-----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, TsfrjnDqRW6g+YGuBOc8TFaoqOyotH8pLvzMDOA/IcjFU7+6yOCDA/ojvYx4h4WN 2sD5MzqSRjvSOtOt5zkQeQ== 0000026058-96-000004.txt : 19961210 0000026058-96-000004.hdr.sgml : 19961210 ACCESSION NUMBER: 0000026058-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960929 FILED AS OF DATE: 19961112 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: 96657848 BUSINESS ADDRESS: STREET 1: 905 W BLVD N CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192937511 10-Q 1 1996 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 September 29, 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 September 29, 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 November 8, 1996: 5,227,756 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 Nine Months Ended September 29, 1996, and October 1, 1995 3 Condensed Consolidated Balance Sheets - As of September 29, 1996, and December 31, 1995 4 Condensed Consolidated Statements of Cash Flows - For the Nine Months Ended September 29, 1996, and October 1, 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 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 Nine Months Ended Sept. 29, Oct. 1, Sept. 29, Oct. 1, 1996 1995 1996 1995 Net sales $76,457 $73,890 $240,463 $226,281 Costs and expenses: Cost of goods sold 55,731 55,545 178,064 171,515 Selling, general and administrative expenses 9,987 9,973 31,967 30,144 Research and development expenses 2,892 1,956 7,780 6,306 Operating earnings 7,847 6,416 22,652 18,316 Other expenses (income): Interest expense 337 430 1,124 1,356 Other, net (521) (688) (1,986) (1,680) Total other (income) (184) (258) (862) (324) Earnings before income taxes 8,031 6,674 23,514 18,640 Income taxes 2,971 2,456 8,700 6,524 Net earnings $ 5,060 $ 4,218 $ 14,814 $ 12,116 Net earnings per share $ .96 $ .81 $ 2.82 $ 2.33 Cash dividends declared per share $ .18 $ .15 $ .48 $ .45 Average common and common equivalent shares outstanding 5,264,736 5,204,690 5,258,529 5,198,092 See notes to condensed consolidated financial statements. (/table) Page 3 of 12 Part I. -- FINANCIAL INFORMATION CTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars) September 29, December 31, 1996 1995* ASSETS (Unaudited) Current Assets Cash $ 36,646 $ 37,271 Accounts receivable, less allowances (1996--$657; 1995--$774) 48,780 41,737 Inventories--Note B 38,237 38,885 Other current assets 4,091 2,544 Deferred income taxes 5,676 5,676 Total current assets 133,430 126,113 Property, Plant and Equipment, less accumulated depreciation (1996--$134,981; 1995--$131,445) 53,996 50,696 Other Assets Goodwill, less accumulated amortization (1996--$8,194; 1995--$7,687) 4,148 4,603 Prepaid pension 48,636 44,739 Other 915 976 Total other assets 53,699 50,318 $241,125 $227,127 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Notes payable $ 0 $ 6,685 Current maturities of long-term obligations 2,203 2,211 Accounts payable 17,407 15,605 Accrued liabilities 32,952 26,461 Total current liabilities 52,562 50,962 Long-term Obligations 13,421 13,714 Deferred Income Taxes 11,909 11,909 Postretirement Benefits 4,311 4,289 Shareholders' Equity: Common stock-authorized 8,000,000 shares without par value; issued 5,807,031 shares 33,444 33,355 Retained earnings 138,697 126,546 Cumulative foreign translation adjustment (461) (645) 171,680 159,256 Less cost of common stock held in treasury: 1996--581,775 shares; 1995--589,702 shares 12,758 13,003 Total shareholders' equity 158,922 146,253 $241,125 $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)
Nine Months Ended September 29, October 1, 1996 1995 Cash flows from operating activities: Net earnings $14,814 $12,116 Depreciation and amortization 9,552 9,346 (Increase) decrease in: Accounts receivable (7,043) (8,274) Inventories 648 1,337 Other current assets (1,547) (907) Prepaid pension expense (3,897) (4,070) Other 294 1,212 Increase in: Accounts payable and accrued liabilities 8,135 5,670 Total adjustments 6,142 4,314 Net cash provided by operating activities 20,956 16,430 Cash flows from investing activities: Proceeds from sale of property, plant and equipment 724 272 Capital expenditures (13,043) (7,576) Net cash used in investing activities (12,319) (7,304) Cash flows from financing activities: Payments of long-term obligations (304) (197) Decrease in notes payable (6,685) (2,331) Dividend payments (2,505) (2,336) Net cash used in financing activities (9,494) (4,864) Effect of exchange rate changes on cash 232 460 Net increase (decrease) in cash (625) 4,722 Cash at beginning of year 37,271 24,922 Cash at end of period $36,646 $29,644 Supplemental disclosures of cash flow information Net cash paid during the period for: Interest $ 1,134 $ 1,678 Income Taxes $ 3,855 $ 4,202 See notes to condensed consolidated financial statements.
Page 5 of 12 Part I. -- FINANCIAL INFORMATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) September 29, 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 nine-month period ended September 29, 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) September 29, December 31, 1996 1995 Finished goods $ 7,504 $ 7,445 Work-in-process 15,917 14,789 Raw material 14,816 16,651 $38,237 $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 September 29, 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) September 29, December 31, Increase 1996 1995 (Decrease) Cash $36,646 $37,271 $ (625) Accounts receivable, net 48,780 41,737 7,043 Inventories, net 38,237 38,885 (648) Current assets 133,430 126,113 7,317 Accounts payable 17,407 15,605 1,802 Accrued liabilities 32,952 26,461 6,491 Current liabilities 52,562 50,962 1,600 Working capital 80,868 75,151 5,717 Current ratio 2.5 2.5 -- Interest bearing debt 15,392 22,267 (6,875) Net tangible worth 154,774 141,650 13,124 Ratio of interest bearing debt to net tangible worth .10 .16 (0.06) From December 31, 1995, to September 29, 1996, cash of CTS Corporation and its subsidiaries ("CTS" or "Company") decreased $0.6 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 third quarter of 1996, compared to the last quarter of 1995. Capital expenditures were $13.0 million for the first nine months of 1996, compared with $7.6 million for the same period a year earlier. Capital expenditures continued to relate to increased manufacturing capacity, new products and manufacturing improvement programs. The $6.9 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 Third Quarter 1996 to Third Quarter 1995 The following table highlights changes in significant components of the consolidated statements of earnings for the three-month periods ending September 29, 1996, and October 1, 1995: (Dollars in thousands) September 29, October 1, (Decrease) 1996 1995 Increase Net sales $76,457 $73,890 $2,567 Gross earnings 20,726 18,345 2,381 Gross earnings as a percent of sales 27.11% 24.83% 2.28% Selling, general and administrative expenses 9,987 9,973 14 Selling, general and administrative expenses as a percent of sales 13.06% 13.50% (0.44)% Research and development expenses 2,892 1,956 936 Operating earnings 7,847 6,416 1,431 Operating earnings as a percent of sales 10.26% 8.68% 1.58% Interest expense 337 430 (93) Earnings before income taxes 8,031 6,674 1,357 Income taxes 2,971 2,456 515 Net earnings 5,060 4,218 842 Income tax rate 37.00% 36.80% 0.20% Net sales increased by $2.6 million, or 3.5% from the third quarter of 1995. The improvement in sales reflects continued demand for electronic components, particularly for commercial interconnect and automotive 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 remained basically flat. The Company continues to emphasize cost control over all operating expenses. Research and development expenses increased by $0.9 million, or 47.9%, primarily due to the continuation of new product development programs, particularly in the automotive product area. Page 8 of 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) 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 Nine Months of 1996 to First Nine Months of 1995 The following table highlights changes in significant components of the consolidated statements of earnings for the nine-month periods ending September 29, 1996, and October 1, 1995: (Dollars in thousands) September 29, October 1, (Decrease) 1996 1995 Increase Net sales $240,463 $226,281 $14,182 Gross earnings 62,399 54,766 7,633 Gross earnings as a percent of sales 25.95% 24.20% 1.75% Selling, general and administrative expenses 31,967 30,144 1,823 Selling, general and administrative expenses as a percent of sales 13.29% 13.32% (0.03)% Research and development expenses 7,780 6,306 1,474 Operating earnings 22,652 18,316 4,336 Operating earnings as a percent of sales 9.42% 8.09% 1.33% Interest expense 1,124 1,356 (232) Earnings before income taxes 23,514 18,640 4,874 Income taxes 8,700 6,524 2,176 Net earnings 14,814 12,116 2,698 Income tax rate 37.00% 35.00% 2.00% For the first nine months of 1996, net sales increased $14.2 million, or 6.3% compared to the first nine months of 1995. Consistent with the third quarter of 1996, improvement was realized as a result of the continuing demand for commercial interconnect and automotive products in both domestic and European markets. Page 9 of 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Gross earnings have improved throughout 1996, primarily due to the sales and production volume increases which have favorably affected operating efficiencies, as well as continuing efforts to control manufacturing expenses. 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 $1.5 million, or 23.4%, during the first nine months of 1996, primarily due to the new product development programs, particularly in automotive products. The estimated effective tax rate for 1996 of 37% approximated the actual 1995 tax rate of 38%. Page 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 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: November 11, 1996 Page 12 of 12 EX-27 2
5 9-MOS DEC-31-1996 JAN-01-1996 SEP-29-1996 36,646 0 49,437 657 38,237 133,430 188,977 134,981 241,125 52,562 0 0 0 33,444 125,478 241,125 240,463 240,463 178,064 217,811 (1,986) 0 1,124 23,514 8,700 14,814 0 0 0 14,814 2.82 2.82
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