CTS Announces Second Quarter 2006 Results; Year-over-Year Earnings Per Share Improvement Continues.ELKHART Elkhart, city (1990 pop. 43,627), Elkhart co., N Ind., at the confluence of the Elkhart and St. Joseph rivers; settled 1824, inc. 1877. The city's status as a chief producer of band instruments began in 1875. , Ind IND Investigational new drug Therapeutics A status assigned by the FDA to a drug before allowing its use in humans, exempting it from premarketing approval requirements so that experimental clinical trials may be conducted. See Phase 1.2, 3 studies, Sponsorship. . -- CTS (1) (Clear To Send) The RS-232 signal sent from the receiving station to the transmitting station that indicates it is ready to accept data. Contrast with RTS. (2) (Common Type System) The data typing used in . Corporation (NYSE NYSE See: New York Stock Exchange : CTS) today announced second quarter 2006 revenues of $165.9 million, a 5% increase from the second quarter of 2005. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of were $0.16, which included a charge of $0.03 per share for the previously announced consolidation of the Berne, Indiana Berne is a city in Adams County, Indiana, settled in 1852 by seventy devout Mennonite immigrants who came directly from Switzerland, and named for the capital of Switzerland. The population was 4,150 at the 2000 census. Geography Berne is located in Northeast Indiana. operation. In the comparable period last year, second quarter 2005 diluted earnings per share were $0.10, which included a net negative $0.07 per share from repatriation-related tax expense and the reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of certain reserves. E[acute accent acute accent n. A mark (´) indicating: a. that a vowel is close or tense, as é in French été. b. that a vowel or syllable has a high or rising pitch, as in Chinese or Ancient Greek. c. ]"We were very pleased with financial results in the quarter, as well as the pace of new business development. We had a record number of design wins for electronic components in infrastructure applications, secured our first production award from Honda honda a quick release metal eyelet for the end of a lariat. When the restrained animal is no longer required it is not necessary to slacken off the loop and pull it over the head—a very great advantage when working with wild cattle or unbroken horses. and added several new EMS Ems, town, Germany Ems or Bad Ems (bät ĕms), town (1994 pop. 10,130), Rhineland-Palatinate, W Germany, on the Lahn River. customers," stated Donald Donald (Domnall, Domhnall, Dumhnuil, Dónall) is an anglicized version of a Scottish or Irish Gaelic personal name, containing the elements dumno "world" and val "rule", viz. "ruler of the world". Compare Dumnorix. Schwanz, CTS Chairman and Chief Executive Officer. E[acute accent]Based on the first half results and outlook for the remainder of the year, we are maintaining our prior full-year 2006 guidance of 6% - 8% in sales growth over 2005 and maintaining our earnings per share guidance in a range of $0.75 to $0.80, excluding $0.08 per share for full-year Berne Berne, Switzerland: see Bern. restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and related charges. E[acute accent]Capital expenditures of $3.4 million were 2.0% of sales in the second quarter of 2006. The full-year 2006 capital expenditures are expected to be in the range of $18 - $20 million. Free cash flow of $11.4 million was generated in the second quarter of 2006 compared to $0.2 million in the first quarter, and $10.8 million in the second quarter last year. E[acute accent]The Berne consolidation is proceeding smoothly and should be completed in the third quarter. The new Czech Republic Czech Republic, Czech Česká Republika (2005 est. pop. 10,241,000), republic, 29,677 sq mi (78,864 sq km), central Europe. It is bordered by Slovakia on the east, Austria on the south, Germany on the west, and Poland on the north. facility of CTS began operations during the second quarter. Production will be increased gradually grad·u·al adj. Advancing or progressing by regular or continuous degrees: gradual erosion; a gradual slope. n. Roman Catholic Church 1. throughout the year to meet business growth and better serve automotive OEMs in that region.
SEGMENT INFORMATION
(Dollars in millions)
Second Quarter Second Quarter First Quarter
2006 2005 2006
---------------- ---------------- ----------------
Segment Segment Segment
Net Operating Net Operating Net Operating
Sales Earnings Sales Earnings Sales Earnings
------- -------- ------- -------- ------- ---------
Components &
Sensors $71.7 $8.0 $66.5 $7.5 $67.6 $10.4
Electronics
Manufacturing
Services (EMS) 94.2 2.5 91.8 2.8 82.9 1.0
-------- -------- --------
Segment
Operating
Earnings 10.5 10.3 11.4
Expenses not
allocated to
business
segments:
-Restructuring
and related
charges (1.4) (2.1)
------- -------- ------- -------- ------- --------
Total $165.9 $9.1 $158.3 $10.3 $150.5 $9.3
======= ======== ======= ======== ======= ========
E[acute accent]Components & Sensors
Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before increased $0.5 million on higher sales, partially reduced by stock option expenses and lower pension income. E[acute accent]Components and sensors sales increased $4.1 million or 6% from the first quarter of 2006 primarily reflecting strong automotive product demand. Despite the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact of higher sales, segment operating earnings decreased $2.4 million from the first quarter from timing-related royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. income and the $1.5 million favorable insurance claim settlement recorded in the first quarter. E[acute accent]EMS: EMS sales increased $2.4 million or 3% from the second quarter of 2005 driven primarily by increased sales in the communication, defense and medical markets, partially reduced by lower sales in the computer market. Segment operating earnings decreased $0.3 million primarily due to increased operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. partially offset by the impact of higher volume and improved product mix. E[acute accent]Compared to the first quarter of 2006, EMS segment sales increased $11.3 million or 14% primarily from improved sales in the communication, defense, medical and industrial markets. Total segment operating earnings increased $1.5 million primarily on higher volumes and more favorable product mix. E[acute accent]Conference Call E[acute accent]As previously announced, the Company has scheduled a conference call on Thursday Thursday: see week. , July July: see month. 27, 2006 at 11:00 a.m. Eastern Daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). Time. Those interested in participating may dial 800-762-4758 (480-629-9035, if calling from outside the U.S.). No access code is needed. There will be a replay of the conference call available from 4:15 p.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT on July 27, 2006, through 11:59 p.m. EDT on August 3, 2006. The telephone number for the replay is 800-475-6701 (320-365-3844, if calling from outside the U.S.). The access code is 836003. There will also be a live audio webcast of the conference call, which can be accessed directly from the Web sites of CTS Corporation (www.ctscorp.com), StreetEvents (www.StreetEvents.com), Netscape (1) (Netscape Communications Corporation, Mountain View, CA, www.netscape.com) Part of America Online (AOL), Netscape specializes in Web software, including the Netscape Web browser. (www.netscape.com), Compuserve An online information service that provides access to the Internet, e-mail, instant messaging and an integrated contact list. Founded in 1969 as a timesharing service, CompuServe is one of the oldest online services, being the first to offer e-mail in 1979 and online chat a year later. (www.compuserve.com CompuServe's Internet domain address. When sending e-mail to a CompuServe customer via the Internet, the comma in the CompuServe account number is turned into a dot; for example, account 71020,1560 becomes 71020.1560@compuserve.com. ) and others. AOL (A division of Time Warner, Inc., New York, NY, www.aol.com) The world's largest online information service with access to the Internet, e-mail, chat rooms and a variety of databases and services. subscribers will have access through the Personal Finance section of AOL. E[acute accent]About CTS E[acute accent]CTS is a leading designer and manufacturer of electronic components and sensors and a provider of electronics manufacturing services Electronic manufacturing services (EMS) is term used for companies that design, test, manufacture, distribute and provide return/repair services for electronic component and assemblies for original equipment manufacturers (OEMs). (EMS) to OEMs in the automotive, computer, communications, medical and industrial markets. CTS manufactures products in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and Asia. CTS' stock is traded on
the NYSE under the ticker symbol Ticker SymbolAn arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors "CTS." To find out more, visit the CTS Web site at www.ctscorp.com. E[acute accent]Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement E[acute accent]This press release contains certain statements that are, or may be deemed to be, forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements include, but are not limited to, any financial or other guidance, and all statements that are not based on historical fact, but rather reflect our current expectations concerning future results and events. We make certain assumptions when making forward-looking statements, any of which could prove inaccurate, including, but not limited to, statements about our future operating results and business plans. The ultimate correctness of these forward-looking statements is dependent upon a number of known and unknown risks and events, and is subject to various uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance or achievements expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by these statements. E[acute accent]For more detailed information on the risks and uncertainties associated with CTS' business activities, see our reports filed with the SEC. CTS undertakes no obligation to publicly update its forward-looking statements, whether as a result of market or industry changes, new information or future events.
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
------------------- -------------------
July 2, July 3, July 2, July 3,
2006 2005 2006 2005
--------- --------- --------- ---------
Net sales $165,925 $158,346 $316,418 $313,676
Costs and expenses:
Cost of goods sold 131,945 126,054 250,364 253,169
Selling, general and
administrative
expenses 19,924 17,404 36,661 35,161
Research and
development expenses 4,070 4,567 8,162 9,354
Restructuring charge 920 - 2,882 -
--------- --------- --------- ---------
Operating earnings 9,066 10,321 18,349 15,992
Other expenses (income):
Interest expense 1,034 1,582 2,145 3,299
Other (257) (70) (385) (515)
--------- --------- --------- ---------
Total other
expenses 777 1,512 1,760 2,784
--------- --------- --------- ---------
Earnings before
income taxes 8,289 8,809 16,589 13,208
Income tax expense 1,973 4,867 (1) 4,048 5,879 (1)
--------- --------- --------- ---------
Net earnings $6,316 $3,942 $12,541 $7,329
--------- --------- --------- ---------
Net earnings per share:
Basic $0.18 $0.11 $0.35 $0.20
--------- --------- --------- ---------
Diluted $0.16 $0.10 (1) $0.32 $0.19 (1)
--------- --------- --------- ---------
Cash dividends declared
per share $0.03 $0.03 $0.06 $0.06
Average common shares
outstanding:
Basic 35,843 36,621 35,832 36,508
Diluted 40,145 41,226 40,189 41,101
(1) Second quarter 2005 income tax expense and diluted earnings per
share include a net impact of $2.8 million and $0.07 per diluted
share, respectively, consisting of $4.5 million of expense
relating to the repatriation of foreign cash to the United States
under the provisions of the American Jobs Creation Act of 2004 and
a $1.7 million benefit relating to the reversal of income tax
reserves due to the successful resolution of tax issues in certain
foreign jurisdictions.
CTS Corporation and Subsidiaries
Condensed Consolidated Balance Sheets- Unaudited
(In thousands of dollars)
July 2, December 31,
2006 2005 (1)
------------- ------------
Cash and cash equivalents $17,651 $12,029
Accounts receivable, net 104,600 91,265
Inventories, net 65,012 60,564
Other current assets 17,989 16,816
------------- ------------
Total current assets 205,252 180,674
------------- ------------
Property, plant & equipment, net 104,450 109,676
Other assets 244,449 243,586
------------- ------------
Total Assets $554,151 $533,936
============= ============
Notes payable and current portion
of long-term debt $12,095 $13,463
Accounts payable 74,060 67,196
Other accrued liabilities 44,147 39,274
------------- ------------
Total current liabilities 130,302 119,933
------------- ------------
Long-term debt 64,266 68,293
Other obligations 16,350 16,139
Shareholders' equity 343,233 329,571
Total Liabilities and
------------- ------------
Shareholders' Equity $554,151 $533,936
============= ============
(1) The balance sheet at December 31, 2005 has been derived from the
audited financial statements at that date.
CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION
The following table reconciles projected earnings per share, diluted
to adjusted projected earnings per share, diluted for the Company:
------------------
Projected
------------------
Twelve Months
Ended
December 31,
2006
------------------
Earnings per share, diluted $0.67 - $0.72
Tax affected charges to reported diluted
earnings per share:
Restructuring and related charges 0.08
------------------
Adjusted earnings per share, diluted $0.75 - $0.80
==================
Projected adjusted earnings per share, diluted is a non-GAAP financial
measure. The most directly comparable GAAP financial measure is
projected earnings per share, diluted. CTS calculates full year
projected adjusted earnings per share, diluted to exclude the per
share impact of restructuring and related charges. We exclude the
impact of this item because it is a discrete event which has a
significant impact on comparable GAAP financial measures and could
distort an evaluation of our normal operating performance. CTS used
adjusted earnings per share, diluted measures to evaluate overall
performance, establish plans and perform strategic analysis. Using
adjusted earnings per share, diluted measures avoids distortion in the
evaluation of operating results by eliminating the impact of events
which are not related to normal operating performance. Because
adjusted earnings per share, diluted measures are based on the
exclusion of specific items, they may not be comparable to measures
used by other companies which have similar titles. CTS' management
compensates for this limitation when performing peer comparisons by
evaluating both GAAP and non-GAAP financial measures reported by peer
companies. CTS believes that adjusted earnings per share, diluted
measures are useful to its management, investors and stakeholders in
that they:
- provide a truer measure of CTS' operating performance,
- reflect the results used by management in making decisions about the
business, and
- help review and project CTS' performance over time.
We recommend that investors consider both actual and projected
adjusted earnings per share, diluted measures in evaluating the
performance of CTS with peer companies.
Segment Operating Earnings
Segment operating earnings is a non-GAAP financial measure outside the
context of the FAS No. 131 required reconciliation in the notes to the
company's financial statements. The most comparable GAAP term is
operating earnings. Segment operating earnings always excludes the
effects of charges for restructuring and related or similar expenses
when they are incurred by the Company. Segment operating earnings
exclude interest expense and non-operating income and income taxes
according to how a particular segment is measured. CTS' management
provides the segment operating earnings measure to provide consistency
between segment information in its earnings release and the business
segment discussion in the notes to its financial statements.
Free Cash Flow
The following table summarizes free cash flow for the Company:
Quarter Ended
-------------------------------------
July 2, July 2, April 2,
2006 2005 2006
------------------------- -----------
(In thousands of dollars)
Net cash provided by operations $14,798 $13,717 $2,629
Capital expenditures (3,369) (2,907) (2,479)
-------------- ---------- -----------
Free cash flow $11,429 $10,810 $150
============== ========== ===========
Free cash flow is a non-GAAP financial measure which CTS defines as
net cash provided by operations less capital expenditures. The most
directly comparable GAAP measure is net cash provided by operations.
CTS' management uses free cash flow to evaluate financial performance
and in strategic planning, specifically, for investing and financing
decisions. CTS' management believes free cash flow is a useful measure
because it reflects the performance of its overall operations more
accurately than net cash provided by operations and because it
provides investors with the same results that management used as the
basis for making decisions about the business. Free cash flow is not
an indicator of residual cash available for discretionary spending,
because it does not take into account mandatory debt service or other
non-discretionary spending requirements which are not deducted in the
calculation of free cash flow. CTS' management takes these limitations
into account when using free cash flow to make investing and financing
decisions.
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