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): April 23, 2020
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 April 23, 2020, CTS Corporation (the "Registrant") issued a press release providing certain results for the quarter ended March 31, 2020, 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, the information contained in Item 2.02 of this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any filing made by the Registrant under the Securities Act of 1933 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 April 23, 2020 |
| 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: April 23, 2020 | CTS CORPORATION | |
|---|---|---|
| By: | /s/ William M. Cahill | |
| William M. Cahill | ||
| Chief Accounting Officer | ||
| (Principal Accounting Officer) |
Exhibit
 |
Press Release |
|---|---|
| April 23, 2020 | FOR IMMEDIATE RELEASE |
CTS Announces First Quarter 2020 Results
Adjusting Our Cost Structure To Adverse Market Conditions
Lisle, Ill. - CTS Corporation (NYSE: CTS) today announced first quarter 2020 results.
| • | Sales were $103.1 million, down 12.4% year-over-year. Sales to transportation customers declined 22.0%, and sales to other end markets grew 7.1%. The QTI acquisition added $5.6 million of sales in the first quarter of 2020. |
|---|---|
| • | Net earnings were $3.8 million or $0.12 per diluted share versus $11.4 million or $0.34 last year. |
| --- | --- |
| • | Adjusted diluted EPS was $0.19 compared to $0.39 in the first quarter of 2019. |
| --- | --- |
| • | Free cash flow was $7.4 million, up from $4.3 million in 2019. |
| --- | --- |
| • | New business wins were $105 million. |
| --- | --- |
| • | At quarter-end, we had zero net debt. |
| --- | --- |
“It has been a challenging quarter as we navigate through a continuing uncertain and unprecedented environment. Our priorities are the safety of our employees and supporting our customers,” said Kieran O’Sullivan, CEO of CTS Corporation. “We had a solid quarter of new business wins despite several weeks of disruptions due to Covid-19. We have adjusted our cost structure to reduce operating expenses. Our strong balance sheet and liquidity position should help us work through these difficult circumstances, and we aim to emerge a stronger company.”
2020 Guidance
Due to ongoing market uncertainties, management has withdrawn its guidance for 2020, and is not providing updated guidance at this time.
www.ctscorp.com
Conference Call
As previously announced, the Company has scheduled a conference call at 11:00 a.m. (EST) today to discuss the first quarter financial results. The dial-in number is 800-309-1256 (720-543-0314, if calling from outside the U.S.). The passcode is 225597. There will be a replay of the conference call from 2:00 p.m. (EST) today through 2:00 p.m. (EST) on Thursday, May 7, 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 5206162. 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
www.ctscorp.com
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands of dollars, except per share amounts)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| March 31, | March 31, | |||||
| 2020 | 2019 | |||||
| Net sales | $ | 103,075 | $ | 117,625 | ||
| Cost of goods sold | 70,176 | 77,010 | ||||
| Gross Margin | 32,899 | 40,615 | ||||
| Selling, general and administrative expenses | 16,759 | 17,522 | ||||
| Research and development expenses | 7,408 | 6,791 | ||||
| Restructuring charges | 240 | 2,084 | ||||
| Operating earnings | 8,492 | 14,218 | ||||
| Other (expense) income: | ||||||
| Interest expense | (851 | ) | (466 | ) | ||
| Interest income | 331 | 432 | ||||
| Other (expense) income, net | (1,982 | ) | 96 | |||
| Total other (expense) income, net | (2,502 | ) | 62 | |||
| Earnings before income taxes | 5,990 | 14,280 | ||||
| Income tax expense | 2,182 | 2,861 | ||||
| Net earnings | $ | 3,808 | $ | 11,419 | ||
| Earnings per share: | ||||||
| Basic | $ | 0.12 | $ | 0.35 | ||
| Diluted | $ | 0.12 | $ | 0.34 | ||
| Basic weighted – average common shares outstanding: | 32,466 | 32,807 | ||||
| Effect of dilutive securities | 327 | 463 | ||||
| Diluted weighted – average common shares outstanding: | 32,793 | 33,270 | ||||
| Cash dividends declared per share | $ | 0.04 | $ | 0.04 |
www.ctscorp.com
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
| (Unaudited) | ||||||
|---|---|---|---|---|---|---|
| March 31, | December 31, | |||||
| 2020 | 2019 | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash and cash equivalents | $ | 150,955 | $ | 100,241 | ||
| Accounts receivable, net | 71,250 | 78,008 | ||||
| Inventories, net | 45,679 | 42,237 | ||||
| Other current assets | 15,094 | 16,992 | ||||
| Total current assets | 282,978 | 237,478 | ||||
| Property, plant and equipment, net | 101,755 | 105,038 | ||||
| Operating lease assets, net | 25,117 | 24,644 | ||||
| Other Assets | ||||||
| Prepaid pension asset | 63,093 | 62,082 | ||||
| Goodwill | 106,056 | 106,056 | ||||
| Other intangible assets, net | 82,919 | 85,215 | ||||
| Deferred income taxes | 20,296 | 19,795 | ||||
| Other | 2,951 | 3,046 | ||||
| Total other assets | 275,315 | 276,194 | ||||
| Total Assets | $ | 685,165 | $ | 643,354 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
| Current Liabilities | ||||||
| Accounts payable | $ | 46,766 | $ | 48,219 | ||
| Operating lease obligations | 3,178 | 2,787 | ||||
| Accrued payroll and benefits | 8,818 | 9,564 | ||||
| Accrued expenses and other liabilities | 34,476 | 36,378 | ||||
| Total current liabilities | 93,238 | 96,948 | ||||
| Long-term debt | 151,200 | 99,700 | ||||
| Long-term operating lease obligations | 25,078 | 24,926 | ||||
| Long-term pension obligations | 6,548 | 6,632 | ||||
| Deferred income taxes | 5,576 | 5,637 | ||||
| Other long-term obligations | 6,059 | 4,292 | ||||
| Total Liabilities | 287,699 | 238,135 | ||||
| Commitments and Contingencies | ||||||
| Shareholders’ Equity | ||||||
| Common stock | 310,098 | 307,932 | ||||
| Additional contributed capital | 39,832 | 43,689 | ||||
| Retained earnings | 512,276 | 509,766 | ||||
| Accumulated other comprehensive loss | (94,994 | ) | (91,726 | ) | ||
| Total shareholders’ equity before treasury stock | 767,212 | 769,661 | ||||
| Treasury stock | (369,746 | ) | (364,442 | ) | ||
| Total shareholders’ equity | 397,466 | 405,219 | ||||
| Total Liabilities and Shareholders’ Equity | $ | 685,165 | $ | 643,354 |
www.ctscorp.com
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 | |||||
|---|---|---|---|---|---|
| March 31, 2020 | March 31, 2019 | ||||
| GAAP diluted earnings per share | $ | 0.12 | $ | 0.34 | |
| Tax affected charges to reported diluted earnings per share: | |||||
| Restructuring charges | — | 0.05 | |||
| Foreign currency loss (gain) | 0.04 | (0.01 | ) | ||
| Non-cash pension expense | 0.01 | 0.01 | |||
| Discrete tax items | 0.02 | — | |||
| Adjusted diluted earnings per share | $ | 0.19 | $ | 0.39 |
Additional Information
The following table includes other financial information not presented in the preceding financial statements.
| Three Months Ended | ||||
|---|---|---|---|---|
| March 31, 2020 | March 31, 2019 | |||
| Depreciation and amortization expense | $ | 6,532 | $ | 5,924 |
| Stock-based compensation expense | $ | 228 | $ | 1,214 |
www.ctscorp.com
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.
www.ctscorp.com