CTS Reports Third Quarter Earnings Per Share of $0.17, Including Tax Benefit and Asset Impairment Charge.Business Editors 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. .--(BUSINESS WIRE)--Oct. 22, 2003 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 third quarter net earnings of $6.1 million, or $0.17 per share. The third quarter results included a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. income tax adjustment of $7.9 million, or $0.22 per share, and an asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of $3.4 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. , or $0.10 per share. Excluding the impact of the tax adjustment and asset impairment charge, adjusted earnings for the quarter were $1.6 million, or $0.05 per share. Revenues for the quarter were $108.5 million, reflecting an $8.2 million decrease from the prior quarter, due primarily to the seasonal impact in the automotive markets and softness in the higher-end computer equipment markets. Revenues were slightly lower than the $110.9 million reported for third quarter of 2002. However, excluding the revenue impact of previously announced end-of-life end-of-life Cardiac pacing noun The point at which a pacemaker signals need for replacement, as its battery is nearing depletion Medtalk adjective products, this year's third quarter revenue was up approximately 3% over last year's third quarter. "Though we have not yet seen any clear upturn in our served markets, we are pleased with the success of our growth initiatives," 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. "We continue to win new automotive platform positions that will drive future revenue growth and we are capturing share in communications infrastructure markets with our precision frequency products," added Schwanz. The Company indicated that it expects fourth quarter revenues to increase 10% - 15% over the third quarter and fourth quarter 2003 earnings per share to be in the $0.07 to $0.09 range. General Comments: -- Automotive sales into Asia grew to $2.5 million in the third quarter. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. automotive sales into Asia are up 30% over the first nine months of 2002. The Company is in the process of expanding its Dongguan, China factory and expects to begin production of automotive products in that location in the first quarter of 2004. Products manufactured there will serve both China and Japan. -- Production of the Company's new Belt Tension Sensor began during the quarter for 2004 model year vehicles. Though production rates are low this year, sales are expected to ramp to about $10 million in 2004. -- Third quarter gross margin was 21.8% of sales, up slightly over the second quarter's 21.0%. -- During the quarter, the Company recorded a $4.6 million pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern , $3.4 million after-tax, impairment charge to reduce the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of certain equipment resulting primarily from previously announced end-of-life products, idle and equipment held for sale. -- The quarter net income benefited from a favorable income tax adjustment of $7.9 million resulting from the reversal of reserves that were no longer required as a result of the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of statutory deadlines. -- Free cash flow, defined 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. net of all investing activities, was $7.0 million for the third quarter and $13.2 million for year-to-date 2003. -- Total debt decreased to $81.0 million, down $4.3 million from the prior quarter and down $14.4 million from 2002 year end. The debt to capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. ratio was 22%. -- During the quarter, the Company paid a dividend of $0.03 per share. The Company has paid dividends every year since 1930. THIRD QUARTER RESULTS - SEGMENT INFORMATION (Dollars in millions)
Third Quarter Third Quarter Second Quarter
2003 2002 2003
----------------- ----------------- -----------------
Segment Segment Segment
Net Operating Net Earnings/ Net Operating
Sales Earnings(a) Sales (Loss)(b) Sales Earnings
------- --------- ------- --------- ------- ---------
Components &
Sensors $ 61.5 $1.5 $ 68.7 $(0.4) $ 64.0 $1.8
Electronics
Manufacturing
Services (EMS) 47.0 2.4 42.2 2.4 52.7 2.7
------ ---- ------ ----- ------ ----
Total $108.5 $3.9 $110.9 $ 2.0 $116.7 $4.5
====== ==== ====== ===== ====== ====
(a) Excludes asset impairments of $4.6 million. (b) Excludes 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). , asset impairment and related one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. charges of $18.4 million. 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 improvement. Third quarter segment sales decreased by $2.5 million or 4% from the second quarter of 2003, driven primarily by unfavorable seasonal factors for automotive sensors. The lower sales caused the decrease in segment operating earnings. EMS: EMS sales increased by $4.9 million, or 12% from the third quarter of last year, primarily as a result of higher volumes in the communications infrastructure end markets. The impact of the higher sales was offset by the less favorable product mix, resulting in approximately the same level of segment operating earnings as the third quarter of 2002. The third quarter 2003 EMS sales decreased by $5.7 million, or 11% from the prior 2003 quarter, due to lower computer end-market demand for high-end high-end adj. Informal 1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment. 2. storage systems, and resulting in lower segment operating earnings. Statements about the Company's earnings outlook and its plans, estimates and beliefs concerning the future 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 current expectations. Actual results may differ materially from those reflected in the forward-looking statements due to a variety of factors which could affect the Company's operating results, liquidity and financial condition. We undertake no obligation to publicly update or revise any forward-looking statement. Factors that could impact future results include among others: the general market conditions in the automotive, computer and communications markets, and in the overall worldwide economies; reliance on key customers; the Company's capabilities to implement measures to improve its financial condition and flexibility; the Company's successful execution of its ongoing cost-reduction plans; pricing pressures and demand for the Company's products, especially if economic conditions worsen wors·en tr. & intr.v. wors·ened, wors·en·ing, wors·ens To make or become worse. worsen Verb to make or become worse worsening adjn or do not recover in the key markets; changes in the liability insurance markets which might impact the Company's capability to obtain appropriate levels of insurance coverage; the effect of major health concerns such as Severe Acute Respiratory Syndrome Severe Acute Respiratory Syndrome (SARS) Definition Severe acute respiratory syndrome (SARS) is the first emergent and highly transmissible viral disease to appear during the twenty-first century. (SARS) on our employees, customers and suppliers; and risks associated with our international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , including trade and tariff barriers tariff barrier n (COMM) → barrera arancelaria tariff barrier n → barrière douanière tariff barrier tariff n , exchange rates and political and 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. risks. 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. We manufacture 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. Our 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. Our 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 our Web site at www.ctscorp.com.
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) - UNAUDITED
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
--------------------- ---------------------
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
2003 2002 2003 2002
-------- -------- -------- --------
Net sales $108,496 $110,944 $330,962 $341,262
Costs and expenses:
Cost of goods sold 84,841 87,059(2) 261,704 273,590(2)
Selling, general and
administrative
expenses 14,694 16,651 42,165 48,531
Research and
development expenses 5,052 5,390 16,083 18,544
Restructuring and
impairment charges 4,563 18,343 4,563 18,343
-------- -------- -------- --------
Operating earnings
(loss) (654) (16,499) 6,447 (17,746)
Other expenses
(income):
Interest expense 2,139 2,192 6,010 7,744
Other (373) (263) (548) (963)
-------- -------- -------- --------
Total other
expenses 1,766 1,929 5,462 6,781
-------- -------- -------- --------
Earnings
(loss) before
income taxes (2,420) (18,428) 985 (24,527)
Income tax benefit (8,494)(1) (4,607) (7,643)(1) (6,132)
-------- -------- -------- --------
Net earnings (loss) $ 6,074 $(13,821) $ 8,628 $(18,395)
-------- -------- -------- --------
Net earnings (loss)
per share:
Basic $ 0.17 $ (0.41) $ 0.25 $ (0.56)
-------- -------- -------- --------
Diluted $ 0.17 $ (0.41) $ 0.25 $ (0.56)
-------- -------- -------- --------
Cash dividends
declared per share $ 0.03 $ 0.03 $ 0.09 $ 0.09
Average common shares
outstanding:
Basic 34,799 33,606 34,351 32,907
Diluted 35,352 33,606 34,729 32,907
(1) Income tax benefit includes $7.9 million relating to the reversal
of income tax reserves due to expiration of certain statutory
limitations.
(2) Cost of goods sold includes restructuring-related, one-time
charges of $0.1 million and $1.3 million, for the three and nine-
month periods ended September 29, 2002, respectively, consisting
primarily of equipment relocation and other employee-related costs.
The nine-month period ended September 29, 2002 also includes a one-
time gain from a customer reimbursement of $3.1 million.
CTS Corporation and Subsidiaries
Condensed Consolidated Balance Sheets- Unaudited
(In thousands of dollars)
September 28, December 31,
2003 2002 (a)
------------ ------------
(Unaudited)
Cash and equivalents $ 19,646 $ 9,225
Accounts receivable, net 62,812 63,802
Inventories, net 37,434 36,262
Other current assets 44,560 43,045
----------- --------
Total current assets 164,452 152,334
----------- --------
Property, Plant & Equipment, net 127,350 148,632
Other Assets 191,171 189,066
----------- --------
Total Assets $482,973 $490,032
=========== ========
Current maturities of long-term debt $ - $ 28,350
Accounts payable 47,342 44,490
Other accrued liabilities 45,695 61,716
----------- --------
Total current liabilities 93,037 134,556
----------- --------
Long-term debt 81,000 67,000
Other obligations 23,384 23,456
Shareholders' equity 285,552 265,020
----------- --------
Total Liabilities and
Shareholders' Equity $482,973 $490,032
=========== ========
(a) The balance sheet at December 31, 2002 has been derived from the
audited financial statements at that date.
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