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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 26, 2022 |
CTS CORPORATION
(Exact name of Registrant as Specified in Its Charter)
Indiana |
1-4639 |
35-0225010 |
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(State or Other Jurisdiction |
(Commission File Number) |
(IRS Employer |
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4925 Indiana Avenue |
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Lisle, Illinois |
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60532 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
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Registrant’s Telephone Number, Including Area Code: 630 577-8800 |
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
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Trading |
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Common Stock, no par value |
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CTS |
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The New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On July 26, 2022, CTS Corporation (the "Registrant") issued a press release providing certain results for the second quarter ended June 30, 2022, as more fully described in the press release. A copy of the press release is attached hereto as Exhibit 99.l and is incorporated by reference herein.
The information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.l hereto, is being "furnished" to the Securities and Exchange Commission and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act” ) or otherwise subject to the liabilities of that section. Furthermore, such information shall not be deemed to be incorporated by reference into any filing made by the Registrant under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except as set forth by specific reference in such filing.
Item 7.01 Regulation FD Disclosure.
As disclosed in the press release furnished as Exhibit 99.1, the Registrant will hold a live web cast on July 26, 2022, relating to the Registrant’s financial results for the second quarter ended Jun 30, 2022. A copy of the slides to be presented during the Registrant’s web cast and discussed in the conference call relating to such financial results is being furnished as Exhibit 99.2 to this Current Report on Form 8-K.
By filing this Current Report on Form 8-K and furnishing the information contained herein, the Company makes no admission as to the materiality of any information in this report that is required to be disclosed solely by reason of Regulation FD.
The information contained in Item 7.01 of this Current Report on Form 8-K and Exhibit 99.2 shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. Furthermore, such information shall not be deemed to be incorporated by reference into any filing made by the Registrant under the Securities Act or the Exchange Act, except as set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit |
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Description |
99.1 |
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99.2 |
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Slides of CTS Corporation, 2nd Quarter 2022, dated July 26, 2022 |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL Document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: July 26, 2022 |
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CTS CORPORATION |
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By: |
/s/ Thomas M. White |
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Thomas M. White |
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Corporate Controller
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Exhibit 99.1
July 26, 2022 |
FOR IMMEDIATE RELEASE |
CTS Announces Second Quarter 2022 Results
Continued growth supported by diversification and portfolio strength
Lisle, Ill. - CTS Corporation (NYSE: CTS), a leading global designer and manufacturer of custom engineered solutions that “Sense, Connect and Move,” today announced second quarter 2022 results.
“We delivered another quarter of profitable growth, underscored by a 12% revenue increase and a 90-basis point Adjusted EBITDA margin expansion, as we continue to drive performance through the execution of our diversification strategy. Our robust portfolio has enabled us to capture secular tailwinds as we expand into premium non-transportation end markets, while also gaining good traction on new electric vehicle applications,” said Kieran O’Sullivan, CEO. “Our recent acquisition of Ferroperm further advances our strategic priorities. Despite a challenging macroeconomic environment, we believe that our operational strength, combined with a strong balance sheet and solid cash generation, position us for long-term sustainable growth.”
Second Quarter 2022 Results
2022 Guidance
Including the recent Ferroperm acquisition, CTS now expects full year 2022 sales to be in the range of $570 - $600 million, up from the previous guidance of $550 – $580 million, and adjusted diluted EPS in the range of $2.40 - $2.55, up from the previous guidance of $2.20 – $2.45. Management continues to monitor the potential impact of the challenging 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 990568. 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/.
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, 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, 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, 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.
www.ctscorp.com
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 CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
CTS Corporation
4925 Indiana Avenue
Lisle, IL 60532 USA
+1 (630) 577-8800
ashish.agrawal@ctscorp.com
www.ctscorp.com
CTS CORPORATION AND SUBSIDIARIES
(In thousands of dollars, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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June 30, |
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June 30, |
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Net sales |
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$ |
144,982 |
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$ |
129,585 |
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$ |
292,677 |
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$ |
258,012 |
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Cost of goods sold |
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93,134 |
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81,889 |
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186,489 |
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167,725 |
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Gross margin |
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51,848 |
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47,696 |
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106,188 |
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90,287 |
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Selling, general and administrative expenses |
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22,238 |
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20,937 |
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44,026 |
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39,262 |
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Research and development expenses |
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6,294 |
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6,029 |
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12,488 |
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11,716 |
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Restructuring charges |
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630 |
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151 |
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942 |
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232 |
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Operating earnings |
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22,686 |
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20,579 |
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48,732 |
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39,077 |
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Other (expense) income: |
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Interest expense |
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(602 |
) |
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(508 |
) |
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(1,148 |
) |
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(1,063 |
) |
Interest income |
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263 |
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|
257 |
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443 |
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|
459 |
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Other (expense), net |
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(5,425 |
) |
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(20,929 |
) |
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(5,359 |
) |
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(24,285 |
) |
Total other (expense), net |
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(5,764 |
) |
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(21,180 |
) |
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(6,064 |
) |
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(24,889 |
) |
Earnings (loss) before income taxes |
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16,922 |
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(601 |
) |
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42,668 |
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14,188 |
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Income tax expense (benefit) |
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4,324 |
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(1,476 |
) |
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9,831 |
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1,323 |
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Net earnings |
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12,598 |
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|
875 |
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32,837 |
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12,865 |
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Earnings per share: |
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Basic |
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$ |
0.39 |
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$ |
0.03 |
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$ |
1.02 |
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$ |
0.40 |
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Diluted |
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$ |
0.39 |
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$ |
0.03 |
|
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$ |
1.02 |
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$ |
0.39 |
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Basic weighted – average common shares outstanding: |
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32,039 |
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|
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32,397 |
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|
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32,096 |
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|
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32,358 |
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Effect of dilutive securities |
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204 |
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229 |
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|
218 |
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|
|
259 |
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Diluted weighted – average common shares outstanding: |
|
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32,243 |
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|
|
32,626 |
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|
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32,314 |
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|
|
32,617 |
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Cash dividends declared per share |
|
$ |
0.04 |
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$ |
0.04 |
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$ |
0.08 |
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$ |
0.08 |
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www.ctscorp.com
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
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(Unaudited) |
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June 30, 2022 |
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December 31, 2021 |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
98,739 |
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$ |
141,465 |
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Accounts receivable, net |
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98,949 |
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82,191 |
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Inventories, net |
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64,158 |
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49,506 |
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Other current assets |
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16,704 |
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15,927 |
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Total current assets |
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278,550 |
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289,089 |
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Property, plant and equipment, net |
|
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99,637 |
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96,876 |
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Operating lease assets, net |
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22,452 |
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|
|
21,594 |
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Other Assets |
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|
|
|
|
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Prepaid pension asset |
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33,860 |
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|
49,382 |
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Goodwill |
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139,617 |
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109,798 |
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Other intangible assets, net |
|
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112,824 |
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|
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69,888 |
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Deferred income taxes |
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23,401 |
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|
|
25,415 |
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Other |
|
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19,293 |
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|
|
2,420 |
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Total other assets |
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328,995 |
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|
|
256,903 |
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Total Assets |
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$ |
729,634 |
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$ |
664,462 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current Liabilities |
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Accounts payable |
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$ |
60,662 |
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$ |
55,537 |
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Operating lease obligations |
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|
3,612 |
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|
|
3,393 |
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Accrued payroll and benefits |
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14,931 |
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|
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18,418 |
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Accrued expenses and other liabilities |
|
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36,171 |
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|
|
36,718 |
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Total current liabilities |
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115,376 |
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|
114,066 |
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Long-term debt |
|
|
91,027 |
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|
|
50,000 |
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Long-term operating lease obligations |
|
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21,851 |
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|
|
21,354 |
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Long-term pension obligations |
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|
6,361 |
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|
|
6,886 |
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Deferred income taxes |
|
|
6,174 |
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|
|
5,894 |
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Other long-term obligations |
|
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2,898 |
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|
|
2,684 |
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Total Liabilities |
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243,687 |
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|
|
200,884 |
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Commitments and Contingencies |
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Shareholders’ Equity |
|
|
|
|
|
|
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Common stock |
|
|
316,502 |
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|
314,620 |
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Additional contributed capital |
|
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42,585 |
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|
|
42,549 |
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Retained earnings |
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522,506 |
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|
|
492,242 |
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Accumulated other comprehensive loss |
|
|
(2,670 |
) |
|
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(4,525 |
) |
Total shareholders’ equity before treasury stock |
|
|
878,923 |
|
|
|
844,886 |
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Treasury stock |
|
|
(392,976 |
) |
|
|
(381,308 |
) |
Total shareholders’ equity |
|
|
485,947 |
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|
|
463,578 |
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Total Liabilities and Shareholders’ Equity |
|
$ |
729,634 |
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|
$ |
664,462 |
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www.ctscorp.com
CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION - UNAUDITED
(In millions of dollars, except per share amounts)
Adjusted Gross Margin
|
|
Three Months Ended |
|
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Six Months Ended |
|
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Twelve Months Ended |
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|||||||||||||||||||
|
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2022 |
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2021 |
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2022 |
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2021 |
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2021 |
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2020 |
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2019 |
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Gross margin |
|
$ |
51.8 |
|
|
$ |
47.7 |
|
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$ |
106.2 |
|
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$ |
90.3 |
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$ |
184.6 |
|
|
$ |
139.1 |
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$ |
157.6 |
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Adjustments to reported gross margin: |
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|
|
|
|
|
|
|
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|
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|
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Inventory fair value step-up |
|
$ |
0.5 |
|
|
$ |
— |
|
|
$ |
1.1 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|||||||
Adjusted gross margin |
|
$ |
52.4 |
|
|
$ |
47.7 |
|
|
$ |
107.3 |
|
|
$ |
90.3 |
|
|
$ |
184.6 |
|
|
$ |
139.1 |
|
|
$ |
157.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net sales |
|
$ |
145.0 |
|
|
$ |
129.6 |
|
|
$ |
292.7 |
|
|
$ |
258.0 |
|
|
$ |
512.9 |
|
|
$ |
424.1 |
|
|
$ |
469.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Adjusted gross margin as a % of net sales |
|
|
36.1 |
% |
|
|
36.8 |
% |
|
|
36.7 |
% |
|
|
35.0 |
% |
|
|
36.0 |
% |
|
|
32.8 |
% |
|
|
33.6 |
% |
Adjusted Operating Earnings
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Twelve Months Ended |
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|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||||||
Operating earnings |
|
$ |
22.7 |
|
|
$ |
20.6 |
|
|
$ |
48.7 |
|
|
$ |
39.1 |
|
|
$ |
76.5 |
|
|
$ |
45.1 |
|
|
$ |
53.8 |
|
Adjustments to reported operating earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Restructuring charges |
|
|
0.6 |
|
|
|
0.2 |
|
|
|
0.9 |
|
|
|
0.2 |
|
|
|
1.7 |
|
|
|
1.8 |
|
|
|
7.4 |
|
Environmental charges |
|
|
0.9 |
|
|
|
0.2 |
|
|
|
1.5 |
|
|
|
0.4 |
|
|
|
2.3 |
|
|
|
2.8 |
|
|
|
2.3 |
|
Legal settlement |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
(0.5 |
) |
||
Acquisition-related costs |
|
|
0.3 |
|
|
|
— |
|
|
|
0.8 |
|
|
|
— |
|
|
— |
|
|
|
0.3 |
|
|
|
0.7 |
|
|
Inventory fair value step-up |
|
|
0.5 |
|
|
|
— |
|
|
|
1.1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Costs of tax improvement initiatives |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
Total adjustments to reported operating earnings |
|
$ |
2.3 |
|
|
$ |
0.4 |
|
|
$ |
4.3 |
|
|
$ |
0.7 |
|
|
$ |
3.9 |
|
|
$ |
4.9 |
|
|
$ |
10.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Adjusted operating earnings |
|
$ |
25.0 |
|
|
$ |
21.0 |
|
|
$ |
53.0 |
|
|
$ |
39.7 |
|
|
$ |
80.4 |
|
|
$ |
50.0 |
|
|
$ |
63.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net sales |
|
$ |
145.0 |
|
|
$ |
129.6 |
|
|
$ |
292.7 |
|
|
$ |
258.0 |
|
|
$ |
512.9 |
|
|
$ |
424.1 |
|
|
$ |
469.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Adjusted operating earnings as a % of net sales |
|
|
17.3 |
% |
|
|
16.2 |
% |
|
|
18.1 |
% |
|
|
15.4 |
% |
|
|
15.7 |
% |
|
|
11.8 |
% |
|
|
13.6 |
% |
Adjusted EBITDA
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Twelve Months Ended |
|
|||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||||||
Net earnings (loss) |
|
$ |
12.6 |
|
|
$ |
0.9 |
|
|
$ |
32.8 |
|
|
$ |
12.9 |
|
|
$ |
(41.9 |
) |
|
$ |
34.7 |
|
|
$ |
36.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Depreciation and amortization expense |
|
|
7.0 |
|
|
|
6.7 |
|
|
|
13.8 |
|
|
|
13.5 |
|
|
|
26.9 |
|
|
|
26.7 |
|
|
|
24.6 |
|
Interest expense |
|
|
0.6 |
|
|
|
0.5 |
|
|
|
1.1 |
|
|
|
1.1 |
|
|
|
2.1 |
|
|
|
3.3 |
|
|
|
2.6 |
|
Tax expense (benefit) |
|
|
4.3 |
|
|
|
(1.5 |
) |
|
|
9.8 |
|
|
|
1.3 |
|
|
|
(19.0 |
) |
|
|
10.8 |
|
|
|
14.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
EBITDA |
|
|
24.5 |
|
|
|
6.6 |
|
|
|
57.6 |
|
|
|
28.8 |
|
|
|
(31.8 |
) |
|
|
75.4 |
|
|
|
77.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Adjustments to EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Restructuring charges |
|
|
0.6 |
|
|
|
0.2 |
|
|
|
0.9 |
|
|
|
0.2 |
|
|
|
1.7 |
|
|
|
1.8 |
|
|
|
6.9 |
|
Environmental charges |
|
|
0.9 |
|
|
|
0.2 |
|
|
|
1.5 |
|
|
|
0.4 |
|
|
|
2.3 |
|
|
|
2.8 |
|
|
|
2.3 |
|
Legal settlement |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.5 |
) |
Acquisition-related costs |
|
|
2.0 |
|
|
|
— |
|
|
|
2.5 |
|
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
|
0.7 |
|
Inventory fair value step-up |
|
|
0.5 |
|
|
|
— |
|
|
|
1.1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Costs of tax improvement initiatives |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
Non-cash pension expense |
|
|
— |
|
|
|
21.8 |
|
|
|
— |
|
|
|
23.7 |
|
|
|
132.4 |
|
|
|
2.5 |
|
|
|
0.8 |
|
Foreign currency loss (gain) |
|
|
3.8 |
|
|
|
(0.9 |
) |
|
|
3.5 |
|
|
|
0.4 |
|
|
|
3.3 |
|
|
|
(5.3 |
) |
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total adjustments to EBITDA |
|
|
7.9 |
|
|
|
21.2 |
|
|
|
9.6 |
|
|
|
24.8 |
|
|
|
139.7 |
|
|
|
2.1 |
|
|
|
12.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Adjusted EBITDA |
|
$ |
32.5 |
|
|
$ |
27.9 |
|
|
$ |
67.2 |
|
|
$ |
53.6 |
|
|
$ |
107.8 |
|
|
$ |
77.5 |
|
|
$ |
89.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net sales |
|
$ |
145.0 |
|
|
$ |
129.6 |
|
|
$ |
292.7 |
|
|
$ |
258.0 |
|
|
$ |
512.9 |
|
|
$ |
424.1 |
|
|
$ |
469.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Adjusted EBITDA as a % of net sales |
|
|
22.4 |
% |
|
|
21.5 |
% |
|
|
22.9 |
% |
|
|
20.8 |
% |
|
|
21.0 |
% |
|
|
18.3 |
% |
|
|
19.1 |
% |
Adjusted Net Earnings
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Twelve Months Ended |
|
|||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||||||
Net earnings (loss) (A) |
|
$ |
12.6 |
|
|
$ |
0.9 |
|
|
$ |
32.8 |
|
|
$ |
12.9 |
|
|
$ |
(41.9 |
) |
|
$ |
34.7 |
|
|
$ |
36.1 |
|
Adjustments to reported net earnings (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Restructuring charges |
|
|
0.6 |
|
|
|
0.2 |
|
|
|
0.9 |
|
|
|
0.2 |
|
|
|
1.7 |
|
|
|
1.8 |
|
|
|
7.4 |
|
Environmental charges |
|
|
0.9 |
|
|
|
0.2 |
|
|
|
1.5 |
|
|
|
0.4 |
|
|
|
2.3 |
|
|
|
2.8 |
|
|
|
2.3 |
|
Legal settlement |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
(0.5 |
) |
||
Acquisition-related costs |
|
|
2.0 |
|
|
|
— |
|
|
|
2.5 |
|
|
|
— |
|
|
— |
|
|
|
0.3 |
|
|
|
0.7 |
|
|
Inventory fair value step-up |
|
|
0.5 |
|
|
|
— |
|
|
|
1.1 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|||
Costs of tax improvement initiatives |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
0.1 |
|
||
Non-cash pension expense |
|
|
— |
|
|
|
21.8 |
|
|
|
— |
|
|
|
23.7 |
|
|
|
132.4 |
|
|
|
2.5 |
|
|
|
0.8 |
|
Foreign currency loss (gain) |
|
|
3.8 |
|
|
|
(0.9 |
) |
|
|
3.5 |
|
|
|
0.4 |
|
|
|
3.3 |
|
|
|
(5.3 |
) |
|
|
1.8 |
|
Total adjustments to reported net earnings (loss) |
|
$ |
7.9 |
|
|
$ |
21.2 |
|
|
$ |
9.6 |
|
|
$ |
24.8 |
|
|
$ |
139.7 |
|
|
$ |
2.1 |
|
|
$ |
12.6 |
|
Total adjustments, tax affected (B) |
|
$ |
7.3 |
|
|
$ |
16.1 |
|
|
$ |
8.7 |
|
|
$ |
19.2 |
|
|
$ |
108.6 |
|
|
$ |
0.4 |
|
|
$ |
10.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Tax adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Increase in valuation allowances |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.9 |
|
|
|
0.2 |
|
|
— |
|
|
Other discrete tax items |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4.7 |
) |
|
|
1.2 |
|
|
|
1.8 |
|
Total tax adjustments (C) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(3.8 |
) |
|
$ |
1.4 |
|
|
$ |
1.8 |
|
Adjusted net earnings (A+B+C) |
|
$ |
19.9 |
|
|
$ |
17.0 |
|
|
$ |
41.5 |
|
|
$ |
32.1 |
|
|
$ |
63.0 |
|
|
$ |
36.5 |
|
|
$ |
48.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net sales |
|
$ |
145.0 |
|
|
$ |
129.6 |
|
|
$ |
292.7 |
|
|
$ |
258.0 |
|
|
$ |
512.9 |
|
|
$ |
424.1 |
|
|
$ |
469.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Adjusted net earnings as a % of net sales |
|
|
13.7 |
% |
|
|
13.1 |
% |
|
|
14.2 |
% |
|
|
12.4 |
% |
|
|
12.3 |
% |
|
|
8.6 |
% |
|
|
10.3 |
% |
Adjusted Diluted Earnings Per Share
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Twelve Months Ended |
|
|||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||||||
GAAP diluted earnings (loss) per share |
|
$ |
0.39 |
|
|
$ |
0.03 |
|
|
$ |
1.02 |
|
|
$ |
0.39 |
|
|
$ |
(1.30 |
) |
|
$ |
1.06 |
|
|
$ |
1.09 |
|
Tax affected charges to reported diluted earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Restructuring charges |
|
|
0.02 |
|
|
|
0.01 |
|
|
|
0.03 |
|
|
|
0.01 |
|
|
|
0.06 |
|
|
|
0.04 |
|
|
|
0.18 |
|
Foreign currency loss (gain) |
|
|
0.12 |
|
|
|
(0.03 |
) |
|
|
0.11 |
|
|
|
0.01 |
|
|
|
0.10 |
|
|
|
(0.16 |
) |
|
|
0.05 |
|
Non-cash pension expense |
|
|
— |
|
|
|
0.51 |
|
|
|
— |
|
|
|
0.56 |
|
|
|
3.13 |
|
|
|
0.06 |
|
|
|
0.02 |
|
Environmental charges |
|
|
0.02 |
|
|
|
— |
|
|
|
0.03 |
|
|
|
0.01 |
|
|
|
0.05 |
|
|
|
0.07 |
|
|
|
0.05 |
|
Acquisition-related costs |
|
|
0.05 |
|
|
|
— |
|
|
|
0.07 |
|
|
|
— |
|
|
— |
|
|
|
0.01 |
|
|
|
0.02 |
|
|
Inventory fair value step-up |
|
|
0.02 |
|
|
|
— |
|
|
|
0.03 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|||
Legal settlement |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
(0.01 |
) |
||
Discrete tax items |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.11 |
) |
|
|
0.04 |
|
|
|
0.05 |
|
Adjusted diluted earnings per share |
|
$ |
0.62 |
|
|
$ |
0.52 |
|
|
$ |
1.29 |
|
|
$ |
0.98 |
|
|
$ |
1.93 |
|
|
$ |
1.12 |
|
|
$ |
1.45 |
|
Debt to Capitalization
|
June 30, |
|
|
December 31, |
|
||||||||||||||
|
2022 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||||
Total debt (A) |
$ |
91.0 |
|
|
$ |
50.0 |
|
|
$ |
50.0 |
|
|
$ |
54.6 |
|
|
$ |
99.7 |
|
Total shareholders' equity (B) |
$ |
485.9 |
|
|
$ |
454.3 |
|
|
$ |
463.6 |
|
|
$ |
423.7 |
|
|
$ |
405.2 |
|
Total capitalization (A+B) |
$ |
577.0 |
|
|
$ |
504.3 |
|
|
$ |
513.6 |
|
|
$ |
478.3 |
|
|
$ |
504.9 |
|
Total debt to capitalization |
|
15.8 |
% |
|
|
9.9 |
% |
|
|
9.7 |
% |
|
|
11.4 |
% |
|
|
19.7 |
% |
Controllable Working Capital
|
June 30, |
|
|
December 31, |
|
|||||||||||||
|
2022 |
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||||
Net accounts receivable |
$ |
98.9 |
|
$ |
80.8 |
|
|
$ |
82.2 |
|
|
$ |
81.0 |
|
|
$ |
78.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net inventory |
$ |
64.2 |
|
$ |
49.0 |
|
|
$ |
49.5 |
|
|
$ |
45.9 |
|
|
$ |
42.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable |
$ |
(60.7 |
) |
$ |
(47.8 |
) |
|
$ |
(55.5 |
) |
|
$ |
(50.5 |
) |
|
$ |
(48.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Controllable working capital |
$ |
102.4 |
|
$ |
82.0 |
|
|
$ |
76.2 |
|
|
$ |
76.4 |
|
|
$ |
72.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Quarter sales |
$ |
145.0 |
|
$ |
129.6 |
|
|
$ |
132.5 |
|
|
$ |
123.0 |
|
|
$ |
115.0 |
|
Multiplied by 4 |
|
4 |
|
|
4 |
|
|
|
4 |
|
|
|
4 |
|
|
|
4 |
|
Annualized sales |
$ |
579.9 |
|
$ |
518.3 |
|
|
$ |
530.1 |
|
|
$ |
492.1 |
|
|
$ |
460.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Controllable working capital as a % of annualized net sales |
|
17.7 |
% |
|
15.8 |
% |
|
|
14.4 |
% |
|
|
15.5 |
% |
|
|
15.7 |
% |
Free Cash Flow
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Twelve Months Ended |
|
|||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||||||
Net cash provided by operating activities |
|
$ |
16.1 |
|
|
$ |
18.7 |
|
|
$ |
35.4 |
|
|
$ |
38.8 |
|
|
$ |
86.1 |
|
|
$ |
76.8 |
|
|
$ |
64.4 |
|
Capital expenditures |
|
|
(3.6 |
) |
|
|
(2.3 |
) |
|
|
(7.0 |
) |
|
|
(4.0 |
) |
|
|
(15.6 |
) |
|
|
(14.9 |
) |
|
|
(21.7 |
) |
Free cash flow |
|
$ |
12.5 |
|
|
$ |
16.3 |
|
|
$ |
28.4 |
|
|
$ |
34.8 |
|
|
$ |
70.5 |
|
|
$ |
61.9 |
|
|
$ |
42.7 |
|
Capital Expenditures
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
Twelve Months Ended |
|
|||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||||||
Capital expenditures |
|
$ |
3.6 |
|
|
$ |
2.3 |
|
|
$ |
7.0 |
|
|
$ |
4.0 |
|
|
$ |
15.6 |
|
|
$ |
14.9 |
|
|
$ |
21.7 |
|
Net sales |
|
$ |
145.0 |
|
|
$ |
129.6 |
|
|
$ |
292.7 |
|
|
$ |
258.0 |
|
|
$ |
512.9 |
|
|
$ |
424.1 |
|
|
$ |
469.0 |
|
Capex as % of net sales |
|
|
2.5 |
% |
|
|
1.8 |
% |
|
|
2.4 |
% |
|
|
1.5 |
% |
|
|
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 |
|
|
Six Months Ended |
|
|
Twelve Months Ended |
|
|||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2021 |
|
|
2020 |
|
|
2019 |
|
|||||||
Depreciation and amortization expense |
|
$ |
7.0 |
|
|
$ |
6.7 |
|
|
$ |
13.8 |
|
|
$ |
13.5 |
|
|
$ |
26.9 |
|
|
$ |
26.7 |
|
|
$ |
24.6 |
|
Stock-based compensation expense |
|
$ |
1.6 |
|
|
$ |
1.9 |
|
|
$ |
3.6 |
|
|
$ |
3.1 |
|
|
$ |
6.1 |
|
|
$ |
3.4 |
|
|
$ |
5.0 |
|
CTS Corporation 2nd Quarter2022 Earnings Call July 26, 2022
Forward-Looking Statements 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 included in this press release includes the non-GAAP financial measures of adjusted gross margin, adjusted operating earnings, adjusted EBITDA, 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 margins, adjusted operating earnings, adjusted EBITDA, 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.
$145M Sales +11.9% Second Quarter (68) bps 36.1% Adj. Gross Margin Organic growth +8.7% Non-transportation revenues +21.1%, organic 14.1% Transportation revenues +4.4% Tewa acquisition added $4.1m in sales in 2Q New business wins $173M $16.1M operating cash flow, $12.5M free cash flow Solid operational performance strengthening financial position $0.62 Adj. diluted EPS +18% All comparisons vs. same period in prior year unless otherwise noted Q2 2022 – Executing on portfolio demand, diversification to achieve profitable growth
Capturing secular trends to expand into premium, growing markets Establishing leadership in non-transportation end markets Industrial Aerospace & Defense Medical +31% +37% +0.4% Revenue ($ Millions) Revenue ($ Millions) Revenue ($ Millions) Gaining in commercial sonar w/piezo products, industrial drones with RF products Strong demand for industrial appliances as consumers return to service industries Expansion in minimally invasive surgery and other applications; Ferroperm adds therapeutic application capability Continued growth in sonar, guided munitions and torpedo applications. Ferroperm adds Europe defense and aerospace capability
Strategic acquisitions fueling diversification – M&A as a catalyst Ferroperm complements existing CTS piezoceramic capabilities Single Crystal Technology 2016 2017 Tape Cast Technology Bulk Technology Pre 2016 2022 Medical Therapeutics Europe Defense Growing Piezoceramic Platform Current Enhancing Piezoceramic Technology and Geographic Reach Building a Strong Global Temperature Sensing Platform 2020 Medical Applications Industrial Applications 2019 Industrial + Medical Europe Expansion 2022 Growing Temperature Platform Current
>$1Bn expansion in Available Market with EV-related new products >95% Light Vehicle portfolio carries over to Electric Vehicles Chassis Height Sensor Accelerator Modules Brake Position Sensor Belt Tension Sensor Seat Track Position Sensor Seat Belt Buckle Switch Sensor Chassis Height Sensor Accelerator Modules Brake Position Sensor Belt Tension Sensor Seat Track Position Sensor Seat Belt Buckle Switch Sensor Traditional light vehicle key product Portfolio 2022: $2.4Bn Available Market (SAM) New products for Electrification >2030: $1Bn+ Light vehicle key products For BEV/HEV/PHEV and ICE 2030: $2.7Bn a + AC Motor Current Sensor AC Motor Position Sensor eBrake™ In Development CTS Portfolio 6
10 Electric Vehicle Platform wins in Q2 2022 – Total 17 in 2022 8% of 2022 light vehicle sales from EV/Hybrid platforms, Goal: >25% by 2025 17 YTD 2022 EV Wins
FY 2022 Guidance 2020-2022 CAGR 11.3% 3 2020-2022 CAGR 30.3% 3 $600 170% 112% Revenue ($ Millions) Free Cash Flow Conversion ($ Millions) Adj. Diluted EPS Returned to Shareholders ($ Millions) Note: 1 $570 $2.55 $2.40 68% 1 2 1 Guidance includes recent Ferroperm acquisition 2 Free cashflow conversion = FCF / Adjusted Net Earnings 3 CAGR based on mid point of 2022 guidance Non-transportation markets robust in 1H, monitoring 2H demand Light vehicle market – US 13-14.5M, China ~24-25M, Europe 15-16M units, forecasts lowered from earlier this year Robust commercial vehicle market through end of 2022 Monitoring additional risks from interest rates, supply challenges, inflationary pressures, COVID-19, geopolitical considerations Tax rate in the range of 20-23% excluding discrete items Key Outlook Assumptions
2nd Quarter 2022 Financial Results
Revenue up 11.9% vs. Q2 2021 and down 2% vs Q1 2022 Non-transportation sales up 21.1% vs Q2 2022, organic growth +14% Transportation sales up 4.4% vs Q2 2021 Adjusted EBITDA up 90 bps to 22.4% Continued margin pressure from supply challenges and cost increases, partially mitigated by continuous improvement projects and pricing Operating cash flow $16.1M, negative impact from foreign currency rates Highlights Net Income ($’Mil) $0.9 $20.2 $12.6 Diluted EPS $0.03 $0.63 $0.39 Adj. Diluted EPS $0.52 $0.67 $0.62 Adj. EBITDA Margin 21.5% 23.5% 22.4% Revenue ($ millions) Q2 2022 Financial Summary
Cash and Debt ($ Millions) Operating Cash Flow Q2 2022 – $7.7M YTD 2022 – $11.7M Returned to shareholders Q2 2022 – $12.5 YTD 2022 – $28.4 Free Cash Flow Strong Balance Sheet Solid Foundation for Strategic M&A Q2 2022 – $3.6M YTD 2022 – $7.0M Capital Expenditures Note: Cash and Debt balance as of June 30, 2022 Borrowed Total Facility ($ Millions) Consistent strong cash flow generation
Q & A
Appendix
Adjusted Diluted EPS Regulation G Schedules 2022 2021 2022 2022 2021 2021 2020 Diluted earnings (loss) per share 0.39 $ 0.03 $ 0.63 $ 1.02 $ 0.40 $ (1.30) $ 1.06 $ Tax affected adjustments to reported diluted earnings (loss) per share: Restructuring charges 0.02 0.01 0.01 0.03 0.01 0.06 0.04 Foreign currency loss (gain) 0.12 (0.03) (0.01) 0.11 0.01 0.10 (0.16) Non-cash pension expense - 0.51 - - 0.57 3.13 0.06 Environmental charges 0.02 - 0.01 0.03 0.01 0.05 0.07 Acquisition-related costs 0.05 - 0.02 0.07 - - 0.01 Inventory fair value step-up 0.02 - 0.01 0.03 - - - Discrete tax items - - - - (0.01) (0.11) 0.04 Adjusted diluted earnings per share 0.62 $ 0.52 $ 0.67 $ 1.29 $ 0.98 $ 1.93 $ 1.12 $ Full Year YTD Q2 Q1
($ Millions, except percentages) Adjusted EBITDA Regulation G Schedules 2022 2021 2022 Net earnings (loss) 12.6 $ 0.9 $ 20.2 $ Depreciation and amortization expense 7.0 6.7 6.7 Interest expense 0.6 0.5 0.5 Tax expense (benefit) 4.3 (1.5) 5.5 EBITDA 24.5 6.6 33.0 Adjustments to EBITDA: Restructuring charges 0.6 0.2 0.3 Environmental charges 0.9 0.2 0.5 Acquisition-related costs 2.0 - 0.5 Inventory fair value step up 0.5 - 0.6 Non-cash pension expense - 21.8 - Foreign currency loss (gain) 3.8 (0.9) (0.3) Total adjustments to EBITDA 7.9 21.2 1.7 Adjusted EBITDA 32.5 $ 27.9 $ 34.7 $ Net sales 145.0 $ 129.6 $ 147.7 $ Adjusted EBITDA as a % of net sales 22.4% 21.5% 23.5% Q1 Q2
($ Millions) Adjusted Gross Margin Regulation G Schedules 2022 2021 Gross margin 51.8 $ 47.7 $ Adjustment to reported gross margin: Inventory fair value step-up $0.5 - Adjusted gross margin 52.4 $ 47.7 $ Net sales 145.0 $ 129.6 $ Adjusted gross margin as a % of net sales 36.1% 36.8% Q2
($ Millions) Free Cash Flow Regulation G Schedules 2022 2022 2021 2020 Net cash provided by operating activities 16.1 $ 35.4 $ 86.1 $ 76.8 $ Capital expenditures (3.6) (7.0) (15.6) (14.9) Free cash flow 12.5 $ 28.4 $ 70.5 $ 61.9 $ Free Cash Flow as % of Adjusted Net Earnings 62.8% 68.3% 112.0% 169.8% Full Year Q2 YTD