The company said the staff reduction is part of a restructuring plan that should help save approximately $6 million annually. The cuts were announced in the company’s second quarter earnings report, which shows a profit of $3.3 million, compared to $4.1 million for the same period a year earlier.
Second Quarter Highlights
CTS initiated a $5 million restructuring plan with expected annual savings of approximately $6 million. This plan will reduce approximately 260 positions, or 6 percent of CTS’ global headcount, throughout Asia, Europe and North America. CTS recognized $3.8 million, or $0.08 per share, of this $5 million plan in the second quarter; the remaining $1.2 million charge is expected to be recognized in the second half of 2012. The plan will further improve our cost structure and capacity utilization.
CTS’ EMS Thailand facility, which had been out of service since the October 2011 flood, is now fully operational with substantially all production having been transferred back to Thailand from the California EMS facilities. Second quarter 2012 earnings include insurance recoveries of $7.4 million and expenses and losses of approximately $5 million. Year-to-date, flood-related reimbursements have exceeded costs by $1.5 million, due to timing.
CTS has incurred approximately $0.6 million of Takata patent litigation costs year-to-date, of which $0.2 million was incurred in the second quarter. In July, the courts sided with CTS’ interpretation of the patent claim. The Company is proceeding with the next stage of litigation.
Non-cash pension expense was higher by approximately $1.2 million, or $0.02 per share, in the second quarter and $2.2 million, or $0.04 per share, year-to-date, compared to last year due to lower discount rates and asset returns.
CTS’ second quarter debt balance decreased $11.7 million from the first quarter driven by strong cash flow.
CTS’ new grill shutter actuator product was launched in May, one quarter earlier than originally planned.
Production on CTS’ major smart actuator program is expected to begin as scheduled in late fourth quarter. This program is slated for a North American medium-duty diesel engine application and is expected to add approximately $20 million in new revenues in 2013.
On June 4, CTS celebrated its 50th anniversary of trading on the New York Stock Exchange by visiting the NYSE trading floor and ringing the closing bell. This significant milestone honored CTS’ rich tradition.
Second quarter 2012 Components and Sensors segment sales grew $8.8 million, or 13 percent, from the same period last year. This increase was driven primarily by higher automotive sensor and actuator sales of $7.0 million, or 17 percent, as Japanese automotive customers recovered from last year’s earthquake. Electronic component sales increased $1.8 million, or 7 percent, primarily from improved piezoceramic product demand, including HDD sales, and incremental sales from the Valpey-Fisher acquisition. EMS second quarter sales decreased $1.4 million, or 2 percent, year-over-year, primarily resulting from the continued impact of the Thailand flood, partially offset by new customer program ramps.
Second quarter cash flow from operations was $16.1 million, the highest level since the third quarter of 2009. Year-to-date cash flow from operations was $12.0 million, compared to $8.8 million in the same period 2011. Year-to-date capital expenditures were $6.9 million compared to $6.5 million last year.
During the second quarter of 2012, the Company repurchased approximately 300,400 shares for $2.9 million, at an average price of $9.68. Year-to-date, the Company repurchased approximately 572,500 shares for $5.6 million, at an average price of $9.86.
Commenting on second quarter 2012 results, Vinod M. Khilnani, CTS Chairman and Chief Executive Officer, stated, “We were pleased with our second quarter performance, despite the global economic slowdown. We believe that continued progress on new product introductions and strong new business wins will allow the Company to drive double-digit growth in Components and Sensors going forward.”
As a result of lower than expected global economic growth, including negative economic growth in Europe and a stronger dollar, management is lowering its full-year 2012 sales guidance from a range of a 10 percent to 13 percent increase over 2011, to 4 percent to 7 percent. However, as a result of expected restructuring savings, management is maintaining its 2012 adjusted earnings guidance of $0.75 to $0.80 per share.
Source: CTS Corp.