TMCnet News
CTS CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")(Edgar Glimpses Via Acquire Media NewsEdge) Forward-Looking Statements This document contains statements that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, any financial or other guidance, statements that reflect our current expectations concerning future results and events, and any other statements that are not based solely on historical fact. Forward-looking statements are based on management's expectations, certain assumptions and currently available information. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. These forward-looking statements are made subject to certain risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from those presented in the forward-looking statements. Examples of factors that may affect future operating results and financial condition include, but are not limited to: rapid technological change; general market conditions in the automotive, communications, and computer industries, as well as conditions in the industrial, defense and aerospace, and medical markets; reliance on key customers; unanticipated natural or other events such as the Japan earthquake; the ability to protect our intellectual property; pricing pressures and demand for our products; and risks associated with our international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks. Many of these, and other, risks and uncertainties are discussed in further detail in Item 1.A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010. We undertake no obligation to publicly update our forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes. Overview CTS Corporation ("we", "our", "us") is a global manufacturer of components and sensors used primarily in the automotive, communications, and defense and aerospace markets. We also provide electronic manufacturing solutions, including design and supply chain management functions, primarily serving the defense and aerospace, communications, industrial and medical markets under contract arrangements with original equipment manufacturers. As discussed in more detail throughout the MD&A: • Total company net sales in the second quarter of 2011 of $146.9 million were reported through two segments, Components and Sensors and EMS. Net sales increased by $8.1 million, or 5.8%, in the second quarter of 2011 from the second quarter of 2010. Net sales in the Components and Sensors segment decreased by $4.2 million, or 5.8% versus the second quarter of 2010, while net sales in the EMS segment increased by $12.3 million, or 18.4%. The decrease in net sales in our Components and Sensor segment was primarily driven by lower sales in our automotive market of approximately $6.3 million as a result of production disruptions caused by the March 2011 earthquake in Japan, partially offset by an increase of $2.0 million in other areas of our automotive market. • Gross margin as a percent of net sales was 19.0% in the second quarter of 2011 compared to 21.9% in the second quarter of 2010 due to a shift in segment mix as the Components and Sensors segment percent of total company net sales declined to 46.3% from 52.0% in the same period 2010. The reduction in gross margin also resulted from higher commodity and precious metal prices as well as program launch costs in preparation for new product introductions. • Selling, general and administrative ("SG&A") expenses were $18.1 million, or 12.3% of net sales, in the second quarter of 2011 versus $18.3 million, or 13.2% of net sales, in the second quarter of 2010. • Research and development ("R&D") expenses were $4.6 million, or 3.1% of net sales, in the second quarter of 2011 compared to $4.3 million, or 3.1% of net sales, in the second quarter of 2010. The increase was primarily to continue to develop and launch new growth initiatives. • During the quarter we restructured certain operations to further improve our cost structure. The cost of these actions was $0.7 million. • Interest and other income was $0.5 million in the second quarter of 2011 compared to $0.5 million expense in the same quarter of 2010. The year-over-year improvement resulted primarily from foreign exchange gains. • Income tax expense and the effective tax rate of the second quarter of 2011 were $0.9 million and 17.9%, respectively, versus $1.4 million and 18.8% in the same quarter of 2010. 17 --------------------------------------------------------------------------------• Net earnings were $4.1 million, or $0.12 per diluted share, in the second quarter of 2011 compared with $5.9 million, or $0.17 per diluted share, in the second quarter of 2010. Critical Accounting Policies MD&A discusses our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that judgments and estimates related to the following critical accounting policies could materially affect our consolidated financial statements: • Inventory valuation, the allowance for doubtful accounts, and other accrued liabilities • Long-lived and intangible assets valuation, and depreciation/amortization periods • Income taxes • Retirement plans • Equity-based compensation In the second quarter of 2011, there were no changes in the above critical accounting policies. Results of Operations Comparison of Second Quarter 2011 and Second Quarter 2010 Segment Discussion Refer to Note G, "Segments," for a description of our segments. The following table highlights the segment results for the quarters ended July 3, 2011 and July 4, 2010: Consolidated ($ in thousands) Components & Sensors EMS Total Second Quarter 2011 Net sales $ 68,037 $ 78,882 $ 146,919 Segment operating earnings $ 4,851 $ 370 $ 5,221 % of Net sales 7.1 % 0.5 % 3.6 % Second Quarter 2010 Net sales $ 72,227 $ 66,624 $ 138,851 Segment operating earnings/(loss) $ 7,942 $ (201 ) $ 7,741 % of Net sales 11.0 % (0.3 )% 5.6 % Net sales in the Components and Sensors segment decreased $4.2 million, or 5.8%, from the second quarter of 2010. The decrease in net sales was primarily driven by lower sales in our automotive market of approximately $6.3 million as a result of production disruptions caused by the March 2011 earthquake in Japan, partially offset by an increase of $2.0 million in other areas of our automotive market. These earthquake-related sales are expected to be partially recovered in the second half of 2011. The Components and Sensors segment operating earnings were $4.9 million in the second quarter of 2011 compared to $7.9 million in the second quarter of 2010. The unfavorable earnings change resulted primarily from lower net sales, higher commodity prices, and higher research and development costs. Net sales in the EMS segment increased $12.3 million, or 18.4%, in the second quarter of 2011 from the second quarter of 2010. The increase in net sales was due to higher net sales of $6.5 million in the industrial market, $2.6 million in the computer market, $2.1 million in the defense and aerospace market, $0.5 million in the medical market, and $0.5 million in the communications market. 18 -------------------------------------------------------------------------------- EMS segment operating earnings were $0.4 million in the second quarter of 2011 versus an operating loss of $0.2 million in the second quarter of 2010 primarily due to higher net sales. Total Company Discussion The following table highlights changes in significant components of the Unaudited Condensed Consolidated Statements of Earnings for the quarters ended July 3, 2011 and July 4, 2010: Quarter ended July 3, July 4, Increase ($ in thousands, except net earnings per share) 2011 2010 (Decrease) Net sales $ 146,919 $ 138,851 $ 8,068 Gross margin $ 27,868 $ 30,340 $ (2,472 ) % of net sales 19.0 % 21.9 % (2.9) % Selling, general and administrative expenses $ 18,057 $ 18,283 $ (226 ) % of net sales 12.3 % 13.2 % (0.9) % Research and development expenses $ 4,590 $ 4,316 $ 274 % of net sales 3.1 % 3.1 % - % Restructuring charge $ 694 $ - $ 694 Operating earnings $ 4,527 $ 7,741 $ (3,214 ) % of net sales 3.1 % 5.6 % (2.5) % Interest and other income/(expense) $ 508 $ (484 ) $ 992 % of net sales 0.3 % (0.3 )% 0.6 % Income tax expense $ 903 $ 1,365 $ (462 ) Net earnings $ 4,132 $ 5,892 $ (1,760 ) % of net sales 2.8 % 4.2 % (1.4) % Net earnings per diluted share $ 0.12 $ 0.17 $ (0.05 ) Net sales of $146.9 million in the second quarter of 2011 increased $8.1 million, or 5.8%, from the second quarter of 2010 attributable to higher EMS net sales of $12.3 million, offset by lower Components and Sensors net sales of $4.2 million. The decrease in net sales in our Components and Sensor segment was primarily driven by lower sales in our automotive market of approximately $6.3 million as a result of production disruptions caused by the March 2011 earthquake in Japan, partially offset by an increase of $2.0 million in other areas of our automotive market. Gross margin as a percent of net sales was 19.0% in the second quarter of 2011 compared to 21.9% in the second quarter of 2010. Approximately half of the reduction was due to a shift in segment mix as the Components and Sensors segment percent of total company net sales declined to 46.3% from 52.0% in the same period 2010. The reduction in gross margin also resulted from higher commodity and precious metal prices as well as program launch costs in preparation for new product introductions. SG&A expenses were $18.1 million, or 12.3% of net sales, in the second quarter of 2011 versus $18.3 million, or 13.2% of net sales, in the second quarter of 2010. SG&A expenses as a percentage of net sales improved, reflecting disciplined spending on higher net sales. R&D expenses were $4.6 million, or 3.1% of net sales, in the second quarter of 2011 compared to $4.3 million, or 3.1% of net sales, in the second quarter of 2010. The increase was primarily driven by spending to continue to develop and launch new products and growth initiatives. R&D expenses are incurred by the Components and Sensors segment and are primarily focused on expanded applications of existing products and new product development, as well as current product and process enhancements. 19 -------------------------------------------------------------------------------- Operating earnings were $4.5 million in the second quarter of 2011 compared to $7.7 million in the second quarter of 2010. The decrease was primarily due to the reasons discussed above. Operating earnings in the second quarter of 2011 also include a restructuring charge of $0.7 million. Interest and other income was $0.5 million in the second quarter of 2011 versus an expense of $0.5 million in the same quarter of 2010 primarily due to foreign exchange gains. The effective tax rate for second quarter 2011 was 17.9% compared to 18.8% in the second quarter of 2010. The decrease in the effective tax rate was primarily due to changes in the mix of earnings by jurisdiction and discrete items. Net earnings were $4.1 million, or $0.12 per diluted share, in the second quarter of 2011 compared with $5.9 million, or $0.17 per diluted share, in the second quarter of 2010. Comparison of First Six Months 2011 and First Six Months 2010 Segment Discussion The following table highlights the segment results for the six-month periods ended July 3, 2011 and July 4, 2010: Consolidated ($ in thousands) Components & Sensors EMS Total First Six Months 2011 Net sales $ 140,068 $ 158,369 $ 298,437 Segment operating earnings $ 10,607 $ 373 $ 10,980 % of Net sales 7.6 % 0.2 % 3.7 % First Six Months 2010 Net sales $ 145,671 $ 122,583 $ 268,254 Segment operating earnings/(loss) $ 16,967 $ (2,879 ) $ 14,088 % of Net sales 11.6 % (2.3 )% 5.3 % Net sales in the Components and Sensors segment decreased $5.6 million, or 3.9% from the first six months of 2010. The decrease in net sales was primarily driven by lower net sales in our automotive market of approximately $6.3 million as a result of production disruptions caused by the March 2011 earthquake in Japan and lower service parts sales, partially offset by higher net sales in electronic components of $1.4 million primarily driven by higher distribution sales. The Components and Sensors segment operating earnings were $10.6 million in the first six months of 2011 versus $17.0 million in the first six months of 2010. The unfavorable earnings change resulted primarily from lower net sales, higher commodity prices, and higher research and development costs. Net sales in the EMS segment increased $35.8 million, or 29.2%, in the first six months of 2011 versus the first six months of 2010. The increase in net sales was due to higher net sales of $11.0 million in the industrial market, $10.5 million in the defense and aerospace market, $6.7 million in the communications market, $6.0 million in the computer market, and $1.5 million in the medical market. EMS segment operating earnings were $0.4 million in the first six months of 2011 versus an operating loss of $2.9 million in the first six months of 2010. The favorable earnings change was primarily due to higher sales volume. Total Company Discussion The following table highlights changes in significant components of the Unaudited Condensed Consolidated Statements of Earnings for the six-month periods ended July 3, 2011 and July 4, 2010: 20 -------------------------------------------------------------------------------- Six months ended Increase ($ in thousands, except net earnings per share) July 3, 2011 July 4, 2010 (Decrease) Net sales $ 298,437 $ 268,254 $ 30,183 Gross margin $ 57,028 $ 60,819 $ (3,791 ) % of net sales 19.1 % 22.7 % (3.6 )% Selling, general and administrative expenses $ 36,429 $ 37,832 $ (1,403 ) % of net sales 12.2 % 14.1 % (1.9 )% Research and development expenses $ 9,619 $ 8,899 $ 720 % of net sales 3.2 % 3.3 % (0.1 )% Restructuring charge $ 694 $ - $ 694 Operating earnings $ 10,286 $ 14,088 $ (3,802 ) % of net sales 3.4 % 5.3 % (1.9 )% Interest and other income/(expense) $ 1,342 $ (1,150 ) $ 2,492 % of net sales 0.4 % (0.4 )% 0.8 % Income tax expense $ 2,380 $ 2,615 $ (235 ) Net earnings $ 9,248 $ 10,323 $ (1,075 ) % of net sales 3.1 % 3.8 % (0.7 )% Net earnings per diluted share $ 0.26 $ 0.30 $ (0.04 ) Net sales of $298.4 million in the first six months of 2011 increased $30.2 million, or 11.3%, from the first six months of 2010 attributable to higher EMS segment net sales of $35.8 million, offset by lower Component and Sensor segment net sales of $5.6 million. The decrease in net sales in our Components and Sensors segment was primarily driven by lower net sales in our automotive market of approximately $6.3 million as a result of production disruptions caused by the March 2011 earthquake in Japan and lower service parts sales, partially offset by higher net sales in electronic components of $1.4 million primarily driven by higher distribution sales. Gross margin as a percent of net sales was 19.1% in the first six months of 2011, compared to 22.7% in the first six months of 2010, primarily due to a shift in segment mix as the percent of total company net sales from the Components and Sensors segment declined to 46.9% from 54.3% in the same period 2010. The reduction in gross margin also resulted from higher commodity and precious metal prices as well as program launch costs in preparation for new product introductions. SG&A expenses were $36.4 million, or 12.2% of net sales, in the first six months of 2011 versus $37.8 million, or 14.1% of net sales, in the first six months of 2010. SG&A expenses as a percentage of net sales improved significantly, reflecting disciplined spending on higher net sales. R&D expenses were $9.6 million, or 3.2% of net sales, in the first six months of 2011 versus $8.9 million, or 3.3% of net sales, in the first six months of 2010. The increase was primarily driven by spending to continue to develop and launch new products and growth initiatives. R&D expenses are incurred by the Components and Sensors segment and are primarily focused on expanded applications of existing products and new product development, as well as current product and process enhancements. Operating earnings were $10.3 million in the first six months of 2011, including a restructuring charge of $0.7 million, compared to $14.1 million in the first six months of 2010. The decrease was primarily due to the reasons discussed above. Interest and other income in the first six months of 2011 was $1.3 million versus an expense of $1.2 million in the same period of 2010 primarily due to foreign exchange gains. The effective tax rate for the first six months of 2011 was 20.5% compared to 20.2% in the first six months of 2010. The increase in the effective tax rate was primarily due to changes in the mix of earnings by jurisdiction and discrete items. Net earnings were $9.2 million, or $0.26 per diluted share, in the first six months of 2011 compared with $10.3 million, or $0.30 per share, in the first six months of 2010. 21 -------------------------------------------------------------------------------- CTS Scotland Facility Fire During the second quarter of 2011, a fire occurred at our Scotland EMS manufacturing facility. The fire damaged approximately $1.4 million of inventory and $0.3 million of machinery and equipment. We have property insurance coverage with a $100,000 deductible that is expected to cover the costs of repairing and/or replacing the damaged inventory and machinery and equipment. We also have business interruption insurance that is expected to cover the lost sales impact and fixed costs. Consequently, as of July 3, 2011, we wrote-off approximately $0.3 million of net book value of machinery and equipment, $1.4 million of inventory, deferred $0.8 million of recoverable fixed costs and $0.3 million of recoverable building restoration costs to other receivable. The total fire-related other receivable was $2.8 million as of July 3, 2011. Acquisition In January 2011, we acquired certain assets and assumed certain liabilities of Fordahl SA, a privately held company located in Brugg, Switzerland. This business was acquired with approximately $2.9 million, net of cash acquired. The assets acquired include accounts receivables, inventory, leasehold improvements, machinery and equipment, and certain intangible assets. The Fordahl SA product line includes high-performance temperature compensated crystal oscillators and voltage controlled crystal oscillators. This product line is expected to expand our frequency product portfolio from clocks and crystals to highly-engineered precision ovenized oscillators. This acquisition is expected to add new customers and to open up new market opportunities for us. This acquisition is accounted for using the acquisition method of accounting whereby the total purchase price will be allocated to tangible and intangible assets based on the fair market values on the date of acquisition. The pro forma effects of the results of this acquisition were not material to our results of operations or financial position. 2011 Outlook Based on our first half results and the current outlook, management maintains its guidance of full-year 2011 sales increase in the range of 9% to 13% over 2010 and full-year 2011 earnings per share in the range of $0.70 to $0.75. Liquidity and Capital Resources Overview Cash and cash equivalents were $75.1 million at July 3, 2011 and $73.3 million at December 31, 2010. Total debt on July 3, 2011 was $74.7 million, compared to $70.0 million at December 31, 2010, as we increased debt primarily to fund domestic working capital requirements. Total debt as a percentage of total capitalization was 20.7% at the end of the second quarter of 2011, compared with 20.3% at December 31, 2010. Total debt as a percentage of total capitalization is defined as the sum of notes payable and long-term debt as a percentage of total debt and shareholders' equity. Working capital increased by $10.7 million in the second quarter of 2011 versus year-end 2010, primarily due to increases in inventory and other current assets of $11.7 million and $3.4 million, respectively, and a decrease in other accrued liabilities of $4.0 million, partially offset by a decrease in accounts receivable of $8.1 million. Cash Flow Operating Activities Net cash provided by operating activities was $8.8 million during the first six months of 2011. Components of net cash provided by operating activities included net earnings of $9.2 million, non-cash adjustments of depreciation and amortization expense of $8.8 million, amortization of retirement benefits of $2.5 million and equity-based compensation expense of $2.4 million which were partially offset by net changes in assets and liabilities of $10.5 million and prepaid pension assets of $4.3 million. The net changes in assets and liabilities were primarily due to increased inventories of $10.6 million, decreased accounts payable and accrued liabilities of $7.2 million, and increased other current assets of $1.4 million, which were partially offset by decreased accounts receivable of $10.2 million, all to support higher anticipated net sales. Net cash provided by operating activities was $6.3 million during the first six months of 2010. Components of net cash provided by operating activities included net earnings of $10.3 million and depreciation and amortization expense of $8.8 million, which were partially offset by net changes in assets and liabilities of $13.0 million. The changes in assets and liabilities, which include the impact of foreign exchange, were primarily due to increased inventories of $14.7 million and increased accounts receivable of $13.8 million which were partially offset by increased accounts payable and accrued liabilities of $17.1 million, all to support higher net sales. 22 -------------------------------------------------------------------------------- Investing Activities Net cash used in investing activities for the first six months of 2011 was $9.5 million, of which $6.5 million was for capital expenditures and $2.9 million was for the acquisition of certain assets of Fordahl SA. Net cash used in investing activities for the first six months of 2010 was $5.7 million of which $6.2 million was for capital expenditures, partially offset by proceeds of $1.0 million received from the sale of an idle facility. Financing Activities Net cash provided by financing activities for the first six months of 2011 was $3.0 million, consisting primarily of a net increase in long-term debt of $4.5 million, offset by $2.1 million in dividend payments. The additional debt was primarily used to meet domestic working capital requirements as net sales increased. Net cash provided by financing activities for the first six months of 2010 was $13.5 million, consisting primarily of a net increase in long-term debt of $15.5 million, offset by $2.0 million in dividend payments. The additional debt was primarily used to meet domestic working capital requirements to support higher sales. Capital Resources Refer to Note E, "Debt," to our unaudited consolidated financial statements for further discussion. Long-term debt was comprised of the following: July 3, December 31, ($ in thousands) 2011 2010 Revolving credit agreement, weighted-average interest rate of 1.8% (2011), and 1.1% (2010) due in 2015 $ 74,500 $ 70,000 Our principal sources of liquidity have been cash flow from operations and from our credit agreements. We historically have accessed various funding sources, including short-term and long-term unsecured bank lines of credit as well as the debt markets in the United States. We expect to have sufficient sources of liquidity to meet our future funding needs due to the multiple funding sources that have been, and continue to be, available to us. On November 18, 2010, we entered into a $150 million, unsecured revolving credit agreement. Under the terms of the revolving credit agreement, we can expand the credit facility to $200 million, subject to participating banks' approval. There was $74.5 million and $70.0 million outstanding under the revolving credit agreement at July 3, 2011 and December 31, 2010, respectively. At July 3, 2011 and December 31, 2010, we had $72.7 million and $77.2 million, respectively, available under this agreement, net of standby letters of credit of $2.8 million. Interest rates on the revolving credit agreement fluctuate based upon the London Interbank Offered Rate and our quarterly total leverage ratio. We pay a commitment fee on the undrawn portion of the revolving credit agreement. The commitment fee varies based on the quarterly leverage ratio and was 0.375 percent per annum at July 3, 2011. The revolving credit agreement requires, among other things, that we comply with a maximum total leverage ratio and a minimum fixed charge coverage ratio. Our failure to comply with these covenants could reduce the borrowing availability under the revolving credit agreement. We were in compliance with all debt covenants at July 3, 2011. The revolving credit agreement requires us to deliver quarterly financial statements, annual financial statements, auditors certifications and compliance certificates within a specified number of days after the end of a quarter and year. Additionally, the revolving agreement contains restrictions limiting our ability to: dispose of assets; incur certain additional debt; repay other debt or amend subordinated debt instruments; create liens on assets; make investments, loans or advances; make acquisitions or engage in mergers or consolidations; engage in certain transactions with our subsidiaries and affiliates; and make stock repurchases and dividend payments. The revolving credit agreement expires in November 2015. In May 2008, our Board of Directors authorized a program to repurchase up to one million shares of our common stock in the open market at a maximum price of $13.00 per share. The authorization has no expiration. Reacquired shares will be used to support equity-based compensation programs and for other corporate purposes. During the second quarter of 2011, 35,500 shares were repurchased at a cost of approximately $326,000 or $9.19 per share under this program. No shares were repurchased under this program in 2010. 23 -------------------------------------------------------------------------------- We have historically funded our capital and operating needs primarily through cash flows from operating activities, supported by available credit under our bank credit agreements. We believe that expected positive cash flows from operating activities and available borrowings under our current credit agreements will be adequate to fund our working capital, capital expenditures and debt service requirements for at least the next twelve months. However, we may choose to pursue additional equity and/or debt financing to provide additional liquidity and/or fund acquisitions. Recent Accounting Pronouncements ASU 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs" In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs" ("ASU 2011-04"). ASU 2011-04 amends Accounting Standards Codification Topic 820, "Fair Value Measurements" ("ASC 820") by: (1) clarifying that the highest-and-best-use and valuation-premise concepts only apply to measuring the fair value of non-financial assets; (2) allowing a reporting entity to measure the fair value of the net asset or net liability position in a manner consistent with how market participants would price the net risk position, if certain criteria are met; (3) providing a framework for considering whether a premium or discount can be applied in a fair value measurement; (4) providing that the fair value of an instrument classified in a reporting entity's shareholders' equity is estimated from the perspective of a market participant that holds the identical item as an asset; and (5) expanding the qualitative and quantitative fair value disclosure requirements. The expanded disclosures include, for Level 3 items, a description of the valuation process and a narrative description of the sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs if a change in those inputs would result in a significantly different fair value measurement. ASU 2011-4 also requires disclosures about the highest-and-best-use of a non-financial asset when this use differs from the asset's current use and the reasons for such a difference. In addition, this ASU amends Accounting Standards Codification 820, "Fair Value Measurements," to require disclosures to include any transfers between Level 1 and Level 2 of the fair value hierarchy. These amendments are effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. The amendments of ASU 2011-04, when adopted, are not expected to have a material impact on our consolidated financial statements. ASU 2011-05, "Presentation of Comprehensive Income" In June 2011, the FASB issued Accounting Standards Update 2011-05, "Presentation of Comprehensive Income" ("ASU 2011-05"). ASU 2011-05 requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, and the second statement would include components of other comprehensive income. This ASU does not change the items that must be reported in other comprehensive income. These provisions are effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. The provisions of ASU 2011-05, when adopted, are not expected to have a material impact on our consolidated financial statements. 24-------------------------------------------------------------------------------- |