CTS CTS Corporation

Solid financial performance

CTS Corporation (NYSE:CTS) today announced first quarter 2017 results.

• Sales were $100.2 million, up 3.6% year-over-year.
• Net earnings were $8.5 million or $0.25 per diluted share compared to $7.9 million or $0.24 per share in the first quarter of 2016.
• Adjusted EPS was $0.26 per diluted share versus $0.26 in the first quarter of 2016.
• Total Booked Business at the end of the first quarter of 2017 was $1.538 billion.

“The first quarter was a solid start to the year,” said Kieran O’Sullivan, CEO of CTS Corporation. “We are focused on improving our performance over the balance of the year. Our booked business is growing steadily. Our operational execution remains on track, and various transition projects are moving forward.”

2017 Guidance

Management reaffirms its prior guidance. Full year 2017 sales are expected to be in the range of $405 to $420 million. Adjusted earnings per diluted share for 2017 are expected to be in the range of $1.12 to $1.22.

Conference Call

As previously announced, the Company has scheduled a conference call at 11:00 a.m. (EDT) today to discuss the first quarter financial results. The dial-in number is 800-311-0799 (719-325-2433, if calling from outside the U.S.). The passcode is 646091. There will be a replay of the conference call from 2:00 p.m. (EDT) today through 2:00 p.m. (EDT) on Thursday, May 11, 2017. The telephone number for the replay is 888-203-1112 (719-457-0820, if calling from outside the U.S.). The replay passcode is 1813598. 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. CTS manufactures sensors, actuators and electronic components in North America, Europe and Asia, and supplies these products to OEMs in the aerospace, communications, defense, industrial, information technology, medical 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.

         

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED

(In thousands of dollars, except per share amounts)

  Three Months Ended March 31, March 31,         2017 2016 Net sales $ 100,154 $ 96,705 Cost of goods sold       65,930   63,237   Gross Margin 34,224 33,468 Selling, general and administrative expenses 15,246 14,872 Research and development expenses 6,003 6,163 Restructuring and impairment charges 777 — Loss (gain) on sale of assets       2   (3 ) Operating earnings 12,196 12,436 Other income (expense): Interest expense (684 ) (820 ) Interest income 253 547 Other income (expense)       460   (198 ) Total other income (expense)       29   (471 ) Earnings before income taxes 12,225 11,965 Income tax expense       3,741   4,102   Net earnings       $ 8,484   $ 7,863   Earnings per share: Basic $ 0.26 $ 0.24 Diluted       $ 0.25   $ 0.24     Basic weighted – average common shares outstanding: 32,802 32,632 Effect of dilutive securities       560   373   Diluted weighted – average common shares outstanding       33,362   33,005     Cash dividends declared per share       $ 0.04   $ 0.04              

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

  (Unaudited) March 31, December 31,         2017 2016 ASSETS Current Assets Cash and cash equivalents $ 121,819 $ 113,805 Accounts receivable, net 63,016 62,612 Inventories, net 30,954 28,652 Other current assets       11,431   10,638   Total current assets 227,220 215,707 Property, plant and equipment, net 83,268 82,111 Other Assets Prepaid pension asset 48,114 46,183 Goodwill 61,744 61,744 Other intangible assets, net 62,833 64,370 Deferred income taxes 42,779 45,839 Other       1,737   1,743   Total other assets       217,207   219,879   Total Assets       $ 527,695   $ 517,697   LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Short-term notes payable $ 1,006 $ 1,006 Accounts payable 41,937 40,046 Accrued payroll and benefits 7,590 11,369 Accrued liabilities       42,463   45,708   Total current liabilities 92,996 98,129 Long-term debt 94,000 89,100 Post retirement obligations 7,008 7,006 Other long-term obligations       7,607   5,580   Total Liabilities 201,611 199,815 Commitments and Contingencies (Note 9) Shareholders’ Equity Common stock 303,736 302,832 Additional contributed capital 38,985 40,521 Retained earnings 418,149 410,979 Accumulated other comprehensive loss       (91,530 ) (93,194 ) Total shareholders’ equity before treasury stock 669,340 661,138 Treasury stock       (343,256 ) (343,256 ) Total shareholders’ equity       326,084   317,882   Total Liabilities and Shareholders’ Equity       $ 527,695   $ 517,697    

CTS CORPORATION AND SUBSIDIARIESOTHER SUPPLEMENTAL INFORMATION

Earnings Per Share

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

Additional Information

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

          Three Months Ended         March 31, 2017 March 31, 2016 GAAP diluted earnings per share $ 0.25 $ 0.24   Tax affected charges to reported diluted earnings per share: Restructuring and related charges 0.02 — Foreign currency (gain) loss (0.01 ) 0.01 Transaction costs       —   0.01 Adjusted diluted earnings per share       $ 0.26   $ 0.26  

Additional Information

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

          Three Months Ended         March 31, 2017 March 31, 2016 Depreciation and amortization expense $ 4,708 $ 4,021 Stock-based compensation expense       $ 880   $ 282  

Non-GAAP Financial Measures

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

CTS adjusts for these items because they are discrete events, which have a significant impact on comparable GAAP financial measures and could distort an evaluation of our normal operating performance.

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.

We recommend that investors consider both actual and adjusted measures in evaluating the performance of CTS with peer companies.

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CTS CorporationAshish Agrawal, +1 630-577-8800Vice President and Chief Financial Officerashish.agrawal@ctscorp.com