-----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, LpPdnIm1L9qwKMzsKp6JzOnfrPPXKRLHBc1q83W2alUI5pKDZy25914rh5S1scOG OqBB7yOrcfIRZHyEsZpZhg== 0000026058-95-000016.txt : 19951119 0000026058-95-000016.hdr.sgml : 19951119 ACCESSION NUMBER: 0000026058-95-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951001 FILED AS OF DATE: 19951113 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: 95590340 BUSINESS ADDRESS: STREET 1: 905 W BLVD N CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192937511 10-Q 1 1995 3RD 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 October 1, 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 October 1, 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 November 9, 1995: 5,207,329 Page 1 of 13 CTS CORPORATION AND SUBSIDIARIES INDEX Page No. PART I -- FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Earnings - For the Nine Months Ended October 1, 1995, and October 2, 1994 3 Condensed Consolidated Balance Sheets - As of October 1, 1995, and December 31, 1994 4 Condensed Consolidated Statements of Cash Flows - For the Nine Months Ended October 1, 1995, and October 2, 1994 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-11 PART II -- OTHER INFORMATION Item 1. Legal Proceedings 12 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 Page 2 of 13 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 Nine Months Ended Oct. 1, Oct. 2, Oct. 1, Oct. 2, 1995 1994 1995 1994 Net sales $73,890 $65,950 $226,281 $200,925 Costs and expenses: Cost of goods sold 55,545 50,850 171,515 153,076 Selling, general and administrative expenses 9,973 9,299 30,144 29,974 Research and development expenses 1,956 1,433 6,306 4,422 Operating earnings 6,416 4,368 18,316 13,453 Other expenses (income): Interest expense 430 90 1,356 506 Other (688) (447) (1,680) (891) Total other expenses (income) (258) (357) (324) (385) Earnings before income taxes 6,674 4,725 18,640 13,838 Income taxes 2,456 1,694 6,524 4,428 Net earnings $ 4,218 $ 3,031 $ 12,116 $ 9,410 Net earnings per share $ .81 $ .59 $ 2.33 $ 1.82 Cash dividends per share $ .15 $ .10 $ .45 $ .30 Average net shares outstanding 5,204,690 5,174,075 5,198,092 5,167,956 See notes to condensed consolidated financial statements.
Page 3 of 13 Part I. -- FINANCIAL INFORMATION CTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars) October 1, December 31, 1995 1994* ASSETS (Unaudited) Current Assets Cash $ 29,644 $ 24,922 Accounts receivable, less allowances (1995--$1,064; 1994--$869) 43,303 35,029 Inventories, net--Note C 40,119 41,456 Other current assets 3,939 3,032 Deferred income taxes 6,228 6,228 Total current assets 123,233 110,667 Property, Plant and Equipment, less accumulated depreciation (1995--$136,825; 1994--$139,649) 49,421 50,777 Other Assets Goodwill, less accumulated amortization (1995--$7,518; 1994--$7,010) 4,766 5,221 Prepaid pension 43,478 39,408 Other 718 753 Total other assets 48,962 45,382 $221,616 $206,826 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable $ 5,105 $ 7,436 Current maturities of long-term obligations 108 304 Accounts payable 15,940 12,768 Accrued liabilities 26,787 24,284 Total current liabilities 47,940 44,792 Long-term Obligations 15,602 15,595 Deferred Income Taxes 11,704 9,222 Postretirement Benefits 3,986 5,362 Stockholders' Equity: Common stock-authorized 8,000,000 shares without par value; issued 5,807,031 shares 33,560 33,870 Retained earnings 122,281 112,506 Cumulative translation adjustment (154) (354) 155,687 146,022 Less cost of common stock held in treasury: 1995--599,702 shares; 1994--628,427 shares 13,303 14,167 Total stockholders' equity 142,384 131,855 $221,616 $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 13 Part I. -- FINANCIAL INFORMATION CTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (In thousands of dollars) Nine Months Ended October 1, October 2, 1995 1994 Cash flows from operating activities: Net earnings $12,116 $ 9,410 Depreciation and amortization 9,346 8,845 (Increase) decrease in: Accounts receivable (8,274) (6,561) Inventories 1,337 (4,229) Other current assets (907) (1,391) Prepaid pension expense (4,070) (4,297) Other 1,212 (126) Increase in: Accounts payable and accrued liabilities 5,670 8,193 Total adjustments 4,314 434 Net cash provided by operating activities 16,430 9,844 Cash flows from investing activities: Proceeds from sale of property, plant and equipment 272 317 Capital expenditures (7,576) (7,682) Net cash used in investing activities (7,304) (7,365) Cash flows from financing activities: Payments of long-term obligations (197) (4,296) Decrease in notes payable (2,331) (6,853) Dividend payments (2,336) (1,552) Net cash used in financing activities (4,864) (12,701) Effect of exchange rate changes on cash 460 703 Net increase (decrease) in cash 4,722 (9,519) Cash at beginning of year 24,922 23,534 Cash at end of period $29,644 $14,015 Supplemental disclosures of cash flow information Net cash paid during the period for: Interest $ 1,678 $ 627 Income Taxes $ 4,202 $ 2,447 See notes to condensed consolidated financial statements. Page 5 of 13 Part I. -- FINANCIAL INFORMATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) October 1, 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 nine-month period ended October 1, 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) October 1, December 31, 1995 1994 Finished goods $ 6,785 $ 5,725 Work-in-process 15,593 16,531 Raw material 17,741 19,200 $40,119 $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 13 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 October 1, 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) October 1, December 31, Increase 1995 1994 (Decrease) Cash $29,644 $24,922 $ 4,722 Accounts receivable, net 43,303 35,029 8,274 Inventories, net 40,119 41,456 (1,337) Current assets 123,233 110,667 12,566 Notes payable 5,105 7,436 (2,331) Accounts payable 15,940 12,768 3,172 Accrued liabilities 26,787 24,284 2,503 Current liabilities 47,940 44,792 3,148 Working capital 75,293 65,875 9,418 Current ratio 2.6 2.5 .1 Interest bearing debt 20,799 23,318 (2,519) Net tangible worth 137,618 126,634 10,984 Ratio of interest bearing debt to net tangible worth .15 .18 (0.03) From December 31, 1994, to October 1, 1995, cash of CTS Corporation and its subsidiaries ("CTS" or "Company") increased $4.7 million. In addition to the significant earnings and non-cash adjustments, the increase in cash primarily reflects increases in accounts payable and accrued liabilities, and a decrease in inventory. The working capital improvement of $4.7 million, excluding cash, reflects an increase in accounts receivable of $8.3 million and a decrease in notes payable of $2.3 million, offset by increases in accounts payable of $3.2 million and accrued liabilities of $2.5 million. These increases are primarily a reflection of the increase in sales and production levels during the third quarter of 1995, compared to the last quarter of 1994. Capital expenditures were $7.6 million for the first nine months of 1995, compared with $7.7 million for the same period a year earlier. Capital expenditures continued to relate to new product, product variation and manufacturing improvement programs. The $2.5 million decrease in interest bearing debt resulted primarily from discretionary debt repayments. Page 7 of 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Material Changes in Results of Operations: Comparison of Third Quarter 1995 to Third Quarter 1994 The following table highlights changes in significant components of the consolidated statements of earnings for the three-month periods ending October 1, 1995, and October 2, 1994: (Dollars in thousands) October 1, October 2, (Decrease) 1995 1994 Increase Net sales $73,890 $65,950 $7,940 Gross earnings 18,345 15,100 3,245 Gross earnings as a percent of sales 24.83% 22.90% 1.93% Selling, general and administrative expenses 9,973 9,299 674 Selling, general and administrative expenses as a percent of sales 13.50% 14.10% (0.60) Research and development expenses 1,956 1,433 523 Operating earnings 6,416 4,368 2,048 Operating earnings as a percent of sales 8.68% 6.62% 2.06% Interest expense 430 90 340 Earnings before income taxes 6,674 4,725 1,949 Income taxes 2,456 1,694 762 Income tax rate 36.80% 35.85% 0.95% Net sales increased by $7.9 million, or 12.0% from the third quarter of 1994. Sales increases occurred principally in the automotive, resistor network and microelectronics related products. The major contributing factors to the automotive sales increase were improved sales of existing products and additional market penetration. The resistor network increase reflects market share gain resulting from improved customer responses and increased sales of new products. The microelectronics increase primarily results from sales of 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. Page 8 of 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Selling, general and administrative expenses in dollars increased slightly as a result of the increased sales levels. As a percent of sales, these expenses remained basically flat reflecting the Company's continued cost control emphasis. 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 network product areas. The increase in interest expense, similar to the first two quarters of 1995, relates to a $15 million term loan established in December 1994. The increase in the effective tax rate is a result of the Company's ability to recognize and utilize, in 1994, net operating losses and tax credits in certain jurisdictions for which valuation allowances had previously been provided. The majority of these net operating losses and tax credits were utilized in 1994 such that the impact on the 1995 effective tax rate is not as significant. Also contributing to the increased effective tax rate, are higher Singapore losses for which there is no corresponding tax benefit and higher taxable income in relatively high rate jurisdictions, such as Canada and the United Kingdom. Page 9 of 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Material Changes in Results of Operations: Comparison of First Nine Months of 1995 to First Nine Months of 1994 The following table highlights changes in significant components of the consolidated statements of earnings for the nine-month periods ending October 1, 1995, and October 2, 1994: (Dollars in thousands) October 1, October 2, (Decrease) 1995 1994 Increase Net sales $226,281 $200,925 $25,356 Gross earnings 54,766 47,849 6,917 Gross earnings as a percent of sales 24.20% 23.81% 0.39% Selling, general and administrative expenses 30,144 29,974 170 Selling, general and administrative expenses as a percent of sales 13.32% 14.92% (1.60)% Research and development expenses 6,306 4,422 1,884 Operating earnings 18,316 13,453 4,863 Operating earnings as a percent of sales 8.09% 6.70% 1.39% Interest expense 1,356 506 850 Earnings before income taxes 18,640 13,838 4,802 Income taxes 6,524 4,428 2,096 Income tax rate 35.00% 32.00% 3.00% For the first nine months of 1995, net sales increased $25.4 million, or 12.6% compared to the first nine months of 1994. Consistent with the third quarter of 1995, the significant 1995 year-to-date sales increases occurred in the microelectronics, automotive and resistor network related products. Gross earnings have improved throughout 1995, primarily due to the sales and production volume increases which have favorably affected operating efficiencies, as well as continuing efforts to control manufacturing expenses. Page 10 of 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Selling, general and administrative expenses in dollars remained relatively flat compared to the first nine months of 1994. However, these expenses in total have decreased as a percent of sales, which reflects continuing efforts to control operating expenses. Research and development expenses have increased by $1.9 million, primarily due to the new product development programs, particularly in automotive products. Interest expense has increased by $0.9 million as a result of the $15 million term loan finalized in December 1994. The increase in the effective tax rate is a result of the Company's ability to recognize and utilize, in 1994, net operating losses and tax credits in certain jurisdictions for which valuation allowances had previously been provided. The majority of these net operating losses and tax credits were utilized in 1994 such that the impact on the 1995 effective tax rate is not as significant. Also contributing to the increased effective tax rate, are higher Singapore losses for which there is no corresponding tax benefit and higher taxable income in relatively high rate jurisdictions, such as Canada and the United Kingdom. Page 11 of 13 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 None Page 12 of 13 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: November 13, 1995 Page 13 of 13 EX-27 2
5 9-MOS DEC-31-1995 JAN-01-1995 OCT-01-1995 29,644 0 44,367 1,064 40,119 123,233 186,246 136,825 221,616 47,940 0 33,560 0 0 108,824 221,616 226,281 226,281 171,515 207,965 (1,680) 0 1,356 18,640 6,524 12,116 0 0 0 12,116 2.33 2.33
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