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CTS Announces First Quarter 2022 Results
المصدر: Nasdaq GlobeNewswire / 28 أبريل 2022 07:30:01 America/New_York
LISLE, Ill., April 28, 2022 (GLOBE NEWSWIRE) -- CTS Corporation (NYSE: CTS), a leading global designer and manufacturer of custom engineered solutions that “sense, connect and move” today announced first quarter 2022 results.
“Our solid first quarter results highlight the progress of our diversification strategy and our ability to deliver enhanced profitability, with revenue growing 15% and Adjusted EBITDA margin expanding 350-basis points. Our acquisition of TEWA Sensors in the first quarter and our recently announced agreement to acquire Ferroperm demonstrate our efforts to expand growth of non-transportation end markets and will move this portion of the business closer to 50% of total revenues in the year ahead,” said Kieran O’Sullivan, CEO of CTS Corporation. "Demand remains robust across all end markets. Our strong balance sheet and solid cash flow generation continue to be key competitive advantages as we further execute on our strategic priorities and drive value for our shareholders.”
First Quarter 2022 Results
- Sales were $147.7 million, up 15% year-over-year. Sales to non-transportation end markets increased 30%, and sales to the transportation end market increased 4% over the same period.
- Net income was $20.2 million, or $0.63 per diluted share, compared to $12.0 million, or $0.37 per diluted share, in the first quarter of 2021.
- Adjusted diluted EPS was $0.67, up from $0.46 in the first quarter of 2021.
- Adjusted EBITDA margin was 23.5% compared to 20.0% in the first quarter of 2021.
- Operating cash flow was $19.3 million compared to $20.1 million in the first quarter of 2021.
2022 Guidance
Including the impact of the recent TEWA Sensors acquisition, CTS now expects full year 2022 sales to be in the range of $550 – $580 million, up from the previous guidance of $525 – $550 million and adjusted diluted EPS in the range of $2.20 - $2.45, up from the previous guidance of $2.00 – $2.25. Management continues to carefully evaluate the impact of inflation, supply chain issues, COVID 19-related disruptions in China, and geopolitical risks.
Conference Call and Supplemental Materials
As previously announced, the Company has scheduled a conference call at 10:00 a.m. (EDT) today to discuss the first quarter 2022 financial results. The dial-in number for the U.S. and Canada is 844-200-6205 (+1 929-526-1599, if calling from outside the U.S. or Canada). The passcode is 549088. In addition, the Company will be using a supplemental slide presentation that will be referred to during the call. The presentation and a live audio webcast of the conference call will be available and can be accessed directly from CTS’ website at https://www.ctscorp.com/investors/events-presentations/.
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, 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 CTS’ actual results, performance or achievements to differ materially from those presented in the forward-looking statements. Examples of factors that may affect future operating results and financial condition include, but are not limited to: the ultimate impact of the COVID-19 pandemic on CTS’ business, results of operations or financial condition; changes in the economy generally and in respect to the business in which CTS operates; unanticipated issues in integrating acquisitions including TEWA Temperature Sensors and Ferroperm Piezoceramics (once closed subject to obtaining regulatory approvals and satisfaction of customary closing conditions); the results of actions to reposition CTS’ business; rapid technological change; general market conditions in the transportation, as well as conditions in the industrial, aerospace and defense, and medical markets; reliance on key customers; unanticipated public health crises, natural disasters or other events; environmental compliance and remediation expenses; the ability to protect CTS’ intellectual property; pricing pressures and demand for CTS’ products; and risks associated with CTS’ international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks (including, without limitation, the potential impact the conflict between Russia and Ukraine may have on our business, results of operations and financial condition). Many of these, and other risks and uncertainties, are discussed in further detail in Item 1A. of CTS’ Annual Report on Form 10-K and other filings made with the SEC. CTS undertakes no obligation to publicly update CTS’ forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.
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 U.S. 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.
The information included in this press release includes the non-GAAP financial measures of adjusted gross margin, adjusted operating earnings, adjusted EBITDA, adjusted net earnings, adjusted diluted earnings per share, debt to capitalization ratio, controllable working capital ratio, and free cash flow. Many of these non-GAAP financial measures exclude the effect of certain expenses and income not related directly to the underlying performance of CTS’ fundamental business operations.
CTS believes that adjusted gross margins, adjusted operating earnings, adjusted EBITDA, adjusted net earnings and, adjusted diluted earnings per share provide useful information to investors regarding its operational performance because they enhance an investor’s overall understanding of CTS’ core financial performance and facilitate comparisons to historical results of operations, by excluding items that are not related directly to the underlying performance of CTS’ fundamental business operations or were not part of CTS’ business operations during a comparable period.
CTS believes that debt to capitalization ratio is a measurement of financial leverage and provides an insight into the financial structure of CTS and its financial strength. CTS believes the controllable working capital ratio provides an objective measure of the efficiency with which CTS manages its short-term capital needs. CTS believes that free cash flow is a useful measure of its ability to generate cash.
CTS believes that these non-GAAP financial measures are commonly used by financial analysts and others in the industries in which CTS operates, and thus further provide useful information to investors. Note that CTS’ definitions of these non-GAAP financial measures may differ from those terms as defined or used by other companies.
CTS does not provide reconciliations of forward-looking non-GAAP financial measures, such as estimated adjusted diluted earnings per share, to the most comparable GAAP financial measures on a forward-looking basis because CTS is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amount of certain items, such as, but not limited to, restructuring costs, environmental remediation costs, acquisition related costs, foreign exchange rates and other non-routine costs. Each of such adjustments has not yet occurred, are out of CTS' control and/or cannot be reasonably predicted. For the same reasons, CTS is unable to address the probable significance of the unavailable information.
Contact
Ashish Agrawal
Vice President and Chief Financial Officer
CTS Corporation
4925 Indiana Avenue
Lisle, IL 60532 USA
+1 (630) 577-8800
ashish.agrawal@ctscorp.comCTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands of dollars, except per share amounts)Three Months Ended March 31,
2022March 31,
2021Net sales $ 147,695 $ 128,427 Cost of goods sold 93,355 85,836 Gross margin 54,340 42,591 Selling, general and administrative expenses 21,788 18,325 Research and development expenses 6,194 5,687 Restructuring charges 312 81 Operating earnings 26,046 18,498 Other (expense) income: Interest expense (546 ) (555 ) Interest income 180 202 Other income (expense), net 66 (3,356 ) Total other expense, net (300 ) (3,709 ) Earnings before income taxes 25,746 14,789 Income tax expense 5,507 2,799 Net earnings 20,239 11,990 Earnings per share: Basic $ 0.63 $ 0.37 Diluted $ 0.63 $ 0.37 Basic weighted – average common shares outstanding: 32,123 32,319 Effect of dilutive securities 204 301 Diluted weighted – average common shares outstanding: 32,327 32,620 Cash dividends declared per share $ 0.04 $ 0.04
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)(Unaudited) March 31, 2022 December 31,
2021ASSETS Current Assets Cash and cash equivalents $ 126,118 $ 141,465 Accounts receivable, net 95,107 82,191 Inventories, net 52,454 49,506 Other current assets 18,366 15,927 Total current assets 292,045 289,089 Property, plant and equipment, net 97,041 96,876 Operating lease assets, net 23,212 21,594 Other Assets Prepaid pension asset 31,882 49,382 Goodwill 117,524 109,798 Other intangible assets, net 79,849 69,888 Deferred income taxes 23,828 25,415 Other 19,365 2,420 Total other assets 272,448 256,903 Total Assets $ 684,746 $ 664,462 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable $ 60,010 $ 55,537 Operating lease obligations 3,522 3,393 Accrued payroll and benefits 12,954 18,418 Accrued expenses and other liabilities 38,554 36,718 Total current liabilities 115,040 114,066 Long-term debt 50,000 50,000 Long-term operating lease obligations 22,712 21,354 Long-term pension obligations 6,464 6,886 Deferred income taxes 5,865 5,894 Other long-term obligations 4,487 2,684 Total Liabilities 204,568 200,884 Commitments and Contingencies Shareholders’ Equity Common stock 316,496 314,620 Additional contributed capital 41,158 42,549 Retained earnings 511,197 492,242 Accumulated other comprehensive loss (3,445 ) (4,525 ) Total shareholders’ equity before treasury stock 865,406 844,886 Treasury stock (385,228 ) (381,308 ) Total shareholders’ equity 480,178 463,578 Total Liabilities and Shareholders’ Equity $ 684,746 $ 664,462
CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION - UNAUDITED
(In millions of dollars, except per share amounts)Adjusted Gross Margin
Three Months Ended
March 31,Twelve Months Ended
December 31,2022 2021 2021 2020 2019 Gross margin $ 54.3 $ 42.6 $ 184.6 $ 139.1 $ 157.6 Adjustments to reported gross margin: Inventory fair value step-up $ 0.6 $ — $ — $ — $ — Adjusted gross margin $ 54.9 $ 42.6 $ 184.6 $ 139.1 $ 157.6 Net sales $ 147.7 $ 128.4 $ 512.9 $ 424.1 $ 469.0 Adjusted gross margin as a % of net sales 37.2 % 33.2 % 36.0 % 32.8 % 33.6 %
Adjusted Operating EarningsThree Months Ended
March 31,Twelve Months Ended
December 31,2022 2021 2021 2020 2019 Operating earnings $ 26.0 $ 18.5 $ 76.5 $ 45.1 $ 53.8 Adjustments to reported operating earnings: Restructuring charges 0.3 0.1 1.7 1.8 7.4 Environmental charges 0.5 0.2 2.3 2.8 2.3 Legal settlement — — — — (0.5 ) Transaction costs 0.5 — — 0.3 0.7 Inventory fair value step-up 0.6 — — — — Costs of tax improvement initiatives — — — — 0.1 Total adjustments to reported operating earnings $ 1.9 $ 0.3 $ 3.9 $ 4.9 $ 10.0 Adjusted operating earnings $ 28.0 $ 18.8 $ 80.4 $ 50.0 $ 63.8 Net sales $ 147.7 $ 128.4 $ 512.9 $ 424.1 $ 469.0 Adjusted operating earnings as a % of net sales 19.0 % 14.6 % 15.7 % 11.8 % 13.6 %
Adjusted EBITDAThree Months Ended
March 31,Twelve Months Ended
December 31,2022 2021 2021 2020 2019 Net earnings (loss) $ 20.2 $ 12.0 $ (41.9 ) $ 34.7 $ 36.1 Depreciation and amortization expense 6.7 6.8 26.9 26.7 24.6 Interest expense 0.5 0.6 2.1 3.3 2.6 Tax expense (benefit) 5.5 2.8 (19.0 ) 10.8 14.1 EBITDA 33.0 22.2 (31.8 ) 75.4 77.5 Adjustments to EBITDA: Restructuring charges 0.3 0.1 1.7 1.8 6.9 Environmental charges 0.5 0.2 2.3 2.8 2.3 Legal settlement — — — — (0.5 ) Transaction costs 0.5 — — 0.3 0.7 Inventory fair value step-up 0.6 — — — — Costs of tax improvement initiatives — — — — 0.1 Non-cash pension expense — 1.9 132.4 2.5 0.8 Foreign currency (gain) loss (0.3 ) 1.3 3.3 (5.3 ) 1.8 Total adjustments to EBITDA 1.7 3.5 139.7 2.1 12.0 Adjusted EBITDA $ 34.7 $ 25.7 $ 107.8 $ 77.5 $ 89.5 Net sales $ 147.7 $ 128.4 $ 512.9 $ 424.1 $ 469.0 Adjusted EBITDA as a % of net sales 23.5 % 20.0 % 21.0 % 18.3 % 19.1 %
Adjusted Net EarningsThree Months Ended
March 31,Twelve Months Ended
December 31,2022 2021 2021 2020 2019 Net earnings (loss) (A) $ 20.2 $ 12.0 $ (41.9 ) $ 34.7 $ 36.1 Adjustments to reported net earnings (loss): Restructuring charges 0.3 0.1 1.7 1.8 7.4 Environmental charges 0.5 0.2 2.3 2.8 2.3 Legal settlement — — — — (0.5 ) Transaction costs 0.5 — — 0.3 0.7 Inventory fair value step-up 0.6 — — — — Costs of tax improvement initiatives — — — — 0.1 Non-cash pension expense — 1.9 132.4 2.5 0.8 Foreign currency (gain) loss (0.3 ) 1.3 3.3 (5.3 ) 1.8 Total adjustments to reported net earnings (loss) $ 1.7 $ 3.5 $ 139.7 $ 2.1 $ 12.6 Total adjustments, tax affected (B) $ 1.4 $ 3.0 $ 108.6 $ 0.4 $ 10.2 Tax adjustments: Increase in valuation allowances — — 0.9 0.2 — Other discrete tax items — — (4.7 ) 1.2 1.8 Total tax adjustments (C) $ — $ — $ (3.8 ) $ 1.4 $ 1.8 Adjusted net earnings (A+B+C) $ 21.7 $ 15.0 $ 63.0 $ 36.5 $ 48.1 Net sales $ 147.7 $ 128.4 $ 512.9 $ 424.1 $ 469.0 Adjusted net earnings as a % of net sales 14.7 % 11.7 % 12.3 % 8.6 % 10.3 %
Adjusted Diluted Earnings Per ShareThree Months Ended
March 31,Twelve Months Ended
December 31,2022 2021 2021 2020 2019 GAAP diluted earnings (loss) per share $ 0.63 $ 0.37 $ (1.30 ) $ 1.06 $ 1.09 Tax affected charges to reported diluted earnings (loss) per share: Restructuring charges 0.01 — 0.06 0.04 0.18 Foreign currency (gain) loss (0.01 ) 0.04 0.10 (0.16 ) 0.05 Non-cash pension expense — 0.04 3.13 0.06 0.02 Environmental charges 0.01 0.01 0.05 0.07 0.05 Transaction costs 0.02 — — 0.01 0.02 Inventory fair value step-up 0.01 — — — — Legal settlement — — — — (0.01 ) Discrete tax items — — (0.11 ) 0.04 0.05 Adjusted diluted earnings per share $ 0.67 $ 0.46 $ 1.93 $ 1.12 $ 1.45
Debt to CapitalizationThree Months Ended
March 31,Twelve Months Ended
December 31,2022 2021 2021 2020 2019 Total debt (A) $ 50.0 $ 50.0 $ 50.0 $ 54.6 $ 99.7 Total shareholders' equity (B) $ 480.2 $ 435.7 $ 463.6 $ 423.7 $ 405.2 Total capitalization (A+B) $ 530.2 $ 485.7 $ 513.6 $ 478.3 $ 504.9 Total debt to capitalization 9.4 % 10.3 % 9.7 % 11.4 % 19.7 %
Controllable Working CapitalThree Months Ended
March 31,Twelve Months Ended
December 31,2022 2021 2021 2020 2019 Net accounts receivable $ 95.1 $ 81.6 $ 82.2 $ 81.0 $ 78.0 Net inventory $ 52.5 $ 47.5 $ 49.5 $ 45.9 $ 42.2 Accounts payable $ (60.0 ) $ (53.3 ) $ (55.5 ) $ (50.5 ) $ (48.2 ) Controllable working capital $ 87.6 $ 75.8 $ 76.2 $ 76.4 $ 72.0 Quarter sales $ 147.7 $ 128.4 $ 132.5 $ 123.0 $ 115.0 Multiplied by 4 4 4 4 4 4 Annualized sales $ 590.8 $ 513.6 $ 530.1 $ 492.1 $ 460.2 Controllable working capital as a % of annualized net sales 14.8 % 14.8 % 14.4 % 15.5 % 15.7 %
Free Cash FlowThree Months Ended
March 31,Twelve Months Ended
December 31,2022 2021 2021 2020 2019 Net cash provided by operating activities $ 19.3 $ 20.1 $ 86.1 $ 76.8 $ 64.4 Capital expenditures (3.4 ) (1.6 ) (15.6 ) (14.9 ) (21.7 ) Free cash flow $ 15.9 $ 18.5 $ 70.5 $ 61.9 $ 42.7
Capital ExpendituresThree Months Ended
March 31,Twelve Months Ended
December 31,2022 2021 2021 2020 2019 Capital expenditures $ 3.4 $ 1.6 $ 15.6 $ 14.9 $ 21.7 Net sales $ 147.7 $ 128.4 $ 512.9 $ 424.1 $ 469.0 Capex as % of net sales 2.3 % 1.3 % 3.0 % 3.5 % 4.6 %
Additional InformationThe following table includes other financial information not presented in the preceding financial statements.
Three Months Ended
March 31,Twelve Months Ended
December 31,2022 2021 2021 2020 2019 Depreciation and amortization expense $ 6.7 $ 6.8 $ 26.9 $ 26.7 $ 24.6 Stock-based compensation expense $ 2.0 $ 1.2 $ 6.1 $ 3.4 $ 5.0