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 2, 1995
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 2, 1995 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, 1995: 5,203,754
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 2, 1995, and April 3, 1994 3
Condensed Consolidated Balance Sheets -
As of April 2, 1995, and December 31, 1994 4
Condensed Consolidated Statements of Cash
Flows - For the Three Months Ended April 2,
1995, and April 3, 1994 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 2, April 3,
1995 1994
Net sales $75,978 $64,357
Costs and expenses:
Cost of goods sold 58,705 48,760
Selling, general and administrative expenses 10,073 10,567
Research and development expenses 2,323 1,470
Operating earnings 4,877 3,560
Other expenses (income):
Interest expense 487 227
Other (469) (224)
Total other expenses 18 3
Earnings before income taxes 4,859 3,557
Income taxes 1,603 1,067
Net earnings $ 3,256 $ 2,490
Net Earnings per share $ .63 $ .48
Cash dividends per share $ .15 $ .10
Average net shares outstanding 5,186,963 5,159,998
See notes to condensed consolidated financial statements.
Page 3 of 11
Part I. -- FINANCIAL INFORMATION
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
April 2,December 31,
1995 1994*
ASSETS (Unaudited)
Current Assets
Cash $ 21,681 $24,922
Accounts receivable, less allowances
(1995--$976; 1994--$869) 42,010 35,029
Inventories--Note C 41,908 41,456
Other current assets 4,030 3,032
Deferred income taxes 6,228 6,228
Total current assets 115,857 110,667
Property, Plant and Equipment, less accumulated
depreciation (1995--$132,866; 1994--$139,649) 50,625 50,777
Other Assets
Goodwill, less accumulated amortization
(1995--$7,180; 1994--$7,010) 5,086 5,221
Prepaid pension 40,866 39,408
Other 719 753
Total other assets 46,671 45,382
$213,153 $206,826
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 6,003 $ 7,436
Current maturities of long-term obligations 311 304
Accounts payable 16,887 12,768
Accrued liabilities 24,817 24,284
Total current liabilities 48,018 44,792
Long-term Obligations 15,616 15,595
Deferred Income Taxes 9,222 9,222
Postretirement Benefits 5,182 5,362
Stockholders' Equity:
Common stock-authorized 8,000,000 shares
without par value; issued 5,807,031 shares 33,536 33,870
Retained earnings 114,982 112,506
Cumulative foreign translation adjustment 179 (354)
148,697 146,022
Less cost of common stock held in treasury:
1995--608,377 shares; 1994--628,427 shares 13,582 14,167
Total stockholders' equity 135,115 131,855
$213,153 $206,826
*The balance sheet at December 31, 1994, has been derived from the
audited financial statements at that date.
See notes to condensed consolidated financial statements.
Page 4 of 11
Part I. -- FINANCIAL INFORMATION
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
(In thousands of dollars)
Three Months Ended
April 2, April 3,
1995 1994
Cash flows from operating activities:
Net earnings $ 3,256 $ 2,490
Depreciation and amortization 3,151 2,929
(Increase) decrease in:
Accounts receivable (6,981) (4,238)
Inventories (452) (1,713)
Other current assets (998) (333)
Prepaid pension expense (1,458) (1,431)
Other (7) 158
Increase in:
Accounts payable & accrued liabilities 4,648 4,028
Total adjustments (2,097) (600)
Net cash provided by operating activities 1,159 1,890
Cash flows from investing activities:
Proceeds from sale of property, plant and
equipment 215 101
Capital expenditures (2,746) (2,942)
Net cash used in investing activities (2,531) (2,841)
Cash flows from financing activities:
Payments of long-term obligations (1) (2,138)
Decrease in notes payable (1,433) (1,461)
Dividend payments (776) (517)
Net cash used in financing activities (2,210) (4,116)
Effect of exchange rate changes on cash 341 (32)
Net decrease in cash (3,241) (5,099)
Cash at beginning of year 24,922 23,534
Cash at end of period $21,681 $18,435
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest $ 680 $ 237
Income Taxes $ 805 $ 892
See notes to condensed consolidated financial statements.
Page 5 of 11
Part I. -- FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
April 2, 1995
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 2, 1995, are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1995. For further information, refer to
the consolidated financial statements and footnotes thereto
included in the Company's 1994 Annual Report on Form 10-K.
NOTE B--RECLASSIFICATIONS
Certain reclassifications have been made for all years presented in
the financial statements to conform to the classifications adopted
in 1995.
NOTE C--INVENTORIES
The components of inventory consist of the following:
(In thousands)
April 2, December 31,
1995 1994
Finished goods $ 5,981 $ 5,725
Work-in-process 17,088 16,531
Raw material 18,839 19,200
$41,908 $41,456
NOTE D--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
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 2,
1995, to December 31, 1994
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 2, December 31, Increase
1995 1994 (Decrease)
Cash $21,681 $24,922 $(3,241)
Accounts receivable, net 42,010 35,029 6,981
Inventories, net 41,908 41,456 452
Current assets 115,857 110,667 5,190
Accounts payable 16,887 12,768 4,119
Current liabilities 48,018 44,792 3,226
Working capital 67,839 65,875 1,964
Current ratio 2.4 2.5 (.1)
Interest bearing debt 21,914 23,318 (1,404)
Net tangible worth 130,029 126,634 3,395
Ratio of interest bearing debt
to net tangible worth .17 .18 (.01)
From December 31, 1994, to April 2, 1995, cash of CTS Corporation
and its subsidiaries ("CTS" or "Company") decreased $3.2 million.
The decrease in cash primarily reflects increased working capital
and a reduction in interest bearing debt. The net increase in
working capital of $2.0 million primarily reflects an increase in
receivables of $7.0 million, offset by an increase in payables of
$4.1 million. The increases in receivables and payables were
principally a result of the increased sales volume in the first
quarter of 1995, compared to the last quarter of 1994.
Capital expenditures were $2.7 million during the first quarter,
compared with $2.9 million for the same period a year earlier.
These capital expenditures were primarily for new products and cost
reduction programs.
The $1.4 million decrease in interest bearing debt resulted
primarily from discretionary debt repayments.
Page 7 of 11
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 1995 to First Quarter 1994
The following table highlights changes in significant components of
the consolidated statements of earnings for the three-month periods
ending April 2, 1995, and April 3, 1994:
(Dollars in thousands)
April 2, April 3, Increase
1995 1994 (Decrease)
Net sales $75,978 $64,357 $11,621
Gross earnings 17,273 15,597 1,676
Gross earnings as a percent
of sales 22.73% 24.24% (1.51)%
Selling, general and
administrative expenses 10,073 10,567 (494)
Selling, general and
administrative expenses as
a percent of sales 13.26% 16.42% (3.16)%
Research and development
expenses 2,323 1,470 853
Operating earnings 4,877 3,560 1,317
Operating earnings as a
percent of sales 6.42% 5.53% .89%
Interest expense 487 227 260
Earnings before income taxes 4,859 3,557 1,302
Income taxes 1,603 1,067 536
Income tax rate 33.00% 30.00% 3.00%
Net sales increased by $11.6 million, or 18.1% from the first
quarter of 1994. Sales increases occurred principally in the
microelectronics and automotive related products. The
microelectronics increase was a result of the 1994 acquisition of
the Light Emitting Diode (LED) based Fiber Optic Data Link (ODL)
products business of AT&T Microelectronics. In terms of the
automotive sales increase, the major contributing factors were
increased sales of existing and new products.
Primarily as a result of the higher sales, gross earnings dollars
increased by 10.7%. Unfavorably impacting gross earnings was a
lower of cost or market inventory reserve in the amount of $1.9
million, established for our military business relative to a fixed
price contract on a major program where the Company's cost to meet
its obligations and fulfill the contract will significantly exceed
the revenues and recoveries from the program.
Page 8 of 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Selling, general and administrative expenses remained essentially
flat compared to the first quarter of 1994, but were a
significantly lower percent of net sales as the Company continues
to emphasize cost control over all operating expenses.
Research and development expenses increased by $0.9 million over
the first quarter of 1994, primarily due to the major new product
development program, the non-contacting or Hall-effect, gallium
arsenide magnetic based sensing technology, within our Automotive
business unit.
The increase in interest expense is related to the Company reaching
an agreement on a $15 million term loan to finance acquisitions at
a fixed interest rate of approximately 8.4% in December 1994.
The tax rate for 1995 is three percentage points higher than the
first quarter 1994 tax rate. The increased rate is primarily the
result of larger losses in some non-U.S. jurisdictions with no tax
benefit.
Page 9 of 11
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 10 of 11
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 11, 1995
Page 11 of 11
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