x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Indiana
|
35-0225010
|
|||
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification Number)
|
905 West Boulevard North, Elkhart, IN
|
46514
|
|||
(Address of principal executive offices)
|
(Zip Code)
|
Page
|
|||
FINANCIAL INFORMATION
|
|||
Item 1.
|
3
|
||
3
|
|||
- For the Three and Nine Months Ended October 3, 2010 and September 27, 2009
|
|||
4
|
|||
- As of October 3, 2010 and December 31, 2009
|
|||
5
|
|||
- For the Nine Months Ended October 3, 2010 and September 27, 2009
|
|||
6
|
|||
- For the Three and Nine Months Ended October 3, 2010 and September 27, 2009
|
|||
7
|
|||
Item 2.
|
16
|
||
Item 3.
|
25
|
||
Item 4.
|
25
|
||
OTHER INFORMATION
|
|||
Item 1.
|
25
|
||
Item 1A.
|
26
|
||
Item 6.
|
26
|
||
27
|
Item 1.
Financial Statements
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
October 3,
2010
|
September 27, 2009
|
October 3,
2010
|
September 27, 2009
|
|||||||||||||
Net sales
|
$ | 139,362 | $ | 126,565 | $ | 407,616 | $ | 365,094 | ||||||||
Costs and expenses:
|
||||||||||||||||
Cost of goods sold
|
109,393 | 100,380 | 316,828 | 297,202 | ||||||||||||
Selling, general and administrative expenses
|
17,112 | 16,494 | 54,944 | 48,357 | ||||||||||||
Research and development expenses
|
5,086 | 3,408 | 13,985 | 10,227 | ||||||||||||
Restructuring charge – Note I
|
— | — | — | 2,243 | ||||||||||||
Goodwill impairment
|
— | — | — | 33,153 | ||||||||||||
Operating earnings/(loss)
|
7,771 | 6,283 | 21,859 | (26,088 | ) | |||||||||||
Other (expense)/income:
|
||||||||||||||||
Interest expense
|
(254 | ) | (256 | ) | (717 | ) | (1,615 | ) | ||||||||
Interest income
|
105 | 17 | 239 | 118 | ||||||||||||
Other
|
1,738 | (390 | ) | 917 | (736 | ) | ||||||||||
Total other income/(expense)
|
1,589 | (629 | ) | 439 | (2,233 | ) | ||||||||||
Earnings/(loss) before income taxes
|
9,360 | 5,654 | 22,298 | (28,321 | ) | |||||||||||
Income tax expense
|
2,445 | 1,173 | 5,060 | 9,872 | ||||||||||||
Net earnings/(loss)
|
$ | 6,915 | $ | 4,481 | $ | 17,238 | $ | (38,193 | ) | |||||||
Net earnings/(loss) per share - Note J
|
||||||||||||||||
Basic
|
$ | 0.20 | $ | 0.13 | $ | 0.51 | $ | (1.13 | ) | |||||||
Diluted
|
$ | 0.20 | $ | 0.13 | $ | 0.50 | $ | (1.13 | ) | |||||||
Cash dividends declared per share
|
$ | 0.03 | $ | 0.03 | $ | 0.09 | $ | 0.09 | ||||||||
Average common shares outstanding:
|
||||||||||||||||
Basic
|
34,181 | 33,873 | 34,060 | 33,799 | ||||||||||||
Diluted
|
34,827 | 34,513 | 34,816 | 33,799 |
October 3,
2010
|
December 31, 2009
|
|||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash and cash equivalents
|
$
|
73,031
|
$
|
51,167
|
||||
Accounts receivable, less allowances (2010 - $1,705; 2009- $2,119)
|
90,136
|
71,718
|
||||||
Inventories, net - Note D
|
76,562
|
54,348
|
||||||
Other current assets
|
19,325
|
16,502
|
||||||
Total current assets
|
259,054
|
193,735
|
||||||
Property, plant and equipment, less accumulated depreciation (2010 - $247,564; 2009 - $264,651)
|
79,409
|
81,120
|
||||||
Other Assets
|
||||||||
Prepaid pension asset
|
32,621
|
29,373
|
||||||
Goodwill – Note L
|
500
|
500
|
||||||
Other intangible assets, net – Note L
|
32,056
|
33,938
|
||||||
Deferred income taxes
|
66,662
|
68,331
|
||||||
Other
|
579
|
660
|
||||||
Total other assets
|
132,418
|
132,802
|
||||||
Total Assets
|
$
|
470,881
|
$
|
407,657
|
Nine Months Ended
|
|||||||
October 3,
2010
|
September 27,
2009
|
||||||
Cash flows from operating activities:
|
|||||||
Net earnings/(loss)
|
$
|
17,238
|
(38,193
|
)
|
|||
Adjustments to reconcile net earnings/(loss) to net cash provided by operating activities:
|
|||||||
Depreciation and amortization
|
13,244
|
14,919
|
|||||
Prepaid pension asset
|
(5,985
|
)
|
(5,853
|
)
|
|||
Equity-based compensation – Note B
|
2,911
|
2,711
|
|||||
Restructuring and impairment charges – Note I
|
—
|
2,243
|
|||||
Goodwill impairment – Note L
|
—
|
33,153
|
|||||
Amortization of retirement benefit adjustments – Note F
|
3,646
|
3,942
|
|||||
Other
|
(987
|
)
|
7,389
|
||||
Changes in assets and liabilities, net of acquisitions
|
|||||||
Accounts receivable
|
(17,929
|
)
|
20,045
|
||||
Inventories
|
(21,587
|
)
|
11,031
|
||||
Other current assets
|
(2,697
|
)
|
1,600
|
||||
Accounts payable and accrued liabilities
|
20,241
|
(18,936
|
)
|
||||
Total adjustments
|
(9,143
|
)
|
72,244
|
||||
Net cash provided by operating activities
|
8,095
|
34,051
|
|||||
Cash flows from investing activities:
|
|||||||
Earnout payment related to a 2008 acquisition
|
(500
|
)
|
—
|
||||
Capital expenditures
|
(10,505
|
)
|
(4,681
|
)
|
|||
Proceeds from sales of assets
|
1,530
|
1,309
|
|||||
Net cash used in investing activities
|
(9,475
|
)
|
(3,372
|
)
|
|||
Cash flows from financing activities:
|
|||||||
Payment of 2.125% Debentures
|
—
|
(32,500
|
)
|
||||
Payments of long-term debt – Note E
|
(2,488,950
|
)
|
(2,141,050
|
)
|
|||
Proceeds from borrowings of long-term debt – Note E
|
2,515,650
|
2,142,550
|
|||||
Payments of short-term notes payable
|
(2,258
|
)
|
(7,755
|
)
|
|||
Proceeds from borrowings of short-term notes payable
|
2,258
|
7,755
|
|||||
Dividends paid
|
(3,063
|
)
|
(3,040
|
)
|
|||
Other
|
69
|
(929
|
)
|
||||
Net cash provided by/(used in) financing activities
|
23,706
|
(34,969
|
)
|
||||
Effect of exchange rate on cash and cash equivalents
|
(462
|
)
|
(9
|
)
|
|||
Net increase/(decrease) in cash and cash equivalents
|
21,864
|
(4,299
|
)
|
||||
Cash and cash equivalents at beginning of year
|
51,167
|
44,628
|
|||||
Cash and cash equivalents at end of period
|
$
|
73,031
|
$
|
40,329
|
|||
Supplemental cash flow information
|
|||||||
Cash paid during the period for:
|
|||||||
Interest
|
$
|
633
|
$
|
728
|
|||
Income taxes—net
|
$
|
2,370
|
$
|
5,915
|
|||
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
October 3,
2010
|
September 27, 2009
|
October 3,
2010
|
September 27, 2009
|
|||||||||||||
Net earnings/(loss)
|
$
|
6,915
|
$
|
4,481
|
$
|
17,238
|
$
|
(38,193
|
)
|
|||||||
Other comprehensive earnings/(loss):
|
||||||||||||||||
Cumulative translation adjustment
|
1,090
|
(352
|
)
|
(546
|
)
|
1,925
|
||||||||||
Amortization of retirement benefit adjustments (net of tax)
|
582
|
779
|
1,998
|
2,253
|
||||||||||||
Comprehensive earnings/(loss)
|
$
|
8,587
|
$
|
4,908
|
$
|
18,690
|
$
|
(34,015
|
)
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
($ in thousands)
|
October 3
2010
|
September 27, 2009
|
October 3.
2010
|
September 27,
2009
|
||||||||||||
Stock options
|
$ | — | $ | 2 | $ | 3 | $ | 34 | ||||||||
Restricted stock units
|
746 | 907 | 2,908 | 2,677 | ||||||||||||
Total
|
$ | 746 | $ | 909 | $ | 2,911 | $ | 2,711 |
2009 Plan
|
2004 Plan
|
2001 Plan
|
1996 Plan
|
|||||||||||||
Awards originally available
|
3,400,000
|
6,500,000
|
2,000,000
|
1,200,000
|
||||||||||||
Stock options outstanding
|
—
|
276,850
|
709,013
|
128,350
|
||||||||||||
Restricted stock units outstanding
|
515,494
|
265,004
|
—
|
—
|
||||||||||||
Options exercisable
|
—
|
276,850
|
709,013
|
128,350
|
||||||||||||
Awards available for grant
|
2,751,449
|
268,500
|
—
|
—
|
October 3, 2010
|
September 27, 2009
|
|||||||||||||||
Options
|
Weighted-Average
Exercise Price
|
Options
|
Weighted-Average
Exercise Price
|
|||||||||||||
Outstanding at beginning of year
|
1,179,088 | $ | 13.72 | 1,294,263 | $ | 14.53 | ||||||||||
Exercised
|
(17,000 | ) | $ | 7.70 | — | $ | — | |||||||||
Expired
|
(47,875 | ) | $ | 42.30 | (109,675 | ) | $ | 21.45 | ||||||||
Forfeited
|
— | $ | — | — | $ | — | ||||||||||
Outstanding at end of period
|
1,114,213 | $ | 12.59 | 1,184,588 | $ | 13.89 | ||||||||||
Exercisable at end of period
|
1,114,213 | $ | 12.59 | 1,163,838 | $ | 13.89 |
October 3, 2010
|
September 27, 2009
|
|||||||||||||||
Options
|
Weighted-average
Grant-Date
Fair Value
|
Options
|
Weighted-average
Grant-Date
Fair Value
|
|||||||||||||
Nonvested at beginning of year
|
20,750 | $ | 6.24 | 74,525 | $ | 6.36 | ||||||||||
Vested
|
(20,750 | ) | $ | 6.24 | (53,775 | ) | $ | 6.41 | ||||||||
Forfeited
|
— | $ | — | — | $ | — | ||||||||||
Nonvested at end of period
|
— | $ | — | 20,750 | $ | 6.24 |
Options Outstanding
|
Options Exercisable
|
||||||||||||||||||||
Weighted Average
|
|||||||||||||||||||||
Range of
|
Number
|
Remaining
|
Weighted Average
|
Number
|
Weighted Average
|
||||||||||||||||
Exercise
|
Outstanding
|
Contractual
|
Exercise
|
Exercisable
|
Exercise
|
||||||||||||||||
Prices
|
at 10/3/10
|
Life (Years)
|
Price
|
At 10/3/10
|
Price
|
||||||||||||||||
$
|
7.70 – 11.11
|
708,663
|
2.89
|
$
|
9.41
|
708,663
|
$
|
9.41
|
|||||||||||||
$
|
13.68 – 16.24
|
227,800
|
2.98
|
$
|
14.12
|
227,800
|
$
|
14.12
|
|||||||||||||
$
|
23.00 – 25.10
|
177,250
|
0.55
|
$
|
23.24
|
177,250
|
$
|
23.24
|
|||||||||||||
$
|
42.69
|
500
|
0.11
|
$
|
42.69
|
500
|
$
|
42.69
|
October 3, 2010
|
September 27, 2009
|
|||||||||||||||
RSUs
|
Weighted-average
Grant-Date
Fair Value
|
RSUs
|
Weighted-average
Grant-Date
Fair Value
|
|||||||||||||
Outstanding at beginning of year
|
854,745 | $ | 8.47 | 700,358 | $ | 10.76 | ||||||||||
Granted
|
282,200 | $ | 7.59 | 390,850 | $ | 6.09 | ||||||||||
Converted
|
(282,895 | ) | $ | 9.01 | (217,991 | ) | $ | 10.70 | ||||||||
Forfeited
|
(73,552 | ) | $ | 7.49 | (22,180 | ) | $ | 1132 | ||||||||
Outstanding at end of period
|
780,498 | $ | 8.39 | 851,037 | $ | 8.61 | ||||||||||
Weighted-average remaining contractual life
|
5.3 years
|
4.7 years
|
($ in thousands)
|
Carrying Value at October 3, 2010
|
Quoted Prices in Active Markets for Identical (Level 1)
|
Significant Other Observable Inputs
(Level 2)
|
Significant Unobservable Inputs
(Level 3)
|
||||||||||||
Long-term debt
|
$
|
77,100
|
$
|
—
|
$
|
77,100
|
$
|
—
|
($ in thousands)
|
Carrying Value at December 31, 2009
|
Quoted Prices in Active Markets for Identical (Level 1)
|
Significant Other Observable Inputs
(Level 2)
|
Significant Unobservable Inputs
(Level 3)
|
||||||||||||
Long-term debt
|
$
|
50,400
|
$
|
—
|
$
|
50,400
|
$
|
—
|
($ in thousands)
|
October 3,
2010
|
December 31,
2009
|
||||||
Finished goods
|
$
|
6,357
|
$
|
7,220
|
||||
Work-in-process
|
17,331
|
12,941
|
||||||
Raw materials
|
52,874
|
34,187
|
||||||
Total inventories, net
|
$
|
76,562
|
$
|
54,348
|
($ in thousands)
|
October 3,
2010
|
December 31,
2009
|
||||||
Revolving credit agreement, weighted-average interest rate of 1.0% (2010), and 1.1%
(2009) due in 2011
|
$ | 77,100 | $ | 50,400 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
($ in thousands)
|
October 3,
2010
|
September 27, 2009
|
October 3,
2010
|
September 27, 2009
|
||||||||||||
PENSION PLANS
|
||||||||||||||||
Service cost
|
$ | 746 | $ | 788 | $ | 2,236 | $ | 2,346 | ||||||||
Interest cost
|
3,315 | 3,396 | 9,957 | 10,268 | ||||||||||||
Expected return on plan assets
(1)
|
(6,086 | ) | (6,108 | ) | (18,247 | ) | (18,305 | ) | ||||||||
Settlement cost
|
— | — | 234 | — | ||||||||||||
Amortization of prior service cost
|
153 | 126 | 663 | 378 | ||||||||||||
Amortization of loss
|
993 | 1,198 | 2,983 | 3,640 | ||||||||||||
Net pension income
|
$ | (879 | ) | $ | (600 | ) | $ | (2,174 | ) | $ | (1,673 | ) |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
($ in thousands)
|
October 3,
2010
|
September 27, 2009
|
October 3,
2010
|
September 27, 2009
|
||||||||||||
OTHER POSTRETIREMENT BENEFIT PLAN
|
||||||||||||||||
Service cost
|
$ | 3 | $ | 3 | $ | 10 | $ | 8 | ||||||||
Interest cost
|
75 | 78 | 225 | 235 | ||||||||||||
Amortization of gain
|
— | (25 | ) | — | (76 | ) | ||||||||||
Net postretirement expense
|
$ | 78 | $ | 56 | $ | 235 | $ | 167 |
($ in thousands)
|
EMS
|
Components and Sensors
|
Total
|
|||||||||
Third Quarter of 2010
|
||||||||||||
Net sales to external customers
|
$
|
67,592
|
$
|
71,770
|
$
|
139,362
|
||||||
Segment operating earnings
|
$
|
72
|
$
|
7,699
|
$
|
7,771
|
||||||
Total assets
|
$
|
137,615
|
$
|
333,266
|
$
|
470,881
|
||||||
Third Quarter of 2009
|
||||||||||||
Net sales to external customers
|
$
|
70,737
|
$
|
55,828
|
$
|
126,565
|
||||||
Segment operating earnings
|
$
|
2,214
|
$
|
4,069
|
$
|
6,283
|
||||||
Total assets
|
$
|
122,937
|
$
|
283,743
|
$
|
406,680
|
||||||
First Nine Months of 2010
|
||||||||||||
Net sales to external customers
|
$
|
190,175
|
$
|
217,441
|
$
|
407,616
|
||||||
Segment operating (loss)/earnings
|
$
|
(2,807
|
)
|
$
|
24,666
|
$
|
21,859
|
|||||
Total assets
|
$
|
137,615
|
$
|
333,266
|
$
|
470,881
|
||||||
First Nine Months of 2009
|
||||||||||||
Net sales to external customers
|
$
|
217,366
|
$
|
147,728
|
$
|
365,094
|
||||||
Segment operating earnings
|
$
|
6,559
|
$
|
2,749
|
$
|
9,308
|
||||||
Total assets
|
$
|
122,937
|
$
|
283,743
|
$
|
406,680
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
($ in thousands)
|
October 3,
2010
|
September 27, 2009
|
October 3,
2010
|
September 27, 2009
|
||||||||||||
Total segment operating earnings
|
$ | 7,771 | $ | 6,283 | $ | 21,859 | $ | 9,308 | ||||||||
Restructuring and related charges
|
— | — | — | (2,243 | ) | |||||||||||
Goodwill impairment
|
— | — | — | (33,153 | ) | |||||||||||
Interest expense
|
(254 | ) | (256 | ) | (717 | ) | (1,615 | ) | ||||||||
Interest income
|
105 | 17 | 239 | 118 | ||||||||||||
Other income/(expense)
|
1,738 | (390 | ) | 917 | (736 | ) | ||||||||||
Earnings/(loss) before income taxes
|
$ | 9,360 | $ | 5,654 | $ | 22,298 | $ | (28,321 | ) |
($ in millions)
March 2009 Plan
|
Planned
Costs
|
Actual incurred through
March 29, 2009
|
||||||
Workforce reduction
|
$ | 1.9 | $ | 2.1 | ||||
Asset impairments
|
— | 0.1 | ||||||
Total restructuring and impairment charge
|
$ | 1.9 | $ | 2.2 |
($ in millions)
March 2009 Plan
|
||||
Restructuring liability at January 1, 2009
|
$
|
—
|
||
Restructuring and restructuring-related charges, excluding asset impairments and write-offs
|
2.1
|
|||
Cost paid
|
(2.1
|
)
|
||
Restructuring liability at December 31, 2009
|
$
|
—
|
($ in thousands, except per share amounts)
|
Net Earnings/(Loss)
(Numerator)
|
Shares
(in thousands) (Denominator)
|
Per Share Amount
|
|||||||||
Third Quarter 2010
|
||||||||||||
Basic EPS
|
$
|
6,915
|
34,181
|
$
|
0.20
|
|||||||
Effect of dilutive securities:
|
||||||||||||
Equity-based compensation plans
|
—
|
646
|
||||||||||
Diluted EPS
|
$
|
6,915
|
34,827
|
$
|
0.20
|
|||||||
Third Quarter 2009
|
||||||||||||
Basic EPS
|
$
|
4,481
|
33,873
|
$
|
0.13
|
|||||||
Effect of dilutive securities:
|
||||||||||||
Equity-based compensation plans
|
—
|
640
|
||||||||||
Diluted EPS
|
$
|
4,481
|
34,513
|
$
|
0.13
|
|||||||
First Nine Months of 2010
|
||||||||||||
Basic EPS
|
$
|
17,238
|
34,060
|
$
|
0.51
|
|||||||
Effect of dilutive securities:
|
||||||||||||
Equity-based compensation plans
|
—
|
756
|
||||||||||
Diluted EPS
|
$
|
17,238
|
34,816
|
$
|
0.50
|
|||||||
First Nine Months of 2009
|
||||||||||||
Basic EPS
|
$
|
(38,193
|
)
|
33,799
|
$
|
(1.13
|
)
|
|||||
Effect of dilutive securities:
|
||||||||||||
Equity-based compensation plans
|
—
|
—
|
||||||||||
Diluted EPS
|
$
|
(38,193
|
)
|
33,799
|
$
|
(1.13
|
)
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||
(Number of Shares in Thousands)
|
October 3,
2010
|
September 27, 2009
|
October 3,
2010
|
September 27, 2009
|
|||||||||
Stock options where the assumed proceeds exceeds the
average market price
|
866
|
919
|
866
|
1,134
|
|||||||||
Restricted stock units
|
—
|
—
|
—
|
582
|
|||||||||
Securities related to the subordinated convertible debt
|
—
|
—
|
—
|
984
|
October 3, 2010
|
December 31, 2009
|
|||||||||||||||
($ in thousands)
|
Gross Carrying Amount
|
Accumulated Amortization
|
Gross Carrying Amount
|
Accumulated Amortization
|
||||||||||||
Amortized intangible assets:
|
||||||||||||||||
Customer lists/relationships
|
$
|
51,084
|
$
|
(19,388
|
)
|
$
|
51,084
|
$
|
(17,544
|
)
|
||||||
Patents
|
10,319
|
(10,319
|
)
|
10,319
|
(10,319
|
)
|
||||||||||
Other intangibles
|
500
|
(140
|
)
|
500
|
(102
|
)
|
||||||||||
Total
|
61,903
|
(29,847
|
)
|
61,903
|
(27,965
|
)
|
||||||||||
Goodwill
|
500
|
—
|
500
|
—
|
||||||||||||
Total other intangible assets and goodwill
|
$
|
62,403
|
$
|
(29,847
|
)
|
$
|
62,403
|
$
|
(27,965
|
)
|
·
|
Total sales in the third quarter of 2010 of $139.4 million were reported through two segments, Components and Sensors and EMS. Sales increased by $12.8 million, or 10.1%, in the third quarter of 2010 from the third quarter of 2009. Sales in the Components and Sensors segment increased by 28.6% versus the third quarter of 2009, while sales in the EMS segment decreased by 4.4%.
|
·
|
Gross margin as a percent of sales was 21.5% in the third quarter of 2010 compared to 20.7% in the third quarter of 2009 due to favorable segment sales mix and improved absorption of fixed costs on higher sales. The Components and Sensors segment, which inherently generates a higher gross margin, increased to 51.5% of total company sales in the third quarter of 2010 compared to 44.1% of total sales in the same period of 2009.
|
·
|
Selling, general and administrative (“SG&A”) expenses were $17.1 million, or 12.3% of sales, in the third quarter of 2010 versus $16.5 million, or 13.0% of sales in the third quarter of 2009.
|
·
|
Research and development (“R&D”) expenses were $5.1 million, or 3.6% of sales, in the third quarter of 2010 compared to $3.4 million, or 2.7% of sales, in the third quarter of 2009. This increase of $1.7 million reflects higher spending on new product development and new growth initiatives.
|
·
|
Income tax expense and effective tax rate for the third quarter of 2010 were $2.4 million and 26.1% respectively versus $1.2 million and 20.7% in the same quarter 2009.
|
·
|
Net earnings were $6.9 million, or $0.20 per diluted share, in the third quarter of 2010. This compares with $4.5 million, or $0.13 per diluted share, in the third quarter of 2009.
|
·
|
Inventory valuation, the allowance for doubtful accounts, and other accrued liabilities
|
·
|
Long-lived and intangible assets valuation, and depreciation/amortization periods
|
·
|
Income taxes
|
·
|
Retirement plans
|
·
|
Equity-based compensation
|
($ in thousands)
|
Components & Sensors
|
EMS
|
Consolidated
Total
|
|||||||||
Third Quarter 2010
|
||||||||||||
Sales
|
$
|
71,770
|
$
|
67,592
|
$
|
139,362
|
||||||
Segment operating earnings
|
7,699
|
$
|
72
|
$
|
7,771
|
|||||||
% of sales
|
10.7
|
%
|
0.1
|
%
|
5.6
|
%
|
||||||
Third Quarter 2009
|
||||||||||||
Sales
|
$
|
55,828
|
$
|
70,737
|
$
|
126,565
|
||||||
Segment operating earnings
|
4,069
|
$
|
2,214
|
$
|
6,283
|
|||||||
% of sales
|
7.3
|
%
|
3.1
|
%
|
5.0
|
%
|
Quarter ended
|
||||||||||||
($ in thousands, except net earnings per share)
|
October 3,
2010
|
September 27, 2009
|
Increase
(Decrease)
|
|||||||||
Net sales
|
$
|
139,362
|
$
|
126,565
|
$
|
12,797
|
||||||
Gross margin
|
$
|
29,969
|
$
|
26,185
|
$
|
3,784
|
|
|||||
% of net sales
|
21.5
|
%
|
20.7
|
%
|
0.8
|
%
|
||||||
Selling, general and administrative expenses
|
$
|
17,112
|
$
|
16,494
|
$
|
618
|
||||||
% of net sales
|
12.3
|
%
|
13.0
|
%
|
(0.7
|
)%
|
||||||
Research and development expenses
|
$
|
5,086
|
$
|
3,408
|
$
|
1,678
|
|
|||||
% of net sales
|
3.6
|
%
|
2.7
|
%
|
0.9
|
%
|
||||||
Operating earnings
|
$
|
7,771
|
$
|
6,283
|
$
|
1,488
|
||||||
% of net sales
|
5.6
|
%
|
5.0
|
%
|
0.6
|
%
|
||||||
Interest and other income/(expense)
|
$
|
1,589
|
$
|
(629
|
)
|
$
|
2,218
|
|||||
% of net sales
|
1.1
|
%
|
(0.5
|
)%
|
1.6
|
%
|
||||||
Income tax expense
|
$
|
2,445
|
$
|
1,173
|
$
|
1,272
|
||||||
Net earnings
|
$
|
6,915
|
$
|
4,481
|
$
|
2,434
|
||||||
% of net sales
|
5.0
|
%
|
3.5
|
%
|
1.5
|
%
|
||||||
Net earnings per diluted share
|
$
|
0.20
|
$
|
0.13
|
$
|
0.07
|
($ in thousands)
|
Components & Sensors
|
EMS
|
Consolidated
Total
|
|||||||||
First Nine Months 2010
|
||||||||||||
Sales
|
$
|
217,441
|
$
|
190,175
|
$
|
407,616
|
||||||
Segment operating earnings/(loss)
|
$
|
24,666
|
$
|
(2,807
|
)
|
$
|
21,859
|
|||||
% of sales
|
11.3
|
%
|
(1.5
|
)%
|
5.4
|
%
|
||||||
First Nine Months 2009
|
||||||||||||
Sales
|
$
|
147,728
|
$
|
217,366
|
$
|
365,094
|
||||||
Segment operating earnings
|
$
|
2,749
|
$
|
6,559
|
$
|
9,308
|
||||||
% of sales
|
1.9
|
%
|
3.0
|
%
|
2.5
|
%
|
Nine months ended
|
||||||||||||
($ in thousands, except net earnings per share)
|
October 3,
2010
|
September 27, 2009
|
Increase
(Decrease)
|
|||||||||
Net sales
|
$
|
407,616
|
$
|
365,094
|
$
|
42,522
|
||||||
Gross margin
|
$
|
90,788
|
$
|
67,892
|
$
|
22,896
|
|
|||||
% of net sales
|
22.3
|
%
|
18.6
|
%
|
3.7
|
%
|
||||||
Selling, general and administrative expenses
|
$
|
54,944
|
$
|
48,357
|
$
|
6,587
|
||||||
% of net sales
|
13.5
|
%
|
13.2
|
%
|
0.3
|
%
|
||||||
Research and development expenses
|
$
|
13,985
|
$
|
10,227
|
$
|
3,758
|
|
|||||
% of net sales
|
3.4
|
%
|
2.8
|
%
|
0.6
|
%
|
||||||
Restructuring charge
|
$
|
—
|
$
|
2,243
|
$
|
(2,243
|
)
|
|||||
% of net sales
|
—
|
%
|
0.6
|
%
|
(0.6
|
)%
|
||||||
Goodwill impairment
|
$
|
—
|
$
|
33,153
|
$
|
(33,153
|
)
|
|||||
% of net sales
|
—
|
%
|
9.1
|
%
|
(9.1
|
)%
|
||||||
Operating earnings/(loss)
|
$
|
21,859
|
$
|
(26,088
|
)
|
$
|
47,947
|
|||||
% of net sales
|
5.4
|
%
|
(7.1
|
)%
|
12.5
|
%
|
||||||
Interest and other income/(expense)
|
$
|
439
|
$
|
(2,233
|
)
|
$
|
2,672
|
|||||
% of net sales
|
0.1
|
%
|
(0.6
|
)%
|
0.7
|
%
|
||||||
Income tax expense
|
$
|
5,060
|
$
|
9,872
|
$
|
(4,812
|
)
|
|||||
Net earnings/(loss)
|
$
|
17,238
|
$
|
(38,193
|
)
|
$
|
55,431
|
|||||
% of net sales
|
4.2
|
%
|
(10.5
|
)%
|
14.7
|
%
|
||||||
Net earnings/(loss) per diluted share
|
$
|
0.50
|
$
|
(1.13
|
)
|
$
|
1.63
|
|||||
For the Nine-month Period Ended September 27, 2009
|
||||
Pre-tax loss
|
$
|
(28,321
|
)
|
|
Income tax expense
|
$
|
9,872
|
||
Effective tax rate
|
(34.9
|
)%
|
||
Pre-tax loss
|
$
|
(28,321
|
)
|
|
Add:
|
||||
Goodwill impairment charges
|
33,153
|
|||
Adjusted Pre-tax earnings
|
$
|
4,832
|
||
Income tax expense
|
$
|
9,872
|
||
Subtract:
|
||||
Tax expense related to cash repatriation and goodwill impairment charges
|
(8,872
|
)
|
||
Adjusted tax benefit
|
$
|
1,000
|
||
Adjusted tax rate
|
20.7
|
%
|
||
Item 1.
Legal Proceedings
|
|
Letter Agreement dated February 19, 2010 by and among CTS Corporation, Toyota Motor Sales, U.S.A. Inc., Toyota Canada Inc. and Toyota Motor Engineering & Manufacturing North America, Inc.
|
|
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.
|
CTS Corporation
|
CTS Corporation
|
||
/s/ Richard G. Cutter III
|
/s/ Donna L. Belusar
|
||
Richard G. Cutter III
Vice President, Secretary and General Counsel
|
Donna L. Belusar
Senior Vice President and Chief Financial Officer
|
||
Dated: October 27, 2010
|
Dated: October 27, 2010
|
TOYOTA MOTOR SALES, U.S.A., Inc. | ||
By:
|
/s/ G. Webster Burns | |
Name: G. Webster Burns | ||
Title: Assistant General Counsel |
CTS CORPORATION | ||
By:
|
/s/ Vinod M. Khilnani | |
Name: Vinod M. Khilnani | ||
Title: Chairman, President & CEO |
TOYOTA MOTOR ENGINEERING &
MANUFACTURING NORTH AMERICA, INC.
|
||
By:
|
/s/ Patrick Nepute | |
Name: Patrick Nepute | ||
Title: VP & General Counsel |
1.
|
I have reviewed this quarterly report on Form 10-Q of CTS Corporation:
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for external purposes in accordance with generally accepted accounting principles; and
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: October 27, 2010
|
By:
|
/s/ Vinod M. Khilnani | |
Vinod M. Khilnani | |||
Chairman of the Board, President and Chief Executive Officer | |||
1.
|
I have reviewed this quarterly report on Form 10-Q of CTS Corporation:
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for external purposes in accordance with generally accepted accounting principles; and
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: October 27, 2010
|
By:
|
/s/ Donna L. Belusar | |
Donna L. Belusar | |||
Senior Vice President and Chief Financial Officer | |||
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: October 27, 2010
|
By:
|
/s/ Vinod M. Khilnani | |
Vinod M. Khilnani | |||
Chairman of the Board, President and
Chief Executive Officer
|
|||
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: October 27, 2010
|
By:
|
/s/ Donna L. Belusar | |
Donna L. Belusar | |||
Senior Vice President and Chief Financial Officer | |||