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 31, 1996
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 31, 1996 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 9, 1996: 5,220,954
Page 1 of 10
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 31, 1996, and April 2, 1995 3
Condensed Consolidated Balance Sheets -
As of March 31, 1996, and December 31, 1995 4
Condensed Consolidated Statements of Cash
Flows - For the Three Months Ended March 31,
1996, and April 2, 1995 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 7-8
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
Page 2 of 10
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 31, April 2,
1996 1995
Net sales $80,186 $75,978
Costs and expenses:
Cost of goods sold 60,387 58,705
Selling, general and administrative expenses 10,952 10,073
Research and development expenses 2,260 2,323
Operating earnings 6,587 4,877
Other expenses (income):
Interest expense 436 487
Other (855) (469)
Total other expenses (419) 18
Earnings before income taxes 7,006 4,859
Income taxes 2,592 1,603
Net earnings $ 4,414 $ 3,256
Net earnings per share $ .83 $ .63
Cash dividends per share $ .15 $ .15
Average common and common equivalent
shares outstanding 5,294,933 5,186,963
See notes to condensed consolidated financial statements.
Page 3 of 10
Part I. -- FINANCIAL INFORMATION
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
March 31, December 31,
1996 1995*
ASSETS (Unaudited)
Current Assets
Cash $ 42,303 $ 37,271
Accounts receivable, less allowances
(1996--$707; 1995--$774) 43,890 41,737
Inventories--Note C 38,101 38,885
Other current assets 3,658 2,544
Deferred income taxes 5,676 5,676
Total current assets 133,628 126,113
Property, Plant and Equipment, less accumulated
depreciation (1996--$131,161; 1995--$131,445) 51,602 50,696
Other Assets
Goodwill, less accumulated amortization
(1996--$7,855; 1995-$7,687) 4,443 4,603
Prepaid pension 46,048 44,739
Other 954 976
Total other assets 51,445 50,318
$236,675 $227,127
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $ 8,055 $ 6,685
Current maturities of long-term obligations 2,203 2,211
Accounts payable 21,006 15,605
Accrued liabilities 25,684 26,461
Total current liabilities 56,948 50,962
Long-term Obligations 13,712 13,714
Deferred Income Taxes 11,909 11,909
Postretirement Benefits 4,318 4,289
Shareholders' Equity:
Common stock-authorized 8,000,000 shares
without par value; issued 5,807,031 shares 33,409 33,355
Retained earnings 130,177 126,546
Cumulative foreign translation adjustment (854) (645)
162,732 159,256
Less cost of common stock held in treasury:
1996--587,777 shares; 1995--589,702 shares 12,944 13,003
Total shareholders' equity 149,788 146,253
$236,675 $227,127
*The balance sheet at December 31, 1995, has been derived from the
audited financial statements at that date.
See notes to condensed consolidated financial statements.
Page 4 of 10
Part I. -- FINANCIAL INFORMATION
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
(In thousands of dollars)
Three Months Ended
March 31, April 2,
1996 1995
Cash flows from operating activities:
Net earnings $ 4,414 $ 3,256
Depreciation and amortization 3,250 3,151
(Increase) decrease in:
Accounts receivable (2,153) (6,981)
Inventories 784 (452)
Other current assets (1,114) (998)
Prepaid pension expense (1,309) (1,458)
Other 8 (7)
Increase in:
Accounts payable & accrued liabilities 4,624 4,648
Total adjustments 4,090 (2,097)
Net cash provided by operating activities 8,504 1,159
Cash flows from investing activities:
Proceeds from sale of property, plant and
equipment 128 215
Capital expenditures (4,247) (2,746)
Net cash used in investing activities (4,119) (2,531)
Cash flows from financing activities:
Payments of long-term obligations (1) (1)
Increase (decrease) in notes payable 1,365 (1,433)
Dividend payments (783) (776)
Net cash provided by (used in)financing
activities 581 (2,210)
Effect of exchange rate changes on cash 66 341
Net increase (decrease) in cash 5,032 (3,241)
Cash at beginning of year 37,271 24,922
Cash at end of period $42,303 $21,681
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest $ 429 $ 680
Income Taxes $ 1,179 $ 805
See notes to condensed consolidated financial statements.
Page 5 of 10
Part I. -- FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1996
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 31, 1996, are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1996. For further information, refer to
the consolidated financial statements and footnotes thereto
included in the Company's 1995 Annual Report on Form 10-K.
NOTE B--RECLASSIFICATIONS
Certain reclassifications have been made to prior periods to
conform to the classifications adopted in 1996.
NOTE C--INVENTORIES
The components of inventory consist of the following:
(In thousands)
March 31, December 31,
1996 1995
Finished goods $ 7,281 $ 7,445
Work-in-process 15,691 14,789
Raw material 15,129 16,651
$38,101 $38,885
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
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.
Page 6 of 10
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 31,
1996, to December 31, 1995
The following table highlights significant changes in balance sheet
captions and ratios and other information related to liquidity and
capital resources:
(Dollars in thousands)
March 31, December 31, Increase
1996 1995 (Decrease)
Cash $ 42,303 $ 37,271 $5,032
Accounts receivable, net 43,890 41,737 2,153
Inventories, net 38,101 38,885 (784)
Current assets 133,628 126,113 7,515
Accounts payable 21,006 15,605 5,401
Current liabilities 56,948 50,962 5,986
Working capital 76,680 75,151 1,529
Current ratio 2.3 2.5 (0.2)
Interest bearing debt 23,628 22,267 1,361
Net tangible worth 145,345 141,650 3,695
Ratio of interest bearing debt
to net tangible worth .16 .16 --
From December 31, 1995, to March 31, 1996, cash of CTS Corporation
and its subsidiaries ("CTS" or "Company") increased $5.0 million.
The increase in cash primarily reflects increases in net cash
provided from operations. The current ratio decreased due to
increased current liabilities, primarily accounts payable.
Capital expenditures were $4.2 million during the first quarter,
compared with $2.7 million for the same period a year earlier.
These capital expenditures were primarily for increased
manufacturing capacity, new products and manufacturing improvement
programs.
Page 7 of 10
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 1996 to First Quarter 1995
The following table highlights changes in significant components of
the consolidated statements of earnings for the three-month periods
ending March 31, 1996, and April 2, 1995:
(Dollars in thousands)
March 31, April 2, Increase
1996 1995 (Decrease)
Net sales $80,186 $75,978 $4,208
Gross earnings 19,799 17,273 2,526
Gross earnings as a percent
of sales 24.69% 22.73% 1.96%
Selling, general and
administrative expenses 10,952 10,073 879
Selling, general and
administrative expenses as
a percent of sales 13.66% 13.26% 0.40%
Research and development
expenses 2,260 2,323 (63)
Operating earnings 6,587 4,877 1,710
Operating earnings as a
percent of sales 8.21% 6.42% 1.79%
Interest expense 436 487 (51)
Earnings before income taxes 7,006 4,859 2,147
Income taxes 2,592 1,603 989
Income tax rate 37.00% 33.00% 4.00%
Net sales increased by $4.2 million, or 5.5% from the first quarter
of 1995. Sales increases occurred principally from increased
shipments of backpanel and automotive products.
Gross earnings improved primarily due to the sales and production
volume increases, as well as continuing efforts to control
manufacturing expenses.
Selling, general and administrative expenses in dollars 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 estimated effective tax rate for 1996 of 37% is consistent with
the actual 1995 tax rate of 38%. The rate has increased over prior
quarterly reporting periods due to a smaller benefit from the
utilization of net operating loss carryforwards and scheduled tax
credits.
Page 8 of 10
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 9 of 10
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 13, 1996
Page 10 of 10
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
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