-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PvJ8DNN3WDNkrCMA8wxnB1ro69/xjs8j4RCfstKTogEJ3zsGIaAU1gxOgXpGPqhk yvMLt5zVAMZS+0jDjWpvZQ== 0000026058-96-000003.txt : 19960904 0000026058-96-000003.hdr.sgml : 19960904 ACCESSION NUMBER: 0000026058-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960807 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: 96605219 BUSINESS ADDRESS: STREET 1: 905 W BLVD N CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192937511 10-Q 1 1996 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 June 30, 1996 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 June 30, 1996 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 6, 1996: 5,225,004 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 June 30, 1996, and July 2, 1995 3 Condensed Consolidated Balance Sheets - As of June 30, 1996, and December 31, 1995 4 Condensed Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 1996, and July 2, 1995 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 June 30, July 2, June 30, July 2, 1996 1995 1996 1995 Net sales $83,820 $76,413 $164,006 $152,391 Costs and expenses: Cost of goods sold 61,946 57,265 122,333 115,970 Selling, general and administrative expenses 11,028 10,098 21,980 20,171 Research and development expenses 2,628 2,027 4,888 4,350 Operating earnings 8,218 7,023 14,805 11,900 Other expenses (income): Interest expense 351 439 787 926 Other, net (610) (523) (1,465) (992) Total other (income) (259) (84) (678) (66) Earnings before income taxes 8,477 7,107 15,483 11,966 Income taxes 3,137 2,465 5,729 4,068 Net earnings $ 5,340 $ 4,642 $ 9,754 $ 7,898 Net earnings per share $ 1.03 $ .89 $ 1.86 $ 1.52 Cash dividends declared per share $ .18 $ .15 $ .33 $ .30 Average common and common equivalent shares outstanding 5,257,468 5,202,746 5,254,122 5,194,811 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)
June 30, December 31, 1996 1995* ASSETS (Unaudited) Current Assets Cash $32,747 $ 37,271 Accounts receivable, less allowances (1996--$800; 1995--$774) 49,471 41,737 Inventories--Note B 37,633 38,885 Other current assets 3,719 2,544 Deferred income taxes 5,676 5,676 Total current assets 129,246 126,113 Property, Plant and Equipment, less accumulated depreciation (1996--$133,640; 1995--$131,445) 53,638 50,696 Other Assets Goodwill, less accumulated amortization (1996--$8,024; 1995--$7,687) 4,298 4,603 Prepaid pension 47,382 44,739 Other 846 976 Total other assets 52,526 50,318 $235,410 $227,127 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes payable $ 28 $ 6,685 Current maturities of long-term obligations 2,204 2,211 Accounts payable 19,417 15,605 Accrued liabilities 29,446 26,461 Total current liabilities 51,095 50,962 Long-term Obligations 13,525 13,714 Deferred Income Taxes 11,909 11,909 Postretirement Benefits 4,304 4,289 Shareholders' Equity: Common stock-authorized 8,000,000 shares without par value; issued 5,807,031 shares 33,390 33,355 Retained earnings 134,577 126,546 Cumulative foreign translation adjustment (598) (645) 167,369 159,256 Less cost of common stock held in treasury: 1996--582,877 shares; 1995--589,702 shares 12,792 13,003 Total shareholders' equity 154,577 146,253 $235,410 $227,127 *The balance sheet at December 31, 1995, 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 June 30, July 2, 1996 1995 Cash flows from operating activities: Net earnings $ 9,754 $ 7,898 Depreciation and amortization 6,492 6,283 (Increase) decrease in: Accounts receivable (7,734) (10,691) Inventories 1,252 (989) Other current assets (1,175) (770) Prepaid pension expense (2,643) (2,732) Other 225 (816) Increase in: Accounts payable and accrued liabilities 6,639 4,075 Total adjustments 3,056 (5,640) Net cash provided by operating activities 12,810 2,258 Cash flows from investing activities: Proceeds from sale of property, plant and equipment 213 356 Capital expenditures (9,298) (4,989) Net cash used in investing activities (9,085) (4,633) Cash flows from financing activities: Payments of long-term obligations (197) (197) Decrease in notes payable (6,657) (1,903) Dividend payments (1,565) (1,555) Net cash used in financing activities (8,419) (3,655) Effect of exchange rate changes on cash 170 392 Net decrease in cash (4,524) (5,638) Cash at beginning of year 37,271 24,922 Cash at end of period $32,747 $19,284 Supplemental disclosures of cash flow information Net cash paid during the period for: Interest $ 799 $ 901 Income Taxes $ 2,664 $ 2,787 See notes to condensed consolidated financial statements.
Page 5 of 12 Part I. -- FINANCIAL INFORMATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) June 30, 1996 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 June 30, 1996, are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's 1995 Annual Report on Form 10-K. NOTE B--INVENTORIES The components of inventory consist of the following: (In thousands) June 30, December 31, 1996 1995 Finished goods $ 7,609 $ 7,445 Work-in-process 14,845 14,789 Raw material 15,179 16,651 $37,633 $38,885 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 June 30, 1996, to December 31, 1995 The following table highlights significant changes in balance sheet captions and ratios and other information related to liquidity and capital resources: (Dollars in thousands) June 30, December 31, Increase 1996 1995 (Decrease) Cash $32,747 $ 37,271 (4,524) Accounts receivable, net 49,471 41,737 7,734 Inventories, net 37,633 38,885 (1,252) Current assets 129,246 126,113 3,133 Accounts payable 19,417 15,605 3,812 Accrued liabilities 29,446 26,461 2,985 Current liabilities 51,095 50,962 133 Working capital 78,151 75,151 3,000 Current ratio 2.5 2.5 - Interest bearing debt 15,418 22,267 (6,849) Net tangible worth 150,279 141,650 8,629 Ratio of interest bearing debt to net tangible worth .10 .16 (.06) From December 31, 1995, to June 30, 1996, cash of CTS Corporation and its subsidiaries ("CTS" or "Company") decreased $4.5 million. The decrease in cash reflects a reduction in interest bearing debt and increased working capital, primarily due to increases in accounts receivable. The working capital increase is primarily a reflection of the increase in sales and production levels during the second quarter of 1996, compared to the last quarter of 1995. Capital expenditures were $9.3 million during the first six months of 1996, compared with $5.0 million for the same period a year earlier. These capital expenditures were primarily for increased manufacturing capacity, new products and manufacturing improvement programs. The $6.8 million decrease in interest bearing debt represented short-term debt payments funded primarily from positive cash flows from operations. 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 1996 to Second Quarter 1995 The following table highlights changes in significant components of the consolidated statements of earnings for the three-month periods ending June 30, 1996, and July 2, 1995: (Dollars in thousands) June 30, July 2, Increase 1996 1995 (Decrease) Net sales $83,820 $76,413 $7,407 Gross earnings 21,874 19,148 2,726 Gross earnings as a percent of sales 26.10% 25.06% 1.04% Selling, general and administrative expenses 11,028 10,098 930 Selling, general and administrative expenses as a percent of sales 13.16% 13.22% (.06%) Research and development expenses 2,628 2,027 601 Operating earnings 8,218 7,023 1,195 Operating earnings as a percent of sales 9.80% 9.19% .61% Interest expense 351 439 (88) Earnings before income taxes 8,477 7,107 1,370 Income taxes 3,137 2,465 672 Net earnings 5,340 4,642 698 Income tax rate 37.00% 35.00% 2.00% Net sales increased by $7.4 million, or 9.7% compared to the second quarter of 1995. The improvement in sales reflects continued demand for electronic components, particularly for automotive and commercial interconnect products in both domestic and European markets. 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 in dollars increased slightly. The Company continues to emphasize 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 $0.6 million, or 29.6%, primarily due to the continuation of new product development programs, particularly in the automotive product areas. The decrease in interest expense resulted primarily from reduced short-term debt. The estimated effective tax rate for 1996 of 37% approximated the actual 1995 tax rate of 38%. Material Changes in Results of Operations: Comparison of First Half of 1996 to First Half of 1995 The following table highlights changes in significant components of the consolidated statements of earnings for the six-month periods ending June 30, 1996, and July 2, 1995: (Dollars in thousands) June 30, July 2, Increase 1996 1995 (Decrease) Net sales $164,006 $152,391 $11,615 Gross earnings 41,673 36,421 5,252 Gross earnings as a percent of sales 25.41% 23.90% 1.51% Selling, general and administrative expenses 21,980 20,171 1,809 Selling, general and administrative expenses as a percent of sales 13.40% 13.24% .16% Research and development expenses 4,888 4,350 538 Operating earnings 14,805 11,900 2,905 Operating earnings as a percent of sales 9.03% 7.81% 1.22% Interest expense 787 926 (139) Earnings before income taxes 15,483 11,966 3,517 Income taxes 5,729 4,068 1,661 Net earnings 9,754 7,898 1,856 Income tax rate 37.00% 34.00% 3.00% Page 9 of 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) For the first half of 1996, net sales increased $11.6 million, or a 7.6% increase compared to the first half of 1995. Consistent with the second quarter of 1996, improvement was realized as a result of the continuing demand for automotive and commercial interconnect products. Gross earnings have improved over the first half of 1995, primarily as a result of the higher sales volume. Sales and production volume increases have favorably affected operating efficiencies. Selling, general and administrative expenses have remained relatively flat as a percent of sales, which reflects continuing efforts to control operating expenses. Research and development expenses have increased by $0.5 million, or 12.4%, during the first half of 1996, primarily due to the new product development programs, particularly in automotive products. The estimated effective tax rate for 1996 of 37% approximates the actual 1995 tax rate of 38%. 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 Shareholders of CTS Corporation was held on April 26, 1996. Each of the five director-nominees identified below was re-elected to a one-year term as director of the Corporation and the CTS Corporation 1996 Stock Option Plan was approved with the following votes reported of the 3,617,463 eligible to vote and represented at the meeting: Votes Votes Cast Broker Director-Nominee Cast For Against Abstentions Non-Votes Lawrence J. Ciancia 3,579,584 1,612 15,305 69,255 Patrick J. Dorme 3,577,300 3,896 15,305 69,255 Gerald H. Frieling, Jr. 3,579,584 1,612 15,305 69,255 Andrew Lozyniak 3,577,270 3,926 15,305 69,255 Joseph P. Walker 3,576,564 4,632 15,305 69,255 Stock Option Plan 3,542,740 11,011 4,051 107,954 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 6, 1996 Page 12 of 12 EX-27 2
5 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 32,747 0 50,271 800 37,633 129,246 187,278 133,640 235,410 51,095 0 0 0 33,390 121,187 235,410 164,006 164,006 122,333 149,201 (1,465) 0 787 15,483 5,729 9,754 0 0 0 9,754 1.86 1.86
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