UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the
Quarterly Period Ended April
2, 2006
OR
o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the
Transition Period from _______________ to _______________
Commission
File Number: 1-4639
CTS
CORPORATION
(Exact
name of registrant as specified in its charter)
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Indiana
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35-0225010
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(State
or other jurisdiction of incorporation or organization)
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(IRS
Employer Identification Number)
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905
West Boulevard North, Elkhart, IN
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46514
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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: 574-293-7511
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
Yes
x No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer o
Accelerated filer x
Non-accelerated filer o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
o No x
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of April 24, 2006: 35,886,365
CTS
CORPORATION AND SUBSIDIARIES
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Page
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Item
1.
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3
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3
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-
For the Three Months ended April 2, 2006 and April 3, 2005
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4
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- As of April 2, 2006, and December 31, 2005
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5
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- For the Three Months Ended April 2, 2006 and April 3, 2005
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6
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-
For the Three Months Ended April 2, 2006 and April 3, 2005
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7
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Item
2.
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17
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Item
3.
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25
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Item
4.
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25
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25
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Item
1.
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25
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Item
1A.
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25
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Item
2.
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26
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Item
6.
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27
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28
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(In
thousands, except per share amounts)
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Three
Months Ended
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April
2, 2006
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April
3, 2005
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Net
sales
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$
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150,493
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$
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155,330
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Costs
and expenses:
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Cost
of goods sold
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118,419
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127,115
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Selling,
general, and administrative expenses
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16,737
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17,757
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Research
and development expenses
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4,092
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4,787
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Restructuring
charge - Note C
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1,962
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—
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Operating
earnings
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9,283
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5,671
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Other
(expense) income:
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Interest
expense
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(1,111
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)
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(1,717
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)
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Interest
income
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125
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419
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Other
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3
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26
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Total
other expense
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(983
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)
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(1,272
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)
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Earnings before
income taxes
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8,300
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4,399
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Income
tax expense
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2,075
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1,012
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Net
earnings
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$
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6,225
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$
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3,387
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Net
earnings per share — Note K
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Basic
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$
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0.17
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$
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0.09
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Diluted
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$
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0.16
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$
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0.09
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Cash
dividends declared per share
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$
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0.03
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$
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0.03
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Average
common shares outstanding:
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Basic
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35,821
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36,398
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Diluted
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40,234
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40,979
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See
notes
to condensed consolidated financial statements.
(In
thousands of dollars)
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April
2, 2006
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December
31, 2005*
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ASSETS
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Current
Assets
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Cash
and cash equivalents
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$
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12,637
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$
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12,029
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Accounts
receivable, less allowances (2006 - $2,578; 2005 - $2,373)
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94,136
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91,265
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Inventories
— Note F
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61,450
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60,564
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Other
current assets
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19,813
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16,816
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Total
current assets
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188,036
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180,674
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Property,
plant and equipment, less accumulated depreciation (2006 - $251,266;
2005
- $252,545)
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106,278
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109,676
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Other
Assets
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Prepaid
pension asset — Note H
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153,680
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152,483
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Goodwill
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24,657
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24,657
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Other
intangible assets
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41,540
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42,347
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Deferred
income taxes
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22,045
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22,011
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Other
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1,943
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2,088
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Total
other assets
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243,865
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243,586
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Total
Assets
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$
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538,179
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$
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533,936
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LIABILITIES
AND SHAREHOLDERS’ EQUITY
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Current
Liabilities
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Notes
payable
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$
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14,124
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$
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13,299
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Current
portion of long-term debt - Note G
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170
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164
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Accounts
payable
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62,681
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67,196
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Accrued
liabilities
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40,552
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39,274
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Total
current liabilities
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117,527
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119,933
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Long-term
debt - Note G
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68,208
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68,293
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Other
long-term obligations
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16,206
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16,139
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Shareholders’
Equity
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Preferred
stock - authorized 25,000,000 shares without par value; none
issued
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—
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—
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Common
stock — authorized 75,000,000 shares without par value; 53,603,592 shares
issued at April 2, 2006 and 53,576,243 shares issued at December 31,
2005
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275,485
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275,211
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Additional
contributed capital
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25,483
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24,743
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Retained
earnings
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302,105
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296,956
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Accumulated
other comprehensive earnings (loss)
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291
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(244
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)
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603,364
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596,666
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Cost
of common stock held in treasury (17,720,127
shares at 2006 and 17,717,657 shares at 2005)
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(267,126
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)
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(267,095
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)
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Total
shareholders’ equity
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336,238
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329,571
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Total
Liabilities and Shareholders’ Equity
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$
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538,179
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$
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533,936
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*The
balance sheet at December 31, 2005, has been derived from the audited
financial statements at that date.
See
notes to condensed consolidated financial statements.
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(In
thousands of dollars)
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Three
Months Ended
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April
2, 2006
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April
3, 2005
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Cash
flows from operating activities:
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Net
earnings
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$
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6,225
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$
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3,387
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Adjustments
to reconcile net earnings to net cash provided by operating
activities:
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Depreciation
and amortization
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6,639
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6,848
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Equity-based
compensation - Note B
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865
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617
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Changes
in assets and liabilities, net of effects from purchase of
SMTEK
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Accounts
receivable
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(2,871
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)
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2,078
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Inventories
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(885
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)
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(139
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)
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Other
current assets
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(2,492
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)
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(2,226
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)
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Prepaid
pension asset
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(1,197
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)
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(1,887
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)
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Accounts
payable and accrued liabilities
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(3,188
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)
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1,688
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Other
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(467
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)
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493
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Total
adjustments
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|
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(3,596
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)
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7,472
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Net
cash provided by operating activities
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2,629
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|
10,859
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Cash
flows from investing activities:
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Payment
for purchase of SMTEK, net of cash acquired
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—
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(35,561
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)
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Capital
expenditures
|
|
|
(2,479
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)
|
|
(3,004
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)
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Proceeds
from sales of assets
|
|
|
513
|
|
|
499
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|
Net
cash used in investing activities
|
|
|
(1,966
|
)
|
|
(38,066
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)
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Cash
flows from financing activities:
|
|
|
|
|
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Repayment
of debt assumed in connection with purchase of SMTEK
|
|
|
—
|
|
|
(13,013
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)
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Payments
of long-term debt
|
|
|
(34,165
|
)
|
|
(33,982
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)
|
Proceeds
from borrowings of long-term debt
|
|
|
34,040
|
|
|
72,715
|
|
Increase
in short-term notes payable
|
|
|
825
|
|
|
188
|
|
Dividends
paid
|
|
|
(1,076
|
)
|
|
(1,078
|
)
|
Other
|
|
|
39
|
|
|
78
|
|
Net
cash provided by (used in) financing activities
|
|
|
(337
|
)
|
|
24,908
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate on cash and cash equivalents
|
|
|
282
|
|
|
(469
|
)
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
608
|
|
|
(2,768
|
)
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of year
|
|
|
12,029
|
|
|
61,005
|
|
Cash
and cash equivalents at end of period
|
|
$
|
12,637
|
|
$
|
58,237
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
559
|
|
$
|
1,503
|
|
Income
taxes—net
|
|
$
|
1,360
|
|
$
|
819
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of noncash investing and financing
activities:
|
|
|
|
|
|
|
|
Refer
to Note E, “Supplemental Schedule of Noncash Investing and Financing
Activities”
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See
notes
to condensed consolidated financial statements.
(In
thousands of dollars)
|
|
Three
Months Ended
|
|
|
|
April
2, 2006
|
|
April
3, 2005
|
|
|
|
|
|
|
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Net
earnings
|
|
$
|
6,225
|
|
$
|
3,387
|
|
Other
comprehensive earnings (loss):
|
|
|
|
|
|
|
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Cumulative
translation adjustment
|
|
|
535
|
|
|
(395
|
)
|
Comprehensive
earnings
|
|
$
|
6,760
|
|
$
|
2,992
|
|
See
notes
to condensed consolidated financial statements.
April
2, 2006
NOTE
A—Basis of Presentation
The
accompanying condensed consolidated interim financial statements have been
prepared by CTS Corporation (CTS or the Company), without audit, pursuant
to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been
omitted pursuant to such rules and regulations. The unaudited condensed
consolidated interim financial statements should be read in conjunction with
the
financial statements, notes thereto, and other information included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2005.
The
accompanying unaudited condensed consolidated interim financial statements
reflect, in the opinion of management, all adjustments (consisting of normal
recurring items) necessary for a fair statement, in all material respects,
of
the financial position and results of operations for the periods presented.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ materially from those estimates.
The results of operations for the interim periods are not necessarily
indicative of the results for the entire year.
NOTE
B—Share-Based Compensation
Effective
January 1, 2006, CTS adopted the provisions of the Financial Accounting
Standards Board’s (FASB) Financial Accounting Standard (FAS) No. 123(R),
“Share-Based Payment.” FAS No. 123(R) requires that CTS recognize expense
related to the fair value of stock-based compensation awards in the Unaudited
Condensed Consolidated Statement of Earnings.
Prior
to
January 1, 2006, CTS accounted for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board (APB) Opinion No.
25,
“Accounting for Stock Issued to Employees,” and its related Interpretations.
Accordingly, stock compensation expense was not recognized in the Unaudited
Condensed Consolidated Statement of Earnings for stock options granted with
an
exercise price equal to the market value of the common stock on the grant
date.
However, prior years’ financial statements did include pro forma disclosures for
equity-based awards as if the fair-value approach had been followed. The
following table presents the pro forma net earnings and net earnings per
share
for the quarter ending April 3, 2005, as if CTS had applied the provisions
of
FAS No. 123(R) during that period:
($
in thousands, except per share amounts)
|
|
Three
Months Ended
April
3, 2005
|
|
Net
earnings, as reported
|
|
$
|
3,387
|
|
Deduct:
Stock-based employee compensation cost, net of tax, if fair value
method were used
|
|
|
(130
|
)
|
Proforma
net earnings
|
|
$
|
3,257
|
|
|
|
|
|
|
Net
earnings per share-basic, as reported
|
|
$
|
0.09
|
|
Proforma
net earnings per share-basic
|
|
|
0.09
|
|
Net
earnings per share-diluted, as reported
|
|
|
0.09
|
|
Proforma
net earnings per share-diluted
|
|
$
|
0.09
|
|
CTS
has
elected to follow the modified prospective transition method allowed by FAS
No.
123(R), and therefore, will apply the provisions of FAS No. 123(R) to awards
modified or granted after January 1, 2006. In addition, for awards which
were
unvested as of January 1, 2006, CTS will recognize compensation expense in
the
Unaudited Condensed Consolidated Statement of Earnings over the remaining
vesting period. The compensation expense for these awards will be based on
the
grant-date fair value as calculated for the prior years’ pro forma disclosures.
As allowed under the modified prospective transition method, the financial
results for prior periods have not been restated. The cumulative effect of
the
change in accounting principle from APB No. 25 was not
material.
As
a
result of adopting FAS No. 123(R), CTS’ operating earnings and earnings before
income taxes for the three months ending April 2, 2006 includes $209,000
of
additional compensation expense, equating to $157,000 of after-tax expense
included in net earnings. Reported basic and diluted earnings per share are
unchanged due to the adoption of FAS No. 123(R).
Prior
to
the adoption of FAS No. 123(R), CTS presented tax benefits in excess of
recognized cumulative compensation costs as operating cash flows in the
Unaudited Condensed Consolidated Statement of Cash Flows. FAS No. 123(R)
requires these cash flows be classified as financing cash flows. CTS has
classified $26,000 and $15,000 of these excess tax benefits as financing
cash
flows for the periods ending April 2, 2006 and April 3, 2005,
respectively.
At
April
2, 2006, CTS had five equity-based compensation plans: the 1988 Restricted
Stock
and Cash Bonus Plan (1988 Plan), the 1996 Stock Option Plan (1996 Plan),
the
2001 Stock Option Plan (2001 Plan), the Nonemployee Directors’ Stock Retirement
Plan (Directors’ Plan), and the 2004 Omnibus Long-Term Incentive Plan (2004
Plan). As of December 2004, additional grants can only be made under the
2004
Plan. CTS believes that equity-based awards align the interest of employees
with
those of its shareholders.
The
2004
Plan, and previously the 1996 Plan and 2001 Plan, provides for grants of
incentive stock options or nonqualified stock options to officers, key
employees, and nonemployee members of CTS’ board of directors. In addition, the
2004 Plan allows for grants of stock appreciation rights, restricted stock,
restricted stock units, performance shares, performance units, and other
stock
awards.
The
following table summarizes the compensation expense included in the Unaudited
Condensed Consolidated Statement of Earnings for the three months ended April
2,
2006 and April 3, 2005 relating to these plans:
($
in thousands)
|
|
April
2, 2006
|
|
April
3, 2005
|
|
Stock
options (1)
|
|
$
|
223
|
|
$
|
23
|
|
Restricted
stock units
|
|
|
581
|
|
|
516
|
|
Restricted
stock
|
|
|
61
|
|
|
78
|
|
Total
|
|
$
|
865
|
|
$
|
617
|
|
(1) |
Stock
option expense includes $14 and $23 in the quarters ending April
2, 2006
and April 3, 2005, respectively, related to non-employee director
stock
options.
|
_______________________
The
following table summarizes the status of these plans as of April 2,
2006:
|
|
2004
Plan
|
|
2001
Plan
|
|
1996
Plan
|
|
Awards
originally available
|
|
|
6,500,000
|
|
|
2,000,000
|
|
|
1,200,000
|
|
Stock
options outstanding
|
|
|
239,000
|
|
|
952,974
|
|
|
332,000
|
|
Restricted
stock units outstanding
|
|
|
520,128
|
|
|
—
|
|
|
—
|
|
Awards
exercisable
|
|
|
25,601
|
|
|
748,529
|
|
|
287,351
|
|
Awards
available for grant
|
|
|
5,671,534
|
|
|
—
|
|
|
—
|
|
Stock
Options
Stock
options are exercisable in cumulative annual installments over a maximum
10-year
period, commencing at least one year from the date of grant. Stock options
are
generally granted with an exercise price equal to the market price of the
Company’s stock on the date of grant. The stock options generally vest over four
years and have a 10-year contractual life. The awards generally contain
provisions to either accelerate vesting or allow vesting to continue on schedule
upon retirement if certain service and age requirements are met. The awards
also
provide for accelerated vesting if there is a change in control
event.
The
Company estimates the fair value of the stock option on the grant date using
the
Black-Scholes option-pricing model and assumptions for expected price
volatility, option term, risk-free interest rate, and dividend yield. Expected
price volatilities are based on historical volatilities of the Company’s stock.
The expected option term is derived from historical data on exercise behavior.
The dividend yield is based on historical dividend payments. The risk-free
rate
for periods within the contractual life of the option is based on the U.S.
Treasury yield curve in effect at the time of grant.
A
summary
of the status of stock options as of April 2, 2006 and April 3, 2005, and
changes during the three-month periods then ended, is presented
below:
|
|
April
2, 2006
|
|
April
3, 2005
|
|
|
|
Options
|
|
Weighted-Average
Exercise
Price
|
|
Options
|
|
Weighted-Average
Exercise
Price
|
|
Outstanding
at beginning of year
|
|
|
1,567,499
|
|
$
|
15.93
|
|
|
1,636,900
|
|
$
|
16.82
|
|
Granted
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Exercised
|
|
|
(16,000
|
)
|
|
8.54
|
|
|
(8,725
|
)
|
|
8.32
|
|
Expired
|
|
|
(20,475
|
)
|
|
26.93
|
|
|
(31,601
|
)
|
|
30.01
|
|
Forfeited
|
|
|
(7,050
|
)
|
|
9.31
|
|
|
(6,274
|
)
|
|
11.05
|
|
Outstanding
at end of period (1)
|
|
|
1,523,974
|
|
$
|
15.89
|
|
|
1,590,300
|
|
$
|
16.63
|
|
Exercisable
at end of period
|
|
|
1,061,481
|
|
$
|
18.38
|
|
|
821,908
|
|
$
|
21.52
|
|
(1)
All
options outstanding at April 2, 2006 are currently expected to
vest.
_____________________
The
total
intrinsic value of share options exercised during the quarters ended April
2,
2006 and April 3, 2005 was $65,000 and $38,000, respectively.
A
summary
of the weighted-average remaining contractual term and aggregate intrinsic
value
of options outstanding and exercisable at April 2, 2006 is presented
below:
|
|
Weighted-average
Remaining
Contractual Life
|
|
Aggregate
Intrinsic
Value
|
|
Options
outstanding
|
|
|
7.71
years
|
|
|
—
|
|
Options
exercisable
|
|
|
7.96
years
|
|
|
—
|
|
A
summary
of the nonvested stock options as of April 2, 2006 and April 3, 2005, and
changes during the three-month periods then ended, is presented
below:
|
|
April
2, 2006
|
|
April
3, 2005
|
|
|
|
Options
|
|
Weighted-average
Grant-Date
Fair
Value
|
|
Options
|
|
Weighted-average
Grant-Date
Fair
Value
|
|
Nonvested
at beginning of year
|
|
|
488,943
|
|
$
|
6.94
|
|
|
792,716
|
|
$
|
5.53
|
|
Granted
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Vested
|
|
|
(19,400
|
)
|
|
4.62
|
|
|
(18,060
|
)
|
|
10.31
|
|
Forfeited
|
|
|
(7,050
|
)
|
|
4.64
|
|
|
(6,274
|
)
|
|
4.16
|
|
Nonvested
at end of period
|
|
|
462,493
|
|
$
|
7.06
|
|
|
768,392
|
|
$
|
5.34
|
|
The
total
fair value of shares vested during the quarters ended April 2, 2006 and April
3,
2005 was $90,000 and $186,000, respectively. As of April 2, 2006, there
was $869,000 of unrecognized compensation cost related to nonvested stock
options. That cost is expected to be recognized over a weighted-average
period of 1.7 years. CTS recognizes expense on a straight-line basis over
the requisite service period for each separately vesting portion of the award
as
if the award was, in substance, multiple awards.
The
following table summarizes information about stock options outstanding at
April
2, 2006:
|
|
Options
Outstanding
|
|
Options
Exercisable
|
|
Range
of Exercise Prices
|
|
Number
Outstanding at 4/2/06
|
|
Weighted-Average
Remaining Contractual Life (Years)
|
|
Weighted-Average
Exercise Price
|
|
Number
Exercisable at 4/2/06
|
|
Weighted-Average
Exercise Price
|
|
$
7.70.
11.11
|
|
|
929,099
|
|
|
7.31
|
|
$
|
9.33
|
|
|
478,606
|
|
$
|
8.66
|
|
14.02
- 16.24
|
|
|
144,800
|
|
|
5.93
|
|
|
14.37
|
|
|
132,800
|
|
|
14.34
|
|
23.00
- 33.63
|
|
|
344,325
|
|
|
4.78
|
|
|
24.56
|
|
|
344,325
|
|
|
24.56
|
|
35.97
- 50.00
|
|
|
104,250
|
|
|
4.45
|
|
|
47.05
|
|
|
104,250
|
|
|
47.05
|
|
56.94
- 79.25
|
|
|
1,500
|
|
|
3.53
|
|
|
64.38
|
|
|
1,500
|
|
|
64.38
|
|
Restricted
Stock Units
Stock
settled restricted stock units (RSUs) entitle the holder to receive one share
of
common stock for each unit when the unit vests. RSUs are issued to officers
and
key employees as compensation. Generally, the RSUs vest over a five-year
period.
A summary of the status of RSUs as of April 2, 2006 and April 3, 2005, and
changes during the three-month periods then ended is presented
below:
|
|
April
2, 2006
|
|
April
3, 2005
|
|
|
|
RSUs
|
|
Weighted-average
Grant-Date
Fair
Value
|
|
RSUs
|
|
Weighted-average
Grant-Date
Fair
Value
|
|
Outstanding
at beginning of year
|
|
|
525,898
|
|
$
|
11.49
|
|
|
252,000
|
|
$
|
11.07
|
|
Granted
|
|
|
20,000
|
|
|
12.26
|
|
|
72,450
|
|
|
13.31
|
|
Settled
|
|
|
(12,310
|
)
|
|
12.27
|
|
|
—
|
|
|
—
|
|
Cancelled
|
|
|
(13,460
|
)
|
|
11.25
|
|
|
(4,950
|
)
|
|
11.04
|
|
Outstanding
at end of year
|
|
|
520,128
|
|
$
|
11.51
|
|
|
319,500
|
|
$
|
11.58
|
|
Weighted-average
remaining contractual
life
|
|
|
4.9
years
|
|
|
|
|
|
5.4 years
|
|
|
|
|
As
of
April 2, 2006, there was $3.2 million of unrecognized compensation cost related
to nonvested RSUs. That cost is expected to be recognized over a
weighted-average period of 2.0 years. CTS recognizes expense on a straight-line
basis over the requisite service period for each separately vesting portion
of
the award as if the award was, in substance, multiple awards.
Restricted
Stock and Cash Bonus Plan
CTS’
1988
Plan originally reserved 2,400,000 shares of CTS’ common stock for sale at
market price, or award, to key employees. Under the 1988 Plan, 53,482 shares
of
Restricted Stock were outstanding as of April 2, 2006. Shares sold or
awarded are subject to restrictions against transfer and repurchase rights
of
CTS. In general, restrictions lapse at the rate of 20% per year beginning
one year from the grant date. In addition, the 1988 Plan provides for a
cash bonus to the participant equal to the fair market value of shares on
the
dates restrictions lapse, in the case of an award. The total bonus paid to
any
participant during the restricted period is limited to twice the fair market
value of the shares on the date of award or sale. As of April 2, 2006, there
was
$346,000 of total unrecognized compensation cost related to nonvested Restricted
Stock. That cost is expected to be recognized over a weighted-average period
of
1.7 years. CTS recognizes expense on a straight-line basis over the
requisite service period for each separately vesting portion of the award
as if
the award was, in substance, multiple awards.
Stock
Retirement Plan
The
Directors’ Plan provides for a portion of the total compensation payable to
nonemployee directors to be deferred and paid in CTS stock. The Directors
Plan
was frozen effective December 1, 2004. All future grants will be from the
2004
Plan.
NOTE
C - Restructuring Charge
In
January 2006, CTS announced its intention to consolidate its Berne, Indiana
manufacturing operations into three of its other existing facilities. Automotive
product operations at Berne will be transferred to CTS’ automotive facilities in
Matamoros, Mexico and Elkhart, Indiana. Electronic components operations
in
Berne will be moved to CTS’ Singapore facility. Some electronic component
related service functions are expected to remain in Berne. The consolidation
process is expected to largely be completed in the second half of
2006.
The
following table displays the cost associated with the Berne consolidation
which
are expected to be incurred, as well as a summary of the actual costs incurred
through April 2, 2006:
($
in millions)
|
|
Expected
to be Incurred
|
|
Actual
incurred through
April
2, 2006
|
|
|
|
|
|
|
|
Workforce
reduction
|
|
$
|
3.1
|
|
$
|
1.7
|
|
Postemployment
obligation curtailment, net - Note H
|
|
|
0.2
|
|
|
0.2
|
|
Other
|
|
|
0.1
|
|
|
—
|
|
Restructuring
charge
|
|
|
3.4
|
|
|
1.9
|
|
Equipment
relocation
|
|
|
0.3
|
|
|
—
|
|
Other
employee related costs
|
|
|
0.3
|
|
|
0.2
|
|
Restructuring-related
costs
|
|
|
0.6
|
|
|
0.2
|
|
Total
restructuring and restructuring-related costs
|
|
$
|
4.0
|
|
$
|
2.1
|
|
All
of
the Berne consolidation costs relate to the Components and Sensors business
segment. Restructuring charges are reported on a separate line on the Unaudited
Condensed Consolidated Statement of Earnings and the restructuring-related
costs
are included in cost of goods sold.
The
following table displays the restructuring reserve activity for the quarter
ending April 2, 2006:
($
in millions)
|
|
|
|
Restructuring
liability at January 1, 2006
|
|
$
|
—
|
|
First
quarter 2006 charge
|
|
|
2.1
|
|
Costs
paid
|
|
|
(0.4
|
)
|
Restructuring
liability at April 2, 2006
|
|
$
|
1.7
|
|
NOTE
D—Acquisition
Effective
January 31, 2005, CTS acquired 100% of SMTEK International Inc., (SMTEK).
The
results of SMTEK’s operations have been included in the consolidated financial
statements since that date. SMTEK is an EMS provider serving original equipment
manufacturers in the medical, industrial, instrumentation, telecommunications,
security, financial services, automation, aerospace, and defense industries.
SMTEK had four facilities located in Moorpark and Santa Clara, California;
Marlborough, Massachusetts; and Bangkok, Thailand.
The
following table presents CTS’ unaudited pro forma consolidated results of
operations for the quarter ending April 3, 2005 as if the acquisition had
been
completed at the beginning of the period. The pro forma information is presented
for comparative purposes only and does not purport to be indicative of what
would have occurred had the acquisition actually been made at such date,
nor is
it necessarily indicative of future operating results.
($
in thousands, except per share amounts)
|
|
Pro
forma
Three
Months Ended
April
3, 2005
|
|
|
|
|
|
Revenues
|
|
$
|
165,377
|
|
Net
income
|
|
$
|
3,561
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
Basic
|
|
$
|
0.10
|
|
Diluted
|
|
$
|
0.09
|
|
NOTE
E—Supplemental Schedule of Noncash Investing and Financing
Activities
In
2005,
the Company purchased all of the capital stock of SMTEK for $61.1 million.
In
conjunction with the acquisition, CTS issued common stock and assumed
liabilities as follows (refer also to Note D, “Acquisition”):
($
in millions)
|
|
|
|
Cash
paid
|
|
$
|
37.2
|
|
Fair
value of stock issued
|
|
|
10.9
|
|
Liabilities
assumed
|
|
|
32.8
|
|
Fair
value of assets acquired
|
|
$
|
80.9
|
|
NOTE
F—Inventories
Inventories
consist of the following:
($
in thousands)
|
|
April
2, 2006
|
|
December
31, 2005
|
|
Finished
goods
|
|
$
|
10,582
|
|
$
|
11,771
|
|
Work-in-process
|
|
|
14,352
|
|
|
16,039
|
|
Raw
materials
|
|
|
36,516
|
|
|
32,754
|
|
Total
inventories
|
|
$
|
61,450
|
|
$
|
60,564
|
|
NOTE
G - Debt
Long-term
debt was comprised of the following:
($
in thousands)
|
|
April
2, 2006
|
|
December
31, 2005
|
|
Revolving
credit agreement, average interest rate of 6.5% (2006) and 6.1%
(2005) due
in
2007
|
|
$
|
2,000
|
|
$
|
2,080
|
|
Convertible,
senior subordinated debentures at a weighted-average rate of 2.125%,
due
in 2024
|
|
|
60,000
|
|
|
60,000
|
|
Convertible,
subordinated debentures at a weighted-averaged rate of 6.5%, due
in
2007
|
|
|
5,500
|
|
|
5,500
|
|
Term
loan, interest 5.8%, due in 2011
|
|
|
878
|
|
|
875
|
|
Other
debt, weighted-average rate of 6.3% (2005) due 2006
|
|
|
—
|
|
|
2
|
|
|
|
|
68,378
|
|
|
68,457
|
|
Less
current maturities
|
|
|
170
|
|
|
164
|
|
Total
long-term debt
|
|
$
|
68,208
|
|
$
|
68,293
|
|
CTS
has a
$75 million senior, secured revolving credit agreement that had an outstanding
balance of $2.0 million at April 2, 2006. Any outstanding balances under
the
revolving credit agreement are senior to CTS’ convertible debentures. The
revolving credit agreement is collateralized by substantially all U.S. assets
and a pledge of 65% of the capital stock of certain non-U.S. subsidiaries.
Interest rates on the revolving credit agreement fluctuate based upon LIBOR.
CTS
pays a commitment fee on the undrawn portion of the revolving credit agreement.
The commitment fee varies based on performance under certain financial covenants
and was 0.38 percent per annum at April 2, 2006. The revolving credit agreement
requires, among other things, that CTS comply with minimum fixed charge
coverage, maximum leverage ratio, and minimum tangible net worth covenants.
Failure of CTS to comply with these covenants could reduce the borrowing
availability under the revolving credit agreement. Additionally, the revolving
credit agreement limits the amounts allowed for capital expenditures and
acquisitions. In March 2006, CTS amended its revolving credit agreement to
increase the permitted level of unsecured debt under other agreements and
to
modify restrictions on dividends and other distributions. The revolving credit
agreement expires in July 2007.
CTS
has
$60 million convertible senior subordinated debentures (2.125% Debentures).
These unsecured debentures bear interest at an annual rate of 2.125%, payable
semiannually on May 1 and November 1 of each year through the maturity date
of
May 1, 2024. The 2.125% Debentures are convertible, under certain circumstances,
into CTS common stock at a conversion price of $15.00 per share (which is
equivalent to an initial conversion rate of approximately 66.6667 shares
per
$1,000 principal amount of the notes). Upon conversion of the 2.125% Debentures,
in lieu of delivering common stock, the Company may, at its discretion, deliver
cash or a combination of cash and common stock.
The
conversion price of the 2.125% Debentures will be adjusted if CTS completes
certain transactions, including: distribution of shares as a dividend to
substantially all shareholders; subdivision, combination or reclassification
of
its common stock; distribution of stock purchase warrants to substantially
all
shareholders; distribution of cash, stock or property to shareholders in
excess
of $0.03 per share; or purchase of its common stock pursuant to a tender
offer
or exchange offer under certain circumstances.
Holders
may convert the 2.125% million Debentures at any time during a conversion
period
if the closing price of CTS common stock is more than 120% of the conversion
price ($18.00 per share) for at least 20 of the 30 consecutive trading days
immediately preceding the first trading day of the conversion period. The
conversion periods begin on February 15, May 15, August 15, and November
15 of
each year. Holders may also convert the notes if certain corporate transactions
occur. As of April 2, 2006, none of the conditions for conversion of the
2.125%
million Debentures were satisfied.
CTS
may,
at its option, redeem all or a portion of the 2.125% Debentures for cash
at any
time on or after May 1, 2009, at a redemption price equal to the principal
amount of the notes plus any accrued and unpaid interest at the redemption
date.
Holders may require CTS to purchase for cash all or part of their notes on
May
1, 2009, 2014, and 2019, or upon the occurrence of certain events, at 100%
of
the principal amount of the notes plus accrued and unpaid interest up to,
but
not including, the date of purchase.
CTS
has a
registration rights agreement relating to the 2.125% Debentures which became
effective in 2004. CTS' obligation to keep the registration statement
continuously effective for a period of two years will expire in May 2006.
The
registration rights agreement provides that in the event of a default in
this
obligation, CTS is subject to an additional interest penalty of 0.25% per
annum
of the principal for the first 90 days of default and 0.5% per annum of
principal thereafter. If a holder converts during a period of default, in
lieu
of additional interest CTS must deliver 103% of the number of shares the
holder
would otherwise have received in settlement. As of April 2, 2006, the maximum
additional interest which CTS could incur as a result of the failure to maintain
an effective registration statement was approximately $20,000.
The
Company has $5.5 million of 6.5% convertible, subordinated debentures (6.5%
Debentures) outstanding at April 2, 2006. These debentures are unsecured
and
convert into CTS common stock at a conversion price of $20.05 per share.
At any
time after April 2005, the purchasers may accelerate the maturity of the
debentures. CTS also has the right at any time after April 2005, and under
certain circumstances including a volume weighted average price greater than
the
conversion price by more than 175% for at least twenty trading days, to force
conversion of the debentures into common stock. Interest on the debentures
is
payable semi-annually.
The
conversion price of the 6.5% Debentures will be adjusted if CTS completes
certain transactions, including: a common stock split or similar event; a
distribution of stock purchase warrants to substantially all shareholders;
a
distribution of non-cash assets to substantially all shareholders; a cash
distribution to substantially all shareholders which together with other
cash
distributions during the preceding year totals in excess of 3% of the market
price of common stock; or a merger or other transaction under which shares
of
common stock are converted into another class of stock or security or into
the
securities of another corporation.
While
any
of the 6.5% Debentures are outstanding, CTS is subject to covenants which
among
other things, restrict its ability to pay dividends, repurchase stock, make
payments on debt which ranks junior to the 6.5% Debentures and engage in
certain
transactions with subsidiaries and affiliates. CTS' obligation under a
registration right agreement to maintain an effective registration statement
for
the stock underlying the 6.5% Debentures expired in 2004.
In
connection with the acquisition of SMTEK, CTS assumed a term loan, which
has a
balance of $0.9 million at April 2, 2006. The term loan is secured by machinery
and equipment of the Thailand manufacturing facility and requires monthly
payments through May 2011.
NOTE
H—Retirement Plans
Net
pension (income) / postretirement expense for the three months ended April
2,
2006 and April 3, 2005 includes the following components:
|
|
Pension
Plans
|
|
Other
Postretirement
Benefit
Plans
|
|
($
in thousands)
|
|
April
2, 2006
|
|
April
3, 2005
|
|
April
2, 2006
|
|
April
3, 2005
|
|
Service
cost
|
|
$
|
1,276
|
|
$
|
1,318
|
|
$
|
4
|
|
$
|
7
|
|
Interest
cost
|
|
|
3,012
|
|
|
2,846
|
|
|
75
|
|
|
79
|
|
Expected
return on plan assets (2)
|
|
|
(6,175
|
)
|
|
(6,318
|
)
|
|
—
|
|
|
—
|
|
Amortization
of unrecognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transition
obligation
|
|
|
—
|
|
|
(76
|
)
|
|
—
|
|
|
—
|
|
Prior
service cost
|
|
|
134
|
|
|
184
|
|
|
—
|
|
|
—
|
|
Recognized
(gain) loss
|
|
|
644
|
|
|
206
|
|
|
—
|
|
|
—
|
|
Curtailment
loss
|
|
|
325
|
|
|
475
|
|
|
(81
|
)
|
|
—
|
|
(Income)/expense,
net
|
|
$
|
(784
|
)
|
$
|
(1,365
|
)
|
$
|
(2
|
)
|
$
|
86
|
|
(2)
Expected return on plan assets is net of expected investment
expenses and certain administrative expenses.
________________________
In
the
first quarter of 2006, CTS recognized a pension plan curtailment loss of
approximately $0.3 million and another postretirement benefit plan curtailment
gain of approximately $0.1 million due to reduced employment levels. Also,
effective April 1, 2006, CTS closed one of its U.S. defined benefit plans
to new
participants.
NOTE
I—Business Segments
FAS
No. 131, “Disclosures about Segments of an Enterprise and Related
Information,” requires companies to provide certain information about their
operating segments. CTS has two reportable business segments: 1)
Electronics Manufacturing Services (EMS) and 2) Components and
Sensors.
EMS
includes the higher level assembly of electronic and mechanical components
into
a finished subassembly or assembly performed under a contract manufacturing
agreement with an OEM or other contract manufacturer. Additionally, for some
customers, CTS provides full turnkey manufacturing and completion including
design, bill-of-material management, logistics, and repair.
Components
and sensors are products which perform specific electronic functions for
a given
product family and are intended for use in customer assemblies. Components
and sensors consist principally of automotive sensors and actuators used
in
commercial or consumer vehicles; electronic components used in communications
infrastructure and computer markets; terminators, including ClearONE™
terminators, used in computer and other high speed applications, switches,
resistor networks, and potentiometers used to serve multiple markets.
The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies in the Company’s annual report
on Form 10-K. Management evaluates performance based upon segment
operating earnings before restructuring and related charges, interest expense,
other non-operating income, and income tax expense.
Summarized
financial information concerning CTS’ reportable segments is shown in the
following table:
($
in thousands)
|
|
EMS
|
|
Components
and Sensors
|
|
Total
|
|
First
Quarter of 2006
|
|
|
|
|
|
|
|
|
|
|
Net
sales to external customers
|
|
$
|
82,865
|
|
$
|
67,628
|
|
$
|
150,493
|
|
Segment
operating earnings
|
|
|
1,047
|
|
|
10,357
|
|
|
11,404
|
|
Total
assets
|
|
|
154,828
|
|
|
383,351
|
|
|
538,179
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter of 2005
|
|
|
|
|
|
|
|
|
|
|
Net
sales to external customers
|
|
$
|
91,166
|
|
$
|
64,164
|
|
$
|
155,330
|
|
Segment
operating earnings
|
|
|
2,131
|
|
|
3,540
|
|
|
5,671
|
|
Total
assets
|
|
|
166,481
|
|
|
428,160
|
|
|
594,641
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling
information between reportable segments’ operating earnings and CTS’
consolidated pre-tax income is shown in the following table:
($
in thousands)
|
|
First
Quarter
2006
|
|
First
Quarter
2005
|
|
Total
segment operating earnings
|
|
$
|
11,404
|
|
$
|
5,671
|
|
Restructuring
and related charges - Components and Sensors
|
|
|
(2,121
|
)
|
|
—
|
|
Interest
expense
|
|
|
(1,111
|
)
|
|
(1,717
|
)
|
Interest
income
|
|
|
125
|
|
|
419
|
|
Other
income
|
|
|
3
|
|
|
26
|
|
Earnings
before income taxes
|
|
$
|
8,300
|
|
$
|
4,399
|
|
NOTE
J—Contingencies
Certain
processes in the manufacture of CTS’ current and past products create hazardous
waste by-products as currently defined by federal and state laws and
regulations. CTS has been notified by the U.S. Environmental Protection
Agency, state environmental agencies and, in some cases, generator groups,
that
it is or may be a Potentially Responsible Party (PRP) regarding hazardous
waste remediation at several non-CTS sites. In addition to these non-CTS
sites, CTS has an ongoing practice of providing reserves for probable
remediation activities at certain of its manufacturing locations and for
claims
and proceedings against CTS with respect to other environmental matters.
In the opinion of management, based upon presently available information
relating to all such matters, either adequate provision for probable costs
has
been made, or the ultimate costs resulting will not materially affect the
consolidated financial position, results of operations, or cash flows of
CTS.
Certain
claims are pending against CTS with respect to matters arising out of the
ordinary conduct of its business. For all claims, in the opinion of
management, based upon presently available information, either adequate
provision for anticipated costs has been made or the ultimate anticipated
costs
resulting will not materially affect CTS’ consolidated financial position,
results of operations or cash flows.
NOTE
K—Earnings Per Share
FAS
No. 128, “Earnings per Share,” requires companies to provide a
reconciliation of the numerator and denominator of the basic and diluted
earnings per share (EPS) computations. The calculations below provide net
earnings, average common shares outstanding, and the resultant earnings per
share for both basic and diluted EPS for the quarters ending April 2, 2006
and
April 3, 2005.
($
in thousands, except per share amounts)
|
|
Net
Earnings (Numerator)
|
|
Shares
(in
thousands) (Denominator)
|
|
Per
Share Amount
|
|
First
Quarter 2006
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
|
$
|
6,225
|
|
|
35,821
|
|
$
|
0.17
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
Convertible
debt
|
|
|
241
|
|
|
4,000
|
|
|
|
|
Equity-based
compensation plans
|
|
|
|
|
|
413
|
|
|
|
|
Diluted
EPS
|
|
$
|
6,466
|
|
|
40,234
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter 2005
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
|
$
|
3,387
|
|
|
36,398
|
|
$
|
0.09
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
Convertible
debt
|
|
|
250
|
|
|
4,000
|
|
|
|
|
Equity-based
compensation plans
|
|
|
|
|
|
581
|
|
|
|
|
Diluted
EPS
|
|
$
|
3,637
|
|
|
40,979
|
|
$
|
0.09
|
|
The
following table shows the potentially dilutive securities which have been
excluded from the first quarter 2006 and 2005 dilutive earnings per share
calculation because they are either anti-dilutive, or the exercise price
exceeds
the average market price.
|
|
Three
Months Ended
|
|
(Number
of shares in thousands)
|
|
April
2, 2006
|
|
April
3, 2005
|
|
Stock
options where the assumed proceeds exceed the average market price
of
common shares during the period
|
|
|
834
|
|
|
713
|
|
Securities
related to the 6.5% convertible debentures
|
|
|
274
|
|
|
1,247
|
|
NOTE
L - Leases
CTS
incurred approximately $1.3 million and $1.9 million of rent expense in the
quarters ending April 2, 2006 and April 3, 2005, respectively. The future
minimum lease payments under the Company’s operating leases are $3.6 million for
the remainder of 2006, $4.7 million in 2007, $4.0 million in 2008, $3.8 million
in 2009, $2.4 million in 2010, and $3.7 million thereafter.
Overview
CTS
is a
global manufacturer of components and sensors used primarily in the automotive,
communications, and computer markets. The Company also provides electronic
manufacturing solutions, including design and supply chain management functions,
primarily serving the communications, computer, industrial, and medical markets
under contract arrangements with the original equipment manufacturers (OEMs).
Sales and marketing are accomplished through CTS sales engineers, independent
manufacturer’s representatives, and distributors. Sales are reported through two
business segments, Electronics Manufacturing Services (EMS) and Components
and
Sensors.
In
the
first quarter of 2006, sales of EMS and Components and Sensors business segments
represented 55.1% and 44.9% of CTS’ total sales respectively, compared to 58.7%
and 41.3% respectively in the first quarter of 2005.
As
discussed in more detail throughout the Management's Discussion and
Analysis:
· |
Sales
decreased
by
$4.8 million, or 3.1%, in
the first quarter of 2006 from the first quarter of 2005. Sales in
the EMS
business segment decreased by 9.1% compared to the first quarter
of 2005,
while sales in the Components and Sensors business segment increased
by
5.4% versus the first quarter of 2005.
|
· |
Gross
margins, as a percent of sales, were 21.3% and 18.2% in the first
quarter
of 2006 and 2005, respectively. The overall increase in gross margins
was
due to favorable segment sales mix versus the first quarter of 2005
as
well as increased gross margins within each business segment. The
Components and Sensors business segment, which inherently generates
a
higher gross margin, increased to 44.9% of total sales in the first
quarter of 2006 compared to 41.3% of total sales in the same period
of
2005.
|
· |
The
Company continued to reduce selling, general and administrative,
and
research and development expenses as a percent of sales. Despite
the sales
decrease from the first quarter of 2005, selling, general, and
administrative expenses combined with research and development expenses
decreased to 13.8% of total sales compared to 14.5% of total sales
in the
first quarter of 2005.
|
· |
Net
earnings were $6.2 million, or $0.16 per diluted share, in the first
quarter of 2006 compared to $3.4 million, or $0.09 per diluted share,
in
the first quarter of 2005.
|
· |
The
first quarter of 2006 included a $2.1 million pre-tax expense, or
$0.04
per share, for restructuring and related charges associated with
the
consolidation of CTS’ Berne, Indiana manufacturing operations into three
of its other existing facilities (see Note C for additional information).
Additionally, the first quarter of 2006 included a favorable insurance
claim settlement of approximately $1.5 million pre-tax, or $0.03
per
share.
|
Critical
Accounting Policies
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
discusses the Company’s unaudited condensed consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial
statements requires management to make estimates and assumptions that affect
the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Management
believes that judgment and estimates related to the following critical
accounting policies could materially affect its consolidated financial
statements.
§
|
Estimating
inventory valuation, the allowance for the doubtful accounts, and
other
accrued liabilities
|
§
|
Valuation
of long-lived and intangible assets, and depreciation/amortization
periods
|
In
the
first quarter of 2006, there have been no changes in the above critical
accounting policies, except that the following policy has been added in
consideration of CTS’ adoption of FAS No. 123(R), “Share based Payment,”
effective January 1, 2006.
Share-Based
Compensation
Effective
January 1, 2006, CTS adopted the provisions of FAS No. 123(R) which required
CTS
to recognize the expense related to the fair value of stock-based compensation
awards in the Unaudited Condensed Consolidated Statement of Earnings. CTS
elected to follow the modified prospective transition method allowed by FAS
No.
123(R), and therefore, only applied the provisions of FAS No. 123(R) to awards
modified or granted after January 1, 2006. In addition, for awards which
were
unvested as of January 1, 2006, CTS will recognize compensation expense in
the
Unaudited Condensed Consolidated Statement of Earnings over the remaining
vesting period. Prior to January 1, 2006, CTS accounted for stock-based
compensation using the intrinsic value method prescribed in APB No. 25,
“Accounting for Stock Issued to Employees.”
FAS
No.
123(R) requires companies to estimate the fair value of stock-based awards
on
the date of grant using an option-pricing model. CTS uses the Black-Scholes
option pricing model. A number of assumptions are used by the Black-Scholes
option-pricing model to compute the grant date fair value, including expected
price volatility, option term, risk-free interest rate, and dividend yield.
Expected volatilities are based on historical volatilities of the Company’s
stock. The expected option term is derived from historical data on exercise
behavior. The dividend yield is based on historical dividend payments. The
risk-free rate for periods within the contractual life of the option is based
on
the U.S. treasury yield curve in effect at the time of grant. The value of
the
portion of the award that is ultimately expected to vest is recognized as
expense over the requisite service periods in the Unaudited Condensed
Consolidated Statement of Earnings. CTS’ stock options primarily have a
graded-vesting schedule. CTS recognizes expense on a straight-line basis
over
the requisite service period for each separately vesting portion of the award
as
if the award was, in-substance, multiple awards. CTS’
stock options generally contain provisions to either accelerate vesting or
allow
vesting to continue on schedule upon retirement if certain service and age
requirements are met. As a result, equity-based compensation expense recorded
in
future income statements could fluctuate based on the terms of the awards,
the
assumptions used in the valuation model, or the status of those employees
receiving awards.
Results
of Operations
Comparison
of First Quarter 2006 and First Quarter 2005
Business
Segment Discussion
Refer
to
Note I, “Business Segments,” for a description of the Company’s business
segments.
The
following table highlights the business segment results for the three-month
periods ending April 2, 2006 and April 3, 2005:
($
in thousands)
|
|
Components
& Sensors
|
|
EMS
|
|
Consolidated
Total
|
|
First
Quarter 2006
|
|
|
|
|
|
|
|
Sales
|
|
$
|
67,628
|
|
$
|
82,865
|
|
$
|
150,493
|
|
Segment
operating earnings
|
|
|
10,357
|
|
|
1,047
|
|
|
11,404
|
|
%
of sales
|
|
|
15.3
|
%
|
|
1.3
|
%
|
|
7.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter 2005
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
64,164
|
|
$
|
91,166
|
|
$
|
155,330
|
|
Segment
operating earnings
|
|
|
3,540
|
|
|
2,131
|
|
|
5,671
|
|
%
of sales
|
|
|
5.5
|
%
|
|
2.3
|
%
|
|
3.7
|
%
|
Sales
in
the Components and Sensors business segment were up $3.5 million, or
approximately 5.4% from the first quarter of 2005. The increase in sales
was
attributable primarily to growth in automotive product sales, growth in the
sale
of electronic components into infrastructure applications, and increased
royalty
revenue partially offset by a decrease of sales into mobile handset applications
as CTS continues to de-emphasize these products.
The
Components and Sensors business segment operating earnings were $10.4 million
in
the first quarter of 2006 versus $3.5 million in the first quarter of 2005.
Operating earnings in the first quarter of 2006 included a favorable insurance
claim settlement of approximately $1.5 million, or $0.03 per share. Other
operating earning improvements resulted from personnel savings related to
headcount reductions taken primarily in the first quarter of 2005, margin
contribution from the higher sales volume, favorable product mix as the sales
shifted from the less profitable handset market into the more profitable
infrastructure applications and automotive products, and increased royalty
revenue. In the first quarter of 2006, CTS has recorded pension income of
$0.8
million in operating income. This amount includes $0.3 million of pension
curtailment losses associated with the Berne consolidation, which are included
in the restructuring charge discussed above. The remaining $1.1 million of
pension income compares to $1.4 million of pension income recorded in the
first
quarter of 2005. The decrease from prior year results primarily from the
amortization of losses resulting from lower pension returns than expected
in
prior years in the U.S. Plans. The increase in the loss amortization expense
item from 2005 to 2006 is a result of a change in mortality assumption
(resulting in longer life expectancies), actual plan experience being less
favorable than expected, and the amortization of deferred asset losses from
prior years.
The
EMS
business segment experienced a sales decrease of $8.3 million, or 9.1%, in
the
first quarter of 2006 versus the first quarter of 2005. The decrease in sales
was attributable primarily to lower sales into the computer market.
The
EMS
business segment operating earnings decreased $1.1 million primarily due
to
lower sales volumes and the incremental costs related to the full quarter
of
expense in 2006 versus two months of expense in 2005 for the January 31,
2005
SMTEK acquisition.
Total
Company Discussion
The
following table highlights changes in significant components of the unaudited
condensed consolidated statements of earnings for the three-month periods
ended
April 2, 2006 and April 3, 2005:
|
|
Three
months ended
|
|
|
|
($
in thousands, except net earnings per share)
|
|
April
2, 2006
|
|
April
3, 2005
|
|
Increase
(Decrease)
|
|
Net
sales
|
|
$
|
150,493
|
|
$
|
155,330
|
|
$
|
(4,837
|
)
|
Restructuring-related
costs
|
|
|
159
|
|
|
-
|
|
|
159
|
|
|
|
|
0.1
|
%
|
|
-
|
%
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
|
32,074
|
|
|
28,215
|
|
|
3,859
|
|
%
of net sales
|
|
|
21.3
|
%
|
|
18.2
|
%
|
|
3.1
|
%
|
|
Selling,
general and administrative expenses
|
|
|
16,737
|
|
|
17,757
|
|
|
(1,020
|
)
|
%
of net sales
|
|
|
11.1
|
%
|
|
11.4
|
%
|
|
(0.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development expenses
|
|
|
4,092
|
|
|
4,787
|
|
|
(695
|
)
|
%
of net sales
|
|
|
2.7
|
%
|
|
3.1
|
%
|
|
(0.4
|
)%
|
|
Restructuring
charge
|
|
|
1,962
|
|
|
-
|
|
|
1,962
|
|
%
of net sales
|
|
|
1.3
|
%
|
|
-
|
%
|
|
1.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Operating
earnings
|
|
|
9,283
|
|
|
5,671
|
|
|
3,612
|
|
%
of net sales
|
|
|
6.2
|
%
|
|
3.7
|
%
|
|
2.5
|
%
|
|
Income
tax expense
|
|
|
2,075
|
|
|
1,012
|
|
|
1,063
|
|
|
Net
earnings
|
|
$
|
6,225
|
|
$
|
3,387
|
|
$
|
2,838
|
|
%
of net sales
|
|
|
4.1
|
%
|
|
2.2
|
%
|
|
1.9
|
%
|
|
Net
earnings per share - diluted
|
|
$
|
0.16
|
|
$
|
0.09
|
|
$
|
0.07
|
|
First
quarter sales of $150.5 million decreased $4.8 million, or 3.1%, from the
first
quarter of 2005. The decrease was mainly attributable to lower sales in the
computer market in the EMS business segment. The Components and Sensors business
segment partially offset the sales decrease with higher sales of automotive
products, higher sales of electronic components into infrastructure
applications, and higher revenue from royalties.
Gross
margin increased $3.9 million in the first quarter of 2006 from the first
quarter of 2005 due to favorable business segment sales mix and gross margin
improvement within each business segment. The Components and Sensors business
segment, which inherently generates a higher gross margin, increased to 44.9%
of
total sales in the first quarter of 2006 compared to 41.3% of total sales
in the
same period of 2005 due mainly to sales growth in automotive sensor products.
Selling,
general and administrative expenses were $16.7 million, or 11.1% of sales,
in
the first quarter of 2006 versus $17.8
million, or 11.4% of sales in the first quarter of 2005.
Selling,
general and administrative expenses were favorably impacted by an insurance
claim settlement received in the first quarter of 2006 and by personnel
reductions taken primarily
in
the
first quarter of 2005.
Research
and development expenses were $4.1 million, or 2.7% of sales in the first
quarter of 2006 versus $4.8 million, or 3.1% of sales in the first quarter
of
2005. The percentage decrease was primarily due to personnel savings related
to
headcount reductions taken primarily in the first quarter of 2005 primarily
in
the Components and Sensors business segment. Research and development
expenditures in the EMS business segment are typically much lower than in
the
Components and Sensors business segment. Significant ongoing research and
development activities continue in Components and Sensors to support expanded
application and new product development.
Operating
earnings were $9.3 million in the first quarter of 2006 compared to $5.7
million
in the first quarter of 2005. The increase in operating earnings included
$2.1
million of expenses, or $0.04 per share, from restructuring and related charges
associated with the consolidation of CTS’ Berne, Indiana manufacturing
operations and also included the favorable impact from an insurance claim
settlement of approximately $1.5 million, or $0.03 per share. In the first
quarter of 2006, CTS has recorded pension income of $0.8 million in operating
income. This amount includes $0.3 million of pension curtailment losses
associated with the Berne consolidation, which are included in the restructuring
charge discussed above. The remaining $1.1 million of pension income compares
to
$1.4 million of pension income recorded in the first quarter of 2005 The
decrease from prior year results primarily from the amortization of losses
resulting from lower pension returns than expected in prior years in the
U.S.
Plans. The increase in the loss amortization expense item from 2005 to 2006
is a
result of a change in mortality assumption (resulting in longer life
expectancies), actual plan experience being less favorable than expected,
and
the amortization of deferred asset losses from prior years.
In
2005,
CTS changed its estimate of its 2005 tax rate before the benefit of reversal
of
reserves and expense of HIA dividend from 23% to 25%. The
higher effective tax rate reflects the lower than planned revenue and
profitability in certain jurisdictions with lower statutory tax rates partially
offset by increased profitability in certain jurisdictions with higher statutory
tax rates.
Net
earnings of $6.2 million, or 4.1% of sales, increased $2.8 million versus
the
first quarter of 2005. Net earnings per share of $0.16 were $0.09 higher
than
first quarter 2005.
Outlook
Based
on
the first quarter results and the outlook for the remainder of the year,
CTS
expects full-year 2006 sales to grow by 6% - 8% over 2005. Full-year adjusted
diluted earnings per share are now expected to be in a range of $0.75 to
$0.80,
excluding full-year Berne restructuring and related charges of approximately
$0.08 per share.
The
following table provides a reconciliation of projected earnings per share,
diluted to adjusted actual and projected earnings per share, diluted for
the
Company:
|
|
Actual
|
|
Projected
Twelve
Months Ended
December
31, 2006
|
|
|
|
Three
Months Ended
|
|
|
|
April
2, 2006
|
|
April
3, 2005
|
|
Earnings
per share, diluted
|
|
$
|
0.16
|
|
$
|
0.09
|
|
$
|
0.67
- $ 0.72
|
|
Tax
affected charges to reported diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Restructuring
and related charges
|
|
|
0.04
|
|
|
—
|
|
|
0.08
|
|
Adjusted
earnings per share, diluted
|
|
$
|
0.20
|
|
$
|
0.09
|
|
$
|
0.75
- $ 0.80
|
|
Adjusted
earnings per share, diluted is a non-GAAP financial measure. The most directly
comparable GAAP financial measure is earnings per share, diluted. CTS calculated
adjusted earnings per share, diluted for the first quarter of 2006 and
full year
projected adjusted earnings per share, diluted to exclude the per share
impact
of restructuring and related charges associated with the Berne facility
consolidation. We exclude the impact of this item because it was a discrete
event which had a significant impact on comparable GAAP financial measures
and
could distort an evaluation of our normal operating performance. CTS uses
adjusted earnings per share, diluted measures, to evaluate overall performance,
establish plans and perform strategic analysis. Using adjusted earnings
per
share, diluted measures avoids distortion in the evaluation of operating
results
by eliminating the impact of events which are not related to normal operating
performance. Because adjusted earnings per share, diluted measures are
based on
the exclusion of specific items, they may not be comparable to measures
used by
other companies which have similar titles. CTS' management compensates
for this
limitation when performing peer comparisons by evaluating both GAAP and
non-GAAP
financial measures reported by peer companies. CTS believes that adjusted
earnings per share, diluted measures are useful to its management, investors
and
stakeholders in that they:
-
provide
a truer measure of CTS' operating performance,
-
reflect
the results used by management in making decisions about the business, and
-
help
review and project CTS' performance over time.
We
recommend that investors consider both actual and projected earnings per
share,
diluted and actual and projected
adjusted earnings per share, diluted measures in evaluating the performance
of
CTS with peer companies.
Liquidity
and Capital Resources
Overview
Cash
and
cash equivalents were $12.6 million at April 2, 2006 compared to $12.0 million
at December 31, 2005. Total debt on April 2, 2006 was $82.5 million,
substantially unchanged from $81.8 million at the end of 2005. Total debt
as a
percentage of total capitalization was 19.7% at the end of the first quarter
of
2006, compared with 19.9% at the end of 2005.
Working
capital increased $9.8 million in the first quarter of 2006 versus December
of
2005, primarily driven by the following:
· |
Other
current assets increase of $3.0 million, which included a non-trade
receivable for royalties of $1.2 million and a $0.8 million related
to
non-trade receivables for lease deposit
refunds.
|
· |
Accounts
receivables increased by $2.9 million. The primary drivers for the
increase were $2.5 million due to the Delphi bankruptcy proceedings
and
slower payments from other key customers.
|
· |
Inventory
increased by $0.9 million due to increased buffer stock for the Berne
product transition and inventory builds related to anticipated new
customer demand in the EMS business segment.
|
· |
Accounts
payable decreased by $4.5 million primarily driven by the EMS business
segment sales decrease.
|
Working
capital increases were partially offset by
· |
Accrued
liabilities increased by $1.3 million primarily driven by increased
accrued payroll, deductions and benefits.
|
Cash
Flow
Operating
Activities
Net
cash
provided by operating activities was $2.6 million for the first quarter of
2006.
Components of net cash provided by operating activities included net
earnings of $6.2 million, depreciation and amortization expense of $6.6 million
and equity-based compensation of $0.9 million partially offset by unfavorable
changes in assets and liabilities of $11.1 million. The unfavorable changes
in
assets and liabilities were primarily due to increased accounts receivables
of
$2.9 million, an increase in other current assets of $2.5 million, an increase
in prepaid pension asset of $1.2 million, an increase in inventory of $0.9
million and a decrease in accounts payable and accrued liabilities of $3.2
million.
Net
cash
provided by operating activities was $10.9 million for the first quarter
of
2005. Components of net cash provided by operating activities included net
earnings of $3.4 million, depreciation and amortization expense of $6.8 million,
equity-based compensation of $0.5 million and a $0.1 million favorable change
in
assets and liabilities. The favorable changes in assets and liabilities were
primarily due to decreased accounts receivables of $2.1 million and an increase
of $1.7 million in accounts payable and accrued liabilities. The unfavorable
changes in assets and liabilities were primarily due to the $2.2 million
increase in other current assets and the $1.9 million increase in prepaid
pension asset.
Total
free cash flow in the first quarter of 2006 was $0.1 million. Total free
cash
flow in the first quarter of 2005 was $7.9 million.
Free
cash
flow is a non-GAAP financial measure which CTS defines as net cash provided
by
operations less capital expenditures. The most comparable GAAP measure is
net
cash provided by operations. CTS' management uses free cash flow to evaluate
financial performance and in strategic planning, specifically, for investing
and
financing decisions. CTS' management believes free cash flow is a useful
measure
because it indicates the ability of a business operation to fund its own
required capital investments. CTS' management believes that the non-GAAP
measure
free cash flow is useful to investors because it reflects the performance
of its
overall operations more accurately than net cash provided by operations and
because it provides investors with the same results that management uses
as the
basis for making decisions about the business. Free cash flow is not an
indicator of residual cash available for discretionary spending, because
it does
not take into account mandatory debt service or other non-discretionary spending
requirements which are not deducted in the calculation of free cash flow.
CTS'
management takes these limitations into account when using free cash flow
to
make investing and financing decisions.
The
following table summarizes free cash flow for CTS:
|
|
Three
Months Ended
|
|
($
in millions)
|
|
April
2, 2006
|
|
April
3, 2005
|
|
Net
cash provided by operations
|
|
$
|
2.6
|
|
$
|
10.9
|
|
Capital
expenditures
|
|
|
(2.5
|
)
|
|
(3.0
|
)
|
Free
cash flow
|
|
$
|
0.1
|
|
$
|
7.9
|
|
Net
cash
used in investing activities were $2.0 million for the first quarter of 2006,
including $2.5 million used for capital expenditures partially offset by
$0.5
million in proceeds for sale of assets.
Net
cash
used in investing activities totaled $38.1 million in the first quarter of
2005.
The cash used for the SMTEK acquisition was $35.6 million, and capital
expenditures were $3.0 million.
Net
cash
used in financing activities for the first quarter of 2006 were $0.3 million,
consisting primarily of $1.1 million in dividend payments partially offset
by
$0.8 million in increased short-term notes payable.
Net
cash
provided by financing activities were $24.9 million in first quarter of 2005,
including net proceeds of $38.9 million from borrowings offset by the repayment
of debt of $13.0 million assumed in the SMTEK acquisition, and $1.1 million
in
dividends to shareholders.
Capital
Resources
Refer
to
Note G, “Debt,” for further discussion.
CTS
has a
$75 million senior, secured revolving credit agreement that had an outstanding
balance of $2.0 million at April 2, 2006. Any outstanding balances under
the
revolving credit agreement would be senior to CTS’ convertible debentures. The
revolving credit agreement is collateralized by substantially all U.S. assets
and a pledge of 65% of the capital stock of certain non-U.S. subsidiaries.
Interest rates on the revolving credit agreement fluctuate based on LIBOR.
CTS
pays a commitment fee on the undrawn portion of the credit agreement. The
commitment fee varies based on performance under certain financial covenants
and
is currently 0.38
percent
per annum. The revolving credit agreement requires, among other things, that
CTS
comply with a minimum fixed charge coverage ratio, a maximum leverage ratio,
and
a minimum tangible net worth covenants. As of April 2, 2006, CTS was in
compliance with these covenants. Failure of CTS to comply with these covenants
could reduce the borrowing availability under the credit agreement.
Additionally, the credit agreement limits the amounts allowed for dividends,
capital expenditures, and acquisitions. In
March
2006, CTS amended its revolving credit agreement to increase the permitted
level
of unsecured debt under other agreements and to modify restrictions on dividends
and other distributions. The credit agreement expires in July
2007.
CTS
believes cash flows from operating activities and available borrowings under
its
Credit Facility will be adequate to fund its working capital and capital
expenditure requirements. CTS may choose to pursue additional equity and/or
debt
financing to fund acquisitions and/or to reduce its overall interest expense
or
improve its capital structure.
In
November 2005, CTS’ Board of Directors authorized a program to repurchase up to
one million shares of stock. The authorization expires June 30, 2007. The
previously authorized one million share repurchase program dated July 2004
was
completed in the fourth quarter of 2005. Reacquired shares will be used to
support equity-based compensation programs and for other corporate purposes.
During the first quarter of 2006, CTS repurchased 1,500 shares at a total
cost
of $18,762. At April 2, 2006, CTS was authorized to repurchase approximately
859,100 additional shares.
In
November 2001, CTS’ Form S-3 registration statement registering two million
shares of CTS common stock to be issued under the CTS’ Direct Stock Purchase
Plan was declared effective by the Securities and Exchange Commission. In
November 2005, CTS terminated this direct stock purchase plan under this
registration statement.
On
December 14, 1999, CTS’ shelf registration statement on Form S-3 was declared
effective by the Securities and Exchange Commission. CTS could initially
offer up to $500.0 million in any combination of debt securities, common
stock,
preferred stock or warrants under the registration statement. During the
first three months of 2006, CTS did not issue any securities under this
registration statement. As of April 2, 2006, CTS could offer up to
$435.1
million
of additional debt and/or equity securities under this registration statement.
Capital
Requirements
The
following table sets forth the impact that contractual obligations, as of
April
2, 2006, are expected to have on the Company's liquidity and cash flow in
future
periods:
|
|
Payments
Due by Period
|
|
($
in millions)
|
|
Total
|
|
2006
|
|
2007
- 2008
|
|
2009
- 2010
|
|
2011
- beyond
|
|
Long-term
debt (1)
|
|
$
|
92.0
|
|
|
1.3 |
|
$
|
10.5
|
(2) |
$
|
2.9
|
|
$
|
77.3
|
(3) |
Operating
leases
|
|
|
18.5
|
|
|
3.4 |
|
|
5.7
|
|
|
4.2
|
|
|
5.2
|
|
Purchase
obligations
|
|
|
—
|
|
|
— |
|
|
—
|
|
|
—
|
|
|
—
|
|
Retirement
obligations
|
|
|
15.5
|
|
|
1.1 |
|
|
3.1
|
|
|
3.2
|
|
|
8.1
|
|
|
|
$
|
126.0
|
|
|
5.8 |
|
$
|
19.3
|
|
$
|
10.3
|
|
$
|
90.6
|
|
___________________________
(1)
|
|
Including
principal and coupon payments of the 6.5% Debentures issued in
2002,
principal and coupon payments of 2.125% Debentures issued in 2004,
and
principal payment of the revolving credit agreement.
|
(2)
|
|
Including
6.5% Debentures issued in 2002 and $2.1 million outstanding under
the
revolving credit agreement. For the 6.5% Debentures, the investors
may
accelerate the maturity of the debentures at any time after the
three-year
anniversary of the issue date. These debentures convert into CTS
common
stock at a conversion price of $20.05 per share.
|
(3)
|
|
2.125%
Debentures issued in May 2004. Investors may convert the debentures,
under
certain circumstances, at any time to CTS common stock. The conversion
price is $15.00 per common share.
|
Purchase
obligations are defined as agreements that are enforceable and legally binding
on CTS and that specify all significant terms, including: fixed or minimum
quantities to be purchased; fixed, minimum or variable price provisions;
and the
approximate timing of the transaction. CTS purchases direct materials, generally
related to customer orders, for production occurring at its manufacturing
facilities around the world. These goods are secured using purchase orders,
either blanket or discrete. Purchase orders commit CTS to take delivery of
the
quantities ordered generally over a specified delivery schedule. CTS’ standard
purchase order terms and conditions state that, should CTS cancel an order,
CTS
will reimburse its supplier only for the costs incurred at the time of
cancellation. CTS’ purchase order cancellations generally occur due to order
cancellation by a customer. If a customer cancels its order, CTS’ standard terms
of sale provide for reimbursement of costs, including those related to CTS’
purchase orders. Therefore, these commitments are not included in purchase
obligations.
Retirement
obligations include defined benefit and other post-retirement benefits. Please
refer to “Note H —Retirement Plans” for additional information related to the
retirement plans, including the important assumptions.
Off-Balance
Sheet Arrangements
CTS
incurred approximately $1.3 million and $1.9 million of rent expense in the
quarters ending April 2, 2006 and April 3, 2005, respectively. The future
minimum lease payments under the Company's operating leases are $3.6 million
for
the remainder of 2006, $4.7 million in 2007, $4.0 million in 2008, $3.8 million
in 2009, $2.4 million in 2010, and $3.7 million thereafter.
__________________________________________________
*****
Forward-Looking
Statements
Statements
about the Company’s earnings outlook and its plans, estimates and beliefs
concerning the future are “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are based
on
management’s expectations, certain assumptions and currently available
information. Actual results may differ materially from those reflected in
the
forward-looking statements due to a variety of geopolitical, economic, health,
industry and other factors which could affect the Company’s operating results,
liquidity and financial condition. We undertake no obligations to publicly
update or revise any forward-looking statement. Examples of factors which
may
affect future results include, but are not limited to: rapid technological
change, general market conditions in the automotive, communications and computer
industries; reliance on key customers; the ability to protect our intellectual
property; pricing pressures and demand for our products; and risks associated
with our international operations, including trade and tariff barriers, exchange
rates and political and geopolitical risks. Investors are encouraged to examine
the Company’s 2004 Form 10-K, which more fully describes the risks and
uncertainties associated with the Company’s business.
There
have been no other material changes in CTS’ market risk since December 31,
2005.
CTS
maintains a set of disclosure controls and procedures designed to ensure
information required to be disclosed by CTS in reports that it files or submits
under the Securities Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms. Management recognizes that a control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of
a
control system must reflect the fact that there are resource constraints,
and
the benefits of controls must be considered relative to their costs. As of
April
2, 2006, the end of the quarter covered by this report, an evaluation was
carried out under the supervision and with the participation of CTS’ management,
including the chief executive officer and chief financial officer, of the
effectiveness of CTS’ disclosure controls and procedures. Based upon that
evaluation, the chief executive officer and chief financial officer have
concluded that CTS’ disclosure controls and procedures are effective at the
reasonable assurance level referred to above, provided that the evaluation
of
CTS’ disclosure controls and procedures did not include an evaluation of the
effectiveness of the internal control over financial reporting for the SMTEK
business, as described further below.
The
SMTEK
business had facilities located in Moorpark and Santa Clara, California;
Marlborough, Massachusetts; and Bangkok, Thailand. Each of these facilities
reports financial results that are included in this report for the quarter
ended
April 2, 2006. CTS’ management has not made an assessment of the SMTEK business’
internal control over financial reporting since the date of the acquisition.
Other than changes resulting from CTS’ acquisition of SMTEK, there were no
changes in CTS’ internal control over financial reporting during the quarter
ended April 2, 2006 that materially affected, or are reasonably likely to
materially affect, CTS’ internal control over financial reporting.
Certain
processes in the manufacturer of CTS’ current and past products create hazardous
waste by-products as currently defined by federal and state laws and
regulations. CTS has been notified by the U.S. Environmental Protection Agency,
state environmental agencies and, in some cases, generator groups that it
is or
may be a Potentially Responsible Party (PRP) regarding hazardous waste
remediation at several non-CTS sites. In addition to these non-CTS sites,
CTS
has an ongoing practice of providing reserves for probably remediation
activities at certain of its manufacturing locations and for claims and
proceedings against CTS with respect to other environmental matters. In the
opinion of management, based upon presently available information relating
to
all such matters, either adequate provision for probably costs has been made,
or
the ultimate costs resulting will not materially affect the consolidated
financial position, results of operations or cash flows of CTS.
Certain
claims are pending against CTS with respect to matters arising out of the
ordinary conduct of its business. For all claims, in the opinion of management,
based upon presently available information, either adequate provision for
anticipated costs has been made by insurance, accruals or otherwise, or the
ultimate anticipated costs resulting will not materially affect CTS’
consolidated financial position, results of operations or cash
flows.
There
have been no significant changes in the Company’s risk factors since December
31, 2005.
The
following table summarizes the repurchases of CTS common stock made by the
Company during the three months ended April 2, 2006:
|
|
(a)
Total
Number of
Shares
Purchased
|
|
(b)
Average
Price
Paid
per Share
|
|
(c)
Total
Number of Shares
Purchased
as Part of
Plans
or Programs
(1)
|
|
(d)
Maximum
Number
of
Shares
That
May Yet Be
Purchased
Under the
Plans
or Programs
|
|
|
|
|
|
|
|
|
|
860,600
|
|
February
27, 2006 - April 2, 2006
|
|
|
1,500
|
|
$
|
12.51
|
|
|
1,500
|
|
|
859,100
|
|
Total
|
|
|
1,500
|
|
$
|
12.51
|
|
|
1,500
|
|
|
|
|
_________________________________
(1)
|
In
November 2005, CTS’ Board of Directors authorized a program to repurchase
up to one million shares of its common stock in the open market.
The
authorization expires June 30,
2007.
|
|
|
Amendments
to the CTS Corporation Pension Plan
|
|
|
|
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
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 thereunto
duly authorized.
|
|
|
|
/s/ Richard
G. Cutter III |
|
|
/s/ Vinod
M. Khilnani |
|
|
|
|
Richard
G. Cutter
III Vice President, Secretary and General Counsel |
|
|
Vinod
M.
Khilnani Senior Vice President and Chief Financial Officer |
|
|
|
|
Dated:
April 26, 2006 |
|
|
Dated:
April 26, 2006 |