-----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, XUfj/PVcuY8V4DNDULuoYORYFfY7XXaJBLNVfmWgUuNSpN/DDHg97/ZnSljhXnxB UrvLCR7iibXadunTKlEj/w== 0000026058-94-000012.txt : 19940817 0000026058-94-000012.hdr.sgml : 19940817 ACCESSION NUMBER: 0000026058-94-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940703 FILED AS OF DATE: 19940809 SROS: NYSE 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: 94542516 BUSINESS ADDRESS: STREET 1: 905 W BLVD N CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192937511 10-Q 1 1994 2ND 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 July 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 July 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 August 8, 1994: 5,172,704 Page 1 of 12 CTS CORPORATION AND SUBSIDIARIES INDEX Page No. PART I -- FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Earnings - For the Six Months Ended July 3, 1994, and July 4, 1993 3 Condensed Consolidated Balance Sheets - As of July 3, 1994, and December 31, 1993 4 Condensed Consolidated Statements of Cash Flows - For the Six Months Ended July 3, 1994, and July 4, 1993 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-10 PART II -- OTHER INFORMATION Item 1. Legal Proceedings 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12 Page 2 of 12 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 Six Months Ended July 3, July 4, July 3, July 4, 1994 1993 1994 1993 Net sales $70,618 $62,613 $134,975 $123,052 Cost of goods sold 54,985 49,902 105,215 97,721 Gross earnings 15,633 12,711 29,760 25,331 Selling, general and administrative expenses 10,108 9,668 20,675 19,709 Operating earnings 5,525 3,043 9,085 5,622 Other expenses (income): Interest expense 189 222 416 461 Other (220) (34) (444) (218) Total other expenses (income) (31) 188 (28) 243 Earnings before income taxes and cumulative effect of changes in accounting principles 5,556 2,855 9,113 5,379 Income taxes 1,667 1,045 2,734 1,802 Earnings before cumulative effect of changes in accounting principles 3,889 1,810 6,379 3,577 Cumulative effect of account- ing change - postretirement benefits (5,096) Cumulative effect of account- ing change - income taxes 482 (4,614) Net earnings (loss) $ 3,889 $ 1,810 $ 6,379 $ (1,037) Earnings (loss) per share: Before accounting changes $ .75 $ .35 $ 1.23 $ .69 Cumulative effect on prior years of accounting changes (.89) Net earnings (loss) per share $ .75 $ .35 $ 1.23 $ (.20) Cash dividends per share $ .10 $ .10 $ .20 $ .20 Average net shares outstanding 5,169,970 5,152,600 5,164,930 5,151,710
See notes to condensed consolidated financial statements. Page 3 of 12 Part I. -- FINANCIAL INFORMATION CTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars)
July 3, December 31, 1994 1993* ASSETS (Unaudited) Current Assets Cash $ 11,153 $ 23,534 Accounts receivable, less allowances (1994--$820; 1993--$710) 38,600 30,627 Inventories--Note B 39,645 36,059 Other current assets 2,669 1,929 Deferred income taxes 5,117 5,117 Total current assets 97,184 97,266 Property, Plant and Equipment, less accumulated depreciation (1994--$137,942; 1993--$134,566) 47,856 47,842 Other Assets Goodwill, less accumulated amortization (1994--$6,668; 1993--$6,330) 5,521 5,801 Prepaid pension 35,707 32,845 Other 867 1,310 Total other assets 42,095 39,956 $187,135 $185,064 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable $ 3,114 $ 12,822 Current maturities of long-term obligations 291 341 Accounts payable 16,859 11,611 Accrued liabilities 29,326 25,114 Total current liabilities 49,590 49,888 Long-term Obligations 1,898 4,995 Deferred Income Taxes 5,329 5,329 Postretirement Benefits 5,232 5,649 Stockholders' Equity: Common stock-authorized 8,000,000 shares without par value; issued 5,807,031 shares 33,871 34,130 Retained earnings 106,213 100,868 Cumulative foreign translation adjustment (597) (1,049) 139,487 133,949 Less cost of common stock held in treasury: 1994--636,577 shares; 1993--653,607 shares 14,401 14,746 Total stockholders' equity 125,086 119,203 $187,135 $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 12 Part I. -- FINANCIAL INFORMATION CTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (In thousands of dollars)
Six Months Ended July 3, July 4, 1994 1993 Cash flows from operating activities: Net earnings (loss) $ 6,379 $(1,037) Adjustments to reconcile earnings to net cash provided by (used in) operating activities: Cumulative effect of change in accounting for: Postretirement benefits other than pensions 5,096 Income taxes (482) Depreciation and amortization 5,946 6,343 (Increase) decrease in: Accounts receivable (7,973) (2,357) Inventories (3,586) (3,595) Other current assets (740) 109 Prepaid pension expense (2,862) (2,912) Other 21 (593) Increase in: Accounts payable and accrued liabilities 9,460 6,416 Total adjustments 266 8,025 Net cash provided by operating activities 6,645 6,988 Cash flows from investing activities: Proceeds from sale of property, plant and equipment 543 372 Capital expenditures (5,815) (5,935) Net cash used in investing activities (5,272) (5,563) Cash flows from financing activities: Proceeds from issuance of long-term obligations 418 Payments of long-term obligations (3,215) (3,300) Increase (decrease) in notes payable (9,761) 2,904 Dividend payments (1,034) (1,030) Other 72 Net cash used in financing activities (14,010) (936) Effect of exchange rate changes on cash 256 (146) Net (decrease) increase in cash (12,381) 343 Cash at beginning of year 23,534 18,455 Cash at end of period $11,153 $18,798 Supplemental disclosures of cash flow information Net cash paid during the period for: Interest $ 415 $ 481 Income Taxes $ 1,307 $ 447*
*Net of United Kingdom tax refund of $894. See notes to condensed consolidated financial statements. Page 5 of 12 Part I. -- FINANCIAL INFORMATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) July 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 six-month period ended July 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) July 3, December 31, 1994 1993 Finished goods $ 6,141 $ 5,064 Work-in-process 16,353 15,344 Raw material 17,151 15,651 $39,645 $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 12 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 July 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) July 3, December 31, Increase 1994 1993 (Decrease) Cash $ 11,153 $ 23,534 $(12,381) Accounts receivable, net 38,600 30,627 7,973 Inventories, net 39,645 36,059 3,586 Current assets 97,184 97,266 (82) Current liabilities 49,590 49,888 (298) Working capital 47,594 47,378 216 Current ratio 1.96 1.95 .01 Interest bearing debt 5,280 17,992 (12,712) Net tangible worth 119,565 113,402 6,163 Ratio of interest bearing debt to net tangible worth 0.04 0.16 (0.12) From December 31, 1993, to July 3, 1994, cash of CTS Corporation and its subsidiaries ("CTS" or "Company") decreased $12.4 million. The primary use of cash was the $12.7 million decrease in interest bearing debt which resulted mainly from discretionary short-term debt repayments. The change in working capital, excluding cash and current debt, was an increase of $2.8 million. The $2.8 million primarily reflects increases in accounts receivable of $8.0 million and inventory of $3.6 million, offset by increases in accounts payable of $5.2 million and accrued liabilities of $4.2 million. These increases are primarily a reflection of the increase in sales and production levels during the second quarter of 1994 compared to the last quarter of 1993. Capital expenditures were $5.8 million during the first six months of 1994, compared with $5.9 million for the same period a year earlier. These capital expenditures were primarily for new products and manufacturing improvement programs. Page 7 of 12 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 Second Quarter 1994 to Second Quarter 1993 The following table highlights changes in significant components of the consolidated statements of earnings for the three-month periods ending July 3, 1994, and July 4, 1993:
(Dollars in thousands) July 3, July 4, Increase 1994 1993 (Decrease) Net sales $70,618 $62,613 $8,005 Gross earnings 15,633 12,711 2,922 Gross earnings as a percent of sales 22.14% 20.30% 1.84% Selling, general and administrative expenses 10,108 9,668 440 Selling, general and administrative expenses as a percent of sales 14.31% 15.44% (1.13)% Operating earnings 5,525 3,043 2,482 Operating earnings as a percent of sales 7.82% 4.86% 2.96% Interest expense 189 222 (33) Earnings before income taxes and cumulative effect of changes in accounting principles 5,556 2,855 2,701 Income taxes 1,667 1,045 622 Income tax rate 30.00% 36.60% (6.6)%
Net sales increased by $8.0 million, or 12.8% compared to the second quarter of 1993. The significant sales increases occurred in automotive 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 a sales decline in our microelectronics business. Page 8 of 12 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 relatively flat with a minor increase in selling expense as a result of the increased sales volume. As a percent of sales, these expenses declined slightly reflecting the Company's continued emphasis of cost control over all operating expenses. The tax rate for 1994 is consistent with the first quarter 1994 tax rate and decreased from the 1993 full year 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. Material Changes in Results of Operations: Comparison of First Half of 1994 to First Half of 1993 The following table highlights changes in significant components of the consolidated statements of earnings for the six-month periods ending July 3, 1994, and July 4, 1993:
(Dollars in thousands) July 3, July 4, Increase 1994 1993 (Decrease) Net sales $134,975 $123,052 $11,923 Gross earnings 29,760 25,331 4,429 Gross earnings as a percent of sales 22.05% 20.59% 1.46% Selling, general and administrative expenses 20,675 19,709 966 Selling, general and administrative expenses as a percent of sales 15.32% 16.02% (.70)% Operating earnings 9,085 5,622 3,463 Operating earnings as a percent of sales 6.73% 4.57% 2.16% Interest expense 416 461 (45) Earnings before income taxes and cumulative effect of changes in accounting principles 9,113 5,379 3,734 Income taxes 2,734 1,802 932 Income tax rate 30.00% 33.50% (3.50)%
Page 9 of 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) For the first half of 1994, net sales increased $11.9 million, or a 9.7% increase compared to the first half of 1993. Consistent with the second quarter of 1994, the significant 1994 year-to-date sales increases occurred in automotive and connector related products. These increases have more than offset the year-to-date sales decline experienced by our frequency controls and microelectronics business lines. Gross earnings have improved throughout the first half of the year, primarily due to the sales and production volume increases which have favorably affected operating efficiencies in all business units, excluding the microelectronics and frequency controls units. Selling, general and administrative expenses in dollars have increased for the first half of the year. The increase is primarily selling expenses associated with the increased sales volume. However, these expenses have decreased as a percent of sales, reflecting continuing efforts to control operating expenses. The tax rate has decreased from the 1993 effective year-to-date rate of 33.5% to 30.0%, primarily as a result of expected additional net operating loss utilization. 10 of 12 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 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders of CTS Corporation was held on April 29, 1994. Each of the five director-nominees identified below was re-elected to a one-year term as director of the Corporation with the following votes reported of the 4,150,454 eligible to vote at the meeting: Votes Broker Votes Cast Non- Director-Nominee Cast For Against Abstentions Votes Lawrence J. Ciancia 3,831,458 7,757 24,893 205,403 Pat J. Dorme 3,814,884 11,331 37,893 205,403 Gerald H. Frieling, Jr. 3,831,158 8,057 24,893 205,403 Andrew Lozyniak 3,803,439 11,076 49,593 205,403 Joseph P. Walker 3,831,318 7,897 24,893 205,403 Item 6. Exhibits and Reports on Form 8-K a. Exhibits None b. Forms 8-K None Page 11 of 12 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 /s/ Jeannine M. Davis /s/ Stanley J. Aris Jeannine M. Davis Stanley J. Aris Vice President, Secretary Vice President Finance and General Counsel and Chief Financial Officer Dated: August 9, 1994 Page 12 of 12 -----END PRIVACY-ENHANCED MESSAGE-----