CTS Announces Third Quarter 2020 Results

Rhea-AI Summary

CTS Corporation (NYSE: CTS) reported third quarter 2020 results with sales of $113.8 million, down 2% year-over-year but up 35% from Q2 2020. Sales to transportation customers fell 9%, while sales to other markets increased 10%, or 4% excluding the QTI acquisition. Net earnings reached $11.1 million or $0.34 per diluted share, compared to $2.7 million or $0.08 last year. Free cash flow was $22.4 million. New business wins totaled $127 million. Management expressed cautious optimism despite ongoing market uncertainties.

Positive

• Net earnings increased to $11.1 million from $2.7 million year-over-year.
• Adjusted diluted EPS rose to $0.34, compared to $0.29 last year.
• Free cash flow was robust at $22.4 million.
• New business wins amounted to $127 million.

Negative

• Sales decreased by 2% year-over-year.
• Sales to transportation customers dropped by 9%.
• Company refrained from providing revenue or earnings guidance due to market uncertainties.

Stronger sales, earnings and improved new business wins

LISLE, Ill., Oct. 29, 2020 (GLOBE NEWSWIRE) -- CTS Corporation (NYSE: CTS) today announced third quarter 2020 results.

• Sales were $113.8 million, down 2% year-over-year. Sales to transportation customers declined 9%, and sales to other end markets grew 10%. Excluding the QTI acquisition, sales to other end markets grew 4%. Sales rebounded strongly, up 35% from the second quarter of 2020.
• Net earnings were $11.1 million or $0.34 per diluted share versus $2.7 million or $0.08 last year.
• Adjusted diluted EPS was $0.34, compared to $0.29 last year.
• Free cash flow was $22.4 million. Balance sheet and liquidity remain robust.
• New business wins were $127 million.
  

“Our teams delivered strong operational results and improved new business wins, while striving to maintain a safe work environment,” said Kieran O’Sullivan, CEO of CTS Corporation. “We saw a significant third quarter rebound. Market uncertainty may persist for several quarters; however, we are cautiously optimistic. While we are implementing cost structure improvements, our primary focus is on enhancing our front-end capabilities to drive profitable growth.”

2020 Guidance
Due to ongoing market uncertainties, management is not providing revenue or earnings guidance.

Conference Call
As previously announced, the Company has scheduled a conference call at 10:00 a.m. (EDT) today to discuss the third quarter financial results. The dial-in number is 800-309-1256 (720-543-0314, if calling from outside the U.S.). The passcode is 544640. There will be a replay of the conference call from 1:00 p.m. (EDT) today through 1:00 p.m. (EST) on Thursday, November 12, 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 9449979. 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								Nine Months Ended
		September 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
Net sales		$	113,777			$	115,651			$	301,049			$	353,959
Cost of goods sold			76,871				78,594				204,677				235,084
Gross Margin			36,906				37,057				96,372				118,875
Selling, general and administrative expenses			16,883				17,774				48,310				52,371
Research and development expenses			5,723				6,806				18,653				19,854
Restructuring charges			1,041				2,342				1,416				5,337
Loss (gain) on sale of assets			—				11				—				(111	)
Operating earnings			13,259				10,124				27,993				41,424
Other (expense) income:
Interest expense			(857	)			(812	)			(2,617	)			(1,745	)
Interest income			217				524				852				1,396
Other income (expense), net			1,617				(2,636	)			(109	)			(3,646	)
Total other income (expense), net			977				(2,924	)			(1,874	)			(3,995	)
Earnings before income taxes			14,236				7,200				26,119				37,429
Income tax expense			3,163				4,478				6,381				11,345
Net earnings		$	11,073			$	2,722			$	19,738			$	26,084
Earnings per share:
Basic		$	0.34			$	0.08			$	0.61			$	0.80
Diluted		$	0.34			$	0.08			$	0.61			$	0.79
Basic weighted – average common shares outstanding:			32,268				32,642				32,331				32,748
Effect of dilutive securities			241				425				270				417
Diluted weighted – average common shares outstanding:			32,509				33,067				32,601				33,165
Cash dividends declared per share		$	0.04			$	0.04			$	0.12			$	0.12

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

		(Unaudited)
		September 30, 2020				December 31, 2019
ASSETS
Current Assets
Cash and cash equivalents		$	131,740			$	100,241
Accounts receivable, net			76,431				78,008
Inventories, net			41,492				42,237
Other current assets			14,020				16,992
Total current assets			263,683				237,478
Property, plant and equipment, net			97,777				105,038
Operating lease assets, net			23,727				24,644
Other Assets
Prepaid pension asset			65,115				62,082
Goodwill			106,056				106,056
Other intangible assets, net			76,126				85,215
Deferred income taxes			20,595				19,795
Other			2,774				3,046
Total other assets			270,666				276,194
Total Assets		$	655,853			$	643,354
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable		$	46,739			$	48,219
Operating lease obligations			3,149				2,787
Accrued payroll and benefits			12,437				9,564
Accrued expenses and other liabilities			32,794				36,378
Total current liabilities			95,119				96,948
Long-term debt			106,300				99,700
Long-term operating lease obligations			23,747				24,926
Long-term pension obligations			6,446				6,632
Deferred income taxes			6,223				5,637
Other long-term obligations			4,052				4,292
Total Liabilities			241,887				238,135
Commitments and Contingencies
Shareholders’ Equity
Common stock			310,976				307,932
Additional contributed capital			40,796				43,689
Retained earnings			525,624				509,766
Accumulated other comprehensive loss			(90,908	)			(91,726	)
Total shareholders’ equity before treasury stock			786,488				769,661
Treasury stock			(372,522	)			(364,442	)
Total shareholders’ equity			413,966				405,219
Total Liabilities and Shareholders’ Equity		$	655,853			$	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								Nine Months Ended
		September 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
GAAP diluted earnings per share		$	0.34			$	0.08			$	0.61			$	0.79
Tax affected charges to reported diluted earnings per share:
Restructuring charges			0.03				0.06				0.04				0.13
Foreign currency (gain) loss			(0.07	)			0.08				(0.06	)			0.08
Non-cash pension expense			0.01				—				0.04				0.01
Environmental charges			0.01				—				0.03				—
Transaction charges			—				0.01				—				0.01
Discrete tax items			0.02				0.06				0.03				0.06
Adjusted diluted earnings per share		$	0.34			$	0.29			$	0.69			$	1.08

Additional Information

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

		Three Months Ended								Nine Months Ended
		September 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
Depreciation and amortization expense		$	6,676			$	6,119			$	19,819			$	18,038
Stock-based compensation expense		$	1,119			$	1,157			$	2,164			$	3,950

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.

FAQ

What were CTS Corporation's third quarter 2020 sales figures?

CTS Corporation reported third quarter 2020 sales of $113.8 million.

How much did CTS earn in the third quarter of 2020?

CTS reported net earnings of $11.1 million, or $0.34 per diluted share.

What was the year-over-year sales decline for CTS in Q3 2020?

Sales declined by 2% year-over-year.

What is the amount of new business wins reported by CTS in Q3 2020?

CTS reported new business wins totaling $127 million.

Did CTS provide guidance for revenue or earnings for 2020?

No, CTS did not provide revenue or earnings guidance due to ongoing market uncertainties.