-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, FC19SAIwy8w5k9FuOGKcvz0acl2XkZVG9BnQYnf++LI8WmEw5NVHQylrgAuYf3tH SAo/W+VCGRIEznjDwiR4Yg== 0000026058-94-000010.txt : 19940602 0000026058-94-000010.hdr.sgml : 19940602 ACCESSION NUMBER: 0000026058-94-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940403 FILED AS OF DATE: 19940511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CTS CORP CENTRAL INDEX KEY: 0000026058 STANDARD INDUSTRIAL CLASSIFICATION: 3670 IRS NUMBER: 350225010 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04639 FILM NUMBER: 94527195 BUSINESS ADDRESS: STREET 1: 905 W BLVD N CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192937511 10-Q 1 1994 1ST Q 10 Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Form 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 3, 1994 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _____________ to _________________ For Quarter Ended Commission File Number April 3, 1994 1-4639 CTS CORPORATION (Exact name of registrant as specified in its charter) Indiana 35-0225010 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 905 West Boulevard North Elkhart, IN 46514 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (219) 293-7511 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_______ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 10, 1994: 5,169,954 Page 1 of 11 CTS CORPORATION AND SUBSIDIARIES INDEX Page No. PART I -- FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Earnings - For the Three Months Ended April 3, 1994, and April 4, 1993 3 Condensed Consolidated Balance Sheets - As of April 3, 1994, and December 31, 1993 4 Condensed Consolidated Statements of Cash Flows - For the Three Months Ended April 3, 1994, and April 4, 1993 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 PART II -- OTHER INFORMATION Item 1. Legal Proceedings 10 Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11 Page 2 of 11 Part I. -- FINANCIAL INFORMATION Item 1. Financial Statements CTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS UNAUDITED (In thousands of dollars, except per share amounts) Three Months Ended April 3, April 4, 1994 1993 Net sales $64,357 $60,439 Cost of goods sold 50,230 47,819 Gross earnings 14,127 12,620 Selling, general and administrative expenses 10,567 10,041 Operating earnings 3,560 2,579 Other expenses (income): Interest expense 227 239 Other (224) (184) Total other expenses 3 55 Earnings before income taxes and cumulative effect of changes in accounting principles 3,557 2,524 Income taxes 1,067 757 Earnings before cumulative effect of changes in accounting principles 2,490 1,767 Cumulative effect of accounting change - postretirement benefits (5,096) Cumulative effect of accounting change - income taxes 482 (4,614) Net earnings (loss) $ 2,490 $(2,847) Earnings (loss) per share: Before accounting changes $ .48 $ .34 Cumulative effect on prior years of accounting changes (.89) Net earnings (loss) per share $ .48 $ (.55) Cash dividends per share $ .10 $ .10 Average net shares outstanding 5,159,998 5,150,850 See notes to condensed consolidated financial statements. Page 3 of 11 Part I. -- FINANCIAL INFORMATION CTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars) April 3, December 31, 1994 1993* ASSETS (Unaudited) Current Assets Cash $18,435 $ 23,534 Accounts receivable, less allowances (1994--$757; 1993--$710) 34,865 30,627 Inventories--Note C 37,772 36,059 Other current assets 2,262 1,929 Deferred income taxes 5,117 5,117 Total current assets 98,451 97,266 Property, Plant and Equipment, less accumulated depreciation (1994--$136,215; 1993--$134,566) 47,942 47,842 Other Assets Goodwill, less accumulated amortization (1994--$6,499; 1993--$6,330) 5,648 5,801 Prepaid pension 34,276 32,845 Other 948 1,310 Total other assets 40,872 39,956 $187,265 $185,064 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable $ 11,427 $ 12,822 Current maturities of long-term obligations 341 341 Accounts payable 13,974 11,611 Accrued liabilities 26,779 25,114 Total current liabilities 52,521 49,888 Long-term Obligations 2,846 4,995 Deferred Income Taxes 5,329 5,329 Postretirement Benefits 5,434 5,649 Stockholders' Equity: Common stock-authorized 8,000,000 shares without par value; issued 5,807,031 shares 33,843 34,130 Retained earnings 102,841 100,868 Cumulative foreign translation adjustment (1,122) (1,049) 135,562 133,949 Less cost of common stock held in treasury: 1994--637,677 shares; 1993--653,607 shares 14,427 14,746 Total stockholders' equity 121,135 119,203 $187,265 $185,064 *The balance sheet at December 31, 1993, has been derived from the audited financial statements at that date. See notes to condensed consolidated financial statements. Page 4 of 11 Part I. -- FINANCIAL INFORMATION CTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (In thousands of dollars) Three Months Ended April 3, April 4, 1994 1993 Cash flows from operating activities: Net earnings (loss) $ 2,490 $(2,847) Adjustments to reconcile earnings (loss) to net cash provided by operating activities: Cumulative effect of change in accounting for: Postretirement benefits 5,096 Income taxes (482) Depreciation and amortization 2,929 3,184 (Increase) decrease in: Accounts receivable (4,238) (3,748) Inventories (1,713) (2,677) Other current assets (333) (1,035) Prepaid pension expense (1,431) (1,466) Other 158 (125) Increase in: Accounts payable & accrued liabilities 4,028 5,258 Total adjustments (600) 4,005 Net cash provided by operating activities 1,890 1,158 Cash flows from investing activities: Proceeds from sale of property, plant and equipment 101 305 Capital expenditures (2,942) (2,413) Net cash used in investing activities (2,841) (2,108) Cash flows from financing activities: Payments of long-term obligations (2,138) (2,684) (Decrease) increase in notes payable (1,461) 883 Dividend payments (517) (515) Other 31 Net cash used in financing activities (4,116) (2,285) Effect of exchange rate changes on cash (32) (12) Net decrease in cash (5,099) (3,247) Cash at beginning of year 23,534 18,455 Cash at end of period $18,435 $15,208 Supplemental disclosures of cash flow information Net cash paid during the period for: Interest $ 237 $ 211 Income Taxes $ 892 $ (27) See notes to condensed consolidated financial statements. Page 5 of 11 Part I. -- FINANCIAL INFORMATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) April 3, 1994 NOTE A--BASIS OF PRESENTATION The accompanying condensed interim consolidated financial data is unaudited; however, in the opinion of management, the interim data includes all adjustments considered necessary for a fair presentation of the results for the interim period. Operating results for the three-month period ended April 3, 1994, are not necessarily indicative of the results that may be expected for the year ending December 31, 1994. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's 1993 Annual Report on Form 10-K. NOTE B--INVENTORIES The components of inventory consist of the following: (In thousands) April 3, December 31, 1994 1993 Finished goods $ 6,019 $ 5,064 Work-in-process 16,248 15,344 Raw material 15,505 15,651 $37,772 $36,059 NOTE C--LITIGATION and CONTINGENCIES Contested claims involving various matters, including environmental claims brought by government agencies, are being litigated by CTS, both in legal and administrative forums. In the opinion of management, based upon currently available information, adequate provision for potential costs has been made, or the costs which might ultimately result from such litigation or administrative proceedings will not materially affect the consolidated financial position of the Company or the results of operations. Page 6 of 11 Part I. -- FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Material Changes in Financial Condition: Comparison of April 3, 1994, to December 31, 1993 The following table highlights significant changes in balance sheet captions and ratios and other information related to liquidity and capital resources: (Dollars in thousands) April 3, December 31, Increase 1994 1993 (Decrease) Cash $ 18,435 $ 23,534 $(5,099) Accounts receivable, net 34,865 30,627 4,238 Inventories, net 37,772 36,059 1,713 Current assets 98,451 97,266 1,185 Current liabilities 52,521 49,888 2,633 Working capital 45,930 47,378 (1,448) Current ratio 1.87 1.95 (0.08) Interest bearing debt 14,586 17,992 (3,406) Net tangible worth 115,487 113,402 2,085 Ratio of interest bearing debt to net tangible worth 0.13 0.16 (0.03) From December 31, 1993, to April 3, 1994, cash of CTS Corporation and its subsidiaries ("CTS" or "Company") decreased $5.1 million. The decrease in cash primarily reflects capital expenditures and a reduction in interest bearing debt. The net decrease in working capital of $1.4 million reflects increases in accrued liabilities of $1.7 million and accounts payable of $2.4 million, offset by increases in receivables of $4.2 million and inventories of $0.7 million. The increases in receivables and inventory were mainly a result of the increased sales volume in the first quarter of 1994 compared to the last quarter of 1993. Capital expenditures were $2.9 million during the first quarter, compared with $2.4 million for the same period a year earlier, and $3.3 million for the fourth quarter of 1993. These capital expenditures were primarily for new products and cost reduction programs. The $3.4 million decrease in interest bearing debt resulted primarily from discretionary debt repayments. Page 7 of 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) On March 31, 1993, the Company replaced its previous $40 million long-term revolving credit agreement with a new $45 million long- term revolving credit agreement. The new agreement expires on April 1, 1997. The new agreement contains certain loan covenants with which the Company is in full compliance. The revolving agreement is the Company's primary credit vehicle, and with cash from operations, is expected to adequately fund the Company's anticipated cash needs. Material Changes in Results of Operations: Comparison of First Quarter 1994 to First Quarter 1993 The following table highlights changes in significant components of the consolidated statements of earnings for the three-month periods ending April 3, 1994, and April 4, 1993: (Dollars in thousands) April 3, April 4, Increase 1994 1993 (Decrease) Net sales $64,357 $60,439 $ 3,918 Gross earnings 14,127 12,620 1,507 Gross earnings as a percent of sales 21.95% 20.88% 1.07% Selling, general and administrative expenses 10,567 10,041 526 Selling, general and administrative expenses as a percent of sales 16.42% 16.61% (0.19)% Operating earnings 3,560 2,579 981 Operating earnings as a percent of sales 5.53% 4.27% 1.26% Interest expense 227 239 (12) Earnings before income taxes and cumulative effect of changes in accounting principles 3,557 2,524 1,033 Income taxes 1,067 757 310 Income tax rate 30.00% 30.00% Net sales increased by $3.9 million or 6.5% from the first quarter of 1993. Sales increases occurred principally in automotive, electrocomponents and connector related products as a result of the overall improved automotive market, new products and applications and additional market penetration. These increases more than offset decreases in our microelectronics and frequency controls businesses. Page 8 of 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Gross earnings improved primarily due to the sales and production volume increases which favorably affected operating efficiencies in all business units, excluding the microelectronics and frequency controls units. Selling, general and administrative expenses remained essentially flat compared to the first quarter of 1993, and were a slightly lower percent of net sales. The Company continues to emphasize cost control over all operating expenses. The tax rate for 1994 is consistent with the first quarter 1993 tax rate and decreased from the 1993 annual effective rate of 36%. The 1994 rate change from the 1993 annual rate is primarily the result of additional expected net operating loss utilization. Page 9 of 11 Part II -- OTHER INFORMATION Item 1. Legal Proceedings CTS is involved in litigation and in other administrative proceedings with government agencies regarding the protection of the environment, and other matters, the results of which are not yet determinable. In the opinion of management, based upon currently available information, adequate provision for anticipated costs has been made, or the ultimate costs resulting from such litigation or administrative proceedings will not materially affect the consolidated financial position of the Company or the results of operations. Item 6. Exhibits and Reports on Form 8-K a. Exhibits None b. Forms 8-K The Company filed a Form 8-K, dated January 6, 1994, announcing that on December 15, 1993, the Corporation settled litigation with a component supplier relative to damages caused to the Corporation by a defective component purchased from that supplier. The gross recovery was $2,250,000. Page 10 of 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CTS CORPORATION CTS CORPORATION Jeannine M. Davis Stanley J. Aris Jeannine M. Davis Stanley J. Aris Vice President, Secretary Vice President Finance and General Counsel and Chief Financial Officer Dated: May 10, 1994 Page 11 of 11 -----END PRIVACY-ENHANCED MESSAGE-----