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CTS Announces Fourth Quarter and Full Year 2014 Results

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CTS Corporation (NYSE:CTS) announced 4th quarter and full year 2014 results.

Fourth Quarter 2014 Results

  • Sales were $100.4 million, down 2.0% compared to the fourth quarter of 2013.
  • GAAP earnings were $7.0 million, or $0.21 per diluted share, compared to $4.1 million, or $0.12 per diluted share from continuing operations in the fourth quarter of 2013.
  • Adjusted EPS was $0.24, flat with fourth quarter of 2013 from continuing operations.

Fourth quarter sales to automotive customers declined 2.1% year-over-year. Sales of electronic components declined 1.7% year-over-year. CTS received $171 million in new business wins in the fourth quarter.

Full Year 2014 Results

  • Sales were $404.0 million, down 1.3% compared to 2013.
  • GAAP earnings were $26.5 million, or $0.78 per diluted share, compared to $2.0 million, or $0.06 per diluted share from continuing operations in 2013.
  • Adjusted EPS was $0.97 versus $0.75 from continuing operations in 2013.

2014 sales to automotive customers increased 1.0% year-over-year. Prior year sales to automotive customers included $5.5 million for a special one-time order. Excluding this order, sales to automotive customers were up 3.1% in 2014 compared to 2013. Sales of electronic components declined 5.9% year-over-year. CTS recorded $484 million in new business wins for the full year 2014.

“We are pleased with the results for 2014. We delivered strong earnings growth despite softer than anticipated sales,” said Kieran O’Sullivan, CEO of CTS Corporation. “The fourth quarter new business wins are an indication of the traction we are getting on driving growth. We expect 2015 growth to be modest until the new business we have won over the last two years begins to have a more significant impact on sales in 2017 and beyond.”

2015 Guidance

Management expects full year 2015 sales in the range of $400 to $430 million and adjusted earnings per diluted share in the range of $0.98 to $1.10. Results are anticipated to improve sequentially throughout the year, with a stronger second half. Management is concerned about the current trends in currency rates, especially the Euro and Chinese Renminbi. This can impact sales by as much as 2-3% for 2015.

Conference Call

As previously announced, the Company has scheduled a conference call on Friday, February 6, 2015 at 11:00 a.m. (EST). The dial-in number for the conference call is 888-287-5563 (719-325-2448, if calling from outside the U.S.). The conference I.D. number is 6035936. There will be a replay of the conference call from 2:00 p.m. (EST) on Friday, February 6, 2015 through 2:00 p.m. (EST) on Friday, February 13, 2015. The telephone number for the replay is 888-203-1112 (719-457-0820, if calling from outside the U.S.). The access code is 6035936. Also, please note that a live audio webcast of the conference call will be available and can be accessed directly from the website of CTS Corporation www.ctscorp.com.

About CTS

CTS is a leading designer and manufacturer of electronic components and sensors to OEMs in the automotive, communications, medical, defense and aerospace, industrial and computer markets. CTS manufactures products in North America, Europe and Asia. CTS’ stock is traded on the NYSE under the ticker symbol “CTS.”

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. Examples of factors that may affect future operating results and financial condition include, but are not limited to: changes in the economy generally and in respect to the businesses in which CTS operates; unanticipated issues in integrating acquisitions; the results of actions to reposition our businesses; rapid technological change; general market conditions in the automotive, communications, and computer industries, as well as conditions in the industrial, defense and aerospace, and medical markets; reliance on key customers; unanticipated natural disasters or other events; the ability to protect our intellectual property; pricing pressures and demand for our products; and risks associated with our international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks. Many of these, and other, risks and uncertainties are discussed in further detail in Item 1A. of the 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 (LOSS) – UNAUDITED
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2014 2013 2014 2013
Net sales $ 100,378 $ 102,386 $ 404,021 $ 409,461
Costs and expenses:
Cost of goods sold 67,352 72,220 274,058 288,108
Selling, general and administrative expenses 15,783 17,327 59,136 69,989
Research and development expenses 5,798 5,481 22,563 23,222
Restructuring charge 1,135 2,348 5,941 10,455
Operating earnings 10,310 5,010 42,323 17,687
Other (expense) income:
Interest expense (563 ) (482 ) (2,326 ) (3,264 )
Interest income 827 601 2,786 1,901
Other income (expense) (1,817 ) 1,358 (3,435 ) 1,739
Total other income (expense) (1,553 ) 1,477 (2,975 ) 376
Earnings from continuing operations before income taxes 8,757 6,487 39,348 18,063
Income tax expense 1,793 2,339 12,826 16,066
Earnings from continuing operations 6,964 4,148 26,522 1,997
Discontinued operations
Loss from discontinued operations, net of tax (7,129 ) (5,926 )
Net earnings (loss) $ 6,964 $ (2,981 ) $ 26,522 $ (3,929 )
Net earnings (loss) per share:
Basic
Continuing operations $ 0.21 $ 0.12 $ 0.79 $ 0.06
Discontinued operations (0.21 ) (0.18 )
Net earnings (loss) attributable to CTS Corporation $ 0.21 $ (0.09 ) 0.79 $ (0.12 )
Diluted
Continuing operations $ 0.21 $ 0.12 0.78 $ 0.06
Discontinued operations (0.21 ) (0.18 )
Net earnings (loss) attributable to CTS Corporation $ 0.21 $ (0.09 ) 0.78 $ (0.12 )
Cash dividends declared per share $ 0.040 $ 0.040 $ 0.160 $ 0.145
Average common shares outstanding:
Basic 33,431 33,594 33,618 33,601
Diluted 33,935 34,314 34,130 34,249
CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION

Earnings / (Loss) per Share

The following table reconciles GAAP earnings (loss) per diluted share to adjusted earnings per share for CTS:
Three Months Ended Twelve Months Ended
December 31, December 31, December 31, December 31,
2014 2013 2014 2013
GAAP earnings (loss) per share from continuing operations $ 0.21 $ 0.12 $ 0.78 $ 0.06
Tax affected charges to reported diluted earnings / (loss) per share:
Restructuring and related charges 0.03 0.10 $ 0.18 0.28
CEO transition costs 0.03 0.07
Tax impact of cash repatriation 0.31
Tax asset write-off related to restructuring (0.01 ) 0.01 0.03
Adjusted earnings per share $ 0.24 $ 0.24 $ 0.97 $ 0.75

Additional Information

The following table includes other financial information not presented in the preceding financial statements.
Three Months Ended Twelve Months Ended
$ In thousands December 31, December 31, December 31, December 31,

Expense

2014 2013 2014 2013
Depreciation and Amortization $ 4,249 $ 4,492 $ 16,971 $ 21,169
Equity Based Compensation $ 821 $ 1,078 $ 2,660 $ 4,219

OTHER SUPPLEMENTAL INFORMATION

(continued)

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.

CTS Corporation and Subsidiaries
Condensed Consolidated Balance Sheets – Unaudited
(In thousands of dollars)
December 31, December 31,
2014 2013
Cash and cash equivalents $ 134,508 $ 124,368
Accounts receivable, net 56,894 62,667
Inventories 27,887 32,226
Other current assets 21,112 17,008
Total current assets 240,401 236,269
Property, plant and equipment, net 71,414 74,869
Other Assets
Prepaid pension asset 32,099 56,396
Goodwill 32,047 32,047
Indefinite-lived intangible asset 690 690
Other intangible assets, net 35,902 40,092
Deferred income taxes 43,120 38,620
Other 1,253 1,282
Total other assets 145,111 169,127
Total Assets $ 456,926 $ 480,265
Accounts payable $ 43,343 $ 47,052
Accrued payroll and benefits 11,283 20,822
Accrued liabilities 25,356 27,246
Total current liabilities 79,982 95,120
Long-term debt 75,000 75,000
Post retirement obligations 3,049 7,935
Other long-term obligations 9,106 5,481
Shareholders’ equity
Common stock 299,892 297,164
Additional contributed capital 39,153 39,631
Retained earnings 380,145 358,997
Accumulated other comprehensive loss (104,233 ) (81,897 )
Total shareholders’ equity before treasury stock 614,957 613,895
Treasury stock (325,168 ) (317,166 )
Total shareholders’ equity 289,789 296,729
Total Liabilities and Shareholders’ Equity $ 456,926 $ 480,265

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