-----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, RvcvEvDTHRrSrKfI3gfRC4NeWOEdh96yLTiGKM3yUBgvNtNYZR18YnQkSWRP15yl W6srsBweKffcRoy7hhro8w== 0000026058-98-000008.txt : 19980514 0000026058-98-000008.hdr.sgml : 19980514 ACCESSION NUMBER: 0000026058-98-000008 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980329 FILED AS OF DATE: 19980513 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/A SEC ACT: SEC FILE NUMBER: 001-04639 FILM NUMBER: 98617300 BUSINESS ADDRESS: STREET 1: 905 W BLVD N CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 2192937511 MAIL ADDRESS: STREET 1: 905 W BLVD NORTH CITY: ELKHART STATE: IN ZIP: 46514 10-Q/A 1 1998 1ST Q 10 Q AMENDMENT TO INITIAL FILING OF CTS CORPORATION'S 1998 1ST QUARTER 10-Q THIS CORRECTS COST OF SALES NUMBER IN FINANCIAL DATA SCHEDULE. REMOVED THE WORD "BASICALLY" FROM THE FIRST LINE IN PARAGRAPH FOUR ON PAGE 11 OF 12. UNITED STATES 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 March 29, 1998 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 March 29, 1998 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 May 11, 1998: 14,011,466 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 Ended March 29, 1998, and March 30, 1997 3 Condensed Consolidated Balance Sheets - As of March 29, 1998, and December 31, 1997 4 Condensed Consolidated Statements of Cash Flows - For the Three Months Ended March 29, 1998, and March 30, 1997 5 Notes to Condensed Consolidated Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-11 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 March 29, March 30, 1998 1997 Net sales $126,052 $91,269 Costs and expenses: Cost of goods sold 93,996 65,978 Selling, general and administrative expenses 15,451 11,824 Research and development expenses 3,458 2,974 Operating earnings 13,147 10,493 Other expenses (income): Interest expense 1,098 263 Other (1,354) (808) Total other expenses (income) (256) (545) Earnings before income taxes 13,403 11,038 Income taxes 4,691 4,084 Net earnings $8,712 $ 6,954 Net earnings per share - Note E Basic $ 0.59 $ 0.45 Diluted $ 0.56 $ 0.44 Cash dividends declared per share $ 0.06 $ 0.06 Average common shares outstanding: Basic 14,866,979 15,675,239 Diluted 15,567,727 15,799,369 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) March 29, December 31, 1998 1997* ASSETS (Unaudited) Current Assets Cash $9,340 $ 39,847 Accounts receivable, less allowances (1998--$1,176; 1997--$1,074) 77,251 68,679 Inventories--Note B 62,077 56,007 Other current assets 6,265 5,327 Deferred income taxes 15,873 15,873 Total current assets 170,806 185,733 Property, Plant and Equipment, less accumulated depreciation (1998--$130,213; 1997--$130,907) 75,732 76,027 Other Assets Prepaid pension 63,471 61,738 Other 4,837 6,083 Total other assets 68,308 67,821 $314,846 $329,581 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Current maturities of long-term obligations $5,983 $5,465 Accounts payable 29,576 28,200 Accrued liabilities 60,481 58,687 Total current liabilities 96,040 92,352 Long-term Obligations 68,254 63,474 Deferred Income Taxes 21,950 21,950 Postretirement Benefits 4,304 4,309 Shareholders' Equity: Preferred stock-authorized 25,000,000 shares without par value; none issued Common stock-authorized 75,000,000 shares without par value; issued 24,170,949 shares 189,742 186,794 Additional contributed capital 14,141 15,822 Retained earnings 171,020 163,169 Cumulative translation adjustment 1,097 694 376,000 366,479 Less cost of common stock held in treasury: 1998--9,867,817 shares; 1997--8,873,056 shares 251,702 218,983 Total shareholders' equity 124,298 147,496 $314,846 $329,581 *The balance sheet at December 31, 1997, 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) Three Months Ended March 29, March 30, 1998 1997 Cash flows from operating activities: Net earnings $ 8,712 $ 6,954 Depreciation and amortization 4,477 3,768 (Increase) decrease in: Accounts receivable (8,572) (10,670) Inventories (6,070) 1,564 Other current assets (938) (1,713) Prepaid pension asset (1,733) (1,674) (Gain) loss on sale of fixed assets (1,254) 3 Other 925 40 Increase in: Accounts payable & accrued liabilities 1,863 9,794 Total adjustments (11,302) 1,112 Net cash (used in) provided by operating activities (2,590) 8,066 Cash flows from investing activities: Proceeds from sale of property, plant and equipment 2,227 6 Capital expenditures (4,864) 4,833) Net cash used in investing activities (2,637) (4,827) Cash flows from financing activities: Proceeds from issuance of long-term obligations 8,000 Dividend payments (911) (940) Purchases of treasury stock (32,926) Other 392 (150) Net cash used in financing activities (25,445) (1,090) Effect of exchange rate changes on cash 165 (550) Net (decrease) increase in cash (30,507) 1,599 Cash at beginning of year 39,847 44,957 Cash at end of period $9,340 $46,556 Supplemental cash flow information Cash paid during the period for: Interest $ 1,044 $ 278 Income Taxes--Net $ 3,769 $ 852 See notes to condensed consolidated financial statements. Page 5 of 12 Part I. -- FINANCIAL INFORMATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) March 29, 1998 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 three-month period ended March 29, 1998, are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's 1997 Annual Report on Form 10-K. NOTE B--INVENTORIES The components of inventory consist of the following: (In thousands) March 29, December 31, 1998 1997 Finished goods $ 8,995 $ 8,061 Work-in-proces 30,117 26,036 Raw material 22,965 21,910 $62,077 $56,007 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 could ultimately result from such litigation or administrative proceedings will not materially affect the consolidated financial position of the Company or the results of operations. Note D - SUBSEQUENT EVENTS During the second quarter of 1998, the Company announced actions as part of its ongoing integration plans for the newly acquired DCA business units including the closure of the DCA Greenwich, Connecticut corporate office, retirement/termination of certain officers and employees, including repurchase of 226,300 shares of CTS common stock, and the sale of the Waring Products Division of DCA to Conair Corporation. The Company expects to continue its integration efforts throughout fiscal 1998 and does not expect the finalization of the integration will have any significant effect on the consolidated financial position or results of operations of the Company. Page 6 of 12 Note E - Earnings Per Share FASB Statement No. 128, "Earnings per Share," requires companies to provide a reconciliation of the numerator and denominator of the basic and diluted EPS computations. The calculation below provides net earnings, average common shares outstanding and the resultant earnings per share for both basic and the diluted EPS for the first quarter of 1998 and 1997. The other dilutive securities of 175,500 at March 29, 1998, consisted of shares of CTS common stock to be issued to DCA shareholders who have not yet tendered their DCA shares. Earnings Shares Per Share (Numerator) (Denominator) Amount First Quarter 1998: Basic EPS $8,712 14,866,979 $0.59 Effect of Dilutive Securities: Stock options 525,248 Other 175,500 Diluted EPS $8,712 15,567,727 $0.56 First Quarter 1997: Basic EPS $6,954 15,675,239 $0.45 Effect of Dilutive Securities: Stock options 123,530 Other 600 Diluted EPS $6,954 15,799,369 $0.44 Page 7 of 12 NOTE F - COMPREHENSIVE EARNINGS Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This Statement requires that all items recognized under accounting standards as components of comprehensive earnings be reported in an annual financial statement that is displayed with the same prominence as other annual financial statements. This statement also requires that an entity classify items of other comprehensive earnings by their nature in an annual financial statement. Other comprehensive earnings include foreign currency translation adjustments. The Company's comprehensive earnings for the first quarter of 1998 and the comparable period last year were as follows: Three Months Ended 1998 1997 (In thousands of dollars) Net earnings $8,712 $6,954 Other comprehensive earnings (loss)- translation adjustments 403 (1,024) Comprehensive earnings $9,115 $5,930 Page 8 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 March 29, 1998, to December 31, 1997 The following table highlights significant changes in balance sheet items and ratios and other information related to liquidity and capital resources: (Dollars in thousands) March 29, December 31, Increase 1998 1997 (Decrease) Cash $9,340 $ 39,847 $ (30,507) Accounts receivable, net 77,251 68,679 8,572 Inventories, net 62,077 56,007 6,070 Current assets 170,806 185,733 (14,927) Accounts payable 29,576 28,200 1,376 Current liabilities 96,040 92,352 3,688 Working capital 74,766 93,381 (18,615) Current ratio 1.78 2.01 (.23) Interest bearing debt 69,210 61,206 8,004 Net tangible worth 123,165 146,320 (23,155) Ratio of interest bearing debt to net tangible worth .56 .42 .14 From December 31, 1997, to March 29, 1998, cash decreased by $30.5 million and working capital of CTS Corporation and its subsidiaries ("CTS" or "Company") decreased $18.6 million. These decreases primarily reflect the implementation of the Company's Stock Repurchase Plan, which included the purchase of 0.7 million of CTS common shares from WHX Corporation on March 5, 1998, and 0.3 million shares in the open market and other transactions. The impact of these stock purchases on working capital was partially offset by Accounts Receivable and Inventory increases due to the overall increase in business activity. The current ratio decreased slightly due to the relative decrease in current assets, primarily cash, due to the level of common stock repurchases. The ratio of interest bearing debt to net tangible worth increased due to an $8.0 million increase in revolving debt and a decrease of $23.2 million in net tangible worth, relating primarily to the Stock Repurchase activity. Capital expenditures were $4.9 million during the first quarter, compared with $4.8 million for the same period a year earlier. These capital expenditures were primarily for increased manufacturing capacity, manufacturing improvement programs and new products. Page 9 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 First Quarter 1998 to First Quarter 1997 The following table highlights changes in significant components of the consolidated statements of earnings for the three-month periods ending March 29, 1998, and March 30, 1997: (Dollars in thousands) March 29, March 30, Increase 1998 1997 (Decrease) Net sales $126,052 $91,269 $34,783 Gross earnings 32,056 25,291 6,765 Gross earnings as a percent of sales 25.43% 27.71% (2.28%) Selling, general and administrative expenses 15,451 11,824 3,627 Selling, general and administrative expenses as a percent of sales 12.26% 12.96% (0.70%) Research and development expenses 3,458 2,974 484 Operating earnings 13,147 10,493 2,654 Operating earnings as a percent of sales 10.43% 11.50% (1.07%) Interest expense 1,098 263 835 Earnings before income taxes 13,403 11,038 2,365 Income taxes 4,691 4,084 607 Income tax rate 35.00% 37.00% (2.00%) Net sales increased by $34.8 million, or 38.1% from the first quarter of 1997. Sales increases occurred principally as a result of the inclusion of Dynamics Corporation of America (DCA) and strength in our core businesses, partially offset by the 1997 sale of our domestic, military and aerospace connector business and the decline in the disk drive industry. As a percent of total sales, sales of electronic components, electronic component assemblies and other products in the first quarter of 1998 were 50%, 25% and 25%, respectively. As a percentage of total sales, the first quarter of 1997 sales of electronic components, electronic component assemblies and other products were 61%, 39% and 0%, respectively. The increase in other products relates to the inclusion of DCA operations in 1998. Sales of electronic component assemblies decreased in 1998 due primarily to the 1997 sale of our domestic military and aerospace connector business and the decline in the disk drive industry. Gross earnings as a percent of sales decreased primarily due to the inclusion of lower margin DCA businesses. Margins of CTS core business increased as a percent of sales from 27.7% to 29.5%. Page 10 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 First Quarter 1998 to First Quarter 1997 (Continued) Selling, general and administrative expenses in dollars increased as a result of the inclusion of acquired businesses, however decreased as a percentage of sales due to continued expense controls. Research and development expenses increased 16.3% as the Company continued investment efforts in new product development and improvements. The increase in operating earnings, in terms of dollars, is principally due to the incremental margin impact on higher sales volume and continued control of manufacturing and operating expenses. During the first quarter, the Company completed the consolidation, closure and sale of its Bentonville facility. This resulted in a pretax gain on fixed assets of $1.2 million partially offset by estimated consolidation expenses. The effective tax rate decreased by 2% points primarily due to higher earnings in the lower-tax jurisdictions. 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 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: May 12, 1998 Page 12 of 12 EX-27 2
5 3-MOS DEC-31-1998 JAN-01-1998 MAR-29-1998 9,340 0 77,251 1,176 62,077 170,806 205,945 130,213 314,846 96,040 0 0 0 189,742 (65,444) 314,846 126,052 126,052 93,996 112,905 (1,354) 0 1,098 13,403 4,691 8,712 0 0 0 8,712 0.59 0.56
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