CTS Reports Strong Results for the Second Quarter; Full-Year 2004 Earnings Guidance Raised.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 2004 revenues of $137.6 million, an 18% increase over the second quarter of 2003. 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 of $0.19, which included a $0.06 earnings per share gain on the sale of excess land, improved over the 2003 second quarter of $0.06 per share. Revenues for the first six months of $259.8 million were 17% above 2003 first-half revenues of $222.5 million. Diluted earnings per share for the 2004 first half were $0.26 compared to the $0.07 for the first half of 2003. "We were pleased with our second quarter performance. Sales were the highest since the second quarter of 2001 and operating earnings Operating Earnings 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 were the best since the fourth quarter of 2000. Automotive products, components for communication infrastructure and 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). all saw double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" year-over-year sales growth, benefiting from our continuing focus on new products, customer expansion and business execution," commented 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. Based on the first-half 2004 results, the Company has increased its expectations for full-year 2004 sales growth to be in the range of 10% to 14% over 2003. Earnings per share, inclusive of inclusive of prep. Taking into consideration or account; including. the gain from the sale of excess land in the second quarter, are now expected to be in the range of $0.50 to $0.54 for full-year 2004. General Comments: --The Company generated free cash flow of $14.4 million in the second quarter of 2004 and $17.5 million year to date. Free cash flow is defined by the Company as operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. plus cash flow from investing activities Cash Flow From Investing Activities An item on the cash flow statement that reports the aggregate change in a company's cash position resulting from any gains (or losses) from investments in the financial markets and operating subsidiaries, and changes resulting from amounts spent . --Total debt net of cash was $36.8 million, $11.5 million lower than the first quarter and $13.7 million lower than year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2003. --The Company lowered its estimated full-year effective income tax rate from 25% to 23% after it received confirmation of a tax incentive which lowered the statutory tax rate in one of its foreign jurisdictions and due to greater taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. being generated in countries with lower tax rates. --In May 2004, the Company completed its offering of $60 million in senior subordinated convertible notes at a 2-1/8% coupon rate Coupon rate In bonds, notes, or other fixed income securities, the stated percentage rate of interest, usually paid twice a year. , convertible at $15 per share into the Company's common stock under specified conditions, representing a 36.24% premium over the closing price on May 5, 2004. The Company utilized $40 million of the proceeds from this offering to repay industrial revenue bonds which had an average coupon of 7.5%. Beginning in the third quarter 2004, this will reduce interest expense by nearly $0.5 million pre-tax per quarter.
SECOND QUARTER RESULTS - SEGMENT INFORMATION
(Dollars in millions)
Second Quarter Second Quarter First Quarter
2004 2003 2004
----------------- ----------------- -----------------
Segment Segment Segment
Net Operating Net Operating Net Operating
Sales Earnings Sales Earnings Sales Earnings
------- --------- ------- --------- ------- ---------
Components &
Sensors $ 68.2 $ 8.7 $ 64.0 $ 1.8 $ 63.5 $ 3.0
Electronics
Manufacturing
Services (EMS) 69.4 1.9 52.7 2.7 58.6 1.9
------ ------ ------ ------ ------ ------
Total $137.6 $ 10.6 $116.7 $ 4.5 $122.1 $ 4.9
====== ====== ====== ====== ====== ======
Components & Sensors
adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. currency exchange and the gain from the sale of excess land. The second quarter components and sensors sales increased from the first quarter of 2004 by $4.7 million, or 7%, reflecting improving demand and normal seasonal factors. Segment operating earnings were improved over the first quarter as a result of the higher sales, product mix improvements, and the gain from the sale of excess land. EMS: EMS second quarter 2004 sales increased by $16.7 million, or 32%, from the second quarter of 2003, primarily driven by increased demand for communications infrastructure equipment. Segment operating earnings were lower than the second quarter of 2003, primarily due to the additional costs associated with the start-up Start-up The earliest stage of a new business venture. of EMS operations within our Singapore facility, pricing and unfavorable currency exchange. The second quarter EMS revenues were $10.8 million, or 18% above the 2004 first quarter sales, due to continuing demand growth in both the computing computing - computer and communications equipment industry for the Company's products and services. EMS segment operating earnings were unchanged compared to the first quarter of 2004 as contributions from incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. sales were offset by Singapore expansion costs. The statements about future results are "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 statements are based on management's expectations, certain assumptions and currently available information. Actual results may differ materially from those reflected in the forward-looking statements due to a variety of geopolitical ge·o·pol·i·tics n. (used with a sing. verb) 1. The study of the relationship among politics and geography, demography, and economics, especially with respect to the foreign policy of a nation. 2. a. , economic, health, industry and other factors which could affect the Company's operating results, liquidity and financial condition. Investors are encouraged to examine the Company's SEC filings, which more fully describe the risks and uncertainties associated with the Company's business. CTS Corporation is a leading designer and manufacturer of electronic components and sensors, and a provider of EMS products and services for the automotive, computer and communications markets. The Company 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 and Asia. A network of direct sales personnel, independent manufacturers' representatives Manufacturers representatives (reps), also known as sales agents, are independently owned and managed sales companies that are an alternative to hiring a direct sales force. and electronic distributors provides worldwide sales coverage. The Company's stock is traded on the NYSE under the ticker symbol Ticker Symbol An 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.
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
------------------- -------------------
June 27, June 29, June 27, June 29,
2004 2003 2004 2003
--------- --------- --------- ---------
Net sales $137,624 $116,697 $259,771 $222,466
Costs and expenses:
Cost of goods sold 108,707 92,177 206,245 176,863
Selling, general and
administrative expenses 16,622 14,623 31,499 27,471
Research and
development expenses 4,673 5,390 9,557 11,031
Gain on sale of assets (3,006) - (3,067) -
-------- -------- -------- --------
Operating earnings 10,628 4,507 15,537 7,101
Other expenses (income):
Interest expense 1,590 1,899 3,123 3,871
Other 168 (36) 184 (175)
-------- -------- -------- --------
Total other expenses 1,758 1,863 3,307 3,696
-------- -------- -------- --------
Earnings before
income taxes 8,870 2,644 12,230 3,405
Income tax expense 1,973 661 2,813 851
-------- -------- -------- --------
Net earnings $ 6,897 $ 1,983 $ 9,417 $ 2,554
-------- -------- -------- --------
Net earnings per share:
Basic $ 0.19 $ 0.06 $ 0.26 $ 0.07
-------- -------- -------- --------
Diluted $ 0.19 $ 0.06 $ 0.26 $ 0.07
-------- -------- -------- --------
Cash dividends declared
per share $ 0.03 $ 0.03 $ 0.06 $ 0.06
Average common shares
outstanding:
Basic 35,986 34,227 35,971 34,125
Diluted 36,253 34,569 36,248 34,415
CTS Corporation and Subsidiaries
Condensed Consolidated Balance Sheets - Unaudited
(In thousands of dollars)
June 27, December 31,
2004 2003 (a)
------------ ------------
(Unaudited)
Cash and equivalents $ 48,199 $ 25,346
Accounts receivable, net 82,549 72,290
Inventories, net 44,471 31,925
Other current assets 36,820 35,205
----------- -----------
Total current assets 212,039 164,766
----------- -----------
Property, Plant & Equipment, net 116,914 122,481
Other Assets 183,127 195,003
----------- -----------
Total Assets $ 512,080 $ 482,250
=========== ===========
Accounts payable $ 64,352 $ 52,252
Other accrued liabilities 43,584 43,437
----------- -----------
Total current liabilities 107,936 95,689
----------- -----------
Long-term debt 85,000 75,880
Other obligations 16,440 16,490
Shareholders' equity 302,704 294,191
----------- -----------
Total Liabilities and
Shareholders' Equity $ 512,080 $ 482,250
=========== ===========
(a) The balance sheet at December 31, 2003 has been derived from the
audited financial statements at that date.
CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION
The following table summarizes free cash flow for the Company:
Three Months Ended Six Months Ended
June 27, June 29, June 27, June 29,
2004 2003 2004 2003
--------- --------- --------- ---------
(In thousands of dollars)
Net cash provided by
(used in) operations $ 11,448 $ (1,310) $ 4,708 $ 6,889
Net cash provided by
(used in) investing
activities 2,934 (2,306) 12,823 (634)
-------- -------- -------- --------
Free cash flow $ 14,382 $ (3,616) $ 17,531 $ 6,255
======== ======== ======== ========
Management believes that free cash flow provides useful information to
investors regarding the Company's ability to generate cash from
business operations that is available for internal growth, service of
debt principal, dividends, share repurchases and acquisitions and
other investments. Management uses free cash flow as one measure to
monitor and evaluate the performance of the Company.
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