CTS Announces Third Quarter 2020 Results
Stronger sales, earnings and improved new business wins
Lisle, Ill. - CTS Corporation (NYSE: CTS) today announced third quarter 2020 results.
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Sales were $113.8 million, down 2% year-over-year. Sales to transportation customers declined 9%, and sales to other end markets grew 10%. Excluding the QTI acquisition, sales to other end markets grew 4%. Sales rebounded strongly, up 35% from the second quarter of 2020. |
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Net earnings were $11.1 million or $0.34 per diluted share versus $2.7 million or $0.08 last year. |
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Adjusted diluted EPS was $0.34, compared to $0.29 last year. |
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Free cash flow was $22.4 million. Balance sheet and liquidity remain robust. |
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New business wins were $127 million. |
“Our teams delivered strong operational results and improved new business wins, while striving to maintain a safe work environment,” said Kieran O’Sullivan, CEO of CTS Corporation. “We saw a significant third quarter rebound. Market uncertainty may persist for several quarters; however, we are cautiously optimistic. While we are implementing cost structure improvements, our primary focus is on enhancing our front-end capabilities to drive profitable growth.”
2020 Guidance
Due to ongoing market uncertainties, management is not providing revenue or earnings guidance.
Conference Call
As previously announced, the Company has scheduled a conference call at 10:00 a.m. (EDT) today to discuss the third quarter financial results. The dial-in number is 800-309-1256 (720-543-0314, if calling from outside the U.S.). The passcode is 544640. There will be a replay of the conference call from 1:00 p.m. (EDT) today through 1:00 p.m. (EST) on Thursday, November 12, 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 9449979. 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: [email protected]
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands of dollars, except per share amounts)
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Three Months Ended |
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Nine Months Ended |
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September 30, 2020 |
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September 30, 2019 |
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September 30, 2020 |
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September 30, 2019 |
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Net sales |
|
$ |
113,777 |
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$ |
115,651 |
|
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$ |
301,049 |
|
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$ |
353,959 |
|
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Cost of goods sold |
|
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76,871 |
|
|
|
78,594 |
|
|
|
204,677 |
|
|
|
235,084 |
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Gross Margin |
|
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36,906 |
|
|
|
37,057 |
|
|
|
96,372 |
|
|
|
118,875 |
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Selling, general and administrative expenses |
|
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16,883 |
|
|
|
17,774 |
|
|
|
48,310 |
|
|
|
52,371 |
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Research and development expenses |
|
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5,723 |
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|
|
6,806 |
|
|
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18,653 |
|
|
|
19,854 |
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Restructuring charges |
|
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1,041 |
|
|
|
2,342 |
|
|
|
1,416 |
|
|
|
5,337 |
|
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Loss (gain) on sale of assets |
|
|
— |
|
|
|
11 |
|
|
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— |
|
|
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(111 |
) |
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Operating earnings |
|
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13,259 |
|
|
|
10,124 |
|
|
|
27,993 |
|
|
|
41,424 |
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Other (expense) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Interest expense |
|
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(857 |
) |
|
|
(812 |
) |
|
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(2,617 |
) |
|
|
(1,745 |
) |
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Interest income |
|
|
217 |
|
|
|
524 |
|
|
|
852 |
|
|
|
1,396 |
|
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Other income (expense), net |
|
|
1,617 |
|
|
|
(2,636 |
) |
|
|
(109 |
) |
|
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(3,646 |
) |
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Total other income (expense), net |
|
|
977 |
|
|
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(2,924 |
) |
|
|
(1,874 |
) |
|
|
(3,995 |
) |
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Earnings before income taxes |
|
|
14,236 |
|
|
|
7,200 |
|
|
|
26,119 |
|
|
|
37,429 |
|
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Income tax expense |
|
|
3,163 |
|
|
|
4,478 |
|
|
|
6,381 |
|
|
|
11,345 |
|
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Net earnings |
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$ |
11,073 |
|
|
$ |
2,722 |
|
|
$ |
19,738 |
|
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$ |
26,084 |
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Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic |
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$ |
0.34 |
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$ |
0.08 |
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$ |
0.61 |
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$ |
0.80 |
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Diluted |
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$ |
0.34 |
|
|
$ |
0.08 |
|
|
$ |
0.61 |
|
|
$ |
0.79 |
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Basic weighted – average common shares outstanding: |
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32,268 |
|
|
|
32,642 |
|
|
|
32,331 |
|
|
|
32,748 |
|
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Effect of dilutive securities |
|
|
241 |
|
|
|
425 |
|
|
|
270 |
|
|
|
417 |
|
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Diluted weighted – average common shares outstanding: |
|
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32,509 |
|
|
|
33,067 |
|
|
|
32,601 |
|
|
|
33,165 |
|
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Cash dividends declared per share |
|
$ |
0.04 |
|
|
$ |
0.04 |
|
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$ |
0.12 |
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$ |
0.12 |
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CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
|
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(Unaudited) |
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|
|
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|
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September 30, 2020 |
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December 31, 2019 |
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ASSETS |
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Current Assets |
|
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|
|
|
|
|
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Cash and cash equivalents |
|
$ |
131,740 |
|
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$ |
100,241 |
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Accounts receivable, net |
|
|
76,431 |
|
|
|
78,008 |
|
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Inventories, net |
|
|
41,492 |
|
|
|
42,237 |
|
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Other current assets |
|
|
14,020 |
|
|
|
16,992 |
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Total current assets |
|
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263,683 |
|
|
|
237,478 |
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Property, plant and equipment, net |
|
|
97,777 |
|
|
|
105,038 |
|
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Operating lease assets, net |
|
|
23,727 |
|
|
|
24,644 |
|
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Other Assets |
|
|
|
|
|
|
|
|
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Prepaid pension asset |
|
|
65,115 |
|
|
|
62,082 |
|
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Goodwill |
|
|
106,056 |
|
|
|
106,056 |
|
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Other intangible assets, net |
|
|
76,126 |
|
|
|
85,215 |
|
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Deferred income taxes |
|
|
20,595 |
|
|
|
19,795 |
|
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Other |
|
|
2,774 |
|
|
|
3,046 |
|
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Total other assets |
|
|
270,666 |
|
|
|
276,194 |
|
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Total Assets |
|
$ |
655,853 |
|
|
$ |
643,354 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current Liabilities |
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|
|
|
|
|
|
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Accounts payable |
|
$ |
46,739 |
|
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$ |
48,219 |
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Operating lease obligations |
|
|
3,149 |
|
|
|
2,787 |
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Accrued payroll and benefits |
|
|
12,437 |
|
|
|
9,564 |
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Accrued expenses and other liabilities |
|
|
32,794 |
|
|
|
36,378 |
|
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Total current liabilities |
|
|
95,119 |
|
|
|
96,948 |
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Long-term debt |
|
|
106,300 |
|
|
|
99,700 |
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Long-term operating lease obligations |
|
|
23,747 |
|
|
|
24,926 |
|
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Long-term pension obligations |
|
|
6,446 |
|
|
|
6,632 |
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Deferred income taxes |
|
|
6,223 |
|
|
|
5,637 |
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Other long-term obligations |
|
|
4,052 |
|
|
|
4,292 |
|
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Total Liabilities |
|
|
241,887 |
|
|
|
238,135 |
|
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Commitments and Contingencies |
|
|
|
|
|
|
|
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Shareholders’ Equity |
|
|
|
|
|
|
|
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Common stock |
|
|
310,976 |
|
|
|
307,932 |
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Additional contributed capital |
|
|
40,796 |
|
|
|
43,689 |
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Retained earnings |
|
|
525,624 |
|
|
|
509,766 |
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Accumulated other comprehensive loss |
|
|
(90,908 |
) |
|
|
(91,726 |
) |
|
Total shareholders’ equity before treasury stock |
|
|
786,488 |
|
|
|
769,661 |
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Treasury stock |
|
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(372,522 |
) |
|
|
(364,442 |
) |
|
Total shareholders’ equity |
|
|
413,966 |
|
|
|
405,219 |
|
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Total Liabilities and Shareholders’ Equity |
|
$ |
655,853 |
|
|
$ |
643,354 |
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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:
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Three Months Ended |
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Nine Months Ended |
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|
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September 30, 2020 |
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September 30, 2019 |
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September 30, 2020 |
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September 30, 2019 |
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GAAP diluted earnings per share |
|
$ |
0.34 |
|
|
$ |
0.08 |
|
|
$ |
0.61 |
|
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$ |
0.79 |
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Tax affected charges to reported diluted earnings per share: |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Restructuring charges |
|
|
0.03 |
|
|
|
0.06 |
|
|
|
0.04 |
|
|
|
0.13 |
|
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Foreign currency (gain) loss |
|
|
(0.07 |
) |
|
|
0.08 |
|
|
|
(0.06 |
) |
|
|
0.08 |
|
|
Non-cash pension expense |
|
|
0.01 |
|
|
|
— |
|
|
|
0.04 |
|
|
|
0.01 |
|
|
Environmental charges |
|
|
0.01 |
|
|
|
— |
|
|
|
0.03 |
|
|
|
— |
|
|
Transaction charges |
|
|
— |
|
|
|
0.01 |
|
|
|
— |
|
|
|
0.01 |
|
|
Discrete tax items |
|
|
0.02 |
|
|
|
0.06 |
|
|
|
0.03 |
|
|
|
0.06 |
|
|
Adjusted diluted earnings per share |
|
$ |
0.34 |
|
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$ |
0.29 |
|
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$ |
0.69 |
|
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$ |
1.08 |
|
Additional Information
The following table includes other financial information not presented in the preceding financial statements.
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Three Months Ended |
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Nine Months Ended |
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September 30, 2020 |
|
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September 30, 2019 |
|
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September 30, 2020 |
|
|
September 30, 2019 |
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Depreciation and amortization expense |
|
$ |
6,676 |
|
|
$ |
6,119 |
|
|
$ |
19,819 |
|
|
$ |
18,038 |
|
|
Stock-based compensation expense |
|
$ |
1,119 |
|
|
$ |
1,157 |
|
|
$ |
2,164 |
|
|
$ |
3,950 |
|
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:
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provides a meaningful measure of CTS' operating performance, |
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• |
reflects the results used by management in making decisions about the business, and |
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• |
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.