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CTS Announces Third Quarter 2017 Results

CTS | October 26, 2017

CTS Announces Third Quarter 2017 Results

Robust sales and earnings growth

CTS Corporation (NYSE:CTS) today announced third quarter 2017 results.

Sales were $106.2 million, up 6.6% year-over-year. Sales to automotive customers increased 5.8%, and sales of electronic components increased 7.9%. The Noliac acquisition, completed in May 2017, added $2.6 million of sales in the third quarter of 2017.
Net earnings were $9.6 million or $0.29 per diluted share compared to $3.7 million or $0.11 per diluted share in the third quarter of 2016.
Adjusted EPS was $0.31 per diluted share, up 11% from $0.28 in the third quarter of 2016.
Total Booked Business was $1.698 billion at the end of the third quarter of 2017, an increase of $156 million from the second quarter of 2017.

“We made significant progress in the third quarter,” said Kieran O’Sullivan, CEO of CTS Corporation. “We delivered strong sales growth, increased our total booked business substantially, and continued to improve gross margins.”

2017 Guidance

Management narrowed its guidance range for full year 2017. Sales are expected to be in the range of $415 to $420 million. Adjusted earnings per diluted share are expected to be in the range of $1.13 to $1.18.

Conference Call

As previously announced, the Company has scheduled a conference call at 11:00 a.m. (EDT) today to discuss the third quarter financial results. The dial-in number is 866-564-7440 (719-955-9038, if calling from outside the U.S.). The passcode is 984237. There will be a replay of the conference call from 2:00 p.m. (EDT) today through 2:00 p.m. (EDT) on Thursday, November 9, 2017. The telephone number for the replay is 888-203-1112 (719-457-0820, if calling from outside the U.S.). The replay passcode is 6723795. A live audio webcast of the conference call will be available and can be accessed directly from the Investors section of the website of CTS Corporation at www.ctscorp.com .

About CTS

CTS (NYSE:CTS) is a leading designer and manufacturer of products that Sense, Connect and Move. CTS manufactures sensors, actuators and electronic components in North America, Europe and Asia, and supplies these products to OEMs in the aerospace, communications, defense, industrial, information technology, medical and transportation markets.

For more information visit www.ctscorp.com .

Safe Harbor

This document contains statements that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, any financial or other guidance, statements that reflect our current expectations concerning future results and events, and any other statements that are not based solely on historical fact. Forward-looking statements are based on management's expectations, certain assumptions and currently available information. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. These forward-looking statements are made subject to certain risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from those presented in the forward-looking statements. Many of these, and other, risks and uncertainties are discussed in further detail in Item 1A. of CTS’ Annual Report on Form 10-K. We undertake no obligation to publicly update our forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.


CTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED (In thousands of dollars, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2017			2016			2017			2016
Net sales	$	106,243		$	99,697		$	312,083		$	295,095
Cost of goods sold	68,705			63,056			204,527			190,528
Gross Margin	37,538			36,641			107,556			104,567
Selling, general and administrative expenses	15,915			16,048			46,970			46,459
Research and development expenses	6,380			6,284			18,432			18,414
Restructuring charges	1,435			1,969			2,942			2,175
Loss (gain) on sale of assets	697			(150		)	698			(11,501		)
Operating earnings	13,111			12,490			38,514			49,020
Other income (expense):
Interest expense	(773		)	(917		)	(2,209		)	(2,746		)
Interest income	363			203			914			1,082
Other income (expense)	1,258			(46		)	2,889			(1,482		)
Total other income (expense)	848			(760		)	1,594			(3,146		)
Earnings before income taxes	13,959			11,730			40,108			45,874
Income tax expense	4,340			8,010			12,039			19,804
Net earnings	$	9,619		$	3,720		$	28,069		$	26,070
Earnings per share:
Basic	$	0.29		$	0.11		$	0.85		$	0.80
Diluted	$	0.29		$	0.11		$	0.84		$	0.79

Basic weighted – average common shares outstanding:	32,935			32,759			32,876			32,716
Effect of dilutive securities	456			495			475			494
Diluted weighted – average common shares outstanding	33,391			33,254			33,351			33,210

Cash dividends declared per share	$	0.04		$	0.04		$	0.12		$	0.12

See notes to unaudited condensed consolidated financial statements.


CTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars)

	(Unaudited)
	September 30,			December 31,
	2017			2016
ASSETS
Current Assets
Cash and cash equivalents	$	116,152		$	113,805
Accounts receivable, net	64,861			62,612
Inventories, net	35,308			28,652
Other current assets	13,453			10,638
Total current assets	229,774			215,707
Property, plant and equipment, net	84,291			82,111
Other Assets
Prepaid pension asset	52,100			46,183
Goodwill	68,933			61,744
Other intangible assets, net	68,652			64,370
Deferred income taxes	37,850			45,839
Other	1,683			1,743
Total other assets	229,218			219,879
Total Assets	$	543,283		$	517,697
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Short-term notes payable	$	—		$	1,006
Accounts payable	45,479			40,046
Accrued payroll and benefits	11,372			11,369
Accrued liabilities	43,991			45,708
Total current liabilities	100,842			98,129
Long-term debt	82,300			89,100
Post-retirement obligations	6,823			7,006
Other long-term obligations	6,709			5,580
Total Liabilities	196,674			199,815
Commitments and Contingencies (Note 9)
Shareholders’ Equity
Common stock	304,726			302,832
Additional contributed capital	39,525			40,521
Retained earnings	435,099			410,979
Accumulated other comprehensive loss	(89,485		)	(93,194		)
Total shareholders’ equity before treasury stock	689,865			661,138
Treasury stock	(343,256		)	(343,256		)
Total shareholders’ equity	346,609			317,882
Total Liabilities and Shareholders’ Equity	$	543,283		$	517,697

See notes to unaudited condensed consolidated financial statements.

CTS CORPORATION AND SUBSIDIARIES
^{OTHER SUPPLEMENTAL INFORMATION}

Earnings Per Share

The following table reconciles GAAP diluted earnings per share to adjusted diluted earnings per share for the Company:

Additional Information

The following table includes other financial information not presented in the preceding financial statements.


	Three Months Ended					Nine Months Ended
	September 30, 2017			September 30, 2016		September 30, 2017			September 30, 2016
GAAP diluted earnings per share	$	0.29		$	0.11	$	0.84		$	0.79

Tax affected charges to reported diluted earnings per share:
Restructuring charges	0.03			0.04		0.05			0.04
Increase in valuation allowance and revaluation of deferred taxes as a result of restructuring activities	—			0.07		—			0.07
Increase (decrease) in the recognition of foreign valuation allowance	—			0.04		(0.01		)	0.04
Loss (gain) on sale of facilities, net of expenses	0.01			—		0.01			(0.22		)
Transaction costs	—			—		0.01			0.01
Lease termination charge	—			0.02		—			0.02
Foreign currency (gain) loss	(0.02		)	—		(0.06		)	0.04
Adjusted diluted earnings per share	$	0.31		$	0.28	$	0.84		$	0.79

Additional Information

The following table includes other financial information not presented in the preceding financial statements.


	Three Months Ended				Nine Months Ended
	September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Depreciation and amortization expense	$	5,388	$	5,085	$	15,061	$	14,010
Stock-based compensation expense	$	827	$	792	$	2,514	$	1,759