Cts Corp 10-Q for FY2022 Q1

About this 10-Q

Headline figures

Cts Corp (CTS)

10-Q 2022-04-28 For: 2022-03-31

Added on April 07, 2026

Cts Corp filed this 10-Q on April 28, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $147.7M; up 15.0% from $128.43M a year earlier
Net income: $20.24M; up 68.8% from net income of $11.99M a year earlier
Diluted EPS: $0.63; up 70.3% from $0.37 a year earlier

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4925 Indiana Avenue
Lisle IL		60532
(Address of principal executive offices)		(Zip Code)

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
Common stock, without par value		CTS		New York Stock Exchange

			Page

PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements	3

		Condensed Consolidated Statements of Earnings (Unaudited) For the Three Months Ended March 31, 2022 and March 31, 2021	3

		Condensed Consolidated Statements of Comprehensive Earnings (Unaudited) For the Three Months Ended March 31, 2022 and March 31, 2021	4

		Condensed Consolidated Balance Sheets As of March 31, 2022 (Unaudited) and December 31, 2021	5

		Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2022 and March 31, 2021	6

		Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) For the Three Months Ended March 31, 2022 and March 31, 2021	7

		Notes to Condensed Consolidated Financial Statements ‑ (Unaudited)	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28

	Item 4.	Controls and Procedures	29

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	29

	Item 1A.	Risk Factors	29

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

	Item 6.	Exhibits	31

SIGNATURES			32

	Three Months Ended
	March 31,			March 31,
	2022			2021
Net sales	$	147,695		$	128,427
Cost of goods sold		93,355			85,836
Gross margin		54,340			42,591
Selling, general and administrative expenses		21,788			18,325
Research and development expenses		6,194			5,687
Restructuring charges		312			81
Operating earnings		26,046			18,498
Other (expense) income:
Interest expense		(546	)		(555	)
Interest income		180			202
Other income (expense), net		66			(3,356	)
Total other expense, net		(300	)		(3,709	)
Earnings before income taxes		25,746			14,789
Income tax expense		5,507			2,799
Net earnings	$	20,239		$	11,990
Earnings per share:
Basic	$	0.63		$	0.37
Diluted	$	0.63		$	0.37
Basic weighted – average common shares outstanding:		32,123			32,319
Effect of dilutive securities		204			301
Diluted weighted – average common shares outstanding:		32,327			32,620
Cash dividends declared per share	$	0.04		$	0.04

	(Unaudited)
	March 31,			December 31,
	2022			2021
ASSETS
Current Assets
Cash and cash equivalents	$	126,118		$	141,465
Accounts receivable, net		95,107			82,191
Inventories, net		52,454			49,506
Other current assets		18,366			15,927
Total current assets		292,045			289,089
Property, plant and equipment, net		97,041			96,876
Operating lease assets, net		23,212			21,594
Other Assets
Prepaid pension asset		31,882			49,382
Goodwill		117,524			109,798
Other intangible assets, net		79,849			69,888
Deferred income taxes		23,828			25,415
Other		19,365			2,420
Total other assets		272,448			256,903
Total Assets	$	684,746		$	664,462
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	60,010		$	55,537
Operating lease obligations		3,522			3,393
Accrued payroll and benefits		12,954			18,418
Accrued expenses and other liabilities		38,554			36,718
Total current liabilities		115,040			114,066
Long-term debt		50,000			50,000
Long-term operating lease obligations		22,712			21,354
Long-term pension obligations		6,464			6,886
Deferred income taxes		5,865			5,894
Other long-term obligations		4,487			2,684
Total Liabilities		204,568			200,884
Commitments and Contingencies (Note 11)
Shareholders’ Equity
Common stock		316,496			314,620
Additional contributed capital		41,158			42,549
Retained earnings		511,197			492,242
Accumulated other comprehensive loss		(3,445	)		(4,525	)
Total shareholders’ equity before treasury stock		865,406			844,886
Treasury stock		(385,228	)		(381,308	)
Total shareholders’ equity		480,178			463,578
Total Liabilities and Shareholders’ Equity	$	684,746		$	664,462

	Common Stock		Additional Contributed Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total
Balances at December 31, 2021	$	314,620	$	42,549		$	492,242		$	(4,525	)	$	(381,308	)	$	463,578
Net earnings		—		—			20,239			—			—			20,239
Changes in fair market value of derivatives, net of tax		—		—			—			1,235			—			1,235
Changes in unrealized pension cost, net of tax		—		—			—			94			—			94
Cumulative translation adjustment, net of tax		—		—			—			(249	)		—			(249	)
Cash dividends of $0.04 per share		—		—			(1,284	)		—			—			(1,284	)
Acquired 116,176 shares of treasury stock		—		—			—			—			(3,920	)		(3,920	)
Issued shares on vesting of restricted stock units		1,876		(3,289	)		—			—			—			(1,413	)
Stock compensation		—		1,898			—			—			—			1,898
Balances at March 31, 2022	$	316,496	$	41,158		$	511,197		$	(3,445	)	$	(385,228	)	$	480,178

	Three months ended
	March 31, 2022		March 31, 2021
Transportation	$	79,134	$	75,854
Industrial		40,007		29,627
Medical		15,867		11,276
Aerospace & Defense		12,687		11,670
Total	$	147,695	$	128,427

	Fair Values at February 28, 2022
Current assets	$	6,702
Property, plant and equipment		2,175
Other assets		28
Goodwill		7,726
Intangible assets		12,348
Fair value of assets acquired		28,979
Less fair value of liabilities acquired		(4,495	)
Purchase price	$	24,484

	As of
	March 31,			December 31,
	2022			2021
Accounts receivable, gross	$	96,499		$	83,848
Less: Allowance for credit losses		(1,392	)		(1,657	)
Accounts receivable, net	$	95,107		$	82,191

	Domestic Pension Plans					Foreign Pension Plans
	Three Months Ended					Three Months Ended
	March 31,		March 31,			March 31,			March 31,
	2022		2021			2022			2021
Service cost	$	—	$	—		$	6		$	6
Interest cost		5		1,253			4			4
Expected return on plan assets⁽¹⁾		—		(1,113	)		(3	)		(3	)
Amortization of loss		8		1,767			45			43
Total expense, net	$	13	$	1,907		$	52		$	50

	As of
	March 31, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Amount
Customer lists/relationships	$	109,237	$	(50,676	)	$	58,561
Technology and other intangibles		47,441		(26,153	)		21,288
Other intangible assets, net	$	156,678	$	(76,829	)	$	79,849
Amortization expense for the three months ended March 31, 2022			$	2,381

	As of
	December 31, 2021
	Gross Carrying Amount		Accumulated Amortization			Net Amount
Customer lists/relationships	$	96,889	$	(49,213	)	$	47,676
Technology and other intangibles		47,441		(25,229	)		22,212
Other intangible assets, net	$	144,330	$	(74,442	)	$	69,888
Amortization expense for the three months ended March 31, 2021			$	2,369

	Amortization expense
2022	$	7,581
2023		8,149
2024		7,987
2025		7,765
2026		7,731
Thereafter		40,636
Total amortization expense	$	79,849

	Total
Goodwill as of December 31, 2021	$	109,798
Increase from acquisition		7,726
Goodwill as of March 31, 2022		117,524

	Three Months Ended
	March 31,			March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	20,239		$	11,990
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		6,749			6,800
Pension and other post-retirement plan expense		91			1,980
Stock-based compensation		1,950			1,219
Deferred income taxes		1,195			63
Gain on foreign currency hedges, net of cash		(15	)		(42	)
Changes in assets and liabilities, net of acquisition:
Accounts receivable		(9,969	)		(1,121	)
Inventories		(615	)		(2,052	)
Operating lease assets		(224	)		(340	)
Other assets		(253	)		168
Accounts payable		3,936			2,864
Accrued payroll and benefits		(5,733	)		(210	)
Operating lease liabilities		93			325
Accrued expenses and other liabilities		2,219			(1,398	)
Pension and other post-retirement plans		(377	)		(136	)
Net cash provided by operating activities		19,286			20,110
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(3,400	)		(1,638	)
Payments for acquisition, net of cash received		(24,484	)		—
Net cash used in investing activities		(27,884	)		(1,638	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt		(150,000	)		(241,600	)
Proceeds from borrowings of long-term debt		150,000			237,000
Purchase of treasury stock		(3,920	)		—
Dividends paid		(1,289	)		(1,291	)
Payment of contingent consideration		(150	)		—
Taxes paid on behalf of equity award participants		(1,413	)		(1,402	)
Net cash used in financing activities		(6,772	)		(7,293	)
Effect of exchange rate changes on cash and cash equivalents		23			440
Net (decrease) increase in cash and cash equivalents		(15,347	)		11,619
Cash and cash equivalents at beginning of period		141,465			91,773
Cash and cash equivalents at end of period	$	126,118		$	103,392
Supplemental cash flow information:
Cash paid for interest	$	480		$	378

	As of
	March 31,			December 31,
	2022			2021
Finished goods	$	10,891		$	11,955
Work-in-process		19,525			18,878
Raw materials		31,032			28,078
Less: Inventory reserves		(8,994	)		(9,405	)
Inventories, net	$	52,454		$	49,506

	As of
	March 31,		December 31,
	2022		2021
Accrued product related costs	$	3,102	$	3,188
Accrued income taxes		8,170		6,761
Accrued property and other taxes		2,890		2,370
Accrued professional fees		1,876		1,629
Accrued customer related liabilities		4,250		3,254
Dividends payable		1,285		1,289
Remediation reserves		11,106		10,979
Derivative liabilities		—		437
Other accrued liabilities		5,875		6,811
Total accrued expenses and other liabilities	$	38,554	$	36,718

	As of
	March 31,			December 31,
	2022			2021
Balance at beginning of period	$	10,979		$	10,642
Remediation expense		511			2,254
Net remediation payments		(383	)		(1,929	)
Other activity⁽¹⁾		(1	)		12
Balance at end of the period	$	11,106		$	10,979

Restructuring liability at January 1, 2022	$	962
Restructuring charges		312
Cost paid		(458	)
Other activity⁽¹⁾		—
Restructuring liability at March 31, 2022	$	816

							(Gain) Loss
	As of			Gain (Loss)			Reclassified			As of
	December 31,			Recognized			from AOCI			March 31,
	2021			in OCI			to Earnings			2022
Changes in fair market value of derivatives:
Gross	$	(634	)	$	1,577		$	26		$	969
Income tax benefit (expense)		147			(363	)		(5	)		(221	)
Net		(487	)		1,214			21			748
Changes in unrealized pension cost:
Gross		(2,744	)		—			120			(2,624	)
Income tax benefit (expense)		738			—			(26	)		712
Net		(2,006	)		—			94			(1,912	)
Cumulative translation adjustment:
Gross		(2,032	)		(249	)		—			(2,281	)
Income tax benefit		—			—			—			—
Net		(2,032	)		(249	)		—			(2,281	)
Total accumulated other comprehensive (loss) income	$	(4,525	)	$	965		$	115		$	(3,445	)

							(Gain) Loss
	As of			(Loss) Gain			Reclassified			As of
	December 31,			Recognized			from AOCI			March 31,
	2020			in OCI			to Earnings			2021
Changes in fair market value of derivatives:
Gross	$	(1,038	)	$	206		$	(45	)	$	(877	)
Income tax benefit (expense)		240			(47	)		10			203
Net		(798	)		159			(35	)		(674	)
Changes in unrealized pension cost:
Gross		(128,004	)		—			1,847			(126,157	)
Income tax benefit (expense)		34,917			—			(425	)		34,492
Net		(93,087	)		—			1,422			(91,665	)
Cumulative translation adjustment:
Gross		(2,036	)		12			—			(2,024	)
Income tax benefit (expense)		—			—			—			—
Net		(2,036	)		12			—			(2,024	)
Total accumulated other comprehensive (loss) income	$	(95,921	)	$	171		$	1,387		$	(94,363	)

	Unrecognized
	Compensation		Weighted-
	Expense at		Average
	March 31, 2022		Period
Service-based RSUs	$	3,433		1.56
Performance-based RSUs		6,118		2.08
Total	$	9,551		1.89

	2018 Plan		2014 Plan		2009 Plan		2004 Plan		Directors' Plan
Awards originally available		2,500,000		1,500,000		3,400,000		6,500,000	N/A
Maximum potential RSU and cash settled awards outstanding		728,468		35,100		45,200		14,545		4,722
Maximum potential awards outstanding		728,468		35,100		45,200		14,545		4,722
RSUs and cash settled awards vested and released		110,669		—		—		—		—
Awards available for grant		1,660,863		—		—		—		—

	Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2021		283,216		$	24.91
Granted		65,486			33.59
Vested and released		(51,485	)		30.69
Forfeited		(3,753	)		29.44
Outstanding at March 31, 2022		293,464		$	25.78
Releasable at March 31, 2022		132,667		$	17.53

				Quoted Prices in Active

	Asset (Liability)					Significant
	Carrying			Markets for		Other		Significant
	Value at			Identical		Observable		Unobservable
	March 31,			Instruments		Inputs		Inputs
	2022			(Level 1)		(Level 2)		(Level 3)
Interest rate swaps	$	305		$	—	$	305	$	—
Foreign currency hedges	$	660		$	—	$	660	$	—
Contingent consideration	$	(1,050	)	$	—	$	—	$	(1,050	)
Qualified replacement plan assets	$	16,766		$	16,766	$	—	$	—



	Contingent
	Consideration
Balance at December 31, 2021	$	1,200
Settled in cash		(150	)
Balance at March 31, 2022 in accrued expenses and other liabilities	$	1,050

	Three Months Ended									Percent of			Percent of
	March 31,			March 31,			Percent			Net Sales –			Net Sales –
	2022			2021			Change			2022			2021
Net sales	$	147,695		$	128,427			15.0	%		100.0	%		100.0	%
Cost of goods sold		93,355			85,836			8.8			63.2			66.8
Gross margin		54,340			42,591			27.6			36.8			33.2
Selling, general and administrative expenses		21,788			18,325			18.9			14.8			14.3
Research and development expenses		6,194			5,687			8.9			4.2			4.4
Restructuring charges		312			81			285.2			0.2			0.1
Total operating expenses		28,294			24,093			17.4			19.2			18.8
Operating earnings		26,046			18,498			40.8			17.6			14.4
Total other expense, net		(300	)		(3,709	)		(91.9	)		(0.2	)		(2.9	)
Earnings before income taxes		25,746			14,789			74.1			17.4			11.5
Income tax expense		5,507			2,799			96.7			3.7			2.2
Net earnings	$	20,239		$	11,990			68.8	%		13.7	%		9.3	%
Earnings per share:
Diluted net earnings per share	$	0.63		$	0.37

					Total Number		Maximum Dollar
					of Shares		Value of Shares
					Purchased as		That May Yet Be
	Total Number				Part of Publicly		Purchased Under
	of Shares		Average Price		Announced		Publicly Announced
	Purchased		Paid per Share		Programs		Plans or Programs
January 1, 2022 through January 31, 2022		28,000	$	33.66		28,000	$	40,272
February 1, 2022 through February 28, 2022		59,027	$	33.28		59,027	$	38,307
March 1, 2022 through March 31, 2022		29,149	$	34.75		29,149	$	37,295
Total		116,176	$	33.74		116,176



(31)(a)	Certification pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.

(31)(b)	Certification pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.

(32)(a)	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.

(32)(b)	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.

101.1	The following information from CTS Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 formatted in Inline XBRL: (i) Condensed Consolidated Statements of Earnings for the three months ended March 31, 2022 and 2021; (ii) Condensed Consolidated Statements of Comprehensive Earnings for the three months ended March 31, 2022 and 2021; (iii) Condensed Consolidated Balance Sheets at March 31, 2022 and December 31, 2021; (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021; (v) Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2022 and 2021; (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

104	The cover page from this Current Report on Form 10-Q formatted as inline XBRL

CTS Corporation		CTS Corporation

/s/ Thomas M. White		/s/ Ashish Agrawal
Thomas M. White		Ashish Agrawal
Corporate Controller (Principal Accounting Officer)		Vice President and Chief Financial Officer (Principal Financial Officer)


Dated: April 28, 2022		Dated: April 28, 2022


Date: April 28, 2022		/s/ Kieran O’Sullivan
		Kieran O’Sullivan
		Chairman, President and Chief Executive Officer


Date: April 28, 2022		/s/Ashish Agrawal
		Ashish Agrawal
		Vice President and Chief Financial Officer