8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):   February 1, 2006 (January 31, 2006)

CTS CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Indiana	1-4639	35-0225010
(State or Other Jurisdiction of Incorporation)	(Commission File Numbers)	(I.R.S. Employer Identification Nos.)
905 West Boulevard North
Elkhart, Indiana		46514
(Address of Principal Executive Offices)		(Zip Code)

Registrants' Telephone Number, Including Area Code:(574) 293-7511

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

q   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

q   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

q   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

q   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.02 Results of Operations and Financial Condition.

On January 31, 2006, CTS Corporation issued a press release announcing financial results for the fourth quarter and full year ending December 31, 2005 as more fully described in the press release, a copy of which is attached as Exhibit 99.1 hereto and which information is incorporated herein by reference.

Item 9.01Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired.

  Not applicable.

(b)           Pro Forma Financial Information.

  Not applicable.

(c)           Exhibits.

The following exhibits are filed with this report:

Exhibit No.Exhibit Description

99.1Press Release dated January 31, 2006

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CTS CORPORATION

 /s/ Richard G. Cutter  

By:Richard G. Cutter

 Vice President, Secretary

 and General Counsel

Date: February 1, 2006

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EXHIBIT INDEX

Exhibit No.Exhibit Description

99.1                                     Press Release dated January 31, 2006

EX-99.1 CHARTER

newsrelease  

CTS CORPORATION Elkhart, Indiana 46514h(574) 293-7511

January 31, 2006

FOR RELEASE: Immediately

CTS FINISHES 2005 WITH STRONG FOURTH QUARTER

EARNINGS AND CASH FLOW

Repatriates $26 Million Cash Under the American Jobs Creation Act of 2004

Elkhart, IN…CTS Corporation (NYSE: CTS)today announced fourth quarter revenues of $154.6 million, an 8% increase year-over-year. Diluted earnings per share of $0.22 were up 29% over the fourth quarter of 2004. Free cash flow was $12.3 million in the fourth quarter of 2005.

On a year-over-year basis, fourth quarter revenues were up primarily due to the SMTEK acquisition as new business growth was essentially offset by lower EMS sales into computing applications and reduced component sales into handset applications.

Net earnings in the fourth quarter were $8.6 million or $0.22 per diluted share and included a $0.03 negative impact from repatriation-related tax expense and a positive $0.02 per share gain from the sale of excess equipment and the disposition of our Low Temperature Co-fired Ceramic (LTCC) assets, net of related severance costs. Excluding these unusual items, adjusted earnings per share of $0.23 increased 35% over fourth quarter 2004 earnings per share of $0.17.

Revenue for the full year of $617.5 million increased 16% over 2004. EMS business segment sales increased 35% year-over-year, primarily due to the SMTEK acquisition but partially offset by lower sales of communications infrastructure products. The Components and Sensors business segment sales decreased 3% year-over-year, driven by expected declines in component sales for handset applications. Full year 2005 automotive sensor revenues grew 9% year-over-year.

Net earnings in 2005 were $22.2 million or $0.57 per diluted share compared to $20.0 million or $0.53 per diluted share in the prior year. The 2005 results included a $0.10 negative per share impact from repatriation-related tax expense, net of a benefit relating to the reversal of income tax reserves, and a positive $0.02 per share from a gain on the sale of excess equipment and the disposition of our LTCC business unit, net of related severance costs. Included in 2004 was a $0.05 gain on the sale of excess Canadian land. Full year earnings per share, adjusted to exclude these items, were $0.65 in 2005 compared to $0.48 in 2004, for a year-over-year increase of 35%.

During 2005, the Company generated free cash flow of $29.5 million, compared to $1.3 million in 2004. Free cash flow in 2005 is the highest reported since 1998.

Commenting on the fourth quarter, Donald Schwanz, CTS Chairman and Chief Executive Officer, said, "Strong earnings and cash generation in the quarter were clear positives. Despite slightly lower than anticipated sales, the fourth quarter represents the ninth quarter of year-over-year sales growth.”

The Company currently expects full-year 2006 sales to increase 6% to 8% over 2005 and adjusted diluted earnings per share to be in the range of $0.68 to $0.72, excluding restructuring and related costs of $0.08 to $0.09 per share related to the previously announced consolidation of its Berne operations. Earnings per share guidance for 2006 includes approximately $0.03 negative impact related to equity based compensation expensing and reflects a $0.06 per share reduction due to lower pension income.

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General Comments:

·   The fourth quarter included a $1.5 million tax expense for repatriation of approximately $26 million of our overseas cash to the United States under the American Jobs Creation Act. A total of $77 million of overseas cash was repatriated in 2005.

·   Capital expenditures were $15.0 million, or 2.4% of sales in 2005 compared to $12.7 million, or 2.4% of sales in 2004. Capital expenditures in 2006 are expected to be in the range of $18 million to $23 million.

·   Total debt at year-end was $81.8 million, $15.7 million lower than year-end 2004. The total debt to capitalization ratio of 20% at year-end was at the lower end of the Company’s target range of 20% to 30%.

·   The Company repurchased 312,700 shares of stock in the fourth quarter for $3.8 million, or approximately $12.02 per share. During 2005, stock buybacks totaled 956,400 shares at a total cost of $11.3 million which equals to an average price of $11.80.

FOURTH QUARTER RESULTS - SEGMENT INFORMATION

(Dollars in millions)

	Fourth Quarter 2005		Fourth Quarter 2004		Third Quarter 2005
	Net	Segment	Net	Segment	Net	Segment
	Sales	Operating	Sales	Operating	Sales	Operating
		Earnings		Earnings		Earnings
Components & Sensors	$62.3	$12.1	$66.0	$6.9	$60.1	$7.1
Electronics Manufacturing Services (EMS)	92.3	3.0	76.5	2.8	89.1	2.1
Total	$154.6	$15.1	$142.5	$9.7	$149.2	$9.2

Components & Sensors: Components and sensors sales decreased by $3.7 million or 6% from the fourth quarter of 2004, reflecting declining component sales into mobile handset applications partially offset by continued growth in new product sales into automotive and non-handset applications. The Company has de-emphasized component sales for handset applications and expects those sales to substantially end in 2006. Operating earnings of $12.1 million or 19.5% of sales improved $5.2 million or 9 percentage points over the fourth quarter of 2004. While the improvement was partially driven by the gain on the sale of certain assets, it also reflected improved product mix and benefits from continued cost reduction initiatives.

Segment sales increased by $2.2 million, or 4% over the third quarter of 2005, primarily from improved communications infrastructure and automotive product demand. Segment operating earnings increased $5.1 million or 7.7 percentage points over the third quarter, from the gain on sales of assets, the disposition of the LTCC business unit net of related severance costs, cost reduction initiatives and the impact of slightly higher volumes.

EMS: EMS fourth quarter sales increased by $15.8 million or 21% from the same period last year driven primarily by the SMTEK acquisition, partially offset by lower demand for computer data storage equipment. Segment operating earnings were $0.2 million higher than the fourth quarter of 2004. However, earnings as a percent of sales decreased 0.4 percentage points due to less favorable product mix and pricing.

Fourth quarter 2005 EMS sales increased $3.2 million or 4% over third quarter 2005 primarily on higher end-market demand for communications infrastructure products and computer data storage equipment. Operating earnings at 3.3% of sales improved 0.9 percentage points sequentially, from cost control initiatives and higher volumes.

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# # # #

Conference Call

As previously announced, the Company has scheduled a conference call on Wednesday, February 1, 2006 at 11:00 a.m. Eastern Standard Time. Those interested in participating may dial 877-209-0397 (612-332-1213, if calling from outside the U.S.). No access code is needed. There will be a replay of the conference call available from 4:15 p.m. EST on Wednesday, February 1, 2006, through 11:59 p.m. EST on Wednesday, February 8, 2006. The telephone number for the replay is 800-475-6701 (320-365-3844, if calling from outside the U.S.). The access code is 813067. There will also be a live audio webcast of the conference call which can be accessed directly from the Web sites of CTS Corporation (www.ctscorp.com), StreetEvents (www.StreetEvents.com), Netscape (www.netscape.com), Compuserve (www.compuserve.com) and others. AOL subscribers will have access through the Personal Finance section of AOL.

About CTS

CTS is a leading designer and manufacturer of electronic components and sensors and a provider of electronics manufacturing services (EMS) to OEMs in the automotive, computer, communications, medical and industrial markets. CTS manufactures products in North America, Europe and Asia. CTS' stock is traded on the NYSE under the ticker symbol "CTS.” To find out more, visit the CTS Web site at www.ctscorp.com.

Safe Harbor Statement

This press release contains certain 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, and all statements that are not based on historical fact, but rather reflect our current expectations concerning future results and events. We make certain assumptions when making forward-looking statements, any of which could prove inaccurate, including, but not limited to, statements about our future operating results and business plans. The ultimate correctness of these forward-looking statements is dependent upon a number of known and unknown risks and events, and is subject to various uncertainties and other factors that may cause our actual results, performance, or achievements to be different from any future results, performance, or achievements expressed or implied by these statements.

For more detailed information on the risks and uncertainties associated with CTS' business activities, see our reports filed with the SEC. CTS undertakes no obligation to publicly update its forward-looking statements, whether as a result of market or industry changes, new information or future events.

Contact:Vinod M. Khilnani, Senior Vice President and Chief Financial Officer, or

 Mitchell J. Walorski, Director of Investor Relations

 CTS Corporation, 905 West Boulevard North, Elkhart, IN 46514

 Telephone (574) 293-7511 FAX (574) 293-6146

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CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands, except per share amounts)
	Three Months Ended							Twelve Months Ended
	December 31,							December 31,
	2005				2004			2005				2004
Net sales	$	154,598			$	142,496		$	617,484			$	531,316
Costs and expenses:
Cost of goods sold		121,676				112,578			495,069				421,560
Selling, general and administrative expenses		16,276				15,969			68,049				63,485
Research and development expenses		3,762				4,813			17,092				19,063
Gain on sale of assets		(2,259	)			(601	)		(3,065	)			(3,920	)
Operating earnings		15,143				9,737			40,339				31,128
Other expenses (income):
Interest expense		1,349				1,294			5,902				5,535
Other		(179	)			(152	)		(966	)			(324
Total other expenses		1,170				1,142			4,936				5,211
Earnings before income taxes		13,973				8,595			35,403				25,917
Income tax expense		5,398		(1)		1,977			13,169		(2)		5,961
Net earnings	$	8,575			$	6,618		$	22,234			$	19,956
Net earnings per share:
Basic	$	0.23			$	0.18		$	0.61			$	0.56
Diluted	$	0.22		(1)	$	0.17		$	0.57		(2)	$	0.53
Cash dividends declared per share	$	0.03			$	0.03		$	0.12			$	0.12
Average common shares outstanding:
Basic		35,919				35,810			36,307				35,910
Diluted		40,633				40,383			40,960				38,893
(1) Income tax expense and diluted earnings per share of the quarter ending December 31, 2005 include
expense of $1.5 million, or $0.03 per diluted share, respectively, relating to the repatriation of foreign
cash to the United States under the provisions of the American Jobs Creation Act of 2004 and
$0.7 million, or $0.02 per diluted share, respectively, relating to an increase in the overall adjusted
effective tax rate from 23% to 25%.
(2)  Income tax expense and diluted earnings per share include a net impact of $4.3 million, or $0.10 per
diluted share, respectively, consisting of $6.0 million of expense relating to the repatriation of foreign cash
to the United States under the provisions of the American Jobs Creation Act of 2004 and a $1.7 million
benefit relating to the reversal of income tax reserves due to the successful resolution of tax issues
in certain foreign jurisdictions.

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CTS Corporation and Subsidiaries
Condensed Consolidated Balance Sheets- Unaudited
(In thousands of dollars)
	December		December
	31, 2005		31, 2004 *
	(Unaudited)
Cash and cash equivalents	$	12,029	$	61,005
Accounts receivable, net		91,265		84,112
Inventories, net		60,564		42,734
Other current assets		16,816		16,295
Total current assets		180,674		204,146
Property, plant & equipment, net		109,676		112,495
Other assets		243,586		205,536
Total Assets	$	533,936	$	522,177
Notes payable and current portion
of long-term debt	$	13,463	$	3,311
Accounts payable		67,196		55,614
Other accrued liabilities		39,274		44,036
Total current liabilities		119,933		102,961
Long-term debt		68,293		94,150
Other obligations		16,139		14,362
Shareholders' equity		329,571		310,704
Total Liabilities and
Shareholders' Equity	$	533,936	$	522,177
* The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date.

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CTS CORPORATION AND SUBSIDIARIES
OTHER SUPPLEMENTAL INFORMATION
Free Cash Flow
The following table summarizes free cash flow for the Company:
	Twelve Months Ended						Three Months Ended
	December 31,						December 31,
	2005			2004			2005
	(In thousands of dollars)
Net cash provided by operations	$	44,519		$	13,967		$	14,761
Capital expenditures		(15,009	)		(12,711	)		(2,460	)
Free cash flow	$	29,510		$	1,256		$	12,301
Free cash flow is a non-GAAP financial measure which CTS defines as the sum of net cash provided by
operations and cash used for capital expenditures. The most directly comparable GAAP financial measure
is net cash provided by operations. Management believes that free cash flow provides useful information to
investors regarding the Company's ability to generate cash from business operations that was used and/or
is available for internal growth, service of debt principal, dividends, share repurchase and acquisitions and
other investments. Management uses free cash flow as one measure to monitor and evaluate the
performance of the Company.
Adjusted Earnings Per Share
The following table summarizes adjusted earnings per share for the Company:
	Twelve Months Ended						Three Months Ended
	December 31,							December 31,
		2005			2004			2005
GAAP earnings per share	$	0.57		$	0.53		$	0.22
Tax affected charges (credits) to reported earnings per share:
Gain on sale of excess equipment less LTCC severance		(0.02	)		-			(0.02	)
Gain on sale of excess Canadian land		-			(0.05	)		-
Total tax affected adjustments to reported earnings per share	$	0.55		$	0.48		$	0.20
Tax impact of cash repatriation, net of tax benefit relating to reversal
of income tax reserves in certain foreign jurisdictions		0.10			-			0.03
Adjusted earnings per share	$	0.65		$	0.48		$	0.23
Adjusted earnings per share is a non-GAAP financial measure. The most directly comparable GAAP
financial measure is earnings per share. Management believes that adjusted earnings per share,
provides useful information to investors who might compare full year 2005 results to other periods
presented by the Company.

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Projected Adjusted Earnings Per Share
The following table summarizes projected adjusted earnings per share for the Company:
	Twelve Months Ended
	December 31,
		2006
Projected GAAP earnings per share	$	0.60 - $0.63
Approximate restructuring costs - Berne consolidation		0.08 - 0.09
Projected adjusted earnings per share	$	0.68 - $0.72
Projected adjusted earnings per share is a non-GAAP financial measure. The most directly
comparable GAAP financial measure is projected full year earnings per share. Management
believes that projected adjusted earnings per share provides useful information to investors
who might compare full year 2006 projected earnings per share to other periods presented by the Company.

Adjusted Effective Tax Rate
The following table summarizes adjusted effective tax rate for the Company:
	Year ended		Quarter ended
	December 31,
		2005		2005
Effective tax rate		37	%	39	%
Impact of tax benefit relating to the reversal of income tax reserves		5	%	0	%
Impact of tax expense relating to the repatriation of foreign cash		-17	%	-11	%
Adjusted effective tax rate		25	%	28	%
Adjusted effective tax rate is a non-GAAP financial measure. The most directly comparable GAAP
financial measure is effective tax rate. Management believes that adjusted effective tax rate
provides useful information to investors who might compare 2005 results to other periods
presented by the Company.