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Published: 2023-04-27 00:00:00 ET

EX-99 2 cts-ex99_1.htm EX-99.1 EX-99

Exhibit 99.1


April 27, 2023	FOR IMMEDIATE RELEASE

CTS Announces First Quarter 2023 Results

Solid Quarter, Managing Through Challenging Market Dynamics

Lisle, Ill. - CTS Corporation (NYSE: CTS), a leading global designer and manufacturer of custom engineered solutions that “Sense, Connect and Move,” today announced first quarter 2023 results.

“We delivered solid results in the first quarter, supported by ongoing execution of our diversification strategy, against a backdrop of persistent macroeconomic headwinds. Market conditions remain challenging. We are continuing to capture new business to expand into premium non-transportation end markets while gaining momentum on winning new electrification business.” said Kieran O’Sullivan, CEO of CTS Corporation. “With a strong financial profile and robust balance sheet, we are well-positioned to continue driving progress on our strategic priorities to deliver long-term profitable growth and stakeholder value.”

First Quarter 2023 Results

•

Sales were $146.0 million, down 1.2% year-over-year. Sales to non-transportation end markets increased 4.6%, and sales to the transportation end market decreased 6.1% over the same period.

•

Net income was $18.3 million, or 12.6% of sales, compared to $20.2 million, or 13.7% of sales, in the first quarter of 2022.

•

Earnings per share was $0.58 per diluted share compared to $0.63 per diluted share in the first quarter of 2022.

•

Adjusted diluted EPS was $0.61 down from $0.67 in the first quarter of 2022.

•

Adjusted EBITDA margin was 21.9% compared to 23.5% in the first quarter of 2022.

•

Operating cash flow was $11.2 million compared to $19.3 million in the first quarter of 2022.

2023 Guidance

CTS is maintaining its guidance of sales in the range of $580 - $640 million and adjusted diluted EPS to be in the range of $2.40 - $2.70. Management continues to carefully monitor the potential impact of uncertain macroeconomic and geopolitical conditions.

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.

www.ctscorp.com

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 833-470-1428 (+1 929-526-1599, if calling from outside the U.S. and Canada). The passcode is 422657. 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: supply chain disruptions; 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 our acquisitions of TEWA Temperature Sensors, Ferroperm Piezoceramics and maglab, A.G.; 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 (including the ultimate impact of the COVID-19 pandemic on CTS’ business, results of operations or financial condition), 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.

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

www.ctscorp.com

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED

(In thousands, except per share amounts)


	Three Months Ended
	March 31, 2023			March 31, 2022
Net sales	$	145,994		$	147,695
Cost of goods sold		94,342			93,355
Gross margin		51,652			54,340
Selling, general and administrative expenses		21,979			21,788
Research and development expenses		6,586			6,194
Restructuring charges		912			312
Operating earnings		22,175			26,046
Other (expense) income:
Interest expense		(694	)		(546	)
Interest income		1,063			180
Other income, net		165			66
Total other income (expense), net		534			(300	)
Earnings before income taxes		22,709			25,746
Income tax expense		4,365			5,507
Net earnings		18,344			20,239
Earnings per share:
Basic		0.58		$	0.63
Diluted		0.58		$	0.63
Basic weighted – average common shares outstanding:		31,634			32,123
Effect of dilutive securities		259			204
Diluted weighted – average common shares outstanding:		31,893			32,327
Cash dividends declared per share	$	0.04		$	0.04

www.ctscorp.com

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)


	(Unaudited)
	March 31, 2023			December 31, 2022
ASSETS
Current Assets
Cash and cash equivalents	$	143,537		$	156,910
Accounts receivable, net		97,707			90,935
Inventories, net		63,470			62,260
Other current assets		17,930			15,655
Total current assets		322,644			325,760
Property, plant and equipment, net		96,280			97,300
Operating lease assets, net		21,869			22,702
Other Assets
Goodwill		155,651			152,361
Other intangible assets, net		109,706			108,053
Deferred income taxes		23,246			23,461
Other		17,611			18,850
Total other assets		306,214			302,725
Total Assets	$	747,007		$	748,487
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	53,410		$	53,211
Operating lease obligations		4,032			3,936
Accrued payroll and benefits		11,800			20,063
Accrued expenses and other liabilities		36,534			35,322
Total current liabilities		105,776			112,532
Long-term debt		80,261			83,670
Long-term operating lease obligations		20,808			21,754
Long-term pension obligations		5,017			5,048
Deferred income taxes		15,786			16,010
Other long-term obligations		5,223			3,249
Total Liabilities		232,871			242,263
Commitments and Contingencies
Shareholders’ Equity
Common stock		318,785			316,803
Additional contributed capital		42,423			46,144
Retained earnings		563,787			546,703
Accumulated other comprehensive income (loss)		698			(671	)
Total shareholders’ equity before treasury stock		925,693			908,979
Treasury stock		(411,557	)		(402,755	)
Total shareholders’ equity		514,136			506,224
Total Liabilities and Shareholders’ Equity	$	747,007		$	748,487

www.ctscorp.com

CTS CORPORATION AND SUBSIDIARIES

OTHER SUPPLEMENTAL INFORMATION - UNAUDITED

(In millions of dollars, except percentages and per share amounts)

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 believes that the non-GAAP financial measures presented are commonly used by financial analysts and others in the industries in which CTS operates, and thus further provide useful information to investors. CTS’ definitions of these non-GAAP financial measures may differ from those terms as defined or used by other companies. Non-GAAP measures should not be used by investors or third parties as the sole basis for formulating investment decisions, as they may exclude a number of important cash and non-cash recurring items.

CTS has presented these non-GAAP financial measures as it believes that the presentation of its financial results that exclude (1) restructuring charges; (2) environmental charges; (3) acquisition-related costs; (4) inventory fair value step-up costs; (5) foreign exchange (gains) losses; (6) non-cash pension expenses (income); and (7) certain discrete tax items are useful and assist in comparing CTS’ current operating results with past periods and with the operational performance of other companies in its industry. Included below is a description of the expenses that CTS has determined are not normal, recurring cash operating expenses necessary to operate its business and the rationale for why providing financial measures for its business with such expenses excluded or adjusted is useful to investors as a supplement to the U.S. GAAP measures.

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Restructuring charges - costs primarily relating to workforce reduction costs, building and equipment relocation costs, asset impairment charges and other facility closure costs in connection with our continued optimization of our organization.

•

Environmental charges - costs associated with our non-operating facilities that are unrelated to ongoing operations.

•

Acquisition-related costs – diligence and transaction costs related to acquisitions.

•

Inventory fair value step-up costs - purchase accounting-related inventory costs from acquisitions.

•

Foreign exchange (gains) losses - remeasurement income and expenses for non-U.S. subsidiaries with the U.S. dollar as its functional currency.

•

Non-cash pension expenses (income) - pension income and expenses relating to the non-operating U.S. pension and post-retirement life insurance plans, including historical plan settlement activities.

•

Discrete tax items - non-recurring, infrequent, or unusual tax adjustments (e.g., valuation allowances, uncertain tax position changes, unremitted assertion changes and discrete impacts associated with pre-tax non-GAAP items, etc.).

At times, the reconciliations below have been intentionally rounded to the nearest thousand, or $0.01 for EPS figures, and, therefore, may not sum.

www.ctscorp.com

Adjusted Gross Margin


	Three Months Ended March 31,						Twelve Months Ended December 31,
	2023			2022			2022			2021			2020
Gross margin	$	51.7		$	54.3		$	210.5		$	184.6		$	139.1

Net sales	$	146.0		$	147.7		$	586.9		$	512.9		$	424.1

Gross margin as a % of net sales		35.4	%		36.8	%		35.9	%		36.0	%		32.8	%

Adjustments to reported gross margin:
Inventory fair value step-up (b)	$	—		$	0.6		$	4.0		$	—		$	—

Adjusted gross margin	$	51.7		$	54.9		$	214.5		$	184.6		$	139.1

Adjusted gross margin as a % of net sales		35.4	%		37.2	%		36.5	%		36.0	%		32.8	%

Adjusted Operating Earnings


	Three Months Ended March 31,						Twelve Months Ended December 31,
	2023			2022			2022			2021			2020
Operating earnings	$	22.2		$	26.0		$	93.0		$	76.5		$	45.1

Net sales	$	146.0		$	147.7		$	586.9		$	512.9		$	424.1

Operating earnings as a % of net sales		15.2	%		17.6	%		15.8	%		14.9	%		10.6	%

Adjustments to reported operating earnings:
Restructuring charges (c)		0.9			0.3			1.9			1.7			1.8
Environmental charges (a)		0.6			0.5			2.8			2.3			2.8
Acquisition-related costs (a)		0.2			0.5			0.8			—			0.3
Inventory fair value step-up (b)		—			0.6			4.0			—			—
Total adjustments to reported operating earnings	$	1.7		$	1.9		$	9.5		$	3.9		$	4.9

Adjusted operating earnings	$	23.8		$	28.0		$	102.5		$	80.4		$	50.0

Adjusted operating earnings as a % of net sales		16.3	%		19.0	%		17.5	%		15.7	%		11.8	%

Adjusted EBITDA Margin


	Three Months Ended March 31,						Twelve Months Ended December 31,
	2023			2022			2022			2021			2020
Net earnings (loss)	$	18.3		$	20.2		$	59.6		$	(41.9	)	$	34.7

Net sales	$	146.0		$	147.7		$	586.9		$	512.9		$	424.1

Net earnings (loss) margin		12.6	%		13.7	%		10.2	%		-8.2	%		8.2	%

Depreciation and amortization expense		6.9			6.7			29.8			26.9			26.7
Interest expense		0.7			0.5			2.2			2.1			3.3
Tax expense (benefit)		4.4			5.5			21.2			(19.0	)		10.8

EBITDA		30.3			33.0			112.7			(31.8	)		75.4

Adjustments to EBITDA:
Restructuring charges (c)		0.9			0.3			1.9			1.7			1.8
Environmental charges (a)		0.6			0.5			2.8			2.3			2.8
Acquisition-related costs (a)		0.2			0.5			2.5			—			0.3
Inventory fair value step-up (b)		—			0.6			4.0			—			—
Non-cash pension and related (income) expense (d)		—			—			4.8			132.4			2.5
Foreign currency (gain) loss (d)		(0.1	)		(0.3	)		4.9			3.3			(5.3	)

Total adjustments to EBITDA		1.6			1.7			20.9			139.7			2.1

Adjusted EBITDA	$	31.9		$	34.7		$	133.6		$	107.9		$	77.5

Adjusted EBITDA Margin		21.9	%		23.5	%		22.8	%		21.0	%		18.3	%

Adjusted Net Earnings


	Three Months Ended March 31,						Twelve Months Ended December 31,
	2023			2023			2022			2021			2020
Net earnings (loss) (A)	$	18.3		$	20.2		$	59.6		$	(41.9	)	$	34.7

Net sales	$	146.0		$	147.7		$	586.9		$	512.9		$	424.1

Net earnings (loss) as a % of net sales		12.6	%		13.7	%		10.2	%		-8.2	%		8.2	%

Adjustments to reported net earnings (loss):
Restructuring charges (c)		0.9			0.3			1.9			1.7			1.8
Environmental charges (a)		0.6			0.5			2.8			2.3			2.8
Acquisition-related costs (a)		0.2			0.5			2.5			—			0.3
Inventory fair value step-up (b)		—			0.6			4.0			—			—
Non-cash pension and related (income) expense (d)		—			—			4.8			132.4			2.5
Foreign currency (gain) loss (d)		(0.1	)		(0.3	)		4.9			3.3			(5.3	)
Total adjustments to reported net earnings (loss)	$	1.6		$	1.7		$	20.9		$	139.7		$	2.1
Total adjustments, tax affected (B)	$	1.3		$	1.4		$	19.3		$	108.6		$	0.4

Tax adjustments:
Increase in valuation allowances (e)		—			—			—			0.9			0.2
Other discrete tax items (e)		—			—			0.2			(4.7	)		1.2
Total tax adjustments (C)	$	—		$	—		$	0.2		$	(3.8	)	$	1.4
Adjusted net earnings (A+B+C)	$	19.6		$	21.7		$	79.1		$	63.0		$	36.5

Adjusted net earnings as a % of net sales		13.4	%		14.7	%		13.5	%		12.3	%		8.6	%

(a) reflected in selling, general and administrative expenses.
(b) reflected in cost of goods sold.
(c) reflected in restructuring charges.

(d) reflected in other (expense) income, net.

(e) reflected in income tax expense (income).

Adjusted Diluted Earnings Per Share


	Three Months Ended March 31,					Twelve Months Ended December 31,
	2023		2022			2022		2021			2020
GAAP diluted earnings (loss) per share	$	0.58	$	0.63		$	1.85	$	(1.30	)	$	1.06
Tax affected charges to reported diluted earnings (loss) per share:
Restructuring charges		0.02		0.01			0.05		0.06			0.04
Foreign currency (gain) loss		—		(0.01	)		0.15		0.10			(0.16	)
Non-cash pension expense		—	—				0.16		3.13			0.06
Environmental charges		0.01		0.01			0.07		0.05			0.07
Acquisition-related costs		—		0.02			0.07		—			0.01
Inventory fair value step-up		—		0.01			0.10		—			—
Discrete tax items		—		—			0.01		(0.11	)		0.04
Adjusted diluted earnings per share	$	0.61	$	0.67		$	2.46	$	1.93		$	1.12

NOTE: 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 (such as those items noted above in the paragraph titled “Non-GAAP Financial Measures”) or were not part of CTS’ business operations during a comparable period.

Controllable Working Capital


	March 31,						December 31,
	2023			2022			2022			2021			2020
Net accounts receivable	$	97.7		$	95.1		$	90.9		$	82.2		$	81.0

Net inventory	$	63.5		$	52.5		$	62.3		$	49.5		$	45.9

Accounts payable	$	(53.4	)	$	(60.0	)	$	(53.2	)	$	(55.5	)	$	(50.5	)

Controllable working capital	$	107.8		$	87.6		$	100.0		$	76.2		$	76.4

Quarter sales	$	146.0		$	147.7		$	142.3		$	132.5		$	123.0
Multiplied by 4		4			4			4			4			4
Annualized sales	$	584.0		$	590.8		$	569.1		$	530.0		$	492.1

Controllable working capital as a % of annualized sales		18.5	%		14.8	%		17.6	%		14.4	%		15.5	%

NOTE: CTS believes the controllable working capital ratio is a useful measure because it provides an objective measure of the efficiency with which CTS manages its short-term capital needs.

Free Cash Flow


	Three Months Ended March 31,						Twelve Months Ended December 31,
	2023			2022			2022			2021			2020
Net cash provided by operating activities	$	11.2		$	19.3		$	121.2		$	86.1		$	76.8
Capital expenditures		(4.5	)		(3.4	)		(14.3	)		(15.6	)		(14.9	)
Free cash flow	$	6.6		$	15.9		$	106.9		$	70.5		$	61.9

NOTE: CTS believes that free cash flow is a useful measure because it demonstrates the company’s ability to generate cash. Free cash flow is a non-GAAP measure and should be considered in addition to, but not as a substitute for, information contained in the company's condensed consolidated statement of cash flows as a measure of liquidity.

Capital Expenditures


	Three Months Ended March 31,						Twelve Months Ended December 31,
	2023			2022			2022			2021			2020
Capital expenditures	$	4.5		$	3.4		$	14.3		$	15.6		$	14.9
Net sales	$	146.0		$	147.7		$	586.9		$	512.9		$	424.1
Capex as % of net sales		3.1	%		2.3	%		2.4	%		3.0	%		3.5	%

Additional Information

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


	Three Months Ended March 31,				Twelve Months Ended December 31,
	2023		2022		2022		2021		2020
Depreciation and amortization expense	$	6.9	$	6.7	$	29.8	$	26.9	$	26.7
Stock-based compensation expense	$	1.6	$	2.0	$	7.7	$	6.1	$	3.4