CTS Corporation (NYSE: CTS) today announced first quarter 2012 revenues of $147.0 million, a decrease of 3% from the same period last year and a 2% increase from the fourth quarter 2011 revenues. First quarter 2012 net earnings were $2.3 million, or $0.07 per diluted share, compared to $5.1 million, or $0.15 per diluted share, in the same period last year. First quarter 2012 was affected by the following items:
- Timing of Thailand flood-related insurance reimbursements. The first quarter benefited from some insurance recoveries that related to 2011 expenses, due to a normal timing lag in recovery. CTS expects approximately $4.0 million, or $0.08 per share, in first quarter business interruption expenses to be reimbursed in the second quarter of 2012. Similarly, the second quarter flood-related expenses are expected to be reimbursed during the third quarter.
- The Company’s second pedal module for a global vehicle platform was introduced and we also began to ramp up our new piezoceramic product for hard disk drive (HDD) applications.
- Non-cash pension expense was approximately $1.0 million, or $0.02 per share, higher in the first quarter due to lower discount rates and asset returns.
- Delayed recovery of approximately $0.8 million, or $0.02 per share, in certain engineering prototype expense and rare earth cost increases from customers.
- The Valpey-Fisher acquisition was completed with integration activities on track.
Other Noteworthy Items
- During the first quarter of 2012, the Company repurchased approximately 272,100 shares for $2.7 million, at an average price of $10.05. Approximately 302,000 shares remain in our one million share buyback authorization.
- The first quarter debt balance increased by $34.3 million from year-end due primarily to higher working capital requirements, the Thailand flood and approximately $15 million for the Valpey-Fisher acquisition, net of cash acquired. Cash balances increased $8.0 million from year-end.
- First quarter capital expenditures were $4.4 million, or 3% of sales, compared to $3.2 million, or 2.1% of sales, in the same period last year.
|First Quarter of 2012|
|Net sales to external customers||$76,418||$70,551||$146,969|
|Segment operating earnings before corporate and shared services charges||$7,344||$455||$7,799|
|Corporate and shared services charges||(4,324)||(1,543)||(5,867)|
|Segment operating earnings/(loss) (1)||$3,020||$(1,088)||$1,932|
|Fourth Quarter of 2011|
|Net sales to external customers||$70,699||$73,300||$143,999|
|Segment operating earnings before corporate and shared services charges||$10,207||$3,722||$13,929|
|Corporate and share services charges||(3,638)||(647)||(4,285)|
|Segment operating earnings (2)||$6,569||$3,075||$9,644|
|Expenses not allocated to business segments:|
|- Restructuring and related charges||(2,444)|
|Total operating earnings||$7,200|
|First Quarter of 2011|
|Net sales to external customers||$72,031||$79,487||$151,518|
|Segment operating earnings before corporate and shared services charges||$9,805||$1,830||$11,635|
|Corporate and shared services charges||(4,049)||(1,827)||(5,876)|
|Segment operating earnings||$5,756||$3||$5,759|
EMS: EMS first quarter 2012 sales decreased $8.9 million, or 11%, from the first quarter of 2011, due primarily to the impact from the Thailand floods. Sales decreased in communications and computer markets, partially offset by increases in industrial markets. Segment operating earnings contribution before corporate and shared services charges was $0.5 million. This was $1.4 million lower than the first quarter 2011 primarily from the lower sales and flood-related costs incurred in the first quarter 2012 in excess of insurance recoveries.EMS first quarter 2012 sales decreased $2.7 million, or 4%, from the fourth quarter of 2011. Sales decreased in the defense and aerospace and communications markets, partially offset by increases in the industrial and medical markets. The first quarter segment operating earnings contribution before corporate and shared services charges of $0.5 million was $3.3 million unfavorable to the fourth quarter, primarily on lower sales, less favorable product mix and the lower insurance recovery of $1.6 million for property damage. Conference Call As previously announced, the Company has scheduled a conference call on Wednesday, April 25, 2012 at 11:00 a.m. EDT. Those interested in participating may dial 800-288-8960 (612-338-1040, if calling from outside the U.S.). No access code is needed. There will be a replay of the conference call available from 1:30 p.m. EDT on Wednesday, April 25, 2012 through 11:59 p.m. EDT on Wednesday, May 2, 2012. The telephone number for the replay is 800-475-6701 (320-365-3844, if calling from outside the U.S.). The access code is 244201. Also, please note that a live audio webcast of the conference call will be available and can be accessed directly from the Web sites of CTS Corporation www.ctscorp.com, StreetEvents www.streetevents.com, Netscape netscape.aol.com, Compuserve www.compuserve.com and others. About CTS CTS is a leading designer and manufacturer of electronic components and sensors and a provider of electronics manufacturing services (EMS) to OEMs in the automotive, communications, medical, defense and aerospace, industrial and computer markets. CTS manufactures products in North America, Europe and Asia. CTS' stock is traded on the NYSE under the ticker symbol "CTS.” To find out more, visit the CTS Web site at www.ctscorp.com. Safe Harbor Statement This press release 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. 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 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, including, without limitation: changes in the economy generally and in respect to the businesses in which CTS operates; unanticipated issues in integrating acquisitions; rapid technological change; general market conditions in the automotive, communications and computer industries, as well as conditions in the industrial, defense and aerospace and medical markets; reliance on key customers; unanticipated natural or other events such as the Japan earthquake and floods in Thailand; the ability to protect our intellectual property; pricing pressures and demand for our products; and risks associated with our international operations, including trade and tariff barriers, exchange rates and political and geographical risks. For more detailed information on the risks and uncertainties associated with CTS’ business, see the reports CTS files with the Securities and Exchange Commission available at http://www.ctscorp.com/investor_relations/investor.htm. 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.
|CTS CORPORATION AND SUBSIDIARIES|
|CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED|
|(In thousands, except per share amounts)|
|Three Months Ended|
|April 1||April 3|
|Costs and expenses:|
|Cost of goods sold||124,920||122,358|
|Insurance recovery for business interruption||(3,627||)||-|
|Selling, general and administrative expenses||19,404||18,372|
|Research and development expenses||6,109||5,029|
|Insurance recovery for property damage||(1,769||)||-|
|Other (expense) / income:|
|Interest expense, net||(210||)||(296||)|
|Total other income||365||834|
|Earnings before income taxes||2,297||6,593|
|Income tax expense||14||1,477|
|Net earnings per share:|
|Cash dividends declared per share||$||0.035||$||0.03|
|Average common shares outstanding:|
|CTS Corporation and Subsidiaries|
|Condensed Consolidated Balance Sheets - Unaudited|
|(In thousands of dollars)|
|April 1,||December 31,|
|Cash and cash equivalents||$||84,441||$||76,412|
|Accounts receivable, net||89,867||88,345|
|Other current assets||26,838||26,089|
|Total current assets||293,215||283,386|
|Property, plant & equipment, net||89,680||84,860|
|Notes payable and current portion of long-term debt||$||-||$||-|
|Other accrued liabilities||41,657||43,769|
|Total current liabilities||116,216||124,237|
|Total Liabilities and Shareholders' Equity||$||508,666||$||480,815|
|CTS CORPORATION AND SUBSIDIARIES|
|OTHER SUPPLEMENTAL INFORMATION|
|Earnings per Share|
|The following table reconciles GAAP earnings per share to adjusted earnings per share for the Company:|
|GAAP Q1 2012 Earnings Per Share||$||0.07|
|Items Impacting Q1 2012 earnings per share:|
|Thailand flood-related interruption impact on Q1, not yet collected from insurer||0.08|
|Costs incurred, timing-related, to be recovered from customers in Q2, for prototype billings and rare earth material pricing||0.02|
|Costs incurred for non-recurring legal costs and product launch costs/product transfers||0.02|
|Insurance recovery for property damage and expenses for 2011||(0.05||)|
|Q1 2012 Adjusted Earnings Per Share||$||0.14|
|The following table includes other financial information not presented in the preceding financial statements.|
|Three Months Ended|
|$ In thousands||Apr 1||Apr 3|
|Depreciation and Amortization||$||4,790||$||4,401|
|Equity Based Compensation||1,214||1,180|
|Non-GAAP financial measures are discussed below.|
CTS adjusts for this item 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 truer 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. Segment Operating Earnings Segment operating earnings is a non-GAAP financial measure outside the context of the Accounting Standards Codification ("ASC") 280 required reconciliation in the notes to the Company's financial statements. The most comparable GAAP term is operating earnings. Segment operating earnings always exclude the effects of restructuring and restructuring-related charges when they are incurred by the Company. Segment operating earnings exclude interest expense, and other non-operating income and income taxes according to how a particular segment is measured. CTS' management provides the segment operating earnings measure to provide consistency between segment information in its earnings release and the business segment discussion in the notes to its financial statements.