8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report:  October 2, 2013

CTS CORPORATION

(Exact Name of Registrant as Specified in 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)

Registrant’s telephone number, including area code:                                            (574) 523-3800

Not Applicable

(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 (see General Instruction A.2.):

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

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

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

     240.14d-2(b))

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

     240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

     On October 2, 2013, CTS Corporation (“CTS”) sold its Electronics Manufacturing Solutions (“EMS”) business to Benchmark Electronics, Inc. (“Benchmark”) pursuant to the terms and conditions of a stock purchase agreement (the “Purchase Agreement”) and related ancillary agreements entered into by CTS and Benchmark on the same date (collectively, the “Transaction”).  CTS operated the EMS business largely through its wholly owned subsidiary CTS Electronics Manufacturing Solutions, Inc., a Delaware corporation(“CTS EMS”), and CTS EMS’ direct subsidiaries.Included in the Transaction are five manufacturing facilities located in Moorpark, California, Londonderry, New Hampshire, Bangkok, Thailand, Matamoros, Mexico and San Jose, California, and approximately 1,000 employees.

In connection with the Transaction, CTS received cash consideration of $75 million, which includes (a) $58.5 million paid by Benchmark to CTS, pursuant to the Purchase Agreement, in exchange for all of the equity in CTS EMS, and (b) $16.5 million paid by Benchmark Electronics Netherlands Holding B.V., a limited liability company organized under the laws of the Netherlands and a wholly owned subsidiary of Benchmark (“Benchmark Netherlands”), to CTS, pursuant to a separate stock purchase agreement entered into between CTS and Benchmark Netherlands on the same date, in exchange for all of the equity in CTS Electronics Corporation (Thailand), Ltd., a limited company organized under the laws of Thailand.  In addition, certain assets of the EMS business that were held by CTS or its affiliates (other than CTS EMS and its subsidiaries), primarily employees, leases and certain contracts, were transferred to CTS EMSimmediately prior to the signing and closing of the Transaction.

Each of CTS and Benchmark made standard representations and warranties and covenants relating to itself and, in the case of CTS, with respect to the EMS business.  The Purchase Agreement provides that each of CTS and Benchmark will indemnify the other for certain losses, subject to certain limits.

CTS has also entered into a transition services agreement with Benchmark, pursuant to which CTS will provide certain transitional, administrative and support services to Benchmark on a short-term basis.

The Purchase Agreement will be filed as an exhibit to CTS’ quarterly report on Form 10-Q for the quarter ending September 29, 2013.

Item 2.01 Completion of Acquisition or Disposition of Assets.

The disclosures set forth in Item 1.01 hereof are hereby incorporated by reference into this Item 2.01.

Item 8.01              Other Events.

On October 3, 2013, CTS issued a press release announcing the signing and closing of the Transaction.  A copy of this press release is attached to this Report as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01              Financial Statements and Exhibits.

(b)   The unaudited condensed pro forma consolidated balance sheet of CTS as of June 30, 2013, assuming that the disposition of the EMS business had occurred as of that date, and the unaudited condensed pro forma statements of consolidated income for the six months ended June 30, 2013 and for the fiscal years ended December 31, 2012, 2011 and 2010, assuming that the disposition of the EMS business had occurred at the beginning of those periods.

(d)   Exhibits.

The following exhibits are filed with this Current Report on Form 8-K:

Exhibit No.                     Exhibit Description

99.1                           Press Release of CTS Corporation, dated October 3, 2013.

99.2 Unaudited Pro Forma Condensed Consolidated Balance Sheet of CTS Corporation as of June 30, 2013 and Unaudited Pro Forma Condensed Statement of Consolidated Operations of CTS Corporation for the six months ended June 30, 2013, and for the fiscal years ended December 31, 2012, 2011 and 2010.

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

By:           /s/ Thomas A. Kroll                                           

Name:          Thomas A. Kroll

Title:            Vice President and

   Chief Financial Officer

Date:  October 8, 2013

EXHIBIT INDEX

Exhibit No.             Exhibit Description

99.1                       Press Release of CTS Corporation, dated October 3, 2013.

99.2 Unaudited Pro Forma Condensed Consolidated Balance Sheet of CTS Corporation as of June 30, 2013 and Unaudited Pro Forma Condensed Statement of Consolidated Operations of CTS Corporation for the six months ended June 30, 2013, and for the fiscal years ended December 31, 2012, 2011 and 2010.

EX-99.1

newsrelease

CTS CORPORATION  Elkhart, Indiana 46514      574-523-3800

October 3, 2013

FOR RELEASE:  Immediately

CTS CORPORATION ANNOUNCES SALE OF EMS BUSINESS AS PART OF

ITS STRATEGY TO SIMPLIFY, FOCUS AND DRIVE PROFITABLE GROWTH

Company to Pursue Core Market Expansion Opportunities

in Components and Sensors

Electronics Manufacturing Solutions Business Acquired by

Benchmark for $75 Million in Cash

Elkhart, IN . . . CTS Corporation (NYSE: CTS) today announced that it has entered into a definitive agreement with Benchmark Electronics, Inc. under which Benchmark has acquired CTS’ Electronics Manufacturing Solutions (EMS) business for $75 million in cash. Included are five manufacturing facilities located in Moorpark, CA, Londonderry, NH, Bangkok, Thailand, Matamoros, Mexico, and San Jose, CA and approximately 1,000 employees. The transaction sharpens CTS’ focus on its Components and Sensors business, and provides additional capital to drive growth and enhance shareholder value.

“Since I joined CTS in January, I have been working closely with the Board of Directors to evaluate the Company's portfolio in order to ensure alignment with our core vision and business strategies,” said Kieran O’Sullivan, CEO.  “By sharpening our focus on our strengths in Components and Sensors businesses through this transaction, CTS will be better positioned to meet the evolving needs of our customers, increase margins by introducing new value-added products, and grow in attractive adjacencies.  We are excited about this opportunity to simplify CTS, focus on our core strengths, and drive profitable growth.”

“The transaction increases our financial flexibility to fund organic growth in our higher margin businesses, and consider value-enhancing external opportunities,” Mr. O’Sullivan added. “It also permits us to evaluate additional options to return cash to shareholders, which we expect to evaluate in the near term.”

Mr. O’Sullivan continued, “This transaction also is the right long-term strategic move for our EMS customers and employees. We have the highest regard for the dedicated EMS employees and are confident they are a welcome addition to the Benchmark team.  As part of Benchmark, a company dedicated to providing electronics manufacturing services, the EMS business will have better scale and footprint to meet the needs of customers around the world. We are working closely with Benchmark on a smooth transition.”

“As part of our previously announced company-wide strategic evaluation, we will continue to right size our global manufacturing footprint and evaluate ways to streamline the business and reduce costs,” Mr. O’Sullivan concluded.  “While we are focused on improving the Company’s cost structure, the value we expect to create will primarily be driven by growth and innovation.  We remain committed to investing in engineering research and development. CTS is a strong company with outstanding capabilities, employees and customer relationships, and we are excited to move forward with a renewed focus on delivering innovative solutions to our customers.”

CTS will broadcast a live conference call to discuss the transaction at 1:00 PM (EDT) on October 3, 2013.  Those interested in participating may dial 800-230-1085 (612-288-0329, if calling from outside the U.S.). No access code is needed and a web meeting will also be available as follows:  https://www.webmeeting.att.com.  Meeting number is 5114686455 and the participant code is 454771.

The first time you use the Web Meeting Service, you will need to download the client software.  Web Meeting HELP & Software Downloads can be found at:  https://www.webmeeting.att.com.

There will be a replay of the conference call from 4:00 p.m. (EDT) on Thursday, October 3, 2013 through 11:59 p.m. (EDT) on Thursday, October 10, 2013.  The telephone number for the replay is 800-475-6701 (320-365-3844, if calling from outside the U.S.).  The access code is 304658.

About CTS

CTS is a leading designer and manufacturer of electronic components and sensors and a provider of services to OEMs in the automotive, communications, medical, defense and aerospace, industrial and computer markets. CTS manufactures products in North America, Europe and Asia. CTS' stock is traded on the NYSE under the ticker symbol "CTS.” 

Safe Harbor

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 and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. 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: changes in the economy generally and in respect to the businesses in which CTS operates; unanticipated issues in integrating acquisitions; the results of actions to reposition our businesses; 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 disasters or other events; 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 the Annual Report on Form 10-K. 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.

CONTACT:

Investors Thomas Kroll Vice President & Chief Financial Officer CTS Corporation 574-523-3800   Media Andrew Siegel / Meaghan Repko Joele Frank, Wilkinson Brimmer Katcher 212-355-4449  

EX-99.2

CTS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF (LOSS) / EARNINGS
SIX MONTHS ENDED JUNE 30, 2013
(In thousands, except per share amounts)
	Historical (1)			EMS (2)			Pro Forma Adjustments		Pro Forma CTS
Net sales	$	301,073		$	97,630		$	-	$	203,443
Costs and expenses:
Cost of goods sold		234,404			90,147			-		144,257
Insurance recovery for business interruption - casualties		-			-			-		-
Selling, general and administrative expenses		42,156			7,323			-		34,833
Research and development expenses		12,023			-			-		12,023
Insurance recovery for property damage - casualties		-			-			-		-
Restructuring and impairment charge		7,802			596			-		7,206
Gain on sale-leaseback		-			-			-		-
Operating earnings/(loss)		4,688			(436	)		-		5,124
Other (expense)/income:
Interest expense, net		(1,135	)		(30	)		-		(1,105	)
Other (expense)/income		(12	)		97			-		(109	)
Total other (expense)/income		(1,147	)		67			-		(1,214	)
Earnings/(loss) before income taxes		3,541			(369	)		-		3,910
Income tax expense		11,308			692			-		10,616
Net (loss)/earnings	$	(7,767	)	$	(1,061	)	$	-	$	(6,706	)
Net (loss) / earnings per share:
Basic	$	(0.23	)						$	(0.20	)
Diluted	$	(0.23	)						$	(0.20	)
Average common shares outstanding:
Basic		33,589								33,589
Diluted		33,589								33,589
(1) As reported in CTS Corporation and Subsidiaries unaudited financial statements contained in its Quarterly Report on Form 10-Q for the Six Months Ended June 30, 2013.
(2) Derived from EMS Segment reported numbers contained in CTS Corporation and Subsidiaries Quarterly Report on Form 10-Q for the Six Months Ended June 30, 2013 adjusted by $2,753 for certain corporate charges that could not
be supportable and directly attributable to the transaction.

CTS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 2012
(In thousands, except per share amounts)
	Historical (1)			EMS (2)			Pro Forma Adjustments		Pro Forma CTS
Net sales	$	576,918		$	272,437		$	-	$	304,481
Costs and expenses:
Cost of goods sold		475,536			262,571			-		212,965
Insurance recovery for business interruption - casualties		(20,893	)		(20,256	)		-		(637	)
Selling, general and administrative expenses		80,386			17,315			-		63,071
Research and development expenses		20,918			-			-		20,918
Insurance recovery for property damage - casualties		(1,769	)		(1,769	)		-		-
Restructuring and impairment charge		6,386			2,949			-		3,437
Gain on sale-leaseback		(10,334	)		-			-		(10,334	)
Operating earnings/(loss)		26,688			11,627			-		15,061
Other (expense)/income:
Interest (expense)/income, net		(839	)		10			-		(849	)
Other income		1,093			861			-		232
Total other (expense)/income		254			871			-		(617	)
Earnings before income taxes		26,942			12,498			-		14,444
Income tax expense		6,609			4,254			-		2,355
Net earnings	$	20,333		$	8,244		$	-	$	12,089
Net earnings per share:
Basic	$	0.60							$	0.36
Diluted	$	0.59							$	0.35
Average common shares outstanding:
Basic		33,922								33,922
Diluted		34,523								34,523
(1) As reported in CTS Corporation and Subsidiaries audited financial statements contained in its Annual Report on Form 10-K for the Year Ended December 31, 2012.
(2) Derived from EMS Segment reported numbers contained in CTS Corporation and Subsidiaries Annual Report on Form 10-K for the Year Ended December 31, 2012 adjusted by $6,566 for certain corporate charges that could not be supportable and directly attributable to the transaction.

CTS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 2011
(In thousands, except per share amounts)
	Historical (1)			EMS (2)			Pro Forma Adjustments		Pro Forma CTS
Net sales	$	588,506		$	308,649		$	-	$	279,857
Costs and expenses:
Cost of goods sold		478,657			288,023			-		190,634
Insurance recovery for business interruption - casualties		(4,082	)		(4,082	)		-		-
Selling, general and administrative expenses		71,890			17,754			-		54,136
Research and development expenses		19,990			-			-		19,990
Insurance recovery for property damage - casualties		(6,067	)		(6,067	)		-		-
Restructuring and impairment charge		2,878			489			-		2,389
Gain on sale-leaseback		-			-			-		-
Operating earnings		25,240			12,532			-		12,708
Other (expense)/income:
Interest expense, net		(862	)		(11	)		-		(851	)
Other income		1,959			1,500			-		459
Total other (expense)/income		1,097			1,489			-		(392	)
Earnings before income taxes		26,337			14,021			-		12,316
Income tax expense		5,370			2,707			-		2,663
Net earnings	$	20,967		$	11,314		$	-	$	9,653
Net earnings per share:
Basic	$	0.61							$	0.28
Diluted	$	0.60							$	0.28
Average common shares outstanding:
Basic		34,321								34,321
Diluted		35,006								35,006
(1) As reported in CTS Corporation and Subsidiaries audited financial statements contained in its Annual Report on Form 10-K for the Year Ended December 31, 2011.
(2) Derived from EMS Segment reported numbers contained in CTS Corporation and Subsidiaries Annual Report on Form 10-K for the Year Ended December 31, 2011 adjusted by $5,998 for certain corporate charges that could not be supportable and directly attributable to the transaction.

CTS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 2010
(In thousands, except per share amounts)
	Historical (1)			EMS (2)			Pro Forma Adjustments		Pro Forma CTS
Net sales	$	552,641		$	269,781		$	-	$	282,860
Costs and expenses:
Cost of goods sold		432,731			247,126			-		185,605
Insurance recovery for business interruption - casualties		-			-			-		-
Selling, general and administrative expenses		72,310			17,679			-		54,631
Research and development expenses		18,313			-			-		18,313
Insurance recovery for property damage - casualties		-			-			-		-
Restructuring and impairment charge		1,444			434			-		1,010
Gain on sale-leaseback		-			-			-		-
Operating earnings/(loss)		27,843			4,542			-		23,301
Other (expense)/income:
Interest expense, net		(689	)		(58	)		-		(631	)
Other income/(expense)		872			1,651			-		(779	)
Total other income/(expense)		183			1,593			-		(1,410	)
Earnings before income taxes		28,026			6,135			-		21,891
Income tax expense		5,988			539			-		5,449
Net earnings	$	22,038		$	5,596		$	-	$	16,442
Net earnings per share:
Basic	$	0.65							$	0.48
Diluted	$	0.63							$	0.47
Average common shares outstanding:
Basic		34,090								34,090
Diluted		34,849								34,849
(1) As reported in CTS Corporation and Subsidiaries audited financial statements contained in its Annual Report on Form 10-K for the Year Ended December 31, 2010.
(2) Derived from EMS Segment reported numbers contained in CTS Corporation and Subsidiaries Annual Report on Form 10-K for the Year Ended December 31, 2010 adjusted by $7,042 for certain corporate charges that could not be supportable and directly attributable to the transaction.

CTS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2013
(In thousands of dollars)
	Historical (1)	EMS (2)	Pro Forma Adjustments			Pro Forma CTS
Assets
Current Assets
Cash and cash equivalents	$         86,044	$              -	$        73,100	(a)		$           159,144
Accounts receivable, net	93,908	28,339	-			65,569
Inventories	85,160	51,778	-			33,382
Other current assets	28,955	6,824	-			22,131
Total current assets	294,067	86,941	73,100			280,226
Property, plant & equipment, net	91,068	14,640	-			76,428
Deferred income taxes	61,209	219	-			60,990
Other assets	82,329	5,132	-			77,197
Total Assets	$        528,673	$        106,932	$        73,100		$	494,841
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable	70,694	26,068	-			44,626
Other accrued liabilities	46,786	11,847	2,338	(b)		37,277
Total current liabilities	117,480	37,915	2,338			81,903
Long-term debt	129,500	-	-			129,500
Other obligations	20,066	17	-			20,049
Shareholders' Equity
Preferred stock - authorized 25,000,000 shares without par value; non issued	-	-	-			-
Common stock - authorized 75,000,000 shares without par value; 55,672,410
shares issued at June 30, 2013	296,102	28	28			296,102
Additional contributed capital	38,952	63,623	63,623			38,952
Retained earnings	357,681	5,349	7,111			359,443
Accumulated other comprehensive loss	(118,657)	-	-			(118,657)
	574,078	69,000	70,762			575,840
Cost of common stock held in treasury (2013 - 21,980,159)	(312,451)	-	-			(312,451)
Total shareholders' equity	261,627	69,000	70,762	(b)		263,389
Total Liabilities and Shareholders' Equity	$        528,673	$        106,932	$        73,100		$	494,841
(1) As reported in CTS Corporation and Subsidiaries unaudited financial statements contained in its Quarterly Report on Form 10-Q as of June 30, 2013.
(2) Derived from EMS Segment reported numbers contained in CTS Corporation and Subsidiaries Quarterly Report on Form 10-Q as of June 30, 2013 adjusted for assets and liabilities excluded from the stock purchase agreement.

 

UNAUDITED PRO FORMA CONDENSED BALANCE SHEET

NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS

Pro forma adjustments reflect only those adjustments which are supportable and directly attributable to the transaction

and do not include the impact of contingencies.  Pro forma adjustments include the following ($ in thousands):

(a) To record cash proceeds of $75,000 net of transaction costs of $1,900 for the sale of the EMS business.

(b) Adjustment to Equity of $73,100 consists of net assets of EMS sold to Benchmark Electronics, Inc. of

    $69,000 and the estimated gain on sale of net assets of $4,100 (net of taxes of $2,338). The gain is derived from

    the June 30, 2013 pro forma statements, the most recently available financial information.