ELKHART, IN - CTS Corp. announced the following:
Global Footprint Optimization and Restructuring To improve capacity utilization and operating profit on a go-forward basis, CTS will simplify its global footprint by consolidating manufacturing facilities into existing locations. With fewer manufacturing facilities, this plan still allows the company sufficient capacity to grow. This process has already started in Singapore, and the company has entered into a period of consultation with employees at its operation located in Glasgow, Scotland. Additional optimizations are being evaluated, along with the implementation of a leaner corporate cost structure.
The costs associated with these actions are expected to be included in a restructuring beginning this quarter. The company estimates that the pre-tax restructuring charge, assuming all the plans proceed, will total approximately $16 million to $20 million, including $10 million to $15 million during 2013 and the balance in 2014. Approximately one-third of the total cost is expected to be noncash. The anticipated annualized go-forward cost savings from the steps announced are expected to be in the range of $8 million to $10 million once fully implemented in 2014, a portion of which will be realized beginning in the second half of this year.
Kieran O'Sullivan, CEO, commented, "The measures announced are part of a larger strategic evaluation initiated by the management team earlier this year. These initial actions will improve our manufacturing utilization, increase overall efficiency, and better position the company for more profitable future growth. We understand that these are very difficult actions for affected employees and their families, and we are committed to assisting all impacted individuals."
Cash Repatriation and Stock Buyback Authorization
The company will repatriate approximately $30 million to the U.S. from Singapore. The funds will be used to pay down debt and buyback shares. While this transfer of funds will have a book tax cost of approximately $0.33 per diluted share, such cost is essentially cash-free due to the availability of net operating loss carry forward. The board of directors has authorized the repurchase of up to an additional 1 million of the company's outstanding common shares to supplement the company's current stock buyback program. Shares will be purchased from time to time in open-market transactions or otherwise.
CTS Corp. is a leading designer and manufacturer of electronic components and sensors and a provider of electronics manufacturing services to OEMs in the automotive, communications, medical, defense and aerospace, industrial, and computer markets. CTS manufactures products in North America, Europe, and Asia.