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): July 27, 2006 (July 26, 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))

Item 2.02Results of Operations and Financial Condition.

On July 26, 2006, CTS Corporation issued a press release announcing financial results for the second quarter of 2006 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. Only information in the release which relates to completed fiscal periods is furnished hereunder pursuant to the requirements of Item 2.02 of Form 8-K.

Item 9.01 Financial 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 July 26, 2006

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: July 27, 2006

EXHIBIT INDEX

Exhibit No.Exhibit Description

 99.1    Press Release dated July 26, 2006

EX-99.1

    newsrelease

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

July 26, 2006

FOR RELEASE: Immediately

CTS ANNOUNCES SECOND QUARTER 2006 RESULTS

YEAR-OVER-YEAR EARNINGS PER SHARE IMPROVEMENT CONTINUES

Elkhart, IN…CTS Corporation (NYSE: CTS)today announced second quarter 2006 revenues of $165.9 million, a 5% increase from the second quarter of 2005. Diluted earnings per share were $0.16, which included a charge of $0.03 per share for the previously announced consolidation of the Berne, Indiana operation. In the comparable period last year, second quarter 2005 diluted earnings per share were $0.10, which included a net negative $0.07 per share from repatriation-related tax expense and the reversal of certain reserves.

“We were very pleased with financial results in the quarter, as well as the pace of new business development. We had a record number of design wins for electronic components in infrastructure applications, secured our first production award from Honda and added several new EMS customers,” stated Donald Schwanz, CTS Chairman and Chief Executive Officer.

Based on the first half results and outlook for the remainder of the year, we are maintaining our prior full-year 2006 guidance of 6% - 8% in sales growth over 2005 and maintaining our earnings per share guidance in a range of $0.75 to $0.80, excluding $0.08 per share for full-year Berne restructuring and related charges.

Capital expenditures of $3.4 million were 2.0% of sales in the second quarter of 2006. The full-year 2006 capital expenditures are expected to be in the range of $18 - $20 million. Free cash flow of $11.4 million was generated in the second quarter of 2006 compared to $0.2 million in the first quarter, and $10.8 million in the second quarter last year.

The Berne consolidation is proceeding smoothly and should be completed in the third quarter. The new Czech Republic facility of CTS began operations during the second quarter. Production will be increased gradually throughout the year to meet business growth and better serve automotive OEMs in that region.

SEGMENT INFORMATION

(Dollars in millions)

	Second Quarter 2006				Second Quarter 2005				First Quarter 2006
			Segment				Segment				Segment
	Net		Operating		Net		Operating		Net		Operating
	Sales		Earnings		Sales		Earnings		Sales		Earnings
Components & Sensors	$	71.7	$	8.0	$	66.5	$	7.5	$	67.6	$	10.4
Electronics Manufacturing Services (EMS)		94.2		2.5		91.8		2.8		82.9		1.0
Segment Operating Earnings				10.5				10.3				11.4
Expenses not allocated to business segments:
- Restructuring and related charges				(1.4)								(2.1)
Total	$	165.9	$	9.1	$	158.3	$	10.3	$	150.5	$	9.3

Components & Sensors: Components and sensors sales increased $5.2 million, or 8%, over the second quarter of 2005 primarily on the strength of automotive products and electronic component sales for infrastructure applications, partially offset by declines in component sales for mobile handset applications, a business the Company is exiting. Segment operating earnings increased $0.5 million on higher sales, partially reduced by stock option expenses and lower pension income.

Components and sensors sales increased $4.1 million or 6% from the first quarter of 2006 primarily reflecting strong automotive product demand. Despite the favorable impact of higher sales, segment operating earnings decreased $2.4 million from the first quarter from timing-related royalty income and the $1.5 million favorable insurance claim settlement recorded in the first quarter.

EMS: EMS sales increased $2.4 million or 3% from the second quarter of 2005driven primarily by increased sales in the communication, defense and medical markets, partially reduced by lower sales in the computer market. Segment operating earnings decreased $0.3 million primarily due to increased operating expenses partially offset by the impact of higher volume and improved product mix.

Compared to the first quarter of 2006, EMS segment sales increased $11.3 million or 14% primarily from improved sales in the communication, defense, medical and industrial markets. Total segment operating earnings increased $1.5 million primarily on higher volumes and more favorable product mix.

# # # #

Conference Call

As previously announced, the Company has scheduled a conference call on Thursday, July 27, 2006 at 11:00 a.m. Eastern Daylight Time. Those interested in participating may dial 800-762-4758 (480-629-9035, 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. EDT on July 27, 2006, through 11:59 p.m. EDT on August 3, 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 836003. 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

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands, except per share amounts)
	Three Months Ended							Six Months Ended
	July 2,			July 3,				July 2,			July 3,
	2006			2005				2006			2005
Net sales	$	165,925		$	158,346			$	316,418		$	313,676
Costs and expenses:
Cost of goods sold		131,945			126,054				250,364			253,169
Selling, general and administrative expenses		19,924			17,404				36,661			35,161
Research and development expenses		4,070			4,567				8,162			9,354
Restructuring charge		920			-				2,882			-
Operating earnings		9,066			10,321				18,349			15,992
Other expenses (income):
Interest expense		1,034			1,582				2,145			3,299
Other		(257	)		(70	)			(385	)		(515	)
Total other expenses		777			1,512				1,760			2,784
Earnings before income taxes		8,289			8,809				16,589			13,208
Income tax expense		1,973			4,867		(1)		4,048			5,879		(1)
Net earnings	$	6,316		$	3,942			$	12,541		$	7,329
Net earnings per share:
Basic	$	0.18		$	0.11			$	0.35		$	0.20
Diluted	$	0.16		$	0.10		(1)	$	0.32		$	0.19		(1)
Cash dividends declared per share	$	0.03		$	0.03			$	0.06		$	0.06
Average common shares outstanding:
Basic		35,843			36,621				35,832			36,508
Diluted		40,145			41,226				40,189			41,101
(1)  Income tax expense and diluted earnings per share include a net impact of $2.8 million and $0.07 per diluted share, respectively, consisting of $4.5 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.

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In thousands of dollars)
	July 2,		December 31,
	2006		2005 *
Cash and cash equivalents	$	17,651	$	12,029
Accounts receivable, net		104,600		91,265
Inventories, net		65,012		60,564
Other current assets		17,989		16,816
Total current assets		205,252		180,674
Property, plant & equipment, net		104,450		109,676
Other assets		244,449		243,586
Total Assets	$	554,151	$	533,936
Notes payable and current portion
of long-term debt	$	12,095	$	13,463
Accounts payable		74,060		67,196
Other accrued liabilities		44,147		39,274
Total current liabilities		130,302		119,933
Long-term debt		64,266		68,293
Other obligations		16,350		16,139
Shareholders' equity		343,233		329,571
Total Liabilities and
Shareholders' Equity	$	554,151	$	533,936
* The balance sheet at December 31, 2005 has been derived from the audited financial statements at that date.

CTS CORPORATION AND SUBSIDIARIES

OTHER SUPPLEMENTAL INFORMATION

The following table reconciles actual and projected earnings per share, diluted to adjusted actual and projected earnings per share, diluted for the Company:

	Projected
	Twelve Months Ended
	December 31, 2006
Earnings per share, diluted	$	0.67 - $0.72
Tax affected charges to reported diluted earnings per share: Restructuring and related charges		0.08
Adjusted earnings per share, diluted	$	0.75 - $0.80

Projected adjusted earnings per share, diluted is a non-GAAP financial measure. The most directly comparable GAAP financial measure is projected earnings per share, diluted. CTS calculates full year projected adjusted earnings per share, diluted to exclude the per share impact of restructuring and related charges. CTS calculated adjusted earnings per share, diluted for the second quarter of 2005 to exclude unusual income tax expense items, including $4.5 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. We exclude the impact of this item because it is a discrete event which has a significant impact on comparable GAAP financial measures and could distort an evaluation of our normal operating performance.

CTS uses adjusted earnings per share, diluted measures, to evaluate overall performance, establish plans and perform strategic analysis. Using adjusted earnings per share, diluted measures avoids distortion in the evaluation of operating results by eliminating the impact of events which are not related to normal operating performance. Because adjusted earnings per share, diluted measures are based on the exclusion of specific items, they may not be comparable to measures used by other companies which have similar titles. CTS' management compensates for this limitation when performing peer comparisons by evaluating both GAAP and non-GAAP financial measures reported by peer companies. CTS believes that adjusted earnings per share, diluted measures are useful to its management, investors and stakeholders in that they:

-   provide a truer measure of CTS' operating performance,

-   reflect the results used by management in making decisions about the business, and

-   help review and project CTS' performance over time.

We recommend that investors consider both actual and projected adjusted earnings per share, diluted measures in evaluating the performance of CTS with peer companies.

Segment Operating Earnings

Segment operating earnings is a non-GAAP financial measure outside the context of the FAS 131 required reconciliation in the notes to the company's financial statements. The most comparable GAAP term is operating earnings. Segment operating earnings always excludes the effects of charges for restructuring and related or similar expenses when they are incurred by the Company. Segment operating earnings exclude interest expense, and other non-operating income and income taxes according to how a particular segment is measured. CTS' management provides the segment operating earnings measure to provide consistency between segment information in its earnings release and the business segment discussion in the notes to its financial statements.

Free Cash Flow

The following table summarizes free cash flow for the Company:

	Quarter Ended
	July 2, 2006			July 2, 2005			April 2, 2006
			(In thousands of dollars)
Net cash provided by operations	$	14,798		$	13,717		$	2,629
Capital expenditures		(3,369	)		(2,907	)		(2,479	)
Free cash flow	$	11,429		$	10,810		$	150

Free cash flow is a non-GAAP financial measure which CTS defines as net cash provided by operations less capital expenditures. The most directly comparable GAAP measure is net cash provided by operations. CTS’ management uses free cash flow to evaluated financial performance and in strategic planning, specifically, for investing and financing decisions. CTS’ management believes free cash flow is a useful measure because it reflects the performance of its overall operations more accurately than net cash provided by operations and because it provides investors with the same results that management used as the basis for making decisions about the business. Free cash flow is not an indicator of residual cash available for discretionary spending, because it does not take into account mandatory debt service or other non-discretionary spending requirements which are not deducted in the calculation of free cash flow. CTS’ management takes these limitations into account when using free cash flow to make investing and financing decisions.