CTS Announces Strong First Quarter Results; Diluted Earnings Per Share Up 78% Year-Over-Year; CTS Raises EPS Guidance for 2006
ELKHART, Ind.--April 25, 2006--CTS Corporation today announced first quarter 2006 diluted earnings per share of $0.16, up 78% over the same period last year, on sales of $150.5 million, a 3% decrease from the first quarter of 2005. This was the sixteenth consecutive quarter of year-over-year earnings per share growth.First quarter sales declined $4.8 million primarily from expected weaker EMS sales into computer markets and declining component sales for mobile handset applications. Partially offsetting this decline was a 9% increase in automotive component sales, as well as increased sales of electronic components for infrastructure applications.
Net earnings in the first quarter were $6.2 million or $0.16 per diluted share. This included a charge of $0.04 per share for the previously announced consolidation of the Berne, Indiana operation and associated costs. Excluding the restructuring charge, adjusted diluted earnings per share were $0.20. First quarter results benefited $0.03 per share due to the favorable settlement of a long-standing insurance claim.
"Despite expected lower overall sales, CTS demonstrated solid growth in automotive products and component sales for infrastructure applications. We are also very pleased with our strong first quarter earnings, which reflect improved business mix as well as the benefits of continued cost reductions," commented Donald Schwanz, CTS Chairman and Chief Executive Officer.
Based on the first quarter results and our outlook for the remainder of the year, at this time, we are maintaining our prior full-year 2006 guidance of 6% - 8% in sales growth over 2005 and increasing our earnings per share guidance. Full-year adjusted diluted earnings per share are now expected to be in a range of $0.75 to $0.80, excluding $0.08 per share for full-year Berne restructuring and related charges.
Capital expenditures of $2.5 million were 1.6% of sales in the first quarter 2006. The full-year 2006 capital expenditures are expected to be in the range of $18 - $20 million.
SEGMENT INFORMATION
(Dollars in millions)
First Quarter First Quarter Fourth Quarter
2006 2005 2005
----------------- ----------------- -----------------
Net Operating Net Operating Net Operating
Sales Earnings Sales Earnings Sales Earnings
------- --------- ------- --------- ------- ---------
Components &
Sensors $67.6 $10.4 $64.2 $3.6 $62.3 $12.1
Electronics
Manufacturing
Services (EMS) 82.9 1.0 91.1 2.1 92.3 3.0
----- ---- -----
Segment Operating
Earnings 11.4 5.7 15.1
Expenses not
allocated to
business segments:
- Restructuring
and related
charges (2.1)
------ ---- ------ ---- ------ -----
Total $150.5 $9.3 $155.3 $5.7 $154.6 $15.1
====== ===== ====== ==== ====== =====
Components & Sensors: Components and sensors sales increased $3.4 million or 5% over the first quarter of 2005 primarily on the strength of automotive and electronic components. Partially offsetting this were declines in component sales for handset applications, a business the Company is intentionally exiting, and our divestiture of the Low Temperature Co-fired Ceramic (LTCC) product line. Segment operating earnings increased on higher sales, improved margins from cost reductions, better product mix, higher royalty income and a favorable insurance claim settlement, partially reduced by start-up costs related to our new facility in the Czech Republic, which we expect to be fully operational in early third quarter.
Components and sensors sales increased $5.3 million or 9% from the fourth quarter of 2005 reflecting strong automotive product demand. Despite the favorable impact of higher sales and the favorable insurance claim settlement in the first quarter, segment operating earnings decreased from the fourth quarter primarily from reduced pension income, Czech Republic start-up costs and less favorable product mix. In addition, fourth quarter 2005 earnings benefited from gain on sale of assets.
EMS: EMS sales decreased $8.3 million or 9% from the first quarter of 2005 driven primarily by lower sales to Hewlett Packard. The segment operating earnings decrease was primarily due to lower volumes and timing of certain overhead expenses.
Compared to the fourth quarter of 2005, EMS segment sales decreased $9.4 million or 10%. Total segment operating earnings decreased $1.9 million on lower volumes and timing of certain overhead expenses.
Conference Call
As previously announced, the Company has scheduled a conference call on Wednesday, April 26, 2006 at 11:00 a.m. Eastern Daylight Time. Those interested in participating may dial 888-639-6205 (703-925-2608, if calling from outside the U.S.). No access code is needed. There will be a replay of the conference call available from 3:15 p.m. EDT on April 26, 2006, through 11:59 p.m. EDT on May 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 825567. 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 (www.netscape.com), Compuserve (www.compuserve.com) and others. AOL subscribers will have access through the Personal Finance section of AOL.
About CTS
CTS is a leading designer and manufacturer of electronic components and sensors and a provider of electronics manufacturing services (EMS) to OEMs in the automotive, computer, communications, medical and industrial markets. CTS manufactures products in North America, Europe and Asia. CTS' stock is traded on the NYSE under the ticker symbol "CTS." To find out more, visit the CTS Web site at www.ctscorp.com.
Safe Harbor Statement
This press release contains certain 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, 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 by these statements.
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.
Contact: Vinod M. Khilnani, Senior Vice President and Chief Financial
Officer, or
Mitchell J. Walorski, Director of Investor Relations
CTS Corporation, 905 West Boulevard North, Elkhart, IN 46514
Telephone (574) 293-7511 FAX (574) 293-6146
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands, except per share amounts)
Three Months Ended
-------------------
April 2, April 3,
2006 2005
--------- ---------
Net sales $150,493 $155,330
Costs and expenses:
Cost of goods sold 118,419 127,115
Selling, general and administrative expenses 16,737 17,757
Research and development expenses 4,092 4,787
Restructuring charge 1,962 -
--------- ---------
Operating earnings 9,283 5,671
Other expenses (income):
Interest expense 1,111 1,717
Other (128) (445)
--------- ---------
Total other expenses 983 1,272
--------- ---------
Earnings before income taxes 8,300 4,399
Income tax expense 2,075 1,012
--------- ---------
Net earnings $6,225 $3,387
--------- ---------
Net earnings per share:
Basic $0.17 $0.09
--------- ---------
Diluted $0.16 $0.09
--------- ---------
Cash dividends declared per share $0.03 $0.03
Average common shares outstanding:
Basic 35,821 36,398
Diluted 40,234 40,979
CTS Corporation and Subsidiaries
Condensed Consolidated Balance Sheets- Unaudited
(In thousands of dollars)
April 2, December 31,
2006 2005(a)
---------- ------------
Cash and cash equivalents $12,637 $12,029
Accounts receivable, net 94,136 91,265
Inventories, net 61,450 60,564
Other current assets 19,813 16,816
---------- ------------
Total current assets 188,036 180,674
---------- ------------
Property, plant & equipment, net 106,278 109,676
Other assets 243,865 243,586
---------- ------------
Total Assets $538,179 $533,936
========== ============
Notes payable and current portion
of long-term debt $14,294 $13,463
Accounts payable 62,681 67,196
Other accrued liabilities 40,552 39,274
---------- ------------
Total current liabilities 117,527 119,933
---------- ------------
Long-term debt 68,208 68,293
Other obligations 16,206 16,139
Shareholders' equity 336,238 329,571
Total Liabilities and ---------- ------------
Shareholders' Equity $538,179 $533,936
========== ============
(a) 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 actual and projected earnings per
share, diluted to adjusted actual and projected earnings per share,
diluted for the Company:
------------------ -------------------
Actual Projected
------------------ -------------------
Three Months Ended Twelve Months Ended
April 2, April 3, December 31,
2006 2005 2006
------------------ -------------------
Earnings per share, diluted $0.16 $0.09 $0.67 - $0.72
Tax affected charges to reported
diluted earnings per share:
Restructuring and related
charges 0.04 - 0.08
--------- -------- -------------------
Adjusted earnings per share,
diluted $0.20 $0.09 $0.75 - $0.80
========= ======== ===================
Adjusted earnings per share, diluted is a non-GAAP financial measure.
The most directly comparable GAAP financial measure is earnings per
share, diluted. CTS calculated adjusted earnings per share, diluted
for the first quarter of 2006 and full year projected adjusted
earnings per share, diluted to exclude the per share impact of
restructuring and related charges resulting from the consolidation of
CTS' Berne, Indiana facility. We exclude the impact of this item
because it was a discrete event which had a significant impact on
comparable GAAP financial measures and could distort an evaluation of
our normal operating performance. CTS uses 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
earnings per share, diluted and 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 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 other 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.