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CTS Announces Third Quarter 2022 Results
来源: Nasdaq GlobeNewswire / 26 10月 2022 08:00:02 America/New_York
LISLE, Ill., Oct. 26, 2022 (GLOBE NEWSWIRE) -- CTS Corporation (NYSE: CTS), a leading global designer and manufacturer of custom engineered solutions that “Sense, Connect and Move,” today announced third quarter 2022 results.
“We delivered strong results in the third quarter, increasing revenue by 24% while expanding Adjusted EBITDA margin by 60-basis points. Our advanced materials expertise, coupled with the strength of our commercial teams, are helping to accelerate our diversification into non-transportation end markets, enabling CTS’ performance in an uncertain macroeconomic environment,” said Kieran O’Sullivan, CEO. “We look forward to continued execution of our strategic priorities to further strengthen our financial profile, positioning CTS for long-term profitable growth.”
Third Quarter 2022 Results
- Sales were $151.9 million, up 24% year-over-year. Sales to non-transportation end markets increased 22.5%, and sales to the transportation end market increased 25.7% over the same period.
- Net income was $11.8 million, or $0.37 per diluted share, compared to a $63.9 million net loss, or $(1.97) per share, in the third quarter of 2021.
- Adjusted diluted EPS was $0.62, up from $0.46 in the third quarter of 2021.
- Adjusted EBITDA margin was 22.3% compared to 21.7% in the third quarter of 2021.
- Operating cash flow was $60.4 million compared to $21.3 million in the third quarter of 2021, which includes $34 million from termination of the US pension plan.
2022 Guidance
Including the recent Ferroperm acquisition, CTS now expects full year 2022 sales to be in the range of $585 – $595 million, updated from the previous guidance of $570 – $600 million, and adjusted diluted EPS in the range of $2.40 – $2.55, unchanged from the prior guidance. Management continues to monitor the potential impact of the challenging supply situation, macro-economic environment, and geopolitical events on this guidance.
Conference Call and Supplemental Materials
As previously announced, the Company has scheduled a conference call for 10:00 a.m. (EDT) today. 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. and Canada). The passcode is 336733. 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, including supply chain disruption; changes in the economy generally, including inflationary and/or recessionary conditions, and in respect to the business in which CTS operates; unanticipated issues in integrating acquisitions, including TEWA Temperature Sensors and Ferroperm Piezoceramics; 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 U.S./China relations and 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’ most recent 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 in this press release includes the non-GAAP financial measures of adjusted gross margin, adjusted operating earnings, adjusted EBITDA margin, 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 margin, adjusted operating earnings, adjusted EBITDA margin, 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.com
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands of dollars, except per share amounts)Three Months Ended Nine Months Ended September 30,
2022September 30,
2021September 30,
2022September 30,
2021Net sales $ 151,911 $ 122,382 $ 444,588 $ 380,394 Cost of goods sold 98,565 76,720 285,054 244,446 Gross margin 53,346 45,662 159,534 135,948 Selling, general and administrative expenses 24,003 19,922 68,029 59,184 Research and development expenses 6,207 6,454 18,695 18,170 Restructuring charges 492 319 1,434 551 Operating earnings 22,644 18,967 71,376 58,043 Other (expense) income: Interest expense (342 ) (514 ) (1,490 ) (1,577 ) Interest income 167 230 610 689 Other (expense), net (5,171 ) (108,502 ) (10,530 ) (132,786 ) Total other (expense), net (5,346 ) (108,786 ) (11,410 ) (133,674 ) Earnings (loss) before income taxes 17,298 (89,819 ) 59,966 (75,631 ) Income tax expense (benefit) 5,500 (25,923 ) 15,331 (24,600 ) Net earnings (loss) 11,798 (63,896 ) 44,635 (51,031 ) Earnings (loss) per share: Basic $ 0.37 $ (1.97 ) $ 1.39 $ (1.58 ) Diluted $ 0.37 $ (1.97 ) $ 1.38 $ (1.58 ) Basic weighted – average common shares outstanding: 31,865 32,379 32,018 32,365 Effect of dilutive securities 225 — 220 — Diluted weighted – average common shares outstanding: 32,090 32,379 32,238 32,365 Cash dividends declared per share $ 0.04 $ 0.04 $ 0.12 $ 0.12
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)(Unaudited) September 30,
2022December 31,
2021ASSETS Current Assets Cash and cash equivalents $ 147,908 $ 141,465 Accounts receivable, net 97,004 82,191 Inventories, net 63,465 49,506 Other current assets 18,020 15,927 Total current assets 326,397 289,089 Property, plant and equipment, net 95,906 96,876 Operating lease assets, net 22,630 21,594 Other Assets Prepaid pension asset 5 49,382 Goodwill 138,945 109,798 Other intangible assets, net 106,207 69,888 Deferred income taxes 22,992 25,415 Other 21,597 2,420 Total other assets 289,746 256,903 Total Assets $ 734,679 $ 664,462 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable $ 65,687 $ 55,537 Operating lease obligations 3,532 3,393 Accrued payroll and benefits 16,979 18,418 Accrued expenses and other liabilities 35,741 36,718 Total current liabilities 121,939 114,066 Long-term debt 85,478 50,000 Long-term operating lease obligations 22,097 21,354 Long-term pension obligations 6,248 6,886 Deferred income taxes 5,515 5,894 Other long-term obligations 2,790 2,684 Total Liabilities 244,067 200,884 Commitments and Contingencies Shareholders’ Equity Common stock 316,520 314,620 Additional contributed capital 44,659 42,549 Retained earnings 533,036 492,242 Accumulated other comprehensive loss (8,849 ) (4,525 ) Total shareholders’ equity before treasury stock 885,366 844,886 Treasury stock (394,754 ) (381,308 ) Total shareholders’ equity 490,612 463,578 Total Liabilities and Shareholders’ Equity $ 734,679 $ 664,462
CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION - UNAUDITED
(In millions of dollars, except per share amounts)Adjusted Gross Margin
Three Months Ended
September 30,Nine Months Ended
September 30,Twelve Months Ended
December 31,2022 2021 2022 2021 2021 2020 2019 Gross margin $ 53.3 $ 45.7 $ 159.5 $ 135.9 $ 184.6 $ 139.1 $ 157.6 Adjustments to reported gross margin: Inventory fair value step-up $ 2.2 $ — $ 3.3 $ — $ — $ — $ — Adjusted gross margin $ 55.6 $ 45.7 $ 162.9 $ 135.9 $ 184.6 $ 139.1 $ 157.6 Net sales $ 151.9 $ 122.4 $ 444.6 $ 380.4 $ 512.9 $ 424.1 $ 469.0 Adjusted gross margin as a % of net sales 36.6 % 37.3 % 36.6 % 35.7 % 36.0 % 32.8 % 33.6 %
Adjusted Operating EarningsThree Months Ended
September 30,Nine Months Ended
September 30,Twelve Months Ended
December 31,2022 2021 2022 2021 2021 2020 2019 Operating earnings $ 22.6 $ 19.0 $ 71.4 $ 58.0 $ 76.5 $ 45.1 $ 53.8 Adjustments to reported operating earnings: Restructuring charges 0.5 0.3 1.4 0.6 1.7 1.8 7.4 Environmental charges 0.3 0.4 1.8 0.9 2.3 2.8 2.3 Legal settlement — — — — — — (0.5 ) Acquisition-related costs — — 0.8 — — 0.3 0.7 Inventory fair value step-up 2.2 — 3.3 — — — — Costs of tax improvement initiatives — — — — — — 0.1 Total adjustments to reported operating earnings $ 3.0 $ 0.7 $ 7.3 $ 1.4 $ 3.9 $ 4.9 $ 10.0 Adjusted operating earnings $ 25.7 $ 19.7 $ 78.7 $ 59.4 $ 80.4 $ 50.0 $ 63.8 Net sales $ 151.9 $ 122.4 $ 444.6 $ 380.4 $ 512.9 $ 424.1 $ 469.0 Adjusted operating earnings as a % of net sales 16.9 % 16.1 % 17.7 % 15.6 % 15.7 % 11.8 % 13.6 % Adjusted EBITDA
Three Months Ended
September 30,Nine Months Ended
September 30,Twelve Months Ended
December 31,2022 2021 2022 2021 2021 2020 2019 Net earnings (loss) $ 11.8 $ (63.9 ) $ 44.6 $ (51.0 ) $ (41.9 ) $ 34.7 $ 36.1 Depreciation and amortization expense 8.0 6.7 21.7 20.2 26.9 26.7 24.6 Interest expense 0.3 0.5 1.5 1.6 2.1 3.3 2.6 Tax expense (benefit) 5.5 (25.9 ) 15.3 (24.6 ) (19.0 ) 10.8 14.1 EBITDA 25.6 (82.6 ) 83.2 (53.8 ) (31.8 ) 75.4 77.5 Adjustments to EBITDA: Restructuring charges 0.5 0.3 1.4 0.6 1.7 1.8 6.9 Environmental charges 0.3 0.4 1.8 0.9 2.3 2.8 2.3 Legal settlement — — — — — — (0.5 ) Acquisition-related costs — — 2.5 — — 0.3 0.7 Inventory fair value step-up 2.2 — 3.3 — — — — Costs of tax improvement initiatives — — — — — — 0.1 Non-cash pension expense 4.7 107.4 4.8 131.1 132.4 2.5 0.8 Foreign currency loss (gain) 0.5 1.0 4.0 1.4 3.3 (5.3 ) 1.8 Total adjustments to EBITDA 8.2 109.2 17.8 134.0 139.7 2.1 12.0 Adjusted EBITDA $ 33.8 $ 26.6 $ 101.0 $ 80.2 $ 107.8 $ 77.5 $ 89.5 Net sales $ 151.9 $ 122.4 $ 444.6 $ 380.4 $ 512.9 $ 424.1 $ 469.0 Adjusted EBITDA margin 22.3 % 21.7 % 22.7 % 21.1 % 21.0 % 18.3 % 19.1 % Adjusted Net Earnings
Three Months Ended
September 30,Nine Months Ended
September 30,Twelve Months Ended
December 31,2022 2021 2022 2021 2021 2020 2019 Net earnings (loss) (A) 11.8 $ (63.9 ) $ 44.6 $ (51.0 ) $ (41.9 ) $ 34.7 $ 36.1 Adjustments to reported net earnings (loss): Restructuring charges 0.5 0.3 1.4 0.6 1.7 1.8 7.4 Environmental charges 0.3 0.4 1.8 0.9 2.3 2.8 2.3 Legal settlement — — — — — — (0.5 ) Acquisition-related costs — — 2.5 — — 0.3 0.7 Inventory fair value step-up 2.2 — 3.3 — — — — Costs of tax improvement initiatives — — — — — — 0.1 Non-cash pension expense 4.7 107.4 4.8 131.1 132.4 2.5 0.8 Foreign currency loss (gain) 0.5 1.0 4.0 1.4 3.3 (5.3 ) 1.8 Total adjustments to reported net earnings (loss) $ 8.2 $ 109.2 $ 17.8 $ 134.0 $ 139.7 $ 2.1 $ 12.6 Total adjustments, tax affected (B) $ 8.0 $ 84.3 $ 16.6 $ 103.5 $ 108.6 $ 0.4 $ 10.2 Tax adjustments: Increase in valuation allowances — — — — 0.9 0.2 — Other discrete tax items — (5.4 ) — (5.4 ) (4.7 ) 1.2 1.8 Total tax adjustments (C) $ — $ (5.4 ) $ — $ (5.4 ) $ (3.8 ) $ 1.4 $ 1.8 Adjusted net earnings (A+B+C) $ 19.8 $ 15.0 $ 61.3 $ 47.1 $ 63.0 $ 36.5 $ 48.1 Net sales $ 151.9 $ 122.4 $ 444.6 $ 380.4 $ 512.9 $ 424.1 $ 469.0 Adjusted net earnings as a % of net sales 13.0 % 12.3 % 13.8 % 12.4 % 12.3 % 8.6 % 10.3 % Adjusted Diluted Earnings Per Share
Three Months Ended
September 30,Nine Months Ended
September 30,Twelve Months Ended
December 31,2022 2021 2022 2021 2021 2020 2019 GAAP diluted earnings (loss) per share $ 0.37 $ (1.97 ) $ 1.38 $ (1.58 ) $ (1.30 ) $ 1.06 $ 1.09 Tax affected charges to reported diluted earnings (loss) per share: Restructuring charges 0.01 0.01 0.04 0.02 0.06 0.04 0.18 Foreign currency loss (gain) 0.01 0.03 0.12 0.04 0.10 (0.16 ) 0.05 Non-cash pension expense 0.16 2.54 0.16 3.10 3.13 0.06 0.02 Environmental charges 0.01 0.01 0.04 0.02 0.05 0.07 0.05 Acquisition-related costs — — 0.07 — — 0.01 0.02 Inventory fair value step-up 0.06 — 0.09 — — — — Legal settlement — — — — — — (0.01 ) Discrete tax items — (0.16 ) — (0.16 ) (0.11 ) 0.04 0.05 Adjusted diluted earnings per share $ 0.62 $ 0.46 $ 1.90 $ 1.44 $ 1.93 $ 1.12 $ 1.45 Debt to Capitalization
September 30, December 31, 2022 2021 2021 2020 2019 Total debt (A) $ 85.5 $ 50.0 $ 50.0 $ 54.6 $ 99.7 Total shareholders' equity (B) $ 490.6 $ 457.4 $ 463.6 $ 423.7 $ 405.2 Total capitalization (A+B) $ 576.1 $ 507.4 $ 513.6 $ 478.3 $ 504.9 Total debt to capitalization 14.8 % 9.9 % 9.7 % 11.4 % 19.7 % Controllable Working Capital
September 30, December 31, 2022 2021 2021 2020 2019 Net accounts receivable $ 97.0 $ 78.2 $ 82.2 $ 81.0 $ 78.0 Net inventory $ 63.5 $ 50.9 $ 49.5 $ 45.9 $ 42.2 Accounts payable $ (65.7 ) $ (49.0 ) $ (55.5 ) $ (50.5 ) $ (48.2 ) Controllable working capital $ 94.8 $ 80.1 $ 76.2 $ 76.4 $ 72.0 Quarter sales $ 151.9 $ 122.4 $ 132.5 $ 123.0 $ 115.0 Multiplied by 4 4 4 4 4 4 Annualized sales $ 607.6 $ 489.5 $ 530.1 $ 492.1 $ 460.2 Controllable working capital as a % of annualized net sales 15.6 % 16.4 % 14.4 % 15.5 % 15.7 % Free Cash Flow
Three Months Ended
September 30,Nine Months Ended
September 30,Twelve Months Ended
December 31,2022 2021 2022 2021 2021 2020 2019 Net cash provided by operating activities $ 60.4 $ 21.3 $ 95.7 $ 60.1 $ 86.1 $ 76.8 $ 64.4 Capital expenditures (2.3 ) (4.2 ) (9.3 ) (8.1 ) (15.6 ) (14.9 ) (21.7 ) Free cash flow $ 58.1 $ 17.1 $ 86.5 $ 52.0 $ 70.5 $ 61.9 $ 42.7 Capital Expenditures
Three Months Ended
September 30,Nine Months Ended
September 30,Twelve Months Ended
December 31,2022 2021 2022 2021 2021 2020 2019 Capital expenditures $ 2.3 $ 4.2 $ 9.3 $ 8.1 $ 15.6 $ 14.9 $ 21.7 Net sales $ 151.9 $ 122.4 $ 444.6 $ 380.4 $ 512.9 $ 424.1 $ 469.0 Capex as % of net sales 1.5 % 3.4 % 2.1 % 2.1 % 3.0 % 3.5 % 4.6 % Additional Information
The following table includes other financial information not presented in the preceding financial statements.
Three Months Ended
September 30,Nine Months Ended
September 30,Twelve Months Ended
December 31,2022 2021 2022 2021 2021 2020 2019 Depreciation and amortization expense $ 8.0 $ 6.7 $ 21.7 $ 20.2 $ 26.9 $ 26.7 $ 24.6 Stock-based compensation expense $ 2.2 $ 1.0 $ 5.8 $ 4.1 $ 6.1 $ 3.4 $ 5.0