CTS Announces Fourth Quarter and Full Year 2021 Results

Rhea-AI Summary

CTS Corporation (NYSE: CTS) reported Q4 2021 sales of $132.5 million, an 8% increase year-over-year, driven by a 25% growth in non-transportation revenues. However, net income fell to $9.2 million from $14.9 million due to higher foreign exchange costs and taxes. For the full year, sales rose 21% to $512.9 million, but a net loss of $41.9 million was reported, mainly due to a $96.6 million pension plan termination charge. CTS anticipates 2022 sales between $525 and $550 million and adjusted EPS of $2.00 to $2.25.

Positive

• New business wins totaled $694 million, up from $442 million in 2020.
• Adjusted diluted EPS increased to $1.93 from $1.12 in 2020.
• Sales in non-transportation end markets rose 25% year-over-year.

Negative

• Net income dropped to $9.2 million, down from $14.9 million in Q4 2020.
• Full year net loss of $41.9 million compared to net earnings of $34.7 million in 2020 due to pension charges.

Delivering Solid Growth and Diversification

LISLE, Ill., Feb. 08, 2022 (GLOBE NEWSWIRE) -- CTS Corporation (NYSE: CTS), a leading global designer and manufacturer of custom engineered solutions that “sense, connect and move” today announced fourth quarter and full year 2021 results.

“We delivered strong growth across all end markets despite a challenging macroeconomic environment. Importantly, we also further advanced our diversification strategy, which was underscored by a 25% increase in non-transportation revenues over the previous year, while at the same time winning record new business across end markets,” said Kieran O’Sullivan, CEO of CTS Corporation.

“We enter 2022 with a goal to continue our progress on profitable growth and diversification. The investments we’ve made in the business combined with our strong balance sheet and disciplined capital allocation approach will enable us to capitalize on future growth opportunities and continue to return value to our shareholders.”

Fourth Quarter 2021 Results

• Sales were $132.5 million, up 8% year-over-year. Sales to non-transportation end markets increased 25%, and sales to the transportation end market decreased 3% over the same period.
• Net income was $9.2 million, or $0.28 per diluted share, compared to $14.9 million, or $0.46 per diluted share, in the fourth quarter of 2020. The lower net income was due to increased foreign exchange expense and a higher tax rate.
• Adjusted diluted EPS was $0.49, up from $0.43 in the fourth quarter of 2020.
• Adjusted EBITDA margin was 20.9% compared to 21.4% in the fourth quarter of 2020.
• Operating cash flow was $26.0 million, compared to $26.4 million in the fourth quarter of 2020.
• New business wins were $185 million, up from $104 million in the fourth quarter of 2020.

Full Year 2021 Results

• Sales were $512.9 million, up 21% year-over-year. Sales to non-transportation end markets increased 25%, and sales to the transportation end market increased 18% over the same period.
• Net loss was $41.9 million, or $(1.30) per diluted share, versus net earnings of $34.7 million, or $1.06 per diluted share, in 2020. The 2021 net earnings were impacted by non-cash charges of $96.6 million, net of taxes related to the previously disclosed termination of the U.S. pension plan.
• Adjusted diluted EPS was $1.93, up from $1.12 in 2020.
• Adjusted EBITDA margin was 21.0% compared to 18.3% for 2020.
• Operating cash flow was $86.1 million, up from $76.8 million in 2020.
• New business wins were $694 million, up from $442 million in 2020.

2022 Guidance

CTS expects full year 2022 sales to be in the range of $525 – $550 million and adjusted diluted EPS in the range of $2.00 – $2.25.

Conference Call and Supplemental Materials

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 2021 financial results. The dial-in number for the U.S. and Canada is 844-200-6205 (+1 929-526-1599, if calling from outside the U.S.). The passcode is 160107. In addition, the Company will be using a supplemental slide presentation that will be referred to during the call. The presentation and 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 https://www.ctscorp.com/investors/events-presentations/

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, 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 CTS’ 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 CTS’ actual results, performance or achievements to differ materially from those presented in the forward-looking statements. Examples of factors that may affect future operating results and financial condition include, but are not limited to: the ultimate impact of the COVID-19 pandemic on CTS’ business, results of operations or financial condition; changes in the economy generally and in respect to the business in which CTS operates; unanticipated issues in integrating acquisitions; the results of actions to reposition CTS’ business; rapid technological change; general market conditions in the transportation industry, as well as conditions in the industrial, aerospace and defense, and medical markets; reliance on key customers; unanticipated public health crises, natural disasters or other events; environmental compliance and remediation expenses; the ability to protect CTS’ intellectual property; pricing pressures and demand for CTS’ products; and risks associated with CTS’ international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks. Many of these, and other, risks and uncertainties are discussed in further detail in Item 1A. of CTS’ Annual Report on Form 10-K and other filings made with the SEC. 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.

Non-GAAP Financial Measures

From time to time, CTS may use non-GAAP financial measures in discussing CTS’ business. These measures are intended to supplement, not replace, CTS’ presentation of its financial results in accordance with U.S. GAAP. CTS’ management believes that non-GAAP financial measures can be useful to investors in analyzing CTS’ financial performance and results of operations over time. CTS recommends that investors consider both actual and adjusted measures in evaluating the performance of CTS with peer companies.

The information included in this press release includes the non-GAAP financial measures of adjusted operating earnings, adjusted EBITDA, adjusted net earnings, adjusted diluted earnings per share, debt to capitalization ratio, controllable working capital ratio, and free cash flow. Many of these non-GAAP financial measures exclude the effect of certain expenses and income not related directly to the underlying performance of CTS’ fundamental business operations.

CTS believes that adjusted operating earnings, adjusted EBITDA, adjusted net earnings and, adjusted diluted earnings per share provide useful information to investors regarding its operational performance because they enhance an investor’s overall understanding of CTS’ core financial performance and facilitate comparisons to historical results of operations, by excluding items that are not related directly to the underlying performance of CTS’ fundamental business operations or were not part of CTS’ business operations during a comparable period.

CTS believes that debt to capitalization ratio is a measurement of financial leverage and provides an insight into the financial structure of CTS and its financial strength. CTS believes the controllable working capital ratio provides an objective measure of the efficiency with which CTS manages its short-term capital needs. CTS believes that free cash flow is a useful measure of its ability to generate cash.

CTS believes that these non-GAAP financial measures are commonly used by financial analysts and others in the industries in which CTS operates, and thus further provide useful information to investors. Note that CTS’ definitions of these non-GAAP financial measures may differ from those terms as defined or used by other companies.

CTS does not provide reconciliations of forward-looking non-GAAP financial measures, such as estimated adjusted diluted earnings per share, to the most comparable GAAP financial measures on a forward-looking basis because CTS is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of certain items, such as, but not limited to, restructuring costs, environmental remediation costs, acquisition related costs, foreign exchange rates and other non-routine costs. Each of such adjustments has not yet occurred, are out of CTS' control and/or cannot be reasonably predicted. For the same reasons, CTS is unable to address the probable significance of the unavailable information.

Contact

Ashish Agrawal
Vice President and Chief Financial Officer
CTS Corporation
4925 Indiana Avenue
Lisle, IL 60532 USA
+1 (630) 577-8800
ashish.agrawal@ctscorp.com

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

	Three Months Ended									Twelve Months Ended
	December 31, 2021				December 31, 2020					December 31, 2021								December 31, 2020
Net sales	$	132,531			$	123,018				$		512,925						$		424,066
Cost of goods sold		83,860				80,327						328,306								285,003
Gross margin		48,671				42,691						184,619								139,063
Selling, general and administrative expenses		23,413				19,476						82,597								67,787
Research and development expenses		5,686				5,664						23,856								24,317
Restructuring charges		1,136				414						1,687								1,830
Operating earnings		18,436				17,137						76,479								45,129
Other (expense) income:
Interest expense		(534	)			(655	)					(2,111		)						(3,272		)
Interest income		151				195						840								1,047
Other (expense) income, net		(3,302	)			2,682						(136,088		)						2,575
Total other (expense) income, net		(3,685	)			2,222						(137,359		)						350
Earnings (loss) before income taxes		14,751				19,359						(60,880		)						45,479
Income tax expense (benefit)		5,586				4,412						(19,014		)						10,793
Net earnings (loss)		9,165				14,947						(41,866		)				$		34,686
Earnings (loss) per share:
Basic	$	0.28			$	0.46				$		(1.30		)				$		1.07
Diluted	$	0.28			$	0.46				$		(1.30		)				$		1.06
Basic weighted – average common shares outstanding:		32,214				32,273						32,327								32,317
Effect of dilutive securities		218				289						—								267
Diluted weighted – average common shares outstanding:		32,432				32,562					32,327								32,584
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, 2021				December 31, 2020
ASSETS
Current Assets
Cash and cash equivalents	$	141,465			$	91,773
Accounts receivable, net		82,191				80,981
Inventories, net		49,506				45,870
Other current assets		15,927				14,607
Total current assets		289,089				233,231
Property, plant and equipment, net		96,876				97,437
Operating lease assets, net		21,594				23,281
Other Assets
Prepaid pension asset		49,382				56,642
Goodwill		109,798				109,497
Other intangible assets, net		69,888				79,121
Deferred income taxes		25,415				24,250
Other		2,420				2,590
Total other assets		256,903				272,100
Total Assets	$	664,462			$	626,049
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	55,537			$	50,489
Operating lease obligations		3,393				3,294
Accrued payroll and benefits		18,418				12,978
Accrued expenses and other liabilities		36,718				38,171
Total current liabilities		114,066				104,932
Long-term debt		50,000				54,600
Long-term operating lease obligations		21,354				23,163
Long-term pension obligations		6,886				7,466
Deferred income taxes		5,894				7,010
Other long-term obligations		2,684				5,196
Total Liabilities		200,884				202,367
Commitments and Contingencies
Shareholders’ Equity
Common stock		314,620				311,190
Additional contributed capital		42,549				41,654
Retained earnings		492,242				539,281
Accumulated other comprehensive loss		(4,525	)			(95,921	)
Total shareholders’ equity before treasury stock		844,886				796,204
Treasury stock		(381,308	)			(372,522	)
Total shareholders’ equity		463,578				423,682
Total Liabilities and Shareholders’ Equity	$	664,462			$	626,049

CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION - UNAUDITED
(In millions of dollars, except per share amounts)

Adjusted Operating Earnings

	Three Months Ended December 31,								Twelve Months Ended December 31,
	2021				2020				2021				2020				2019
Operating earnings	$	18.4			$	17.1			$	76.5			$	45.1			$	53.8
Adjustments to reported operating earnings:
Restructuring charges		1.1				0.4				1.7				1.8				7.4
Environmental charges		1.4				1.5				2.3				2.8				2.3
Legal settlement		—				—				—				—				(0.5	)
Transaction costs		—				0.3				—				0.3				0.7
Costs of tax improvement initiatives		—				—				—				—				0.1
Total adjustments to reported operating earnings	$	2.5			$	2.2			$	3.9			$	4.9			$	10.0
Adjusted operating earnings	$	21.0			$	19.4			$	80.4			$	50.0			$	63.8
Net sales	$	132.5			$	123.0			$	512.9			$	424.1			$	469.0
Adjusted operating earnings as a % of net sales		15.8	%			15.7	%			15.7	%			11.8	%			13.6	%

Adjusted EBITDA

	Three Months Ended December 31,								Twelve Months Ended December 31,
	2021				2020				2021				2020				2019
Net earnings (loss)	$	9.2			$	14.9			$	(41.9	)		$	34.7			$	36.1
Depreciation and amortization expense		6.7				6.9				26.9				26.7				24.6
Interest expense		0.5				0.7				2.1				3.3				2.6
Tax expense (benefit)		5.6				4.4				(19.0	)			10.8				14.1
EBITDA		22.0				26.9				(31.8	)			75.4				77.5
Adjustments to EBITDA:
Restructuring charges		1.1				0.4				1.7				1.8				6.9
Environmental charges		1.4				1.5				2.3				2.8				2.3
Legal settlement		—				—				—				—				(0.5	)
Transaction costs		—				0.3				—				0.3				0.7
Costs of tax improvement initiatives		—				—				—				—				0.1
Non-cash pension expense		1.3				0.6				132.4				2.5				0.8
Foreign currency loss (gain)		1.9				(3.4	)			3.3				(5.3	)			1.8
Total adjustments to EBITDA		5.7				(0.5	)			139.7				2.1				12.0
Adjusted EBITDA	$	27.7			$	26.5			$	107.8			$	77.5			$	89.5
Net sales	$	132.5			$	123.0			$	512.9			$	424.1			$	469.0
Adjusted EBITDA as a % of net sales		20.9	%			21.4	%			21.0	%			18.3	%			19.1	%

Adjusted Net Earnings

	Three Months Ended December 31,								Twelve Months Ended December 31,
	2021				2020				2021				2020				2019
Net earnings (loss) (A)	$	9.2			$	14.9			$	(41.9	)		$	34.7			$	36.1
Adjustments to reported net earnings (loss):
Restructuring charges		1.1				0.4				1.7				1.8				7.4
Environmental charges		1.4				1.5				2.3				2.8				2.3
Legal settlement		—				—				—				—				(0.5	)
Transaction costs		—				0.3				—				0.3				0.7
Costs of tax improvement initiatives		—				—				—				—				0.1
Non-cash pension expense		1.3				0.6				132.4				2.5				0.8
Foreign currency (gain) loss		1.9				(3.4	)			3.3				(5.3	)			1.8
Total adjustments to reported net earnings (loss)	$	5.7			$	(0.5	)		$	139.7			$	2.1			$	12.6
Total adjustments, tax affected (B)	$	5.1			$	(1.2	)		$	108.6			$	0.4			$	10.2
Tax adjustments:
Increase (decrease) in valuation allowances		0.9				(0.6	)			0.9				0.2				—
Other discrete tax items		0.7				0.9				(4.7	)			1.2				1.8
Total tax adjustments (C)	$	1.6			$	0.3			$	(3.8	)		$	1.4			$	1.8
Adjusted net earnings (A+B+C)	$	15.9			$	14.1			$	63.0			$	36.5			$	48.1
Net sales	$	132.5			$	123.0			$	512.9			$	424.1			$	469.0
Adjusted net earnings as a % of net sales		12.0	%			11.5	%			12.3	%			8.6	%			10.3	%

Adjusted Diluted Earnings Per Share

	Three Months Ended December 31,								Twelve Months Ended December 31,
	2021				2020				2021				2020				2019
GAAP diluted earnings (loss) per share	$	0.28			$	0.46			$	(1.30	)		$	1.06			$	1.09
Tax affected charges to reported diluted earnings (loss) per share:
Restructuring charges		0.04				0.01				0.06				0.04				0.18
Foreign currency loss (gain)		0.06				(0.10	)			0.10				(0.16	)			0.05
Non-cash pension expense		0.03				0.01				3.13				0.06				0.02
Environmental charges		0.03				0.03				0.05				0.07				0.05
Transaction costs		—				0.01				—				0.01				0.02
Legal Settlement		—				—				—				—				(0.01	)
Discrete tax items		0.05				0.01				(0.11	)			0.04				0.05
Adjusted diluted earnings per share	$	0.49			$	0.43			$	1.93			$	1.12			$	1.45

Debt to Capitalization

	Twelve Months Ended December 31,
	2021				2020				2019
Total debt (A)	$	50.0			$	54.6			$	99.7
Total shareholders' equity (B)	$	463.6			$	423.7			$	405.2
Total capitalization (A+B)	$	513.6			$	478.3			$	504.9
Total debt to capitalization		9.7	%			11.4	%			19.7	%

Controllable Working Capital

	Twelve Months Ended December 31,
	2021				2020				2019
Net accounts receivable	$	82.2			$	81.0			$	78.0
Net inventory	$	49.5			$	45.9			$	42.2
Accounts payable	$	(55.5	)		$	(50.5	)		$	(48.2	)
Controllable working capital	$	76.2			$	76.4			$	72.0
Quarter sales	$	132.5			$	123.0			$	115.0
Multiplied by 4		4				4				4
Annualized sales	$	530.1			$	492.1			$	460.2
Controllable working capital as a % of annualized sales		14.4	%			15.5	%			15.7	%

Free Cash Flow

	Three Months Ended December 31,								Twelve Months Ended December 31,
	2021				2020				2021				2020				2019
Net cash provided by operating activities	$	26.0			$	26.4			$	86.1			$	76.8			$	64.4
Capital expenditures		(7.5	)			(4.4	)			(15.6	)			(14.9	)			(21.7	)
Free cash flow	$	18.5			$	22.0			$	70.5			$	61.9			$	42.7

Capital Expenditures

	Three Months Ended December 31,								Twelve Months Ended December 31,
	2021				2020				2021				2020				2019
Capital expenditures	$	7.5			$	4.4			$	15.6			$	14.9			$	21.7
Net sales	$	132.5			$	123.0			$	512.9			$	424.1			$	469.0
Capex as % of net sales		5.7	%			3.6	%			3.0	%			3.5	%			4.6	%

Additional Information

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

	Three Months Ended December 31,								Twelve Months Ended December 31,
	2021				2020				2021				2020
Depreciation and amortization expense	$	6.7			$	6.9			$	26.9			$	26.7
Stock-based compensation expense	$	2.0			$	1.3			$	6.1			$	3.4

FAQ

What were CTS's fourth quarter results for 2021?

CTS reported Q4 2021 sales of $132.5 million, an 8% increase year-over-year, with net income of $9.2 million.

How did CTS perform in non-transportation markets in 2021?

Sales to non-transportation end markets increased by 25% in 2021.

What is the expected sales range for CTS in 2022?

CTS forecasts full year 2022 sales between $525 million and $550 million.

What was the adjusted diluted EPS for CTS in 2021?

Adjusted diluted EPS for 2021 was $1.93, up from $1.12 in 2020.

How much new business did CTS win in 2021?

CTS won new business totaling $694 million, a significant increase from $442 million in 2020.