-----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, qhWLpr03ZMLCjqXO2ENWLLvfyUFc5qPqj+xzRrz5aXPYAKnZ5CHCZYHxUmPYWkkl XtTm/XyKLttZN667IwKN9Q== 0000026058-95-000015.txt : 19950814 0000026058-95-000015.hdr.sgml : 19950814 ACCESSION NUMBER: 0000026058-95-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950702 FILED AS OF DATE: 19950811 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CTS CORP CENTRAL INDEX KEY: 0000026058 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [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: 95561541 BUSINESS ADDRESS: STREET 1: 905 W BLVD N CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192937511 10-Q 1 1995 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 2, 1995 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 2, 1995 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 10, 1995: 5,204,254 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 Three Months and Six Months ended July 2, 1995, and July 3, 1994 3 Condensed Consolidated Balance Sheets - As of July 2, 1995, and December 31, 1994 4 Condensed Consolidated Statements of Cash Flows - For the Six Months Ended July 2, 1995, and July 3, 1994 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 2, July 3, July 2, July 3, 1995 1994 1995 1994 Net sales $76,413 $70,618 $152,391 $134,975 Costs and expenses: Cost of goods sold 57,265 53,466 115,970 102,226 Selling, general and administrative expenses 10,098 10,108 20,171 20,675 Research and development expenses 2,027 1,519 4,350 2,989 Operating earnings 7,023 5,525 11,900 9,085 Other expenses (income): Interest expense 439 189 926 416 Other (523) (220) (992) (444) Total other expenses (income) (84) (31) (66) (28) Earnings before income taxes 7,107 5,556 11,966 9,113 Income taxes 2,465 1,667 4,068 2,734 Net earnings $ 4,642 $ 3,889 $ 7,898 $ 6,379 Net earnings per share $ .89 $ .75 $ 1.52 $ 1.23 Cash dividends per share $ .15 $ .10 $ .30 $ .20 Average net shares outstanding 5,202,746 5,169,970 5,194,811 5,164,930 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 2, December 31, 1995 1994* ASSETS (Unaudited) Current Assets Cash $19,284 $ 24,922 Accounts receivable, less allowances (1995--$1,048; 1994--$869) 45,720 35,029 Inventories--Note C 42,445 41,456 Other current assets 3,802 3,032 Deferred income taxes 6,228 6,228 Total current assets 117,479 110,667 Property, Plant and Equipment, less accumulated depreciation (1995--$135,456; 1994--$139,649) 49,705 50,777 Other Assets Goodwill, less accumulated amortization (1995--$7,349; 1994--$7,010) 4,923 5,221 Prepaid pension 42,140 39,408 Other 692 753 Total other assets 47,755 45,382 $214,939 $206,826 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable $ 5,533 $ 7,436 Current maturities of long-term obligations 108 304 Accounts payable 16,056 12,768 Accrued liabilities 25,076 24,284 Total current liabilities 46,773 44,792 Long-term Obligations 15,606 15,595 Deferred Income Taxes 9,222 9,222 Postretirement Benefits 4,436 5,362 Stockholders' Equity: Common stock-authorized 8,000,000 shares without par value; issued 5,807,031 shares 33,526 33,870 Retained earnings 118,844 112,506 Cumulative foreign translation adjustment (63) (354) 152,307 146,022 Less cost of common stock held in treasury: 1995--603,077 shares; 1994--628,427 shares 13,405 14,167 Total stockholders' equity 138,902 131,855 $214,939 $206,826 *The balance sheet at December 31, 1994, 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 2, July 3, 1995 1994 Cash flows from operating activities: Net earnings $ 7,898 $ 6,379 Depreciation and amortization 6,283 5,946 (Increase) decrease in: Accounts receivable (10,691) (7,973) Inventories (989) (3,586) Other current assets (770) (740) Prepaid pension expense (2,732) (2,862) Other (816) 21 Increase in: Accounts payable and accrued liabilities 4,075 9,460 Total adjustments (5,640) 266 Net cash provided by operating activities 2,258 6,645 Cash flows from investing activities: Proceeds from sale of property, plant and equipment 356 543 Capital expenditures (4,989) (5,815) Net cash used in investing activities (4,633) (5,272) Cash flows from financing activities: Payments of long-term obligations (197) (3,215) Decrease in notes payable (1,903) (9,761) Dividend payments (1,555) (1,034) Net cash used in financing activities (3,655) (14,010) Effect of exchange rate changes on cash 392 256 Net decrease in cash (5,638) (12,381) Cash at beginning of year 24,922 23,534 Cash at end of period $19,284 $11,153 Supplemental disclosures of cash flow information Net cash paid during the period for: Interest $ 901 $ 415 Income Taxes $ 2,787 $ 1,307 See notes to condensed consolidated financial statements.
Page 5 of 12 Part I. -- FINANCIAL INFORMATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) July 2, 1995 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 2, 1995, are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's 1994 Annual Report on Form 10-K. NOTE B--RECLASSIFICATIONS Certain reclassifications have been made for all years presented in the financial statements to conform to the classifications adopted in 1995. NOTE C--INVENTORIES The components of inventory consist of the following: (In thousands) July 2, December 31, 1995 1994 Finished goods $ 7,078 $ 5,725 Work-in-process 16,505 16,531 Raw material 18,862 19,200 $42,445 $41,456 NOTE D--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 2, 1995, to December 31, 1994 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 2, December 31, Increase 1995 1994 (Decrease) Cash $19,284 $ 24,922 (5,638) Accounts receivable, net 45,720 35,029 10,691 Inventories, net 42,445 41,456 989 Current assets 117,479 110,667 6,812 Accounts payable 16,056 12,768 3,288 Current liabilities 46,773 44,792 1,981 Working capital 70,706 65,875 4,831 Current ratio 2.5 2.5 - Interest bearing debt 21,231 23,318 (2,087) Net tangible worth 133,979 126,634 7,345 Ratio of interest bearing debt to net tangible worth .16 .18 (.02) From December 31, 1994, to July 2, 1995, cash of CTS Corporation and its subsidiaries ("CTS" or "Company") decreased $5.6 million. The decrease in cash primarily reflects increased working capital and a reduction in interest bearing debt. The change in working capital, excluding cash and current debt, was an increase of $8.4 million. The $8.4 million primarily reflects increases in accounts receivable of $10.7 million and inventory of $1.0 million, offset by an increase in accounts payable of $3.3 million. These increases are primarily a reflection of the increase in sales and production levels during the second quarter of 1995, compared to the last quarter of 1994. Capital expenditures were $5.0 million during the first six months of 1995, compared with $5.8 million for the same period a year earlier. These capital expenditures were primarily for new products and manufacturing improvement programs. The $2.1 million decrease in interest bearing debt resulted primarily from discretionary debt repayments. Page 7 of 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Material Changes in Results of Operations: Comparison of Second Quarter 1995 to Second Quarter 1994 The following table highlights changes in significant components of the consolidated statements of earnings for the three-month periods ending July 2, 1995, and July 3, 1994: (Dollars in thousands) July 2, July 3, Increase 1995 1994 (Decrease) Net sales $76,413 $70,618 $5,795 Gross earnings 17,121 15,633 1,488 Gross earnings as a percent of sales 22.41% 22.14% .27% Selling, general and administrative expenses 10,098 10,108 (10) Selling, general and administrative expenses as a percent of sales 13.22% 14.31% (1.09%) Research and development expenses 2,027 1,519 508 Operating earnings 7,023 5,525 1,498 Operating earnings as a percent of sales 9.19% 7.82% 1.37% Interest expense 439 189 250 Earnings before income taxes 7,107 5,556 1,551 Income taxes 2,465 1,667 798 Income tax rate 35.00% 30.00% 5.00% Net sales increased by $5.8 million, or 8.2% compared to the second quarter of 1994, generally as a result of the continued demand for electronic components. In addition, 1995 sales include the Light Emitting Diode (LED) based Fiber Optic Data Link (ODL) products, which were acquired in late 1994. Gross earnings improved primarily due to the sales and production volume increases, as well as continuing efforts to control manufacturing expenses. Selling, general and administrative expenses remained relatively flat with a minor increase in selling expense, specifically commissions, 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. Page 8 of 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Research and development expenses increased by $0.5 million, primarily due to the continuation of new product development programs, particularly in the automotive and resistor networks product areas. The increase in interest expense, similar to the first quarter, is related to the $15 million term loan to finance acquisitions at a fixed interest rate of approximately 8.4%, in December 1994. The tax rate for the second quarter of 1995 is five percentage points higher than the second quarter 1994 tax rate and is consistent with the 1994 full-year annual effective rate of 35.0%. This primarily results from increased losses in Singapore with no corresponding tax benefits, combined with increased income in Canada and the United Kingdom with relatively high tax rates. Material Changes in Results of Operations: Comparison of First Half of 1995 to First Half of 1994 The following table highlights changes in significant components of the consolidated statements of earnings for the six-month periods ending July 2, 1995, and July 3, 1994: (Dollars in thousands) July 2, July 3, Increase 1995 1994 (Decrease) Net sales $152,391 $134,975 $17,416 Gross earnings 32,071 29,760 2,311 Gross earnings as a percent of sales 21.05% 22.05% (1.00)% Selling, general and administrative expenses 20,171 20,675 (504) Selling, general and administrative expenses as a percent of sales 13.24% 15.32% (2.08)% Research and development expenses 4,350 2,989 1,361 Operating earnings 11,900 9,085 2,815 Operating earnings as a percent of sales 7.81% 6.73% 1.08% Interest expense 926 416 510 Earnings before income taxes 11,966 9,113 2,853 Income taxes 4,068 2,734 1,334 Income tax rate 34.00% 30.00% 4.00% Page 9 of 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) For the first half of 1995, net sales increased $17.4 million, or a 12.9% increase compared to the first half of 1994. Consistent with the second quarter of 1995, overall improvement was realized as a result of the continued demand for electronic components. In addition, sales increased as a result of the late 1994 acquisition of the Light Emitting Diode (LED) based Fiber Optic Data Link (ODL) products. Gross earnings have improved over the first half of 1994, primarily as a result of the higher sales volume. Sales and production volume increases have favorably affected operating efficiencies. The first half earnings were unfavorably impacted by the $1.9 million lower of cost or market reserve established in the first quarter for our military products relative to a fixed price contract. Selling, general and administrative expenses in dollars have decreased for the first half of the year, reflecting continuing efforts to control operating expenses. Research and development expenses have increased by $1.4 million during the first half of 1995, primarily due to the new product development programs, particularly in automotive products. Interest expense has increased by $0.5 million as a result of the $15 million term loan finalized in December 1994. The tax rate has increased from the 1994 June year-to-date effective rate of 30.0% to 34.0%. This primarily results from increased losses in Singapore with no corresponding tax benefits, combined with increased income in Canada and the United Kingdom with relatively high tax rates. 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 28, 1995. 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 4,173,854 eligible to vote at the meeting: Votes Votes Cast Broker Director-Nominee Cast For Against Abstentions Non-Votes Lawrence J. Ciancia 4,002,917 5,864 15,000 60,107 Patrick J. Dorme 4,002,298 6,483 15,000 60,107 Gerald H. Frieling, Jr. 4,001,917 6,864 15,000 60,107 Andrew Lozyniak 4,001,143 7,638 15,000 60,107 Joseph P. Walker 4,001,717 7,064 15,000 60,107 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 10, 1995 Page 12 of 12 EX-27 2
5 6-MOS DEC-31-1995 JAN-1-1995 JUL-2-1995 19,284 0 46,768 1,048 42,445 117,479 185,161 135,456 214,939 46,773 0 33,526 0 0 105,376 214,939 152,391 152,391 115,970 140,491 (992) 0 926 11,966 4,068 7,898 0 0 0 7,898 1.52 1.52
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