shareholders' equity
Common stock 300,869 299,892
Additional contributed capital 40,237 39,153
Retained earnings 402,863 380,145
Accumulated other comprehensive loss   (101,900 )   (104,233 )
Total shareholders' equity before treasury stock 642,069 614,957
Treasury stock   (336,537 )   (325,168 )
Total shareholders' equity   305,532     289,789  
Total Liabilities and Shareholders' Equity $ 489,270   $ 456,926  

Contacts

CTS Corporation
Ashish Agrawal, 574-523-3800
Vice President and Chief Financial Officer

Contacts

CTS Corporation
Ashish Agrawal, 574-523-3800
Vice President and Chief Financial Officer