CTS Announces Third Quarter 2021 Results

Solid Financial Results Driven by Long-Term Diversification of the Business

Lisle, Illinois, UNITED STATES


LISLE, Ill., Oct. 27, 2021 (GLOBE NEWSWIRE) -- CTS Corporation (NYSE: CTS) today announced third quarter 2021 results.

  • Sales were $122.4 million, up 8% year-over-year. Sales to non-transportation end markets increased 24%, and sales to transportation end market decreased 5%. The Sensor Scientific acquisition added $1.8 million of sales in the third quarter of 2021.
  • Net loss was $63.9 million, or $(1.97) per diluted share, versus $11.1 million, or $0.34 per diluted share, in the third quarter of last year. The third quarter net earnings were impacted by a non-cash charge of $76 million, net of taxes related to the previously disclosed termination of the U.S. pension plan.
  • Adjusted diluted EPS was $0.46, up from $0.34 in the third quarter of 2020.
  • Free cash flow was $17.2 million, down from $22.4 million in the third quarter of 2020.
  • New business wins were $179 million.

“We continued to advance our diversification strategy during the third quarter, with non-transportation related revenue closer to 50% of total revenue for the quarter. Further, our third quarter results demonstrated the differentiation of our product portfolio, as well as the richness of our customer base, which allowed us to deliver growth ahead of the industry, despite a challenging supply chain environment. As we look forward, we believe the strong execution of our team, coupled with a robust pipeline will allow us to continue to capitalize on the opportunities in the industrial, medical, aerospace and defense end markets,” said Kieran O’Sullivan, CEO of CTS Corporation.

2021 Guidance

While management remains mindful of supply chain uncertainties, CTS has raised and narrowed its 2021 guidance for sales to $495 – $505 million from $480 – $500 million and for adjusted diluted EPS to $1.85 – $1.95 from $1.70 – $1.90.

Conference Call

As previously announced, the Company has scheduled a conference call at 10:00 a.m. (EST) today to discuss the third quarter financial results. The dial-in number is 800-309-1256 (323-347-3622, if calling from outside the U.S.). The passcode is 572446. A replay of the conference call will be available from 1:00 p.m. (EST) on Wednesday, October 27, 2021 through 1:00 p.m. (EST) on Wednesday, November 10, 2021. The telephone number for the replay is 888-203-1112 (719-457-0820, if calling from outside the U.S.). The replay passcode is 6028607. A live audio webcast of the conference call will be available and can be accessed directly from the Investors section of the website of CTS Corporation at www.ctscorp.com.

About CTS

CTS (NYSE: CTS) is a leading designer and manufacturer of products that Sense, Connect, and Move. The company manufactures sensors, actuators, and electronic components in North America, Europe, and Asia, and provides engineered products to customers in the aerospace/defense, industrial, medical, telecommunications/IT, and transportation markets. For more information, visit www.ctscorp.com.

Safe Harbor

This document contains statements that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, any financial or other guidance, statements that reflect our current expectations concerning future results and events, and any other statements that are not based solely on historical fact. Forward-looking statements are based on management's expectations, certain assumptions and currently available information. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. These forward-looking statements are made subject to certain risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from those presented in the forward-looking statements. Many of these, and other, risks and uncertainties are discussed in further detail in Item 1A. of CTS’ Annual Report on Form 10-K. We undertake no obligation to publicly update our forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.

Contact

Ashish Agrawal
Vice President and Chief Financial Officer
CTS Corporation
4925 Indiana Avenue
Lisle, IL 60532
USA
Telephone: +1 (630) 577-8800
E-mail: ashish.agrawal@ctscorp.com

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) EARNINGS - UNAUDITED
(In thousands of dollars, except per share amounts)

  Three Months Ended  Nine Months Ended 
  September 30,
2021
  September 30,
2020
  September 30,
2021
  September 30,
2020
 
Net sales $122,382  $113,777  $380,394  $301,049 
Cost of goods sold  76,720   76,871   244,446   204,677 
Gross margin  45,662   36,906   135,948   96,372 
Selling, general and administrative expenses  19,922   16,883   59,184   48,310 
Research and development expenses  6,454   5,723   18,170   18,653 
Restructuring charges  319   1,041   551   1,416 
Operating earnings  18,967   13,259   58,043   27,993 
Other (expense) income:                
Interest expense  (514)  (857)  (1,577)  (2,617)
Interest income 230  217  689  852 
Other (expense) income, net  (108,502)  1,617   (132,786)  (109)
Total other expense, net  (108,786) 977   (133,674)  (1,874)
(Loss) earnings before income taxes  (89,819)  14,236   (75,631)  26,119 
Income tax expense  (25,923)  3,163   (24,600)  6,381 
Net (loss) earnings  (63,896)  11,073   (51,031) $19,738 
Earnings per share:                
Basic $(1.97) $0.34  $(1.58) $0.61 
Diluted $(1.97) $0.34  $(1.58) $0.61 
Basic weighted – average common shares outstanding:  32,379   32,268   32,365   32,331 
Effect of dilutive securities    241     270 
Diluted weighted – average common shares outstanding:  32,379   32,509   32,365   32,601 
Cash dividends declared per share $0.04  $0.04  $0.12  $0.12 

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)

  (Unaudited)     
  September 30, 2021  December 31, 2020 
ASSETS        
Current Assets        
Cash and cash equivalents $128,527  $91,773 
Accounts receivable, net  78,210   80,981 
Inventories, net  50,867   45,870 
Other current assets  19,845   14,607 
Total current assets  277,449   233,231 
Property, plant and equipment, net  92,533   97,437 
Operating lease assets, net  22,456   23,281 
Other Assets        
Prepaid pension asset  50,638   56,642 
Goodwill  109,798   109,497 
Other intangible assets, net  72,236   79,121 
Deferred income taxes  24,663   24,250 
Other  2,200   2,590 
Total other assets  259,535   272,100 
Total Assets $651,973  $626,049 
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Current Liabilities        
Accounts payable $48,976  $50,489 
Operating lease obligations  3,354   3,294 
Accrued payroll and benefits  17,069   12,978 
Accrued expenses and other liabilities  35,673   38,171 
Total current liabilities  105,072   104,932 
Long-term debt  50,000   54,600 
Long-term operating lease obligations  22,262   23,163 
Long-term pension obligations  7,114   7,466 
Deferred income taxes  6,907   7,010 
Other long-term obligations  3,244   5,196 
Total Liabilities  194,599   202,367 
Commitments and Contingencies        
Shareholders’ Equity        
Common stock  314,351   311,190 
Additional contributed capital  40,958   41,654 
Retained earnings  484,368   539,281 
Accumulated other comprehensive loss  (4,842)  (95,921)
Total shareholders’ equity before treasury stock  834,835   796,204 
Treasury stock  (377,461)  (372,522)
Total shareholders’ equity  457,374   423,682 
Total Liabilities and Shareholders’ Equity $651,973  $626,049 

CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION - UNAUDITED

Earnings Per Share

The following table reconciles GAAP diluted (loss) earnings per share to adjusted diluted earnings per share for the Company:

  Three Months Ended  Nine Months Ended 
  September 30,
2021
  September 30,
2020
  September 30,
2021
  September 30,
2020
 
GAAP diluted (loss) earnings per share $(1.97) $0.34  $(1.58) $0.61 
Tax affected charges to reported diluted (loss) earnings per share:                
Restructuring charges  0.01   0.03   0.02   0.04 
Foreign currency (gain) loss  0.03   (0.07)  0.04   (0.06)
Non-cash pension expense  2.54   0.01   3.10   0.04 
Environmental charges  0.01   0.01   0.02   0.03 
Discrete tax items  (0.16)  0.02   (0.16)  0.03 
Adjusted diluted earnings per share $0.46  $0.34  $1.44  $0.69 

Free Cash Flow

The following table reconciles GAAP operating cash flow to free cash flow for the Company:

  Three Months Ended  Nine Months Ended 
  September 30,
2021
  September 30,
2020
  September 30,
2021
  September 30,
2020
 
Net cash provided by operating activities $21,332  $25,573  $60,117  $49,297 
Capital expenditures  (4,170)  (3,196)  (8,140)  (10,441)
Free cash flow $17,162  $22,377  $51,977  $38,856 

Additional Information

The following table includes other financial information not presented in the preceding financial statements.

  Three Months Ended  Nine Months Ended 
  September 30,
2021
  September 30,
2020
  September 30,
2021
  September 30,
2020
 
Depreciation and amortization expense $6,719  $6,676  $20,231  $19,819 
Stock-based compensation expense $987  $1,119  $4,106  $2,164 

Non-GAAP Financial Measures

From time to time, CTS may use non-GAAP financial measures in discussing CTS’ business. These measures are intended to supplement, not replace, CTS’ presentation of its financial results in accordance with GAAP. CTS’ management believes that non-GAAP financial measures can be useful to investors in analyzing CTS’ financial performance and results of operations over time. CTS recommends that investors consider both actual and adjusted measures in evaluating the performance of CTS with peer companies.

Adjusted Diluted Earnings Per Share

Adjusted diluted earnings per share is a non-GAAP financial measure. The most directly comparable GAAP financial measure is diluted (loss) earnings per share.

CTS uses an adjusted earnings per share measure to evaluate overall performance, establish plans and perform strategic analysis. Using this measure avoids distortion in the evaluation of operating results by eliminating the impact of events which are not related to normal operating performance. Because this measure is based on the exclusion or inclusion 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 this measure is useful to its management, investors and stakeholders in that it:

  • provides a meaningful measure of CTS' operating performance,
  • reflects the results used by management in making decisions about the business, and
  • helps review and project CTS' performance over time.

Free Cash Flow

Free cash flow is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net cash provided by operating activities. CTS believes free cash flow is a useful measure of its ability to generate cash.