CTS Announces Record Quarter and Annual Results
27 January 2000
CTS Announces Record Quarter and Annual Results
ELKHART, Ind.--Jan. 26, 2000--CTS Corporation announced record results for sales, earnings and earnings per share for the fiscal quarter and year ended December 31, 1999.CTS' net sales were $198.7 million for the fourth quarter of 1999, an increase of 113% over the comparable period last year. Fourth quarter net earnings increased 73% to $18.9 million, or $0.66 per diluted share, compared to $10.9 million, or $0.38 per diluted share, in 1998.
Total year net sales of $677.1 million were 83% over 1998 net sales of $370.4 million. Net earnings of $60.1 million, or $2.10 per diluted share, excluding the after-tax amount of $8.6 million for the one-time, noncash write-off for acquired in-process research and development (IPR&D) related to the acquisition of CTS Wireless, were 60% over the 1998 amount of $37.5 million, or $1.28 per diluted share. Net earnings of $51.5 million after the IPR&D write-off were 37% higher than 1998. Earnings per share after the IPR&D write-off for 1999 would have been $0.30 less than the $2.10 per share, but also significantly better than 1998's earnings per share of $1.28.
The fourth quarter earnings from continuing operations of $18.9 million improved by $8.9 million, or 89% from 1998's fourth quarter. The associated diluted earnings per share increased to $0.66 from the $0.35 reported in the fourth quarter of last year, an 89% increase. On a year-to-date basis and excluding the impact of the IPR&D write-off, earnings from continuing operations improved to $60.1 million, a 76% increase from 1998. The diluted earnings per share for continuing operations before the IPR&D write-off of $2.10 represent a 79% increase over the 1998 amount of $1.17. For the twelve months ended December 31, 1999, CTS had EBITDA of $129.6 million, substantially over the $68.8 million for 1998.
"We are very pleased with our continuing performance improvements," said Joseph P. Walker, Chairman of the Board, President and Chief Executive Officer of CTS. "In addition to the impact of the CTS Wireless acquisition, the 1999 fourth quarter results show significant increases over the 1998 fourth quarter in other parts of our business, as a result of the development of a modules product line and the growth in our interconnect, automotive and resistor products. CTS' fourth quarter results also compare favorably to the record results we posted in the third quarter of 1999, primarily due to the CTS Wireless acquisition, the growth of our RF (radio frequency) integrated modules business and the continuing strong performance in our interconnect and automotive products," Walker added.
Summaries of fourth quarter and year-to-date (YTD) financial
results are as follows:
(Dollars in millions, except per share amounts)
(Per share amounts adjusted for 2:1 stock split)(a)
Fourth Quarter
--------------------------
% Change
1999
1999 1998 from 1998
---- ---- ---------
Net sales $198.7 $ 93.3 113%
Operating earnings $29.9 $ 14.4 108%
Earnings from continuing operations $18.9 $ 10.0 89%
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Diluted earnings from
continuing operations $0.66 $ 0.35 89%
---------------------
EBITDA $38.6 $ 21.3 81%
Twelve Months YTD(b)
--------------------------
% Change
1999
1999 1998 from 1998
---- ---- ---------
Net sales $677.1 $370.4 83%
Operating earnings $95.7 $49.6 93%
Earnings from continuing operations $60.1 $34.1 76%
---------------------
Diluted earnings per share from
continuing operations $2.10 $1.17 79%
---------------------
EBITDA $129.6 $ 68.8 88%
(a) All data give effect to the two-for-one stock split on August 12,
1999.
(b) Excludes the effect of a one-time, noncash write-off for acquired
in-process research and development related to the acquisition of
CTS Wireless in the first quarter of 1999 ($12.9 million pre-tax,
$8.6 million after-tax, or $0.30 per diluted share).
Fourth Quarter and Annual Financial and Segment Information
Net sales and operating earnings of CTS' business segments are as
follows:
Fourth Quarter 1999 Fourth Quarter 1998
------------------- -------------------
(Dollars in millions) Net Operating Net Operating
Sales Earnings Sales Earnings
------ --------- ------ ---------
Electronic Components $133.7 $ 21.8 $ 64.7 $ 13.0
Electronic Assemblies 65.0 8.1 28.6 1.4
------ ------ ------ -------
$198.7 $ 29.9 $ 93.3 $14.4
------ ------ ------ -------
------ ------ ------ -------
Twelve Months 1999 Twelve Months 1998
------------------ ------------------
(Dollars in millions) Net Operating Net Operating
Sales Earnings Sales Earnings
------ --------- ------ ---------
Electronic Components $507.4 $ 81.0 $247.7 $ 41.9
Electronic Assemblies 169.7 14.7 122.7 7.7
------ ------ ------ -------
$677.1 95.7 $370.4 49.6
------ ------
------ ------
One-time, noncash write-off
for acquired in-process
research and development (12.9) --
------ -------
Operating earnings $82.8 $49.6
------ -------
------ -------
Electronic components' sales increased $69.0 million (107%) in the fourth quarter of 1999, compared to the 1998 fourth quarter, primarily due to the inclusion of the results of CTS Wireless this year.
Electronic assemblies' sales increased $36.4 million (127%) in the fourth quarter of 1999, compared to the 1998 fourth quarter. Sales of interconnect assemblies increased by 117%. The introduction of RF integrated modules in 1999 also contributed to the revenue increase.
- Compared to the third quarter of 1999, the electronic assemblies
segment had significant sales growth (44%) and improved operating
earnings (43%) in the fourth quarter, principally as a result of
increased sales of interconnect assemblies, as well as the
introduction of RF integrated modules for the wireless
communications market. Modules represent a major and developing
growth opportunity.
Other Financial Information:
Interest bearing debt at December 31, 1999, was $167.0 million versus $148.8 million at the end of the 1999 third quarter, and $56.0 million at December 31, 1998. The primary reason for the increase in debt is the February 1999 acquisition of CTS Wireless. Debt increased in the fourth quarter of 1999 due to higher working capital requirements and capital expenditures. Capital expenditures for the fourth quarter and twelve months of 1999 were $12.9 million and $32.9 million, respectively. Year-end 1999 receivables were $124.7 million and inventories were $78.9 million, exceeding the 1998 year-end comparable amounts of $47.0 million and $33.3 million, respectively, both resulting from increased revenue in 1999.
"1999 was an exceptional year for CTS," said Mr. Walker. "The CTS Wireless acquisition was a Company-transforming transaction, and we are pleased with our progress of integrating Wireless into the Company. We intend to pursue other potential acquisitions complementary to our core businesses, we believe our other key businesses are well positioned for sustainable long-term growth and feel that our ongoing profit-improvement programs are producing the intended results. Accordingly, we are optimistic about the future as we enter the new millennium," Walker said.
The Company's plans, estimates and beliefs concerning the future contained in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those reflected herein due to a variety of factors that could affect the Company's operating results, liquidity and financial condition, such as risks associated with the integration of acquired operations, competitive factors and price pressures, shifts in market demand and general economic conditions, foreign operations and developments and other factors.
CTS Corporation designs, manufactures and sells a broad line of electronic components and custom electronic assemblies for OEM customers primarily in the communications equipment, automotive and computer equipment markets worldwide. CTS operates manufacturing facilities in the United States, Canada, Mexico, Scotland, Singapore, Taiwan and China. For additional information, visit our website at www.ctscorp.com.
CTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
------------------ -------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1999 1998 1999 1998
-------- -------- -------- --------
Net sales $198,709 $ 93,330 $677,076 $370,441
Costs and expenses:
Cost of goods sold 138,016 62,660 471,543 255,844
Selling, general and
administrative
expenses 22,079 12,739 80,866 51,300
Research and development
expenses 7,544 3,492 25,348 13,387
Acquired in-process research
and development (IPR&D) - - 12,940 -
Amortization of intangibles 1,135 76 3,583 302
-------- -------- -------- --------
Operating earnings 29,935 14,363 82,796 49,608
Other expenses (income):
Interest expense 2,867 542 9,944 2,194
Other (78) (110) (1,203) (2,027)
-------- -------- -------- --------
Total other expenses 2,789 432 8,741 167
-------- -------- -------- --------
Earnings before
income taxes 27,146 13,931 74,055 49,441
Income tax expense 8,280 3,940 22,587 15,368
-------- -------- -------- --------
Earnings from continuing
operations 18,866 9,991 51,468 34,073
Discontinued Operations:
Net earnings from
discontinued operations - 907 - 3,401
-------- -------- -------- --------
Net earnings $ 18,866 $ 10,898 $ 51,468 $ 37,474
-------- -------- -------- --------
-------- -------- -------- --------
Basic earnings per share:(d)
Continuing operations $ 0.68 $ 0.37 $ 1.87 $ 1.22
Discontinued operations - 0.03 - 0.12
-------- -------- -------- --------
Net earnings $ 0.68 $ 0.40 $ 1.87 $ 1.34
-------- -------- -------- --------
-------- -------- -------- --------
Net earnings
(excluding IPR&D) $ 2.19(c)
--------
--------
Diluted earnings per share:(d)
Continuing operations $ 0.66 $ 0.35 $ 1.80 $ 1.17
Discontinued operations - 0.03 - 0.11
-------- -------- -------- --------
Net earnings $ 0.66 $ 0.38 $ 1.80 $ 1.28
-------- -------- -------- --------
-------- -------- -------- --------
Net earnings
(excluding IPR&D) $ 2.10(c)
--------
--------
Cash dividends paid
per share(d) $ 0.03 $ 0.03 $ 0.12 $ 0.12
-------- -------- -------- --------
-------- -------- -------- --------
Average common shares outstanding:
Basic 27,518 27,212 27,498 28,028
Diluted 28,384 28,288 28,589 29,228
(c) Excludes the effect of a one-time, noncash write-off for acquired
in-process research and development, related to the acquisition
of CTS Wireless in the first quarter of 1999 ($12.9 million
pre-tax, $8.6 million after-tax, or $0.32 per basic share and
$0.30 per diluted share).
(d) Per share amounts reflect the effect of the two-for-one stock
split, which was distributed on August 12, 1999.