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CTS Announces Second Quarter 2023 Results

CTS Corporation
CTS Corporation

Advancing Strategic Priorities While Navigating Macroeconomic Conditions

LISLE, Ill., July 25, 2023 (GLOBE NEWSWIRE) -- CTS Corporation (NYSE: CTS), a leading global designer and manufacturer of custom-engineered solutions that “Sense, Connect and Move,” today announced second quarter 2023 results.

“In the second quarter, our transportation sales were up double digits, offsetting continued softness in distribution and the industrial end-market. In this challenging environment, we remain focused on operational execution and strategic capital deployment,” said Kieran O’Sullivan, CEO of CTS Corporation. “We made progress on our long-term priorities with strong business wins in the quarter. We received our first eBrake™ award and had significant wins on multiple EV platforms. Advancing our diversification efforts, we added several new customers in the non-transportation end markets.”

Second Quarter 2023 Results

  • Sales were $145.2 million, up 0.1% year-over-year. Sales to the transportation end market increased 10% and sales to the non-transportation end markets decreased 10% over the same period last year.

  • Net income was $12.9 million, or 8.9% of sales, compared to $12.6 million, or 8.7% of sales, in the second quarter of 2022.

  • Earnings per share was $0.41 per diluted share compared to $0.39 per diluted share in the second quarter of 2022.

  • Adjusted diluted EPS was $0.59 compared to $0.62 in the second quarter of 2022.

  • Adjusted EBITDA margin was 21.3% compared to 22.4% in the second quarter of 2022.

  • Operating cash flow was $23.4 million compared to $16.1 million in the second quarter of 2022.

2023 Guidance

CTS expects continued softness in distribution and the industrial end market for the remainder of 2023. As a result, the company now expects full-year 2023 sales to be in the range of $565 – $585 million, down from $580 – $640 million and adjusted diluted EPS in the range of $2.20 – $2.40, down from $2.40 – $2.70.

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.

Conference Call and Supplemental Materials

As previously announced, CTS 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 292049. In addition, CTS 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 Corporation (NYSE: CTS) is a leading designer and manufacturer of products that Sense, Connect and Move. CTS 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; 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


CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands, except per share amounts)

 

Three Months Ended

 

 

Six Months Ended

 

 

June,
2023

 

 

June 30,
2022

 

 

June 30,
2023

 

 

June 30,
2022

 

Net sales

$

145,182

 

 

$

144,982

 

 

$

291,176

 

 

$

292,677

 

Cost of goods sold

 

94,440

 

 

 

93,134

 

 

 

188,782

 

 

 

186,489

 

Gross margin

 

50,742

 

 

 

51,848

 

 

 

102,394

 

 

 

106,188

 

Selling, general and administrative expenses

 

23,694

 

 

 

22,238

 

 

 

45,673

 

 

 

44,026

 

Research and development expenses

 

6,721

 

 

 

6,294

 

 

 

13,307

 

 

 

12,488

 

Restructuring charges

 

1,895

 

 

 

630

 

 

 

2,807

 

 

 

942

 

Operating earnings

 

18,432

 

 

 

22,686

 

 

 

40,607

 

 

 

48,732

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(818

)

 

 

(602

)

 

 

(1,512

)

 

 

(1,148

)

Interest income

 

1,072

 

 

 

263

 

 

 

2,135

 

 

 

443

 

Other expense, net

 

(2,606

)

 

 

(5,425

)

 

 

(2,441

)

 

 

(5,359

)

Total other expense, net

 

(2,352

)

 

 

(5,764

)

 

 

(1,818

)

 

 

(6,064

)

Earnings before income taxes

 

16,080

 

 

 

16,922

 

 

 

38,789

 

 

 

42,668

 

Income tax expense

 

3,183

 

 

 

4,324

 

 

 

7,548

 

 

 

9,831

 

Net earnings

$

12,897

 

 

$

12,598

 

 

$

31,241

 

 

$

32,837

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.41

 

 

$

0.39

 

 

$

0.99

 

 

$

1.02

 

Diluted

$

0.41

 

 

$

0.39

 

 

$

0.98

 

 

$

1.02

 

Basic weighted – average common shares outstanding:

 

31,488

 

 

 

32,039

 

 

 

31,560

 

 

 

32,096

 

Effect of dilutive securities

 

197

 

 

 

204

 

 

 

224

 

 

 

218

 

Diluted weighted – average common shares outstanding:

 

31,685

 

 

 

32,243

 

 

 

31,784

 

 

 

32,314

 

Cash dividends declared per share

$

0.04

 

 

$

0.04

 

 

$

0.08

 

 

$

0.08

 


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

 

(Unaudited)
June 30, 2023

 

 

December 31,
2022

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

$

150,878

 

 

$

156,910

 

Accounts receivable, net

 

97,519

 

 

 

90,935

 

Inventories, net

 

62,556

 

 

 

62,260

 

Other current assets

 

18,924

 

 

 

15,655

 

Total current assets

 

329,877

 

 

 

325,760

 

Property, plant and equipment, net

 

94,956

 

 

 

97,300

 

Operating lease assets, net

 

25,768

 

 

 

22,702

 

Other Assets

 

 

 

 

 

Goodwill

 

155,931

 

 

 

152,361

 

Other intangible assets, net

 

108,717

 

 

 

108,053

 

Deferred income taxes

 

22,831

 

 

 

23,461

 

Other

 

17,826

 

 

 

18,850

 

Total other assets

 

305,305

 

 

 

302,725

 

Total Assets

$

755,906

 

 

$

748,487

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Accounts payable

$

53,119

 

 

$

53,211

 

Operating lease obligations

 

4,293

 

 

 

3,936

 

Accrued payroll and benefits

 

14,389

 

 

 

20,063

 

Accrued expenses and other liabilities

 

35,381

 

 

 

35,322

 

Total current liabilities

 

107,182

 

 

 

112,532

 

Long-term debt

 

77,040

 

 

 

83,670

 

Long-term operating lease obligations

 

24,534

 

 

 

21,754

 

Long-term pension obligations

 

5,017

 

 

 

5,048

 

Deferred income taxes

 

15,780

 

 

 

16,010

 

Other long-term obligations

 

4,958

 

 

 

3,249

 

Total Liabilities

 

234,511

 

 

 

242,263

 

Commitments and Contingencies

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

Common stock

 

319,111

 

 

 

316,803

 

Additional contributed capital

 

43,488

 

 

 

46,144

 

Retained earnings

 

575,422

 

 

 

546,703

 

Accumulated other comprehensive income (loss)

 

3,691

 

 

 

(671

)

Total shareholders’ equity before treasury stock

 

941,712

 

 

 

908,979

 

Treasury stock

 

(420,317

)

 

 

(402,755

)

Total shareholders’ equity

 

521,395

 

 

 

506,224

 

Total Liabilities and Shareholders’ Equity

$

755,906

 

 

$

748,487

 


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.

  • 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 the 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.


Adjusted Gross Margin

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

Twelve Months Ended
December 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2022

 

 

2021

 

 

2020

 

Gross margin

$

50.7

 

 

$

51.8

 

 

$

102.4

 

 

$

106.2

 

 

$

210.5

 

 

$

184.6

 

 

$

139.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

145.2

 

 

$

145.0

 

 

$

291.2

 

 

$

292.68

 

 

$

586.9

 

 

$

512.9

 

 

$

424.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin as a % of net sales

 

35.0

%

 

 

35.8

%

 

 

35.2

%

 

 

36.3

%

 

 

35.9

%

 

 

36.0

%

 

 

32.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to reported gross margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventory fair value step-up (b)

$

 

 

$

0.5

 

 

$

 

 

$

1.1

 

 

$

4.0

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted gross margin

$

50.7

 

 

$

52.4

 

 

$

102.4

 

 

$

107.3

 

 

$

214.5

 

 

$

184.6

 

 

$

139.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted gross margin as a % of net sales

 

35.0

%

 

 

36.1

%

 

 

35.2

%

 

 

36.7

%

 

 

36.5

%

 

 

36.0

%

 

 

32.8

%


Adjusted Operating Earnings

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

Twelve Months Ended
December 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2022

 

 

2021

 

 

2020

 

Operating earnings

$

18.4

 

 

$

22.7

 

 

$

40.6

 

 

$

48.7

 

 

$

93.0

 

 

$

76.5

 

 

$

45.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

145.2

 

 

$

145.0

 

 

$

291.2

 

 

$

292.7

 

 

$

586.9

 

 

$

512.9

 

 

$

424.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings as a % of net sales

 

12.7

%

 

 

15.6

%

 

 

13.9

%

 

 

16.6

%

 

 

15.8

%

 

 

14.9

%

 

 

10.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to reported operating earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charges (c)

 

1.9

 

 

 

0.6

 

 

 

2.8

 

 

 

0.9

 

 

 

1.9

 

 

 

1.7

 

 

 

1.8

 

Environmental charges (a)

 

2.2

 

 

 

0.9

 

 

 

2.7

 

 

 

1.5

 

 

 

2.8

 

 

 

2.3

 

 

 

2.8

 

Acquisition-related costs (a)

 

 

 

 

0.3

 

 

 

0.2

 

 

 

0.8

 

 

 

0.8

 

 

 

 

 

 

0.3

 

Inventory fair value step-up (b)

 

 

 

 

0.5

 

 

 

 

 

 

1.1

 

 

 

4.0

 

 

 

 

 

 

 

Total adjustments to reported operating earnings

$

4.1

 

 

$

2.3

 

 

$

5.7

 

 

$

4.3

 

 

$

9.5

 

 

$

3.9

 

 

$

4.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating earnings

$

22.5

 

 

$

25.0

 

 

$

46.3

 

 

$

53.0

 

 

$

102.5

 

 

$

80.4

 

 

$

50.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted operating earnings as a % of net sales

 

15.5

%

 

 

17.3

%

 

 

15.9

%

 

 

18.1

%

 

 

17.5

%

 

 

15.7

%

 

 

11.8

%


Adjusted EBITDA Margin

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

Twelve Months Ended
December 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2022

 

 

2021

 

 

2020

 

Net earnings (loss)

$

12.9

 

 

$

12.6

 

 

$

31.2

 

 

$

32.8

 

 

$

59.6

 

 

$

(41.9

)

 

$

34.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

145.2

 

 

$

145.0

 

 

$

291.2

 

 

$

292.7

 

 

$

586.9

 

 

$

512.9

 

 

$

424.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) margin

 

8.9

%

 

 

8.7

%

 

 

10.7

%

 

 

11.2

%

 

 

10.2

%

 

 

-8.2

%

 

 

8.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

7.3

 

 

 

7.0

 

 

 

14.2

 

 

 

13.8

 

 

 

29.8

 

 

 

26.9

 

 

 

26.7

 

Interest expense

 

0.8

 

 

 

0.6

 

 

 

1.5

 

 

 

1.1

 

 

 

2.2

 

 

 

2.1

 

 

 

3.3

 

Tax expense (benefit)

 

3.2

 

 

 

4.3

 

 

 

7.5

 

 

 

9.8

 

 

 

21.2

 

 

 

(19.0

)

 

 

10.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

24.2

 

 

 

24.5

 

 

 

54.5

 

 

 

57.6

 

 

 

112.7

 

 

 

(31.8

)

 

 

75.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charges (c)

 

1.9

 

 

 

0.6

 

 

 

2.8

 

 

 

0.9

 

 

 

1.9

 

 

 

1.7

 

 

 

1.8

 

Environmental charges (a)

 

2.2

 

 

 

0.9

 

 

 

2.7

 

 

 

1.5

 

 

 

2.8

 

 

 

2.3

 

 

 

2.8

 

Acquisition-related costs (a)

 

 

 

 

2.0

 

 

 

0.2

 

 

 

2.5

 

 

 

2.5

 

 

 

 

 

 

0.3

 

Inventory fair value step-up (b)

 

 

 

 

0.5

 

 

 

 

 

 

1.1

 

 

 

4.0

 

 

 

 

 

 

 

Non-cash pension and related expense (d)

 

 

 

 

 

 

 

 

 

 

 

 

 

4.8

 

 

 

132.4

 

 

 

2.5

 

Foreign currency loss (gain) (d)

 

2.8

 

 

 

3.8

 

 

 

2.7

 

 

 

3.5

 

 

 

4.9

 

 

 

3.3

 

 

 

(5.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total adjustments to EBITDA

 

6.8

 

 

 

7.9

 

 

 

8.4

 

 

 

9.6

 

 

 

20.9

 

 

 

139.7

 

 

 

2.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

31.0

 

 

$

32.5

 

 

$

62.9

 

 

$

67.2

 

 

$

133.6

 

 

$

107.9

 

 

$

77.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin

 

21.3

%

 

 

22.4

%

 

 

21.6

%

 

 

22.9

%

 

 

22.8

%

 

 

21.0

%

 

 

18.3

%


Adjusted Net Earnings

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

Twelve Months Ended
December 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2022

 

 

2021

 

 

2020

 

Net earnings (loss) (A)

$

12.9

 

 

$

12.6

 

 

$

31.2

 

 

$

32.8

 

 

$

59.6

 

 

$

(41.9

)

 

$

34.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

145.2

 

 

$

145.0

 

 

$

291.2

 

 

$

292.7

 

 

$

586.9

 

 

$

512.9

 

 

$

424.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) as a % of net sales

 

8.9

%

 

 

8.7

%

 

 

10.7

%

 

 

11.2

%

 

 

10.2

%

 

 

-8.2

%

 

 

8.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to reported net earnings (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charges (c)

 

1.9

 

 

 

0.6

 

 

 

2.8

 

 

 

0.9

 

 

 

1.9

 

 

 

1.7

 

 

 

1.8

 

Environmental charges (a)

 

2.2

 

 

 

0.9

 

 

 

2.7

 

 

 

1.5

 

 

 

2.8

 

 

 

2.3

 

 

 

2.8

 

Acquisition-related costs (a)

 

 

 

 

2.0

 

 

 

0.2

 

 

 

2.5

 

 

 

2.5

 

 

 

 

 

 

0.3

 

Inventory fair value step-up (b)

 

 

 

 

0.5

 

 

 

 

 

 

1.1

 

 

 

4.0

 

 

 

 

 

 

 

Non-cash pension and related expense (d)

 

 

 

 

 

 

 

 

 

 

 

 

 

4.8

 

 

 

132.4

 

 

 

2.5

 

Foreign currency loss (gain) (d)

 

2.8

 

 

 

3.8

 

 

 

2.7

 

 

 

3.5

 

 

 

4.9

 

 

 

3.3

 

 

 

(5.3

)

Total adjustments to reported net earnings (loss)

$

6.8

 

 

$

7.9

 

 

$

8.4

 

 

$

9.6

 

 

$

20.9

 

 

$

139.7

 

 

$

2.1

 

Total adjustments, tax affected (B)

$

5.9

 

 

$

7.3

 

 

$

7.2

 

 

$

8.7

 

 

$

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)

$

18.8

 

 

$

19.9

 

 

$

38.4

 

 

$

41.5

 

 

$

79.1

 

 

$

63.0

 

 

$

36.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net earnings as a % of net sales

 

13.0

%

 

 

13.7

%

 

 

13.2

%

 

 

14.2

%

 

 

13.5

%

 

 

12.3

%

 

 

8.6

%

(a) reflected in selling, general and administrative and other (expense) income, net.
(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
June 30,

 

Six Months Ended
June 30,

 

Twelve Months Ended
December 31,

 

 

2023

 

2022

 

2023

 

2022

 

2022

 

2021

 

 

2020

 

GAAP diluted earnings (loss) per share

$

0.41

 

$

0.39

 

$

0.98

 

$

1.02

 

$

1.85

 

$

(1.30

)

 

$

1.06

 

Tax affected charges to reported diluted earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring charges

 

0.05

 

 

0.02

 

 

0.07

 

 

0.03

 

 

0.05

 

 

0.06

 

 

 

0.04

 

Foreign currency (gain) loss

 

0.08

 

 

0.12

 

 

0.08

 

 

0.11

 

 

0.15

 

 

0.10

 

 

 

(0.16

)

Non-cash pension expense

 

 

 

 

 

 

 

 

 

0.16

 

 

3.13

 

 

 

0.06

 

Environmental charges

 

0.05

 

 

0.02

 

 

0.07

 

 

0.03

 

 

0.07

 

 

0.05

 

 

 

0.07

 

Acquisition-related costs

 

 

 

0.05

 

 

 

 

0.07

 

 

0.07

 

 

 

 

 

0.01

 

Inventory fair value step-up

 

 

 

0.02

 

 

 

 

0.03

 

 

0.10

 

 

 

 

 

 

Discrete tax items

 

 

 

 

 

 

 

 

 

0.01

 

 

(0.11

)

 

 

0.04

 

Adjusted diluted earnings per share

$

0.59

 

$

0.62

 

$

1.20

 

$

1.29

 

$

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

 

June 30,

 

 

December 31,

 

 

2023

 

 

2022

 

 

2022

 

 

2021

 

 

2020

 

Net accounts receivable

$

97.5

 

 

$

98.9

 

 

$

90.9

 

 

$

82.2

 

 

$

81.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net inventory

$

62.6

 

 

$

64.2

 

 

$

62.3

 

 

$

49.5

 

 

$

45.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

$

(53.1

)

 

$

(60.7

)

 

$

(53.2

)

 

$

(55.5

)

 

$

(50.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Controllable working capital

$

107.0

 

 

$

102.4

 

 

$

100.0

 

 

$

76.2

 

 

$

76.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter sales

$

145.2

 

 

$

145.0

 

 

$

142.3

 

 

$

132.5

 

 

$

123.0

 

Multiplied by 4

 

4

 

 

 

4

 

 

 

4

 

 

 

4

 

 

 

4

 

Annualized sales

$

580.7

 

 

$

579.9

 

 

$

569.1

 

 

$

530.0

 

 

$

492.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Controllable working capital as a % of annualized sales

 

18.4

%

 

 

17.7

%

 

 

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
June 30,

 

 

Six Months Ended
June 30,

 

 

Twelve Months Ended
December 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2022

 

 

2021

 

 

2020

 

Net cash provided by operating activities

$

23.4

 

 

$

16.1

 

 

$

34.6

 

 

$

35.4

 

 

$

121.2

 

 

$

86.1

 

 

$

76.8

 

Capital expenditures

 

(3.9

)

 

 

(3.6

)

 

 

(8.5

)

 

 

(7.0

)

 

 

(14.3

)

 

 

(15.6

)

 

 

(14.9

)

Free cash flow

$

19.5

 

 

$

12.5

 

 

$

26.1

 

 

$

28.4

 

 

$

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
June 30,

 

 

Six Months Ended
June 30,

 

 

Twelve Months Ended
December 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2022

 

 

2021

 

 

2020

 

Capital expenditures

$

3.9

 

 

$

3.6

 

 

$

8.5

 

 

$

7.0

 

 

$

14.3

 

 

$

15.6

 

 

$

14.9

 

Net sales

$

145.2

 

 

$

145.0

 

 

$

291.2

 

 

$

292.7

 

 

$

586.9

 

 

$

512.9

 

 

$

424.1

 

Capex as % of net sales

 

2.7

%

 

 

2.5

%

 

 

2.9

%

 

 

2.4

%

 

 

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
June 30,

 

Six Months Ended
June 30,

 

Twelve Months Ended
December 31,

 

2023

 

2022

 

2023

 

2022

 

2022

 

2021

 

2020

Depreciation and amortization expense

$

7.3

 

$

7.0

 

$

14.2

 

$

13.8

 

$

29.8

 

$

26.9

 

$

26.7

Stock-based compensation expense

$

1.6

 

$

1.6

 

$

3.2

 

$

3.6

 

$

7.7

 

$

6.1

 

$

3.4