GlobeNewswire Inc | Jul 31, 2020 08:00AM EDT

July 31, 2020

LISLE, Ill., July 31, 2020 (GLOBE NEWSWIRE) -- CTS Corporation (NYSE: CTS) today announced second quarter 2020 results.

-- Sales were $84.2 million, down 30% year-over-year. Sales to transportation customers declined 53%, and sales to other end markets grew 14%. Excluding $5.4 million in sales from the QTI acquisition, sales to other end markets grew 1%. -- Net earnings were $4.9 million or $0.15 per diluted share versus $11.9 million or $0.36 last year. -- Adjusted diluted EPS was $0.16. -- Free cash flow was $9.1 million, and at quarter-end, we were net cash positive. -- New business wins were $105 million.

I am grateful to our teams around the globe for their resilience and care for our customers and partners in this unprecedented downturn. We are adapting our cost structure due to the prolonged impact of COVID-19, said Kieran OSullivan, CEO of CTS Corporation. We received new business awards in some promising areas. Our focus remains on key strategic growth investments. We are making progress on our diversification into non-transportation markets and continue to position the business for the opportunities ahead of us.

2020 Guidance

Due to ongoing market uncertainties, management is not providing revenue or earnings guidance at this time.

Conference Call

As previously announced, the Company has scheduled a conference call at 11:00 a.m. (EDT) today to discuss the second quarter financial results. The dial-in number is 800-309-1256 (720-543-0314, if calling from outside the U.S.). The passcode is 290044. There will be a replay of the conference call from 2:00 p.m. (EDT) today through 2:00 p.m. (EST) on Friday, August 14, 2020. The telephone number for the replay is 888-203-1112 (719-457-0820, if calling from outside the U.S.). The replay passcode is 7215300. A live audio webcast of the conference call will be available and can be accessed directly from the Investors section of the website of CTS Corporation at www.ctscorp.com.

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, telecommunications/IT, 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 our actual results, performance or achievements to differ materially from those presented in the forward-looking statements. Many of these, and other, risks and uncertainties are discussed in further detail in Item 1A. of CTS 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.

Contact

Ashish AgrawalVice President and Chief Financial Officer

CTS Corporation4925 Indiana AvenueLisle, IL 60532USA

Telephone: +1 (630) 577-8800E-mail: ashish.agrawal@ctscorp.com

CTS CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OFEARNINGS - UNAUDITED(In thousands of dollars, except per share amounts)

Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2020 2019 2020 2019Net sales $ 84,197 $ 120,684 $ 187,272 $ 238,308 Cost of goods sold 57,630 79,480 127,806 156,490 Gross Margin 26,567 41,204 59,466 81,818 Selling, general and 14,668 17,036 31,427 34,597 administrative expensesResearch and development 5,522 6,257 12,930 13,048 expensesRestructuring charges 135 911 375 2,995 Gain on sale of assets ? (83 ) ? (122 )Operating earnings 6,242 17,083 14,734 31,300 Other (expense) income: Interest expense (909 ) (467 ) (1,760 ) (933 )Interest income 304 440 635 872 Other income (expense), 256 (1,107 ) (1,726 ) (1,010 )netTotal other (expense), net (349 ) (1,134 ) (2,851 ) (1,071 )Earnings before income 5,893 15,949 11,883 30,229 taxesIncome tax expense 1,036 4,006 3,218 6,867 Net earnings $ 4,857 $ 11,943 $ 8,665 $ 23,362 Earnings per share: Basic $ 0.15 $ 0.36 $ 0.27 $ 0.71 Diluted $ 0.15 $ 0.36 $ 0.27 $ 0.70 Basic weighted ? average 32,262 32,799 32,364 32,803 common shares outstanding:Effect of dilutive 242 406 284 422 securitiesDiluted weighted ? average 32,504 33,205 32,648 33,225 common shares outstanding: Cash dividends declared $ 0.04 $ 0.04 $ 0.08 $ 0.08 per share

CTS CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In thousands of dollars)

(Unaudited) June 30, December 31, 2020 2019ASSETS Current Assets Cash and cash equivalents $ 145,981 $ 100,241 Accounts receivable, net 59,798 78,008 Inventories, net 44,266 42,237 Other current assets 14,750 16,992 Total current assets 264,795 237,478 Property, plant and equipment, net 99,349 105,038 Operating lease assets, net 24,369 24,644 Other Assets Prepaid pension asset 64,104 62,082 Goodwill 106,056 106,056 Other intangible assets, net 80,622 85,215 Deferred income taxes 21,278 19,795 Other 2,816 3,046 Total other assets 274,876 276,194 Total Assets $ 663,389 $ 643,354 LIABILITIES AND SHAREHOLDERS? EQUITY Current Liabilities Accounts payable $ 32,820 $ 48,219 Operating lease obligations 3,051 2,787 Accrued payroll and benefits 8,725 9,564 Accrued expenses and other liabilities 33,175 36,378 Total current liabilities 77,771 96,948 Long-term debt 141,300 99,700 Long-term operating lease obligations 24,473 24,926 Long-term pension obligations 6,504 6,632 Deferred income taxes 6,303 5,637 Other long-term obligations 6,146 4,292 Total Liabilities 262,497 238,135 Commitments and Contingencies Shareholders? Equity Common stock 310,953 307,932 Additional contributed capital 39,775 43,689 Retained earnings 515,841 509,766 Accumulated other comprehensive loss (93,155 ) (91,726 )Total shareholders? equity before treasury stock 773,414 769,661 Treasury stock (372,522 ) (364,442 )Total shareholders? equity 400,892 405,219 Total Liabilities and Shareholders? Equity $ 663,389 $ 643,354

CTS CORPORATION AND SUBSIDIARIESOTHER SUPPLEMENTAL INFORMATION - UNAUDITED

Earnings Per Share

The following table reconciles GAAP diluted earnings per share to adjusted diluted earnings per share for the Company:

Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2020 2019 2020 2019GAAP diluted earnings per share $ 0.15 $ 0.36 $ 0.27 $ 0.70 Tax affected charges to reported diluted earnings per share:Restructuring charges 0.01 0.02 0.01 0.07 Foreign currency (gain) loss (0.03 ) 0.02 0.01 0.01 Non-cash pension expense 0.01 ? 0.02 0.01 Environmental charges 0.02 ? 0.02 ? Discrete tax items ? ? 0.02 ? Adjusted diluted earnings per share $ 0.16 $ 0.40 $ 0.35 $ 0.79

Additional Information

The following table includes other financial information not presented in the preceding financial statements.

Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2020 2019 2020 2019Depreciation and $ 6,611 $ 5,995 $ 13,143 $ 11,919 amortization expenseStock-based compensation $ 817 $ 1,579 $ 1,045 $ 2,793 expense

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.