8-K
CTS CORP (CTS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 8, 2022
CTS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
| IN | 1-4639 | 35-0225010 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (1.R.S. Employer Identification No) |
| 4925 Indiana Avenue | ||
| Lisle IL | 60532 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant's Telephone Number, Including Area Code:(630) 577-8800
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240. l 4d2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4( c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
|---|---|---|
| Common Stock, no par value | CTS | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On February 8, 2022, CTS Corporation (the "Registrant") issued a press release providing certain results for the fourth quarter and full year ended December 31, 2021, as more fully described in the press release. A copy of the press release is attached hereto as Exhibit 99.l and is incorporated by reference herein.
The information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.l hereto, is being "furnished" to the Securities and Exchange Commission and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act” ) or otherwise subject to the liabilities of that section. Furthermore, such information shall not be deemed to be incorporated by reference into any filing made by the Registrant under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except as set forth by specific reference in such filing.
Item 7.01 Regulation FD Disclosure.
As disclosed in the press release furnished as Exhibit 99.1, the Registrant will hold a live web cast on February 8, 2022, relating to the Registrant’s financial results for the fourth quarter and full year ended December 31, 2021. A copy of the slides to be presented during the Registrant’s web cast and discussed in the conference call relating to such financial results is being furnished as Exhibit 99.2 to this Current Report on Form 8-K.
By filing this Current Report on Form 8-K and furnishing the information contained herein, the Company makes no admission as to the materiality of any information in this report that is required to be disclosed solely by reason of Regulation FD.
The information contained in Item 7.01 of this Current Report on Form 8-K and Exhibit 99.2 shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. Furthermore, such information shall not be deemed to be incorporated by reference into any filing made by the Registrant under the Securities Act or the Exchange Act, except as set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit | Description |
|---|---|
| 99.1 | Earnings Release dated February 8, 2022 |
| 99.2 | Slides of CTS Corporation, 4th Quarter and Full Year 2021, dated February 8, 2022 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL Document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: February 8, 2022 | CTS CORPORATION | |
|---|---|---|
| By: | /s/ Thomas M. White | |
| Thomas M. White | ||
| Corporate Controller |
cts-ex991_6.htm
Press Release
February 8, 2022 FOR IMMEDIATE RELEASE
CTS Announces Fourth Quarter and Full Year 2021 Results
Delivering Solid Growth and Diversification
Lisle, Ill. - CTS Corporation (NYSE: CTS), a leading global designer and manufacturer of custom engineered solutions that “sense, connect and move” today announced fourth quarter and full year 2021 results.
“We delivered strong growth across all end markets despite a challenging macroeconomic environment. Importantly, we also further advanced our diversification strategy, which was underscored by a 25% increase in non-transportation revenues over the previous year, while at the same time winning record new business across end markets,” said Kieran O’Sullivan, CEO of CTS Corporation.
“We enter 2022 with a goal to continue our progress on profitable growth and diversification. The investments we’ve made in the business combined with our strong balance sheet and disciplined capital allocation approach will enable us to capitalize on future growth opportunities and continue to return value to our shareholders.”
Fourth Quarter 2021 Results
| • | Sales were $132.5 million, up 8% year-over-year. Sales to non-transportation end markets increased 25%, and sales to the transportation end market decreased 3% over the same period. |
|---|---|
| • | Net income was $9.2 million, or $0.28 per diluted share, compared to $14.9 million, or $0.46 per diluted share, in the fourth quarter of 2020. The lower net income was due to increased foreign exchange expense and a higher tax rate. |
| --- | --- |
| • | Adjusted diluted EPS was $0.49, up from $0.43 in the fourth quarter of 2020. |
| --- | --- |
| • | Adjusted EBITDA margin was 20.9% compared to 21.4% in the fourth quarter of 2020. |
| --- | --- |
| • | Operating cash flow was $26.0 million, compared to $26.4 million in the fourth quarter of 2020. |
| --- | --- |
| • | New business wins were $185 million, up from $104 million in the fourth quarter of 2020. |
| --- | --- |
Full Year 2021 Results
| • | Sales were $512.9 million, up 21% year-over-year. Sales to non-transportation end markets increased 25%, and sales to the transportation end market increased 18% over the same period. |
|---|---|
| • | Net loss was $41.9 million, or $(1.30) per diluted share, versus net earnings of $34.7 million, or $1.06 per diluted share, in 2020. The 2021 net earnings were impacted by non-cash charges of $96.6 million, net of taxes related to the previously disclosed termination of the U.S. pension plan. |
| --- | --- |
| • | Adjusted diluted EPS was $1.93, up from $1.12 in 2020. |
| --- | --- |
| • | Adjusted EBITDA margin was 21.0% compared to 18.3% for 2020. |
| --- | --- |
| • | Operating cash flow was $86.1 million, up from $76.8 million in 2020. |
| --- | --- |
| • | New business wins were $694 million, up from $442 million in 2020. |
| --- | --- |
www.ctscorp.com
2022 Guidance
CTS expects full year 2022 sales to be in the range of $525 – $550 million and adjusted diluted EPS in the range of $2.00 – $2.25.
Conference Call and Supplemental Materials
As previously announced, the Company has scheduled a conference call at 10:00 a.m. (EST) today to discuss the fourth quarter and full year 2021 financial results. The dial-in number for the U.S. and Canada is 844-200-6205 (+1 929-526-1599, if calling from outside the U.S.). The passcode is 160107. In addition, the Company will be using a supplemental slide presentation that will be referred to during the call. The presentation and 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 https://www.ctscorp.com/investors/events-presentations/
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, 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 CTS’ 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 CTS’ 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: the ultimate impact of the COVID-19 pandemic on CTS’ business, results of operations or financial condition; changes in the economy generally and in respect to the business in which CTS operates; unanticipated issues in integrating acquisitions; the results of actions to reposition CTS’ business; rapid technological change; general market conditions in the transportation industry, as well as conditions in the industrial, aerospace and defense, and medical markets; reliance on key customers; unanticipated public health crises, natural disasters or other events; environmental compliance and remediation expenses; the ability to protect CTS’ intellectual property; pricing pressures and demand for CTS’ products; and risks associated with CTS’ 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 CTS’ Annual Report on Form 10-K and other filings made with the SEC. CTS undertakes no obligation to publicly update its forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.
www.ctscorp.com
Non-GAAP Financial Measures
From time to time, CTS may use non-GAAP financial measures in discussing CTS’ business. These measures are intended to supplement, not replace, CTS’ presentation of its financial results in accordance with U.S. GAAP. CTS’ management believes that non-GAAP financial measures can be useful to investors in analyzing CTS’ financial performance and results of operations over time. CTS recommends that investors consider both actual and adjusted measures in evaluating the performance of CTS with peer companies.
The information included in this press release includes the non-GAAP financial measures of adjusted operating earnings, adjusted EBITDA, adjusted net earnings, adjusted diluted earnings per share, debt to capitalization ratio, controllable working capital ratio, and free cash flow. Many of these non-GAAP financial measures exclude the effect of certain expenses and income not related directly to the underlying performance of CTS’ fundamental business operations.
CTS believes that adjusted operating earnings, adjusted EBITDA, adjusted net earnings and, adjusted diluted earnings per share provide useful information to investors regarding its operational performance because they enhance an investor’s overall understanding of CTS’ core financial performance and facilitate comparisons to historical results of operations, by excluding items that are not related directly to the underlying performance of CTS’ fundamental business operations or were not part of CTS’ business operations during a comparable period.
CTS believes that debt to capitalization ratio is a measurement of financial leverage and provides an insight into the financial structure of CTS and its financial strength. CTS believes the controllable working capital ratio provides an objective measure of the efficiency with which CTS manages its short-term capital needs. CTS believes that free cash flow is a useful measure of its ability to generate cash.
CTS believes that these non-GAAP financial measures are commonly used by financial analysts and others in the industries in which CTS operates, and thus further provide useful information to investors. Note that CTS’ definitions of these non-GAAP financial measures may differ from those terms as defined or used by other companies.
CTS does not provide reconciliations of forward-looking non-GAAP financial measures, such as estimated adjusted diluted earnings per share, to the most comparable GAAP financial measures on a forward-looking basis because CTS is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of certain items, such as, but not limited to, restructuring costs, environmental remediation costs, acquisition related costs, foreign exchange rates and other non-routine costs. Each of such adjustments has not yet occurred, are out of CTS' control and/or cannot be reasonably predicted. For the same reasons, CTS is unable to address the probable significance of the unavailable information.
Contact
Ashish Agrawal
Vice President and Chief Financial Officer
CTS Corporation
4925 Indiana Avenue
Lisle, IL 60532 USA
+1 (630) 577-8800
ashish.agrawal@ctscorp.com
www.ctscorp.com
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) - UNAUDITED
(In thousands of dollars, except per share amounts)
| Three Months Ended | Twelve Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31,<br><br><br>2021 | December 31,<br><br><br>2020 | December 31,<br><br><br>2021 | December 31,<br><br><br>2020 | |||||||||
| Net sales | $ | 132,531 | $ | 123,018 | $ | 512,925 | $ | 424,066 | ||||
| Cost of goods sold | 83,860 | 80,327 | 328,306 | 285,003 | ||||||||
| Gross margin | 48,671 | 42,691 | 184,619 | 139,063 | ||||||||
| Selling, general and administrative expenses | 23,413 | 19,476 | 82,597 | 67,787 | ||||||||
| Research and development expenses | 5,686 | 5,664 | 23,856 | 24,317 | ||||||||
| Restructuring charges | 1,136 | 414 | 1,687 | 1,830 | ||||||||
| Operating earnings | 18,436 | 17,137 | 76,479 | 45,129 | ||||||||
| Other (expense) income: | ||||||||||||
| Interest expense | (534 | ) | (655 | ) | (2,111 | ) | (3,272 | ) | ||||
| Interest income | 151 | 195 | 840 | 1,047 | ||||||||
| Other (expense) income, net | (3,302 | ) | 2,682 | (136,088 | ) | 2,575 | ||||||
| Total other (expense) income, net | (3,685 | ) | 2,222 | (137,359 | ) | 350 | ||||||
| Earnings (loss) before income taxes | 14,751 | 19,359 | (60,880 | ) | 45,479 | |||||||
| Income tax expense (benefit) | 5,586 | 4,412 | (19,014 | ) | 10,793 | |||||||
| Net earnings (loss) | 9,165 | 14,947 | (41,866 | ) | $ | 34,686 | ||||||
| Earnings (loss) per share: | ||||||||||||
| Basic | $ | 0.28 | $ | 0.46 | $ | (1.30 | ) | $ | 1.07 | |||
| Diluted | $ | 0.28 | $ | 0.46 | $ | (1.30 | ) | $ | 1.06 | |||
| Basic weighted – average common shares outstanding: | 32,214 | 32,273 | 32,327 | 32,317 | ||||||||
| Effect of dilutive securities | 218 | 289 | — | 267 | ||||||||
| Diluted weighted – average common shares outstanding: | 32,432 | 32,562 | 32,327 | 32,584 | ||||||||
| Cash dividends declared per share | $ | 0.04 | $ | 0.04 | $ | 0.16 | $ | 0.16 |
www.ctscorp.com
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
| (Unaudited) | ||||||
|---|---|---|---|---|---|---|
| December 31, 2021 | December 31, 2020 | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash and cash equivalents | $ | 141,465 | $ | 91,773 | ||
| Accounts receivable, net | 82,191 | 80,981 | ||||
| Inventories, net | 49,506 | 45,870 | ||||
| Other current assets | 15,927 | 14,607 | ||||
| Total current assets | 289,089 | 233,231 | ||||
| Property, plant and equipment, net | 96,876 | 97,437 | ||||
| Operating lease assets, net | 21,594 | 23,281 | ||||
| Other Assets | ||||||
| Prepaid pension asset | 49,382 | 56,642 | ||||
| Goodwill | 109,798 | 109,497 | ||||
| Other intangible assets, net | 69,888 | 79,121 | ||||
| Deferred income taxes | 25,415 | 24,250 | ||||
| Other | 2,420 | 2,590 | ||||
| Total other assets | 256,903 | 272,100 | ||||
| Total Assets | $ | 664,462 | $ | 626,049 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Current Liabilities | ||||||
| Accounts payable | $ | 55,537 | $ | 50,489 | ||
| Operating lease obligations | 3,393 | 3,294 | ||||
| Accrued payroll and benefits | 18,418 | 12,978 | ||||
| Accrued expenses and other liabilities | 36,718 | 38,171 | ||||
| Total current liabilities | 114,066 | 104,932 | ||||
| Long-term debt | 50,000 | 54,600 | ||||
| Long-term operating lease obligations | 21,354 | 23,163 | ||||
| Long-term pension obligations | 6,886 | 7,466 | ||||
| Deferred income taxes | 5,894 | 7,010 | ||||
| Other long-term obligations | 2,684 | 5,196 | ||||
| Total Liabilities | 200,884 | 202,367 | ||||
| Commitments and Contingencies | ||||||
| Shareholders’ Equity | ||||||
| Common stock | 314,620 | 311,190 | ||||
| Additional contributed capital | 42,549 | 41,654 | ||||
| Retained earnings | 492,242 | 539,281 | ||||
| Accumulated other comprehensive loss | (4,525 | ) | (95,921 | ) | ||
| Total shareholders’ equity before treasury stock | 844,886 | 796,204 | ||||
| Treasury stock | (381,308 | ) | (372,522 | ) | ||
| Total shareholders’ equity | 463,578 | 423,682 | ||||
| Total Liabilities and Shareholders’ Equity | $ | 664,462 | $ | 626,049 |
www.ctscorp.com
CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION - UNAUDITED
(In millions of dollars, except per share amounts)
Adjusted Operating Earnings
| Three Months Ended<br><br><br>December 31, | Twelve Months Ended<br><br><br>December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2019 | |||||||
| Operating earnings | $ | 18.4 | $ | 17.1 | $ | 76.5 | $ | 45.1 | $ | 53.8 | |
| Adjustments to reported operating earnings: | |||||||||||
| Restructuring charges | 1.1 | 0.4 | 1.7 | 1.8 | 7.4 | ||||||
| Environmental charges | 1.4 | 1.5 | 2.3 | 2.8 | 2.3 | ||||||
| Legal settlement | — | — | — | — | (0.5 | ) | |||||
| Transaction costs | — | 0.3 | — | 0.3 | 0.7 | ||||||
| Costs of tax improvement initiatives | — | — | — | — | 0.1 | ||||||
| Total adjustments to reported operating earnings | $ | 2.5 | $ | 2.2 | $ | 3.9 | $ | 4.9 | $ | 10.0 | |
| Adjusted operating earnings | $ | 21.0 | $ | 19.4 | $ | 80.4 | $ | 50.0 | $ | 63.8 | |
| Net sales | $ | 132.5 | $ | 123.0 | $ | 512.9 | $ | 424.1 | $ | 469.0 | |
| Adjusted operating earnings as a % of net sales | 15.8% | 15.7% | 15.7% | 11.8% | 13.6% |
Adjusted EBITDA
| Three Months Ended<br><br><br>December 31, | Twelve Months Ended<br><br><br>December 31, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2019 | |||||||||||
| Net earnings (loss) | $ | 9.2 | $ | 14.9 | $ | (41.9 | ) | $ | 34.7 | $ | 36.1 | ||||
| Depreciation and amortization expense | 6.7 | 6.9 | 26.9 | 26.7 | 24.6 | ||||||||||
| Interest expense | 0.5 | 0.7 | 2.1 | 3.3 | 2.6 | ||||||||||
| Tax expense (benefit) | 5.6 | 4.4 | (19.0 | ) | 10.8 | 14.1 | |||||||||
| EBITDA | 22.0 | 26.9 | (31.8 | ) | 75.4 | 77.5 | |||||||||
| Adjustments to EBITDA: | |||||||||||||||
| Restructuring charges | 1.1 | 0.4 | 1.7 | 1.8 | 6.9 | ||||||||||
| Environmental charges | 1.4 | 1.5 | 2.3 | 2.8 | 2.3 | ||||||||||
| Legal settlement | — | — | — | — | (0.5 | ) | |||||||||
| Transaction costs | — | 0.3 | — | 0.3 | 0.7 | ||||||||||
| Costs of tax improvement initiatives | — | — | — | — | 0.1 | ||||||||||
| Non-cash pension expense | 1.3 | 0.6 | 132.4 | 2.5 | 0.8 | ||||||||||
| Foreign currency loss (gain) | 1.9 | (3.4 | ) | 3.3 | (5.3 | ) | 1.8 | ||||||||
| Total adjustments to EBITDA | 5.7 | (0.5 | ) | 139.7 | 2.1 | 12.0 | |||||||||
| Adjusted EBITDA | $ | 27.7 | $ | 26.5 | $ | 107.8 | $ | 77.5 | $ | 89.5 | |||||
| Net sales | $ | 132.5 | $ | 123.0 | $ | 512.9 | $ | 424.1 | $ | 469.0 | |||||
| Adjusted EBITDA as a % of net sales | 20.9 | % | 21.4 | % | 21.0 | % | 18.3 | % | 19.1 | % |
www.ctscorp.com
Adjusted Net Earnings
| Three Months Ended<br><br><br>December 31, | Twelve Months Ended<br><br><br>December 31, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2019 | |||||||||||
| Net earnings (loss) (A) | $ | 9.2 | $ | 14.9 | $ | (41.9 | ) | $ | 34.7 | $ | 36.1 | ||||
| Adjustments to reported net earnings (loss): | |||||||||||||||
| Restructuring charges | 1.1 | 0.4 | 1.7 | 1.8 | 7.4 | ||||||||||
| Environmental charges | 1.4 | 1.5 | 2.3 | 2.8 | 2.3 | ||||||||||
| Legal settlement | — | — | — | — | (0.5 | ) | |||||||||
| Transaction costs | — | 0.3 | — | 0.3 | 0.7 | ||||||||||
| Costs of tax improvement initiatives | — | — | — | — | 0.1 | ||||||||||
| Non-cash pension expense | 1.3 | 0.6 | 132.4 | 2.5 | 0.8 | ||||||||||
| Foreign currency (gain) loss | 1.9 | (3.4 | ) | 3.3 | (5.3 | ) | 1.8 | ||||||||
| Total adjustments to reported net earnings (loss) | $ | 5.7 | $ | (0.5 | ) | $ | 139.7 | $ | 2.1 | $ | 12.6 | ||||
| Total adjustments, tax affected (B) | $ | 5.1 | $ | (1.2 | ) | $ | 108.6 | $ | 0.4 | $ | 10.2 | ||||
| Tax adjustments: | |||||||||||||||
| Increase (decrease) in valuation allowances | 0.9 | (0.6 | ) | 0.9 | 0.2 | — | |||||||||
| Other discrete tax items | 0.7 | 0.9 | (4.7 | ) | 1.2 | 1.8 | |||||||||
| Total tax adjustments (C) | $ | 1.6 | $ | 0.3 | $ | (3.8 | ) | $ | 1.4 | $ | 1.8 | ||||
| Adjusted net earnings (A+B+C) | $ | 15.9 | $ | 14.1 | $ | 63.0 | $ | 36.5 | $ | 48.1 | |||||
| Net sales | $ | 132.5 | $ | 123.0 | $ | 512.9 | $ | 424.1 | $ | 469.0 | |||||
| Adjusted net earnings as a % of net sales | 12.0 | % | 11.5 | % | 12.3 | % | 8.6 | % | 10.3 | % |
Adjusted Diluted Earnings Per Share
| Three Months Ended<br><br><br>December 31, | Twelve Months Ended<br><br><br>December 31, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2019 | ||||||||||
| GAAP diluted earnings (loss) per share | $ | 0.28 | $ | 0.46 | $ | (1.30 | ) | $ | 1.06 | $ | 1.09 | |||
| Tax affected charges to reported diluted earnings (loss) per share: | ||||||||||||||
| Restructuring charges | 0.04 | 0.01 | 0.06 | 0.04 | 0.18 | |||||||||
| Foreign currency loss (gain) | 0.06 | (0.10 | ) | 0.10 | (0.16 | ) | 0.05 | |||||||
| Non-cash pension expense | 0.03 | 0.01 | 3.13 | 0.06 | 0.02 | |||||||||
| Environmental charges | 0.03 | 0.03 | 0.05 | 0.07 | 0.05 | |||||||||
| Transaction costs | — | 0.01 | — | 0.01 | 0.02 | |||||||||
| Legal Settlement | — | — | — | — | (0.01 | ) | ||||||||
| Discrete tax items | 0.05 | 0.01 | (0.11 | ) | 0.04 | 0.05 | ||||||||
| Adjusted diluted earnings per share | $ | 0.49 | $ | 0.43 | $ | 1.93 | $ | 1.12 | $ | 1.45 |
Debt to Capitalization
| Twelve Months Ended<br><br><br>December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2019 | |||||||
| Total debt (A) | $ | 50.0 | $ | 54.6 | $ | 99.7 | |||
| Total shareholders' equity (B) | $ | 463.6 | $ | 423.7 | $ | 405.2 | |||
| Total capitalization (A+B) | $ | 513.6 | $ | 478.3 | $ | 504.9 | |||
| Total debt to capitalization | 9.7 | % | 11.4 | % | 19.7 | % |
www.ctscorp.com
Controllable Working Capital
| Twelve Months Ended<br><br><br>December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2019 | |||||||
| Net accounts receivable | $ | 82.2 | $ | 81.0 | $ | 78.0 | |||
| Net inventory | $ | 49.5 | $ | 45.9 | $ | 42.2 | |||
| Accounts payable | $ | (55.5 | ) | $ | (50.5 | ) | $ | (48.2 | ) |
| Controllable working capital | $ | 76.2 | $ | 76.4 | $ | 72.0 | |||
| Quarter sales | $ | 132.5 | $ | 123.0 | $ | 115.0 | |||
| Multiplied by 4 | 4 | 4 | 4 | ||||||
| Annualized sales | $ | 530.1 | $ | 492.1 | $ | 460.2 | |||
| Controllable working capital as a % of annualized sales | 14.4 | % | 15.5 | % | 15.7 | % |
Free Cash Flow
| Three Months Ended<br><br><br>December 31, | Twelve Months Ended<br><br><br>December 31, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2019 | |||||||||||
| Net cash provided by operating activities | $ | 26.0 | $ | 26.4 | $ | 86.1 | $ | 76.8 | $ | 64.4 | |||||
| Capital expenditures | (7.5 | ) | (4.4 | ) | (15.6 | ) | (14.9 | ) | (21.7 | ) | |||||
| Free cash flow | $ | 18.5 | $ | 22.0 | $ | 70.5 | $ | 61.9 | $ | 42.7 |
Capital Expenditures
| Three Months Ended<br><br><br>December 31, | Twelve Months Ended<br><br><br>December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2019 | ||||||
| Capital expenditures | $ | 7.5 | $ | 4.4 | $ | 15.6 | $ | 14.9 | $ | 21.7 |
| Net sales | $ | 132.5 | $ | 123.0 | $ | 512.9 | $ | 424.1 | $ | 469.0 |
| Capex as % of net sales | 5.7% | 3.6% | 3.0% | 3.5% | 4.6% |
Additional Information
The following table includes other financial information not presented in the preceding financial statements.
| Three Months Ended<br><br><br>December 31, | Twelve Months Ended<br><br><br>December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Depreciation and amortization expense | $ | 6.7 | $ | 6.9 | $ | 26.9 | $ | 26.7 |
| Stock-based compensation expense | $ | 2.0 | $ | 1.3 | $ | 6.1 | $ | 3.4 |
www.ctscorp.com
CTS Corporation 4th Quarter and Full Year 2021 Earnings Call February 8, 2022
Forward-Looking Statements 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 CTS’ 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: the ultimate impact of the COVID-19 pandemic on CTS’ business, results of operations or financial condition; changes in the economy generally and in respect to the business in which CTS operates; unanticipated issues in integrating acquisitions; the results of actions to reposition CTS’ business; rapid technological change; general market conditions in the transportation, as well as conditions in the industrial, aerospace and defense, and medical markets; reliance on key customers; unanticipated public health crises, natural disasters or other events; environmental compliance and remediation expenses; the ability to protect CTS’ intellectual property; pricing pressures and demand for CTS’ products; and risks associated with CTS’ 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 CTS’ Annual Report on Form 10-K and other filings made with SEC. CTS undertakes no obligation to publicly update CTS’ forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.
Non-GAAP Financial Measures The information included in this presentation includes the non-GAAP financial measures of adjusted EBITDA, adjusted net earnings, adjusted diluted EPS, total debt to capitalization and free cash flow. A reconciliation of each non-GAAP financial measure to its most directly comparable GAAP financial measure is included in the Appendix to this presentation. From time to time, CTS may use non-GAAP financial measures, such as those included in this presentation, in discussing its business. CTS’ management believes that the foregoing non-GAAP financial measures are commonly used by financial analysts and others in the industries in which it operates, and thus further provides useful information to investors. In addition, CTS’ management uses these measures when assessing the performance of the business and for business planning purposes. These non-GAAP financial measures are intended to supplement, not replace, CTS’ presentation of its financial results in accordance with U.S. GAAP. CTS does not provide reconciliations of forward-looking non-GAAP financial measures, such as estimated adjusted diluted earnings per share, to the most comparable GAAP financial measures on a forward-looking basis because CTS is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of certain items, such as, but not limited to, restructuring costs, environmental remediation costs, acquisition related costs, foreign exchange rates and other non-routine costs. Each of such adjustments has not yet occurred, are out of CTS’ control and/or cannot be reasonably predicted. For the same reasons, CTS is unable to address the probable significance of the unavailable information.
Q4 and Full Year 2021 Highlights Fourth Quarter FY 2021 Organic growth +6% Non-transportation revenues +25% Transportation revenues -3% New business wins $185M; added 9 new customers Strong execution despite supply chain challenges Generated +$26M operating cash flow Organic growth +19% Non-transportation revenues +25% Transportation revenues +18% New business wins $694M, a record Generated $86M operating cash flow Delivered solid growth and improved profitability All comparisons vs. same period in prior year unless otherwise noted 3
Diversification Strategy – Expanding range of technologies and products across end markets 4 Inkjet printing Transducer applications Temperature sensors EV/Hybrid platforms Passive safety, E-Brake Two-wheeler applications Traditional and intra-vascular ultrasound Temperature sensors Undersea sonar applications European sonar expansion Textured and single crystal material 2017 Revenues $423M Long term target +10% CAGR < 50% 5-15% 10-20% 20-30% 2021 Revenues $513M 1 Non-Transportation Revenue Up from 35% to 45% … Goal >50% Beginning in 2022, sales to Telecom & IT end-market are included in the Industrial end-market
Capital Allocation and M&A M&A Criteria Capital Allocation Priorities Invest in Organic Growth Strategic M&A Return cash to Shareholders 5 Strong Balance Sheet and Cash Flow, Balanced Capital Deployment
6 Our Sustainability Journey Established cross-functional ESG Steering Committee Oversight of sustainability initiatives by Nominating, Governance and Sustainability Committee Board diversity >40% Ethical business practices and compliance training for all employees Supporting sustainable products Vehicle electrification Promoting health and safety High-Definition Ultrasound Intravenous Ultrasound Industrial Automation Launched CTS CARES expanding our legacy of community involvement Strong engagement across business >600 hours in 4th Quarter 18 events 14 locations Creating Long Term Sustainable Value for Stakeholders and Community
FY 2022 Guidance 7 Revenue $550 $525 Adjusted Diluted EPS $2.25 $2.00 ($ millions) Key Assumptions Light vehicle market – US 14-15M, China ~24M, Europe 17-18M units Robust commercial vehicle market through 2022 Supply chain challenges and inflationary pressures persist Non-transportation markets robust in 1H, less visibility on 2H Tax rate in the range of 21-23% excluding discrete items
4th Quarter and Full Year 2021 Financial Results
Q4 2021 Financial Summary 9
Full Year 2021 Financial Summary 10
Strong and Consistent Cash Flow Generation Cash and Debt ($ Millions) Operating Cash Flow $14M Returned to shareholders: $9M buyback, $5M dividends $71M Free Cash Flow, 112% conversion rate Strong Balance Sheet Solid Foundation for Strategic M&A $16M Capital Expenditures in 2021 11 Note: FCF Conversion = FCF / Adjusted Net Earnings ($ Millions)
Q & A
Appendix
($ Millions, except percentages and Adjusted Diluted EPS) Financial Summary Net Sales Adjusted Diluted EPS Operating Cash Flow Total Debt / Capitalization Depreciation and Amortization Adjusted EBITDA Adjusted EBITDA % of Sales Gross Margin Gross Margin % of Sales 2019 $469.0 $1.45 $64.4 19.7% $24.6 $89.5 19.1% $157.6 33.6% 2020 $424.1 $1.12 $76.8 11.4% $26.7 $77.5 18.3% $139.1 32.8% 2021 $512.9 $1.93 $86.1 9.7% $26.9 $107.8 21.0% $184.6 36.0% 14
Regulation G Schedules ($ Millions, except percentages) Adjusted Net Earnings 15
Regulation G Schedules Adjusted Diluted EPS ($ Millions, except percentages) Total Debt to Capitalization 16
Regulation G Schedules ($ Millions, except percentages) Adjusted EBITDA 17
Regulation G Schedules ($ Millions) Free Cash Flow 18