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 April 3, 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
April 3, 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 May 10, 1994: 5,169,954
Page 1 of 11
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 April 3, 1994, and April 4, 1993 3
Condensed Consolidated Balance Sheets -
As of April 3, 1994, and December 31, 1993 4
Condensed Consolidated Statements of Cash
Flows - For the Three Months Ended April 3,
1994, and April 4, 1993 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7-9
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
Page 2 of 11
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
April 3, April 4,
1994 1993
Net sales $64,357 $60,439
Cost of goods sold 50,230 47,819
Gross earnings 14,127 12,620
Selling, general and administrative expenses 10,567 10,041
Operating earnings 3,560 2,579
Other expenses (income):
Interest expense 227 239
Other (224) (184)
Total other expenses 3 55
Earnings before income taxes and cumulative
effect of changes in accounting principles 3,557 2,524
Income taxes 1,067 757
Earnings before cumulative effect of changes
in accounting principles 2,490 1,767
Cumulative effect of accounting change -
postretirement benefits (5,096)
Cumulative effect of accounting change -
income taxes 482
(4,614)
Net earnings (loss) $ 2,490 $(2,847)
Earnings (loss) per share:
Before accounting changes $ .48 $ .34
Cumulative effect on prior years of
accounting changes (.89)
Net earnings (loss) per share $ .48 $ (.55)
Cash dividends per share $ .10 $ .10
Average net shares outstanding 5,159,998 5,150,850
See notes to condensed consolidated financial statements.
Page 3 of 11
<PAGE>
Part I. -- FINANCIAL INFORMATION
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
April 3, December 31,
1994 1993*
ASSETS (Unaudited)
Current Assets
Cash $18,435 $ 23,534
Accounts receivable, less allowances
(1994--$757; 1993--$710) 34,865 30,627
Inventories--Note C 37,772 36,059
Other current assets 2,262 1,929
Deferred income taxes 5,117 5,117
Total current assets 98,451 97,266
Property, Plant and Equipment, less accumulated
depreciation (1994--$136,215; 1993--$134,566) 47,942 47,842
Other Assets
Goodwill, less accumulated amortization
(1994--$6,499; 1993--$6,330) 5,648 5,801
Prepaid pension 34,276 32,845
Other 948 1,310
Total other assets 40,872 39,956
$187,265 $185,064
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 11,427 $ 12,822
Current maturities of long-term obligations 341 341
Accounts payable 13,974 11,611
Accrued liabilities 26,779 25,114
Total current liabilities 52,521 49,888
Long-term Obligations 2,846 4,995
Deferred Income Taxes 5,329 5,329
Postretirement Benefits 5,434 5,649
Stockholders' Equity:
Common stock-authorized 8,000,000 shares
without par value; issued 5,807,031 shares 33,843 34,130
Retained earnings 102,841 100,868
Cumulative foreign translation adjustment (1,122) (1,049)
135,562 133,949
Less cost of common stock held in treasury:
1994--637,677 shares; 1993--653,607 shares 14,427 14,746
Total stockholders' equity 121,135 119,203
$187,265 $185,064
*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 11
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Part I. -- FINANCIAL INFORMATION
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
(In thousands of dollars)
Three Months Ended
April 3, April 4,
1994 1993
Cash flows from operating activities:
Net earnings (loss) $ 2,490 $(2,847)
Adjustments to reconcile earnings (loss) to
net cash provided by operating activities:
Cumulative effect of change in accounting for:
Postretirement benefits 5,096
Income taxes (482)
Depreciation and amortization 2,929 3,184
(Increase) decrease in:
Accounts receivable (4,238) (3,748)
Inventories (1,713) (2,677)
Other current assets (333) (1,035)
Prepaid pension expense (1,431) (1,466)
Other 158 (125)
Increase in:
Accounts payable & accrued liabilities 4,028 5,258
Total adjustments (600) 4,005
Net cash provided by operating activities 1,890 1,158
Cash flows from investing activities:
Proceeds from sale of property, plant and
equipment 101 305
Capital expenditures (2,942) (2,413)
Net cash used in investing activities (2,841) (2,108)
Cash flows from financing activities:
Payments of long-term obligations (2,138) (2,684)
(Decrease) increase in notes payable (1,461) 883
Dividend payments (517) (515)
Other 31
Net cash used in financing activities (4,116) (2,285)
Effect of exchange rate changes on cash (32) (12)
Net decrease in cash (5,099) (3,247)
Cash at beginning of year 23,534 18,455
Cash at end of period $18,435 $15,208
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest $ 237 $ 211
Income Taxes $ 892 $ (27)
See notes to condensed consolidated financial statements.
Page 5 of 11
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Part I. -- FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
April 3, 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 three-month period ended April 3, 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:
(In thousands)
April 3, December 31,
1994 1993
Finished goods $ 6,019 $ 5,064
Work-in-process 16,248 15,344
Raw material 15,505 15,651
$37,772 $36,059
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 11
<PAGE>
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 April 3,
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:
(Dollars in thousands)
April 3, December 31, Increase
1994 1993 (Decrease)
Cash $ 18,435 $ 23,534 $(5,099)
Accounts receivable, net 34,865 30,627 4,238
Inventories, net 37,772 36,059 1,713
Current assets 98,451 97,266 1,185
Current liabilities 52,521 49,888 2,633
Working capital 45,930 47,378 (1,448)
Current ratio 1.87 1.95 (0.08)
Interest bearing debt 14,586 17,992 (3,406)
Net tangible worth 115,487 113,402 2,085
Ratio of interest bearing debt
to net tangible worth 0.13 0.16 (0.03)
From December 31, 1993, to April 3, 1994, cash of CTS Corporation
and its subsidiaries ("CTS" or "Company") decreased $5.1 million.
The decrease in cash primarily reflects capital expenditures and a
reduction in interest bearing debt. The net decrease in working
capital of $1.4 million reflects increases in accrued liabilities
of $1.7 million and accounts payable of $2.4 million, offset by
increases in receivables of $4.2 million and inventories of $0.7
million. The increases in receivables and inventory were mainly a
result of the increased sales volume in the first quarter of 1994
compared to the last quarter of 1993.
Capital expenditures were $2.9 million during the first quarter,
compared with $2.4 million for the same period a year earlier, and
$3.3 million for the fourth quarter of 1993. These capital
expenditures were primarily for new products and cost reduction
programs.
The $3.4 million decrease in interest bearing debt resulted
primarily from discretionary debt repayments.
Page 7 of 11
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
On March 31, 1993, the Company replaced its previous $40 million
long-term revolving credit 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.
Material Changes in Results of Operations: Comparison of First
Quarter 1994 to First Quarter 1993
The following table highlights changes in significant components of
the consolidated statements of earnings for the three-month periods
ending April 3, 1994, and April 4, 1993:
(Dollars in thousands)
April 3, April 4, Increase
1994 1993 (Decrease)
Net sales $64,357 $60,439 $ 3,918
Gross earnings 14,127 12,620 1,507
Gross earnings as a percent
of sales 21.95% 20.88% 1.07%
Selling, general and
administrative expenses 10,567 10,041 526
Selling, general and
administrative expenses as
a percent of sales 16.42% 16.61% (0.19)%
Operating earnings 3,560 2,579 981
Operating earnings as a
percent of sales 5.53% 4.27% 1.26%
Interest expense 227 239 (12)
Earnings before income taxes
and cumulative effect of
changes in accounting
principles 3,557 2,524 1,033
Income taxes 1,067 757 310
Income tax rate 30.00% 30.00%
Net sales increased by $3.9 million or 6.5% from the first quarter
of 1993. Sales increases occurred principally in automotive,
electrocomponents and connector related products as a result of the
overall improved automotive market, new products and applications
and additional market penetration. These increases more than
offset decreases in our microelectronics and frequency controls
businesses.
Page 8 of 11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Gross earnings improved primarily due to the sales and production
volume increases which favorably affected operating efficiencies in
all business units, excluding the microelectronics and frequency
controls units.
Selling, general and administrative expenses remained essentially
flat compared to the first quarter of 1993, and were a slightly
lower percent of net sales. The Company continues to emphasize
cost control over all operating expenses.
The tax rate for 1994 is consistent with the first quarter 1993 tax
rate and decreased from the 1993 annual effective rate of 36%. The
1994 rate change from the 1993 annual rate is primarily the result
of additional expected net operating loss utilization.
Page 9 of 11
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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
The Company filed a Form 8-K, dated January 6, 1994, announcing
that on December 15, 1993, the Corporation settled litigation
with a component supplier relative to damages caused to the
Corporation by a defective component purchased from that
supplier. The gross recovery was $2,250,000.
Page 10 of 11
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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
Jeannine M. Davis Stanley J. Aris
Jeannine M. Davis Stanley J. Aris
Vice President, Secretary Vice President Finance
and General Counsel and Chief Financial Officer
Dated: May 10, 1994
Page 11 of 11
