CTS reports Q2 - repatriates $50 million cash under the American Jobs Creation Act of 2004
Aug 01, 2005
CTS Corporation (NYSE:CTS) announced second quarter 2005 revenues of $158.3 million, a 15% increase over the second quarter of 2004. Diluted earnings per share were $0.10, which included a negative $0.07 per share from repatriation-related tax expense and the reversal of certain tax reserves.
This compares to second quarter 2004 diluted earnings per share of $0.18 which included a gain of $0.05 from the sale of excess Canadian land.
Sales growth was driven by the SMTEK acquisition, which closed January 31, 2005, and strong growth in automotive products, partially offset by weaker EMS sales in communications infrastructure and declining handset component sales.
"The SMTEK acquisition has clearly proven to be a very positive addition to the company, strengthening our competitive position and contributing significantly to sales and earnings growth," commented Donald Schwanz, CTS Chairman and Chief Executive Officer.
Based on the first-half 2005 results and revised estimates for the balance of the year, the Company expects full-year 2005 sales to be in the range of $630 million to $680 million which is 19% to 28% over 2004. Earnings per share, excluding the second quarter tax adjustment impact of $0.07 per share, are now expected to be in the range of $0.62 to $0.68.
Sales relating to the acquired SMTEK business were $29.3 million in the second quarter compared to $23.2 million for two months in the first quarter.
The second quarter included a $4.5 million tax expense for repatriation of $50 million of our overseas cash under the American Jobs Creation Act of 2004 and a $1.7 million tax benefit relating to the reversal of income tax reserves due to successful resolution of certain foreign jurisdiction tax issues.
Capital expenditures of $5.9 million were 1.9% of sales in the first half 2005. The Company expects full-year 2005 capital expenditures to be in the range of $16 - $20 million.
The company continues to generate strong free cash flow, with second quarter free cash flow of $10.8 million.
The company repurchased approximately 322,000 shares of its stock in the second quarter for $3.7 million.
Components & Sensors:
Components and Sensors segment sales decreased by $1.7 million, or 3%, from the second quarter of 2004 driven primarily by lower handset component sales, partially offset by continued growth in automotive products. Total operating earnings decreased $1.2 million from 2004. Note that second quarter 2004 operating earnings included a $2.7 million gain on the sale of excess Canadian land.
The second quarter Components and Sensors sales increased from the first quarter of 2005 by $2.3 million, or 4%, reflecting improving demand in automotive products and communications markets. Segment operating earnings were improved over the first quarter as a result of the higher sales, product mix improvements and reduced headcount.
EMS second quarter 2005 sales increased by $22.4 million, or 32%, from the second quarter of 2004, primarily from the SMTEK acquisition, partially offset by lower demand for communications infrastructure equipment. Segment operating earnings improved primarily from higher gross margins related to the former SMTEK business.
The second quarter EMS revenues were $0.7 million, or 1%, above the 2005 first quarter sales. A full quarter of SMTEK sales contributed to increased revenues, partially offset by slower sales to the communications infrastructure equipment industry. Despite the lower quarter-over-quarter sales, EMS segment operating earnings increased $0.7 million primarily due to higher gross margins of the former SMTEK business.