10-Q 1 cts-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended March 31, 2024

OR

 

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)

 

 

IN

 

35-0225010

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification Number)

 

4925 Indiana Avenue

 

 

Lisle IL

 

60532

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (630) 577-8800

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange on Which Registered

Common stock, without par value

 

CTS

 

New York Stock Exchange

 

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 No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of April 22, 2024: 30,569,672.

 

 


 

CTS CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Earnings (Unaudited) For the Three Months Ended March 31, 2024 and March 31, 2023

 

3

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Earnings (Unaudited) For the Three Months Ended March 31, 2024 and March 31, 2023

 

4

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets As of March 31, 2024 (Unaudited) and December 31, 2023

 

5

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2024 and March 31, 2023

 

6

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) For the Three Months Ended March 31, 2024 and March 31, 2023

 

7

 

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements ‑ (Unaudited)

 

9

 

 

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25

 

 

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

29

 

 

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

30

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

30

 

 

 

 

 

 

 

Item 1A.

 

Risk Factors

 

30

 

 

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

30

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

31

 

 

 

 

 

 

 

Item 6.

 

Exhibits

 

32

 

 

 

 

 

 

SIGNATURES

 

33

 

 

2

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2024

 

 

2023

 

Net sales

 

$

125,750

 

 

$

145,994

 

Cost of goods sold

 

 

80,660

 

 

 

94,342

 

Gross margin

 

 

45,090

 

 

 

51,652

 

Selling, general and administrative expenses

 

 

22,260

 

 

 

21,979

 

Research and development expenses

 

 

6,601

 

 

 

6,586

 

Restructuring charges

 

 

1,693

 

 

 

912

 

Operating earnings

 

 

14,536

 

 

 

22,175

 

Other income (expense):

 

 

 

 

 

 

Interest expense

 

 

(801

)

 

 

(694

)

Interest income

 

 

1,386

 

 

 

1,063

 

Other (expense) income, net

 

 

(1,463

)

 

 

165

 

Total other (expense) income, net

 

 

(878

)

 

 

534

 

Earnings before income taxes

 

 

13,658

 

 

 

22,709

 

Income tax expense

 

 

2,539

 

 

 

4,365

 

Net earnings

 

$

11,119

 

 

$

18,344

 

Earnings per share:

 

 

 

 

 

 

Basic

 

$

0.36

 

 

$

0.58

 

Diluted

 

$

0.36

 

 

$

0.58

 

Basic weighted – average common shares outstanding:

 

 

30,742

 

 

 

31,634

 

Effect of dilutive securities

 

 

252

 

 

 

259

 

Diluted weighted – average common shares outstanding:

 

 

30,994

 

 

 

31,893

 

Cash dividends declared per share

 

$

0.04

 

 

$

0.04

 

 

See notes to unaudited condensed consolidated financial statements.

3

 


 

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS UNAUDITED

(In thousands of dollars)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2024

 

 

2023

 

Net earnings

 

$

11,119

 

 

$

18,344

 

Other comprehensive earnings (loss):

 

 

 

 

 

 

Changes in fair market value of derivatives, net of tax

 

 

730

 

 

 

379

 

Changes in unrealized pension cost, net of tax

 

 

65

 

 

 

(34

)

Cumulative translation adjustment, net of tax

 

 

(2,121

)

 

 

1,024

 

Other comprehensive (loss) earnings

 

$

(1,326

)

 

$

1,369

 

Comprehensive earnings

 

$

9,793

 

 

$

19,713

 

 

See notes to unaudited condensed consolidated financial statements.

4

 


 

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

 

 

(Unaudited)

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

162,425

 

 

$

163,876

 

Accounts receivable, net

 

 

80,663

 

 

 

78,569

 

Inventories, net

 

 

57,784

 

 

 

60,031

 

Other current assets

 

 

17,346

 

 

 

16,873

 

Total current assets

 

 

318,218

 

 

 

319,349

 

Property, plant and equipment, net

 

 

91,626

 

 

 

92,592

 

Operating lease assets, net

 

 

25,290

 

 

 

26,425

 

Other Assets

 

 

 

 

 

 

Goodwill

 

 

156,330

 

 

 

157,638

 

Other intangible assets, net

 

 

99,949

 

 

 

103,957

 

Deferred income taxes

 

 

25,563

 

 

 

25,183

 

Other

 

 

15,864

 

 

 

16,023

 

Total other assets

 

 

297,706

 

 

 

302,801

 

Total Assets

 

$

732,840

 

 

$

741,167

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

Accounts payable

 

$

45,609

 

 

$

43,499

 

Operating lease obligations

 

 

4,399

 

 

 

4,394

 

Accrued payroll and benefits

 

 

13,363

 

 

 

14,585

 

Accrued expenses and other liabilities

 

 

32,577

 

 

 

34,561

 

Total current liabilities

 

 

95,948

 

 

 

97,039

 

Long-term debt

 

 

67,500

 

 

 

67,500

 

Long-term operating lease obligations

 

 

23,824

 

 

 

24,965

 

Long-term pension obligations

 

 

4,615

 

 

 

4,655

 

Deferred income taxes

 

 

14,423

 

 

 

14,729

 

Other long-term obligations

 

 

5,245

 

 

 

5,457

 

Total Liabilities

 

 

211,555

 

 

 

214,345

 

Commitments and Contingencies (Note 11)

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

 

Common stock

 

 

321,858

 

 

 

319,269

 

Additional contributed capital

 

 

40,440

 

 

 

45,097

 

Retained earnings

 

 

612,124

 

 

 

602,232

 

Accumulated other comprehensive income (loss)

 

 

2,938

 

 

 

4,264

 

Total shareholders’ equity before treasury stock

 

 

977,360

 

 

 

970,862

 

Treasury stock

 

 

(456,075

)

 

 

(444,040

)

Total shareholders’ equity

 

 

521,285

 

 

 

526,822

 

Total Liabilities and Shareholders’ Equity

 

$

732,840

 

 

$

741,167

 

 

See notes to unaudited condensed consolidated financial statements.

5

 


 

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED

(In thousands of dollars)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2024

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net earnings

 

$

11,119

 

 

$

18,344

 

Adjustments to reconcile net earnings to net cash provided by operating
   activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

7,325

 

 

 

6,918

 

Pension and other post-retirement plan expense

 

 

84

 

 

 

31

 

Stock-based compensation

 

 

1,221

 

 

 

1,586

 

Deferred income taxes

 

 

(621

)

 

 

(236

)

Change in fair value of contingent consideration liability

 

 

(253

)

 

 

 

(Loss) gain on foreign currency hedges, net of cash

 

 

(299

)

 

 

192

 

Changes in assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

(2,985

)

 

 

(5,906

)

Inventories

 

 

1,656

 

 

 

(784

)

Operating lease assets

 

 

1,135

 

 

 

833

 

Other assets

 

 

792

 

 

 

(133

)

Accounts payable

 

 

2,835

 

 

 

857

 

Accrued payroll and benefits

 

 

(1,273

)

 

 

(8,818

)

Operating lease liabilities

 

 

(1,136

)

 

 

(851

)

Accrued expenses and other liabilities

 

 

(1,247

)

 

 

(797

)

Pension and other post-retirement plans

 

 

(42

)

 

 

(50

)

Net cash provided by operating activities

 

 

18,311

 

 

 

11,186

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Capital expenditures

 

 

(4,035

)

 

 

(4,540

)

Payments for acquisitions, net of cash acquired

 

 

 

 

 

(3,356

)

Net cash used in investing activities

 

 

(4,035

)

 

 

(7,896

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Payments of long-term debt

 

 

(167,500

)

 

 

(204,084

)

Proceeds from borrowings of long-term debt

 

 

167,500

 

 

 

200,675

 

Purchases of treasury stock

 

 

(11,958

)

 

 

(8,802

)

Dividends paid

 

 

(1,233

)

 

 

(1,272

)

Taxes paid on behalf of equity award participants

 

 

(3,117

)

 

 

(3,142

)

Net cash used in financing activities

 

 

(16,308

)

 

 

(16,625

)

Effect of exchange rate changes on cash and cash equivalents

 

 

581

 

 

 

(38

)

Net decrease in cash and cash equivalents

 

 

(1,451

)

 

 

(13,373

)

Cash and cash equivalents at beginning of period

 

 

163,876

 

 

 

156,910

 

Cash and cash equivalents at end of period

 

$

162,425

 

 

$

143,537

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

739

 

 

$

926

 

Cash paid for income taxes, net

 

$

3,799

 

 

$

4,199

 

Non-cash financing and investing activities:

 

 

 

 

 

 

Capital expenditures incurred but not paid

 

$

1,733

 

 

$

1,400

 

Excise taxes on purchase of treasury stock incurred not paid

 

$

77

 

 

$

 

 

See notes to unaudited condensed consolidated financial statements.

 

6

 


 

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - UNAUDITED

(in thousands of dollars, except shares and per share amounts)

 

The following summarizes the changes in total equity for the three months ended March 31, 2024:

 

 

 

Common
Stock

 

 

Additional
Contributed
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive Income
(Loss)

 

 

Treasury
Stock

 

 

Total

 

Balances at December 31, 2023

 

$

319,269

 

 

$

45,097

 

 

$

602,232

 

 

$

4,264

 

 

$

(444,040

)

 

$

526,822

 

Net earnings

 

 

 

 

 

 

 

 

11,119

 

 

 

 

 

 

 

 

 

11,119

 

Changes in fair market value of derivatives, net of tax

 

 

 

 

 

 

 

 

 

 

 

730

 

 

 

 

 

 

730

 

Changes in unrealized pension cost, net of tax

 

 

 

 

 

 

 

 

 

 

 

65

 

 

 

 

 

 

65

 

Cumulative translation adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

(2,121

)

 

 

 

 

 

(2,121

)

Cash dividends of $0.04 per share

 

 

 

 

 

 

 

 

(1,227

)

 

 

 

 

 

 

 

 

(1,227

)

Acquired 271,939 shares of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,035

)

 

 

(12,035

)

Issued shares on vesting of restricted stock units

 

 

2,589

 

 

 

(5,705

)

 

 

 

 

 

 

 

 

 

 

 

(3,116

)

Stock compensation

 

 

 

 

 

1,048

 

 

 

 

 

 

 

 

 

 

 

 

1,048

 

Balances at March 31, 2024

 

$

321,858

 

 

$

40,440

 

 

$

612,124

 

 

$

2,938

 

 

$

(456,075

)

 

$

521,285

 

 

See notes to unaudited condensed consolidated financial statements.

7

 


 

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - UNAUDITED

(in thousands of dollars, except shares and per share amounts)

 

The following summarizes the changes in total equity for the three months ended March 31, 2023:

 

 

 

Common
Stock

 

 

Additional
Contributed
Capital

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive Income
(Loss)

 

 

Treasury
Stock

 

 

Total

 

Balances at December 31, 2022

 

$

316,803

 

 

$

46,144

 

 

$

546,703

 

 

$

(671

)

 

$

(402,755

)

 

$

506,224

 

Net earnings

 

 

 

 

 

 

 

 

18,344

 

 

 

 

 

 

 

 

 

18,344

 

Changes in fair market value of derivatives, net of tax

 

 

 

 

 

 

 

 

 

 

 

379

 

 

 

 

 

 

379

 

Changes in unrealized pension cost, net of tax

 

 

 

 

 

 

 

 

 

 

 

(34

)

 

 

 

 

 

(34

)

Cumulative translation adjustment, net of tax

 

 

 

 

 

 

 

 

 

 

 

1,024

 

 

 

 

 

 

1,024

 

Cash dividends of $0.04 per share

 

 

 

 

 

 

 

 

(1,260

)

 

 

 

 

 

 

 

 

(1,260

)

Acquired 198,271 shares of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,802

)

 

 

(8,802

)

Issued shares on vesting of restricted stock units

 

 

1,982

 

 

 

(5,125

)

 

 

 

 

 

 

 

 

 

 

 

(3,143

)

Stock compensation

 

 

 

 

 

1,404

 

 

 

 

 

 

 

 

 

 

 

 

1,404

 

Balances at March 31, 2023

 

$

318,785

 

 

$

42,423

 

 

$

563,787

 

 

$

698

 

 

$

(411,557

)

 

$

514,136

 

 

See notes to unaudited condensed consolidated financial statements.

8

 


 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

(in thousands except for share and per share data)

March 31, 2024

NOTE 1 — Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by CTS Corporation (“CTS”, “we”, “our”, “us” 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 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, 2023.

The accompanying unaudited condensed consolidated 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.

There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

 

Recently issued accounting pronouncements not yet adopted

ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure"

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments' significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as existing segment disclosures and reconciliation required under ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for the interim periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07.

ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures"

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the reconciliation of the effective tax rate, as well as disclosure of income taxes paid, disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09.

NOTE 2 – Revenue Recognition

The core principle of Accounting Standard Codification (“ASC”) (Topic 606): Revenue from Contracts with Customers is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step process to achieve that core principle:

Identify the contract(s) with a customer
Identify the performance obligations

9

 


 

Determine the transaction price
Allocate the transaction price
Recognize revenue when the performance obligations are met

We recognize revenue when the performance obligations specified in our contracts have been satisfied, after considering the impact of variable consideration and other factors that may affect the transaction price. Our contracts normally contain a single performance obligation that is fulfilled on the date of delivery or shipment based on shipping terms stipulated in the contract. We usually expect payment within 30 to 90 days from the shipping date, depending on our terms with the customer. None of our contracts as of March 31, 2024 contained a significant financing component. Differences between the amount of revenue recognized and the amount invoiced, collected from, or paid to our customers are recognized as contract assets or liabilities. Contract assets will be reviewed for impairment when events or circumstances indicate that they may not be recoverable.

To the extent the transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing the most likely amount method based on an analysis of historical experience and current facts and circumstances, which requires significant judgment. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

Disaggregated Revenue

The following table presents revenues disaggregated by the major markets we serve:

 

 

 

Three months ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Transportation

 

$

66,516

 

 

$

74,289

 

Industrial

 

 

31,064

 

 

 

40,249

 

Medical

 

 

16,901

 

 

 

17,033

 

Aerospace & Defense

 

 

11,269

 

 

 

14,423

 

Total

 

$

125,750

 

 

$

145,994

 

 

The end-market sales for the first quarter of 2023 were adjusted by immaterial amounts to align the classification of certain customers in connection with our most recent acquisitions with our enterprise-level end market information.

NOTE 3 – Business Acquisitions

 

Maglab AG Acquisition

On February 6, 2023, we acquired 100% of the outstanding shares of Maglab AG (”Maglab”). Maglab has deep expertise in magnetic system design and current measurement solutions for use in e-mobility, industrial automation, and renewable energy applications. Maglab’s domain expertise coupled with CTS’ commercial, technical and operational capabilities position us to advance our status as a recognized innovator in electric motor sensing and controls markets.

The final purchase price of $7,717 has been allocated to the fair values of assets and liabilities acquired as of February 6, 2023. The purchase price was increased by $3 for the final settlement of net working capital during the second quarter of 2023. The following table summarizes the final purchase price, the fair values of the assets acquired, and the liabilities assumed as of the date of acquisition:

 

 

Consideration Paid

 

Cash paid, net of cash acquired of $14

 

$

4,153

 

Contingent consideration

 

 

3,564

 

Purchase price

 

$

7,717

 

 

10

 


 

 

 

 

Fair Values at
February 6, 2023

 

Accounts receivable

 

$

348

 

Inventory

 

 

43

 

Other current assets

 

 

41

 

Property, plant and equipment

 

 

35

 

Goodwill

 

 

4,997

 

Intangible assets

 

 

2,860

 

Fair value of assets acquired

 

 

8,324

 

Less fair value of liabilities acquired

 

 

(607

)

Purchase price

 

$

7,717

 

Goodwill represents value the Company expects to be created by combining the operations of the acquired business with the Company's operations, including the expansion of customer relationships, access to new customers, and potential cost savings and synergies. Goodwill related to the acquisition is expected to be deductible for tax purposes.

The following table summarizes the carrying amounts and weighted average lives of the acquired intangible assets:

 

 

Carrying
Value

 

 

Weighted
Average
Amortization
Period

 

Customer lists/relationships

 

$

2,800

 

 

 

13.0

 

Technology and other intangibles

 

 

60

 

 

 

3.0

 

Total

 

$

2,860

 

 

 

 

All contingent consideration is payable in cash and is based on success factors related to the integration process as well as upon the achievement of annual revenue and customer order targets through the fiscal year ending December 31, 2025. The Company recorded $3,564 as the acquisition date fair value of the contingent consideration based on the estimate of the probability of achieving the performance targets. This amount is also reflected as an addition to the purchase price. The contingent consideration has a maximum payout of $6,300.

Supplemental pro forma disclosures are not included as the amounts are deemed to be immaterial.

NOTE 4 – Accounts Receivable, net

The components of accounts receivable, net are as follows:

 

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Accounts receivable, gross

 

$

81,389

 

 

$

79,500

 

Less: Allowance for credit losses

 

 

(726

)

 

 

(931

)

Accounts receivable, net

 

$

80,663

 

 

$

78,569

 

 

NOTE 5 – Inventories, net

Inventories, net consists of the following:

 

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Finished goods

 

$

15,311

 

 

$

20,279

 

Work-in-process

 

 

21,985

 

 

 

19,213

 

Raw materials

 

 

34,325

 

 

 

33,187

 

Less: Inventory reserves

 

 

(13,837

)

 

 

(12,648

)

Inventories, net

 

$

57,784

 

 

$

60,031

 

 

11

 


 

NOTE 6 – Property, Plant and Equipment, net

Property, plant and equipment, net is comprised of the following:

 

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Land and land improvements

 

$

536

 

 

$

536

 

Buildings and improvements

 

 

74,501

 

 

 

74,188

 

Machinery and equipment

 

 

263,188

 

 

 

261,435

 

Less: Accumulated depreciation

 

 

(246,599

)

 

 

(243,567

)

Property, plant and equipment, net

 

$

91,626

 

 

$

92,592

 

 

Depreciation expense for the three months ended March 31, 2024 and March 31, 2023 was $4,500 and $4,407, respectively.

NOTE 7 – Retirement Plans

Pension Plans

Net pension expense for our domestic and foreign plans included in other expense, net in the Condensed Consolidated Statements of Earnings is as follows:

 

 

 

Three months ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2024

 

 

2023

 

Net pension expense

 

$

52

 

 

$

67

 

 

The components of net pension expense for our domestic and foreign plans include the following:

 

 

 

Domestic Pension Plans

 

 

Foreign Pension Plans

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

March 31,

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Service cost

 

$

 

 

$

 

 

$

3

 

 

$

6

 

Interest cost

 

 

9

 

 

 

10

 

 

 

6

 

 

 

10

 

Expected return on plan assets(1)

 

 

 

 

 

 

 

 

(5

)

 

 

(7

)

Amortization of loss

 

 

6

 

 

 

5

 

 

 

33

 

 

 

43

 

Total expense, net

 

$

15

 

 

$

15

 

 

$

37

 

 

$

52

 

 

(1)
Expected return on plan assets is net of expected investment expenses and certain administrative expenses.

Other Post-retirement Benefit Plan

Net post-retirement expense for our other post-retirement plan includes the following components:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2024

 

 

2023

 

Service cost

 

$

 

 

$

 

Interest cost

 

 

48

 

 

 

48

 

Amortization of gain

 

 

(16

)

 

 

(84

)

Total expense (income), net

 

$

32

 

 

$

(36

)

 

NOTE 8 – Goodwill and Other Intangible Assets

Goodwill

Changes in the net carrying amount of goodwill were as follows:

 

12

 


 

 

 

Total

 

Goodwill as of December 31, 2023

 

$

157,638

 

     Foreign exchange impact

 

 

(1,308

)

Goodwill as of March 31, 2024

 

$

156,330

 

 

Other Intangible Assets

Other intangible assets, net consist of the following components:

 

 

 

As of

 

 

 

March 31, 2024

 

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net Amount

 

Customer lists/relationships

 

$

143,652

 

 

$

(65,022

)

 

$

78,630

 

Technology and other intangibles

 

 

53,904

 

 

 

(32,585

)

 

 

21,319

 

Other intangible assets, net

 

$

197,556

 

 

$

(97,607

)

 

$

99,949

 

 

 

 

As of

 

 

 

December 31, 2023

 

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net Amount

 

Customer lists/relationships

 

$

144,671

 

 

$

(63,006

)

 

$

81,665

 

Technology and other intangibles

 

 

54,052

 

 

 

(31,760

)

 

 

22,292

 

Other intangible assets, net

 

$

198,723

 

 

$

(94,766

)

 

$

103,957

 

Amortization expense for the three months ended March 31, 2024 and March 31, 2023 was $2,825 and $2,511, respectively. The changes in the gross carrying amounts of intangible assets are due to foreign exchange impacts in the quarter.

Remaining amortization expense for other intangible assets as of March 31, 2024 is as follows:

 

 

 

Amortization
expense

 

2024

 

$

8,491

 

2025

 

 

10,639

 

2026

 

 

10,483

 

2027

 

 

10,424

 

2028

 

 

10,389

 

Thereafter

 

 

49,523

 

Total amortization expense

 

$

99,949

 

 

 

NOTE 9 – Costs Associated with Exit and Restructuring Activities

Restructuring charges are reported as a separate line within operating earnings in the Condensed Consolidated Statements of Earnings.

Total restructuring charges are as follows:

 

 

Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Restructuring charges

 

$

1,693

 

 

$

912

 

 

September 2020 Plan

In September 2020, we initiated a restructuring plan focused on optimizing our manufacturing footprint and improving operational efficiency by better utilizing our systems capabilities (the "September 2020 Plan"). This plan includes transitioning certain administrative

13

 


 

functions to a shared service center, realignment of manufacturing locations, and certain other efficiency improvement actions. The restructuring cost of the September 2020 Plan is estimated to be in the range of $4,000 to $4,200, including workforce reduction charges, building and equipment relocation charges and other contract and asset-related costs. We have incurred $3,912 in program costs to date and expect the September 2020 Plan to be completed during the second quarter of 2024. During the three months ended March 31, 2024, we recorded $7 in workforce reduction costs and $9 in building and equipment relocation charges under the 2020 Plan. There is no restructuring liability associated with these actions as of March 31, 2024. The total restructuring liability associated with these actions was $83 as of December 31, 2023.

Closure and Consolidation of Juarez Manufacturing Facility and Operations

During the first quarter of 2023, we announced the shutdown of our Juarez manufacturing facility. As a part of this activity, operations from the Juarez plant are being consolidated into our expanded Matamoros facility (collectively, the “Matamoros Consolidation”). We expect the Matamoros Consolidation to be completed later this year. The total restructuring cost of the Matamoros Consolidation is now estimated to be in the range of $4,750 and $5,500, including workforce reduction charges, building and equipment relocation charges and other contract and asset-related costs. The total restructuring costs incurred as part of the Matamoros Consolidation are $4,687. In addition to these charges, we expect to incur an additional $1,200 and $2,000 of other costs relating to the Matamoros Consolidation that would not qualify as restructuring charges, but represent duplicative expenses arising from the transition process, such as excess rent, utilities, personnel-related expenses and other costs. We have incurred $1,051 in other costs relating to the Matamoros Consolidation.

During the three months ended March 31, 2024, we incurred $988 in restructuring costs associated with the Matamoros Consolidation, comprised of $215, $751, and $22 in workforce reduction, building and equipment relocation costs, and asset impairment and other charges, respectively. We also incurred $480 in other related costs. The restructuring liability associated with the Matamoros Consolidation was $204 and $194 as of March 31, 2024 and December 31, 2023, respectively.

Other Restructuring Activities

During the period ended March 31, 2024, we incurred total other restructuring charges of $689, comprised of $385, $286, and $18 in workforce reduction, building and equipment relocation costs, and asset impairment and other charges, respectively. The workforce reduction charges incurred are for restructuring activities used to adjust our business in response to reduced demand across certain locations and products. Restructuring charges incurred in relation to building and equipment relocation costs and other charges are for activities intended to consolidate operations across our site locations. The remaining liability associated with our other restructuring actions was $467 and $246 at March 31, 2024 and December 31, 2023, respectively.

The following table displays the restructuring liability activity included in accrued expenses and other liabilities for all plans for the three months ended March 31, 2024:

 

Restructuring liability at January 1, 2024

 

$

523

 

Restructuring charges

 

 

1,693

 

Costs paid

 

 

(1,537

)

Other activity(1)

 

 

(8

)

Restructuring liability at March 31, 2024

 

$

671

 

 

(1) Other charges include the effects of currency translation, non-cash asset write-downs, travel, legal and other charges.

14

 


 

NOTE 10 – Accrued Expenses and Other Liabilities

The components of accrued expenses and other liabilities are as follows:

 

 

 

As of

 

 

 

March 31,

 

 

December 31,