CTS Announces Fourth Quarter and Full Year 2020 Results

Rhea-AI Summary

CTS Corporation reported its fourth quarter and full year 2020 financial results, showcasing a 7% year-over-year increase in sales to $123 million in Q4. This growth was driven by a 12% rise in transportation sector sales. Net earnings for Q4 were $14.9 million, translating to $0.46 per diluted share, up from $10.1 million or $0.31 last year. However, full year sales decreased by 10% to $424 million, with a 19% drop in transportation sales. Looking forward, the company expects 2021 sales between $430 million and $490 million, with adjusted EPS guidance of $1.20 to $1.60.

Positive

• Q4 sales increased 7% year-over-year to $123 million.
• Net earnings for Q4 rose to $14.9 million, a substantial improvement from Q4 2019.
• Adjusted diluted EPS for Q4 was $0.43, up 16% from $0.37 in 2019.
• Free cash flow improved 28% in Q4, reaching $22 million.
• New business wins totaled $104 million in Q4 and $442 million for the full year.
• Focus 2025 strategic initiative aims for 10% annualized revenue growth.

Negative

• Full year sales decreased by 10% compared to 2019.
• Transportation sector sales fell 19% for the year.
• Adjusted diluted EPS for the full year declined from $1.45 to $1.12.

Continued market recovery, solid operational performance

LISLE, Ill., Feb. 09, 2021 (GLOBE NEWSWIRE) -- CTS Corporation (NYSE: CTS) today announced fourth quarter and full year 2020 results.

Fourth Quarter 2020 Results

• Sales were $123 million, up 7% year-over-year. Sales to transportation customers increased 12%, and sales to other end markets were essentially flat.
• Net earnings were $14.9 million or $0.46 per diluted share versus $10.1 million or $0.31 last year.
• Adjusted diluted EPS was $0.43, up 16% from $0.37 in the fourth quarter of 2019.
• Free cash flow was $22.0 million, up 28% from $17.2 million in 2019.
• New business wins were $104 million.
  

Full Year 2020 Results

• Sales were $424 million, down 10% compared to 2019. Sales to transportation customers declined 19%, and sales to other end markets increased 7%.
• Net earnings were $34.7 million or $1.06 per diluted share versus $36.1 million or $1.09 last year.
• Adjusted diluted EPS was $1.12 compared to $1.45 in 2019.
• Free cash flow was $61.9 million, up 45% from $42.7 million last year.
• New business wins were $442 million.
  

“We saw strength in most end markets and executed well to deliver solid financial results in the fourth quarter,” said Kieran O’Sullivan, CEO of CTS Corporation. “We are making progress on our Focus 2025 strategic initiative, including a target of 10% annualized revenue growth. The recent SSI acquisition strengthens our position with medical customers and advances our end market diversification.”

2021 Guidance

Management remains mindful of market and supply chain uncertainties in this pandemic environment. Full year 2021 sales are expected to be in the range of $430 to $490 million. Adjusted earnings per diluted share for 2021 are expected to be in the range of $1.20 to $1.60. Management aims to narrow the guidance range as the year progresses.

Conference Call

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 financial results. The dial-in number is 800-309-1256 (720-543-0314, if calling from outside the U.S.). The passcode is 886676. There will be a replay of the conference call from 1:00 p.m. (EST) today through 1:00 p.m. (EST) on Tuesday, February 23, 2021. The telephone number for the replay is 888-203-1112 (719-457-0820, if calling from outside the U.S.). The replay passcode is 8354721. 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

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands of dollars, except per share amounts)

		Three Months Ended								Twelve Months Ended
		December 31, 2020				December 31, 2019				December 31, 2020				December 31, 2019
Net sales		$	123,018			$	115,040			$	424,066			$	468,999
Cost of goods sold			80,327				76,340				285,003				311,424
Gross margin			42,691				38,700				139,063				157,575
Selling, general and administrative expenses			19,476				18,037				67,787				70,408
Research and development expenses			5,664				6,113				24,317				25,967
Restructuring charges			414				2,111				1,830				7,448
Loss (gain) on sale of assets			—				48				—				(63	)
Operating earnings			17,137				12,391				45,129				53,815
Other (expense) income:
Interest expense			(655	)			(903	)			(3,272	)			(2,648	)
Interest income			195				341				1,047				1,737
Other income (expense), net			2,682				1,008				2,575				(2,638	)
Total other income (expense), net			2,222				446				350				(3,549	)
Earnings before income taxes			19,359				12,837				45,479				50,266
Income tax expense			4,412				2,775				10,793				14,120
Net earnings		$	14,947			$	10,062			$	34,686			$	36,146
Earnings per share:
Basic		$	0.46			$	0.31			$	1.07			$	1.11
Diluted		$	0.46			$	0.31			$	1.06			$	1.09
Basic weighted – average common shares outstanding:			32,273				32,554				32,317				32,700
Effect of dilutive securities			289				416				267				405
Diluted weighted – average common shares outstanding:			32,562				32,970				32,584				33,105
Cash dividends declared per share		$	0.04			$	0.04			$	0.16			$	0.16

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)

		(Unaudited)
		December 31, 2020				December 31, 2019
ASSETS
Current Assets
Cash and cash equivalents		$	91,773			$	100,241
Accounts receivable, net			80,981				78,008
Inventories, net			45,870				42,237
Other current assets			14,607				16,992
Total current assets			233,231				237,478
Property, plant and equipment, net			97,437				105,038
Operating lease assets, net			23,281				24,644
Other Assets
Prepaid pension asset			56,642				62,082
Goodwill			109,497				106,056
Other intangible assets, net			79,121				85,215
Deferred income taxes			24,250				19,795
Other			2,590				3,046
Total other assets			272,100				276,194
Total Assets		$	626,049			$	643,354
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable		$	50,489			$	48,219
Operating lease obligations			3,294				2,787
Accrued payroll and benefits			12,978				9,564
Accrued expenses and other liabilities			38,171				36,378
Total current liabilities			104,932				96,948
Long-term debt			54,600				99,700
Long-term operating lease obligations			23,163				24,926
Long-term pension obligations			7,466				6,632
Deferred income taxes			7,010				5,637
Other long-term obligations			5,196				4,292
Total Liabilities			202,367				238,135
Commitments and Contingencies
Shareholders’ Equity
Common stock			311,190				307,932
Additional contributed capital			41,654				43,689
Retained earnings			539,281				509,766
Accumulated other comprehensive loss			(95,921	)			(91,726	)
Total shareholders’ equity before treasury stock			796,204				769,661
Treasury stock			(372,522	)			(364,442	)
Total shareholders’ equity			423,682				405,219
Total Liabilities and Shareholders’ Equity		$	626,049			$	643,354

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								Twelve Months Ended
		December 31, 2020				December 31, 2019				December 31, 2020				December 31, 2019
GAAP diluted earnings per share		$	0.46			$	0.31			$	1.06			$	1.09
Tax affected charges to reported diluted earnings per share:
Restructuring charges			0.01				0.05				0.04				0.18
Foreign currency (gain) loss			(0.10	)			(0.03	)			(0.16	)			0.05
Non-cash pension expense			0.01				0.01				0.06				0.02
Environmental charges			0.03				0.05				0.07				0.05
Legal settlement			—				(0.01	)			—				(0.01	)
Transaction costs			0.01				—				0.01				0.02
Discrete tax items			0.01				(0.01	)			0.04				0.05
Adjusted diluted earnings per share		$	0.43			$	0.37			$	1.12			$	1.45

Free Cash Flow

The following table reconciles GAAP operating cash flow to free cash flow for the Company:

		Three Months Ended								Twelve Months Ended
(in thousands)		December 31, 2020				December 31, 2019				December 31, 2020				December 31, 2019
Net cash provided by operating activities		$	26,429			$	23,670			$	76,783			$	64,405
Capital expenditures			(4,417	)			(6,434	)			(14,858	)			(21,733	)
Free cash flow		$	22,012			$	17,236			$	61,925			$	42,672

Additional Information

The following table includes other financial information not presented in the preceding financial statements.

		Three Months Ended								Twelve Months Ended
(in thousands)		December 31, 2020				December 31, 2019				December 31, 2020				December 31, 2019
Depreciation and amortization expense		$	6,851			$	6,581			$	26,670			$	24,619
Stock-based compensation expense		$	1,253			$	1,065			$	3,417			$	5,015

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.
  

Free cash flow is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net cash provided by operating activities. CTS believes free cash flow is a useful measure of its ability to generate cash.

We recommend that investors consider both actual and adjusted measures in evaluating the performance of CTS with peer companies.

FAQ

What were CTS Corporation's fourth quarter 2020 sales?

CTS Corporation reported fourth quarter 2020 sales of $123 million, a 7% increase year-over-year.

What was the net earnings for CTS in the fourth quarter of 2020?

The net earnings for CTS in Q4 2020 were $14.9 million, or $0.46 per diluted share.

How did CTS's sales perform in 2020 compared to 2019?

CTS's total sales for 2020 were $424 million, down 10% from 2019.

What is the expected sales range for CTS in 2021?

CTS expects full year 2021 sales to be in the range of $430 million to $490 million.

What was the adjusted diluted EPS for CTS in 2020?

The adjusted diluted EPS for CTS in 2020 was $1.12, down from $1.45 in 2019.