AMENDMENT #1
This 10-Q is being resubmitted to include the Financial Data Schedule.
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 2, 1994
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 2, 1994 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, 1994: 5,178,104
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 Nine Months
Ended October 2, 1994, and October 3, 1993 3
Condensed Consolidated Balance Sheets -
As of October 2, 1994, and December 31, 1993 4
Condensed Consolidated Statements of Cash
Flows - For the Nine Months Ended October 2,
1994, and October 3, 1993 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 5. Other Events 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)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $65,950 $58,107 $200,925 $181,159
Cost of goods sold 52,283 47,822 157,498 145,543
Gross earnings 13,667 10,285 43,427 35,616
Selling, general and
administrative expenses 9,299 8,096 29,974 27,805
Operating earnings 4,368 2,189 13,453 7,811
Other expenses (income):
Interest expense 90 293 506 754
Other (447) 25 (891) (193)
Total other expenses
(income) (357) 318 (385) 561
Earnings before income
taxes and cumulative
effect of changes in
accounting principles 4,725 1,871 13,838 7,250
Income taxes 1,694 808 4,428 2,610
Earnings before cumulative
effect of changes in
accounting principles 3,031 1,063 9,410 4,640
Cumulative effect of account-
ing change - postretirement
benefits -- -- -- (5,096)
Cumulative effect of account-
ing change - income taxes -- -- -- 482
-- -- -- (4,614)
Net earnings $ 3,031 $ 1,063 $ 9,410 $ 26
Earnings (loss) per share:
Before accounting changes .59 .21 1.82 .90
Cumulative effect on prior
years of accounting
changes -- -- -- (.89)
Net earnings per share $ .59 $ .21 $ 1.82 $ .01
Cash dividends per share $ .10 $ .10 $ .30 $ .30
Average net shares
outstanding 5,174,075 5,153,424 5,167,956 5,152,271
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)
<TABLE>
<CAPTION>
October 2, December 31,
1994 1993*
ASSETS (Unaudited)
Current Assets
<S> <C> <C>
Cash $ 14,015 $ 23,534
Accounts receivable, less allowances
(1994--$861; 1993--$710) 37,188 30,627
Inventories--Note B 40,288 36,059
Other current assets 3,320 1,929
Deferred income taxes 5,117 5,117
Total current assets 99,928 97,266
Property, Plant and Equipment, less accumulated
depreciation (1994--$138,600; 1993--$134,566) 47,377 47,842
Other Assets
Goodwill, less accumulated amortization
(1994--$6,839; 1993--$6,330) 5,380 5,801
Prepaid pension 37,142 32,845
Other 786 1,310
Total other assets 43,308 39,956
$190,613 $185,064
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 6,028 $ 12,822
Current maturities of long-term obligations 182 341
Accounts payable 15,892 11,611
Accrued liabilities 29,026 25,114
Total current liabilities 51,128 49,888
Long-term Obligations 906 4,995
Deferred Income Taxes 5,329 5,329
Postretirement Benefits 5,036 5,649
Stockholders' Equity:
Common stock-authorized 8,000,000 shares
without par value; issued 5,807,031 shares 33,846 34,130
Retained earnings 108,726 100,868
Cumulative foreign translation adjustment (148) (1,049)
142,424 133,949
Less cost of common stock held in treasury:
1994--629,827 shares; 1993--653,607 shares 14,210 14,746
Total stockholders' equity 128,214 119,203
$190,613 $185,064
</TABLE>
*The balance sheet at December 31, 1993, 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)
<TABLE>
<CAPTION>
Nine Months Ended
October 2, October 3,
1994 1993
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings $ 9,410 $ 26
Adjustments to reconcile earnings to net
cash provided by (used in) operating
activities:
Cumulative effect of change in accounting for:
Postretirement benefits 5,096
Income taxes (482)
Depreciation and amortization 8,845 9,302
(Increase) decrease in:
Accounts receivable (6,561) (4,276)
Inventories (4,229) (991)
Other current assets (1,391) 1,028
Prepaid pension expense (4,297) (4,358)
Other (126) 49
Increase in:
Accounts payable and accrued liabilities 8,193 4,850
Total adjustments 434 10,218
Net cash provided by operating activities 9,844 10,244
Cash flows from investing activities:
Proceeds from sale of property, plant and
equipment 317 591
Capital expenditures (7,682) (8,428)
Net cash used in investing activities (7,365) (7,837)
Cash flows from financing activities:
Payments of long-term obligations (4,296) (5,591)
Increase (decrease) in notes payable (6,853) 6,655
Other -- 93
Dividend payments (1,552) (1,545)
Net cash used in financing activities (12,701) (388)
Effect of exchange rate changes on cash 703 (168)
Net (decrease) increase in cash (9,519) 1,851
Cash at beginning of year 23,534 18,455
Cash at end of period $14,015 $20,306
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest $ 627 $ 848
Income Taxes $ 2,447 $ 992*
</TABLE>
*Net of United Kingdom tax refund of $894.
See notes to condensed consolidated financial statements.
Page 5 of 12
Part I. -- FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
October 2, 1994
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 2, 1994, are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1994. For further information, refer to
the consolidated financial statements and footnotes thereto
included in the Company's 1993 Annual Report on Form 10-K.
NOTE B--INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
(In thousands)
October 2, December 31,
1994 1993
<S> <C> <C>
Finished goods $ 5,994 $ 5,064
Work-in-process 17,214 15,344
Raw material 17,080 15,651
$40,288 $36,059
</TABLE>
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 October 2,
1994, to December 31, 1993
The following table highlights significant changes in balance sheet
captions and ratios and other information related to liquidity and
capital resources:
<TABLE>
<CAPTION>
(Dollars in thousands)
October 2, December 31, Increase
1994 1993 (Decrease)
<S> <C> <C> <C>
Cash $14,015 $23,534 $(9,519)
Accounts receivable, net 37,188 30,627 6,561
Inventories, net 40,288 36,059 4,229
Current assets 99,928 97,266 2,662
Current liabilities 51,128 49,888 1,240
Working capital 48,800 47,378 1,422
Current ratio 1.95 1.95 --
Interest bearing debt 7,097 17,992 (10,895)
Net tangible worth 122,834 113,402 9,432
Ratio of interest bearing debt
to net tangible worth .06 .16 (0.10)
</TABLE>
From December 31, 1993, to October 2, 1994, cash of CTS Corporation
and its subsidiaries ("CTS" or "Company") decreased $9.5 million.
The primary use of the cash was the $10.9 million decrease in
interest bearing debt which resulted mainly from discretionary debt
repayments. The net change in working capital, excluding cash and
current debt, was a $4.0 million increase. This increase is
primarily a reflection of the increase in sales and production
levels during the third quarter of 1994, compared to the last
quarter of 1993.
Capital expenditures were $7.7 million for the first nine months of
1994, compared with $8.4 for the same period a year earlier.
Capital expenditures continued to relate to new product, product
variation and manufacturing improvement programs.
On March 31, 1993, the Company replaced its previous $40 million
long-term credit revolving agreement with a new $45 million long-
term revolving credit agreement. The new agreement expires on
April 1, 1997. The new agreement contains certain loan covenants
with which the Company is in full compliance. The revolving
agreement is the Company's primary credit vehicle, and with cash
from operations, is expected to adequately fund the Company's
anticipated cash needs. Additionally, on November 7, 1994, the
Page 7 of 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Company reached agreement on a $15 million term loan at a fixed
interest rate of 8.38%. The loan becomes available in December
1994, and requires annual payments of $2 million in 1996 through
1998, and $9 million in 1999. This credit arrangement is intended
to finance potential acquisitions.
A letter of intent to acquire the Light Emitting Diode (LED) based
Fiber Optic Data Link (ODL) Products business of AT&T
Microelectronics was signed during the third quarter of 1994.
Financial details have not yet been finalized; however, the
transaction will include all assets and backlog on sales contracts,
together with rights in intellectual property, design manufacturing
technology and trademarks of the AT&T Lightwave LED-based ODL
business. The transaction is expected to be completed prior to
December 31, 1994. The proposed transaction is not expected to
have a material impact on the Company's 1994 results of operation
or the Company's financial condition.
Material Changes in Results of Operations: Comparison of Third
Quarter 1994 to Third Quarter 1993
The following table highlights changes in significant components of
the consolidated statements of earnings for the three-month periods
ending October 2, 1994, and October 3, 1993:
<TABLE>
<CAPTION>
(Dollars in thousands)
October 2, October 3, (Decrease)
1994 1993 Increase
<S> <C> <C> <C>
Net sales $65,950 $58,107 $7,843
Gross earnings 13,667 10,285 3,382
Gross earnings as a percent
of sales 20.72% 17.70% 3.02%
Selling, general and
administrative expenses 9,299 8,096 1,203
Selling, general and
administrative expenses as
a percent of sales 14.10% 13.93% .17%
Operating earnings 4,368 2,189 2,179
Operating earnings as a percent
of sales 6.62% 3.77% 2.85%
Earnings before income taxes 4,725 1,871 2,854
Income taxes 1,694 808 886
Income tax rate 35.85% 43.19% 7.34%
</TABLE>
Net sales increased by $7.8 million, or 13.5% from the third
quarter of 1993. Sales increases occurred principally in
automotive and connector related products as a result of the
Page 8 of 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
overall improved automotive market, new products and applications,
and additional market penetration. These increases more than
offset reductions in our microelectronics and frequency controls
businesses.
Gross earnings improved primarily due to the sales and production
volume increases which favorably affected operating efficiencies in
all business units, excluding our microelectronics and frequency
controls units.
Selling, general and administrative expenses 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.
The tax rate decreased from the 1993 tax rate for the same period.
The 1994 annual effective rate is 32% compared to a 1993 effective
rate of 36%. The rate decrease is primarily the result of
additional expected net operating loss utilization.
Material Changes in Results of Operations: Comparison of First
Nine Months of 1994 to First Nine Months of 1993
The following table highlights changes in significant components of
the consolidated statements of earnings for the nine-month periods
ending October 2, 1994, and October 3, 1993:
<TABLE>
<CAPTION>
(Dollars in thousands)
October 2, October 3, (Decrease)
1994 1993 Increase
<S> <C> <C> <C>
Net sales $200,925 $181,159 $19,766
Gross earnings 43,427 35,616 7,811
Gross earnings as a percent
of sales 21.61% 19.66% 1.95%
Selling, general and
administrative expenses 29,974 27,805 2,169
Selling, general and
administrative expenses as
a percent of sales 14.92% 15.35% (.43)%
Operating earnings 13,453 7,811 5,642
Operating earnings as a percent
of sales 6.70% 4.31% 2.39%
Earnings before income taxes
and cumulative effect of
changes in accounting
principles 13,838 7,250 6,588
Income taxes 4,428 2,610 1,818
Income tax rate 32.00% 36.00% (4.00)%
</TABLE>
Page 9 of 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
For the first nine months of 1994, net sales increased $19.8
million, or 10.9% compared to the first nine months of 1993.
Consistent with the third quarter of 1994, the significant 1994
year-to-date sales increases occurred in automotive and connector
related products. These increases have more than offset the year-
to-date sales decline experienced by our microelectronics and
frequency controls business lines.
Gross earnings have improved throughout 1994, primarily due to the
sales and production volume increases which have favorably affected
operating efficiencies in all business units, excluding the
microelectronics and frequency controls units.
Selling, general and administrative expenses in dollars have
increased $2.2 million compared to the first nine months of 1993.
The increase is primarily selling expenses associated with the
increased sales volume. However, these expenses in total have
decreased as a percent of sales, reflecting continuing efforts to
control operating expenses.
The tax rate decreased from the 1993 tax rate for the same period.
The 1994 annual effective rate is 32% compared to a 1993 effective
rate of 36%. The rate decrease is primarily the result of
additional expected net operating loss utilization.
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 5. Other Events
A letter of intent to acquire the Light Emitting Diode (LED) based
Fiber Optic Data Link (ODL) Products business of AT&T
Microelectronics was signed during the third quarter of 1994.
Financial details have not yet been finalized; however, the
transaction will include all assets and backlog on sales contracts,
together with rights in intellectual property, design manufacturing
technology and trademarks of the AT&T Lightwave LED-based ODL
business. The transaction is expected to be completed prior to
December 31, 1994. The proposed transaction is not expected to
have a material impact on the Company's 1994 results of operation
or the Company's financial condition.
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 10, 1994
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the third
quarter 10-Q and is qualified in its entirety by reference to such 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> OCT-02-1994
<CASH> 14,015
<SECURITIES> 0
<RECEIVABLES> 38,049
<ALLOWANCES> 861
<INVENTORY> 40,288
<CURRENT-ASSETS> 99,928
<PP&E> 185,977
<DEPRECIATION> 138,600
<TOTAL-ASSETS> 190,613
<CURRENT-LIABILITIES> 51,128
<BONDS> 0
<COMMON> 33,846
0
0
<OTHER-SE> 94,368
<TOTAL-LIABILITY-AND-EQUITY> 190,613
<SALES> 200,925
<TOTAL-REVENUES> 200,925
<CGS> 157,498
<TOTAL-COSTS> 187,472
<OTHER-EXPENSES> (891)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 506
<INCOME-PRETAX> 13,838
<INCOME-TAX> 4,428
<INCOME-CONTINUING> 9,410
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,410
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 1.82
</TABLE>
