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CTS Announces Second Quarter 2020 Results

CTS Corporation
·8 min read

Adapting to New Market Conditions

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.