8-K

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):  August 1, 2019

CTS CORPORATION

(Exact Name of Registrant as Specified in its Charter)

Indiana	1-4639	35-0225010
(State or other jurisdiction  of incorporation)	(Commission File Number)	(1.R.S. Employer Identification No)

4925 Indiana Avenue
Lisle,	IL	60532
(Address of principal executive offices)		(Zip Code)

Registrant's Telephone Number, Including Area Code: (630) 577-8800

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:

☐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 240.14a12)

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act ( 17 CFR 240. l 4d2(b)) 

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

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, no par value	CTS	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).            

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 7.01     Regulation FD Disclosure.

The investor presentation included as Exhibit 99.1 to this report may be presented at meetings with investors, analysts, and others, in whole or in part and possibly with modifications, during the fiscal year ended December 31, 2019. 

The investor presentation includes financial information not prepared in accordance with generally accepted accounting principles (“GAAP”). A reconciliation of the non-GAAP financial measures to the most directly comparable financial measures prepared in accordance with generally accepted accounting principles, as required by Regulation G, is available within Exhibit 99.1 and on our website at www.ctscorp.com. The Company believes that the non-GAAP financial measures provide investors additional ways to view our operations which we believe provide a more complete understanding of our business than could be obtained absent these disclosures. We believe the non-GAAP financial measures also provide investors a useful tool to assess shareholder value.

By filing this Current Report on Form 8-K and furnishing the information contained herein, the Company makes no admission as to the materiality of any information in this report that is required to be disclosed solely by reason of Regulation FD. 

The information contained in the investor presentation is summary information that is intended to be considered in the context of the Company's Securities and Exchange Commission (“SEC”) filings and other public announcements that the Company may make, by press release or otherwise, from time to time. The Company undertakes no duty or obligation to publicly update or revise the information contained in this report, although it may do so from time to time as its management believes is warranted.  Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.

The information presented in Item 7.01 of this Current Report on Form 8-K and Exhibit 99.1 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, unless the Company specifically states that the information is to be considered “filed” under the Exchange Act or specifically incorporates it by reference into a filing under the Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit	Description
99.1	Investor Presentation dated August 2019
101.INS	XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

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.

Date: August 1, 2019		CTS CORPORATION
	By:	/s/ William M. Cahill
		William M. Cahill
		Chief Accounting Officer

EX-99.1

Investor Presentation August 2019

Forward Looking Statements This presentation 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; unanticipated developments that could occur with respect to contingencies such as litigation and environmental matters as well as any product liability claims; 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 1A. of CTS’ 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. The information provided in this presentation includes certain non-GAAP financial measures. These non-GAAP financial measures should not be considered in isolation or a substitute for the comparable GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is included in the Appendix of this presentation. 2

Solid Foundation With Opportunities For Growth We aim to be a leading provider of sensing and motion devices as well as connectivity components, enabling an intelligent and seamless world. Telecom Aero & & IT Europe Defense 14% 4% Medical 6% 8% North America 56% Asia $477 30% 17% Million Industrial 65% Sales/Technical Office Transportation Manufacturing Facility Note: Sales by region and end market based on trailing twelve months sales as of June 30, 2019 3

Broad Product Portfolio Around Targeted Strategy ▪ Controls ▪ EMI/RFI Filters ▪ Piezoelectric ▪ Pedals ▪ Frequency Control Products ▪ Piezoelectric Products ▪ Rotary Actuators Products ▪ RF Filters ▪ Sensors ▪ Specialty Capacitors ▪ Switches ▪ Specialty Resistors ▪ Transducers 4

156% Shareholder Return from 2012 to 2018 vs. 76% for S&P 500 $1.88 Billion 7.5% CAGR 9.4% to 19.6% Total Booked EBITDA Margin Sales Growth Business Expansion ▪ New business award tracking ▪ End market share gains ▪ Operational excellence ▪ Total booked business tracking ▪ New product introductions ▪ Best cost footprint ▪ Incentive structure aligned ▪ CTG single crystal acquisition ▪ Cost savings initiatives with performance ▪ Noliac acquisition ▪ Prudent expense management Note: Shareholder Return from December 31, 2012 through December 31, 2018 Sales and EBITDA comparison for continuing operations from 2012 to 2018 5

Transportation Market Sectors Electric/Hybrid Commercial Light Vehicles Motorcycles Relevant Products Vehicles Vehicles/Off-Road Key Customers ▪ Accelerator Pedal ▪ Chassis Height Sensor ▪ DPF RF Sensor ▪ Throttle Sensor ▪ Turbo Actuator 6

Industrial Market Sectors Inkjet Print Heads HVAC Systems Commercial Sonar Flow Metering Relevant Products Key Customers ▪ Piezoelectric Components ▪ Transducers ▪ Sensors & Controls ▪ Switches ▪ EMI/RFI Filters 7

Medical Market Sectors Ultrasonic Imaging Therapeutic Ultrasound Dental Equipment Equipment Control Panel Relevant Products Key Customers ▪ Piezoelectric Components ▪ Sensors & Controls ▪ Switches ▪ Frequency Control ▪ EMI/RFI Filters 8

Aero & Defense Market Sectors Torpedo/Missile Airplane Sonobuoys Hydrophones Relevant Products Control Communications Key Customers ▪ Piezoelectric Components ▪ Transducers ▪ RF Filters ▪ EMI/RFI Filters ▪ Frequency Control 9

Telecom & IT Market Sectors Macro Cell Small Cell Satellite Wireline/ Relevant Products Base Stations Base Stations Communication Network Switching Key Customers ▪ Piezoelectric Components ▪ RF Filters ▪ EMI/RFI Filters ▪ Frequency Control 10

End Markets Growing Mid-Single Digits Transportation Industrial Medical Aero & Defense Telecom & IT 6% 4% 8% 17% 65% Goal 30-50% 20-30% 10-20% 5-15% 10-20% SAM $3.3B $1.7B $0.2B $0.7B $1.8B ▪ Booked Business, Share Gains ▪ 3D and textile printing ▪ Medical 3D/4D ultrasound ▪ Hydrophones for sonar ▪ 5G infrastructure build out – applications massive MIMO and small cell ▪ Actuators – Asia/EU customers ▪ Applications in flow and level ▪ HMI control for medical devices deployment sensing ▪ Military communication ▪ RF Sensing for particulate filters ▪ Wireless pacing ▪ High-speed wireline networks - $150m SAM by 2025 ▪ Up-integration into sensors ▪ Up-integration into sensors and transducers ▪ Ultrasound-based drug delivery and transducers ▪ Advanced fingerprint security, ▪ Increased Sensor Content haptics for mobile device ▪ Industrial automation and IOT ▪ Dental and therapeutic ▪ Penetration into European applications ultrasound applications defense market Enhancing Sales And Product Management For Organic Growth 11

Strategic M&A Approach Expand Enhance Broaden Strengthen Product Technology Geographic Customer Range Portfolio Reach Relationships Case Study: Successfully Built Broad Piezoelectric Ceramic Growth Platform Pre 2016 2016 2017 2018+ Bulk Technology Single Crystal Technology Tape Cast Technology Robust Double-Digit Single-Digit Growth Double-Digit Growth Single-Digit Growth Growth Platform SAM : $714M SAM : $46M SAM : $922M $1.7B (>2x SAM ) 12

QTI Sensing Solutions Acquisition Company Overview Acquisition Rationale ▪ Founded in 1977, facilities in Boise, ID and Tecate, Mexico ▪ Provides CTS a new core temperature sensing technology ▪ QTI Sensing Solutions is a leading designer and manufacturer ▪ Increases presence in growing industrial, aerospace, of high-quality temperature sensors serving OEMs in defense and medical end markets industrial, aerospace, defense and medical end markets ▪ Expands OEM customer base and enables cross-selling ▪ QTI has a broad product portfolio to measure temperature in gas, liquid or solid mass to ensure equipment performance ▪ Potential to build a temperature sensing platform and reliability ▪ Global market opportunity of >$1.1 billion ▪ Portfolio includes thermistor and RTD based products Elements Probes Assemblies 13

Balanced Capital Deployment Approach Operating Cash Flow 12-15% of Sales Growth Return Capital to Investment Acquisitions Shareholders ~4% of Sales* 60-80% of Dividends & Buybacks Free Cash Flow 20-40% of Free Cash Flow *6.1% in 2018 5-7% in 2019 Capital Structure Leverage = 1.0x - 2.5x EBITDA 14

Financial Performance Trend and 2019 Guidance Sales Adjusted Earnings Per Share ($ Millions) $490 $1.65 $470 $470 $1.55 $423 $234 $1.53 $397 Booked Business $1.23 $1.08 $238 Q2 YTD Actual $0.79 Q2 YTD Actual 2016 2107 2018 2019E 2016 2017 2018 2019E Note: 2019E represents guidance provided on July 25, 2019. 15

Financial Framework Long-Term 2012 2018 Target Range Gross Margin 30.0% 35.1% 34-37% SG&A Expense 20.7% 15.6% 13-15% R&D Expense 6.9% 5.4% 5-7% CapEx 2.6% 6.1% ~4%* *5-7% in 2019 Targeting 10% Annual Growth (Organic + Inorganic) 16

Well Positioned For Growth Organic Inorganic Healthy Booked Business Strong Cash & Debt Availability ($ Millions) ($ Millions in June 2019) $1,875 +24% $300 Total Facility $1,518 $106 $50 Borrowed Dec 2016 Jun 2019 Cash Debt ▪ Enhance Customer Intimacy ▪ Low leverage, debt-to-equity ratio ▪ Enhance Sales Force Capabilities ▪ Solid pipeline of M&A targets ▪ Enhance Product Management ▪ Disciplined approach focused on strategic fit, ROIC metrics ▪ R&D Investments at 5-7% of Sales 17

Appendix 18

CTS Core Values 19

Financial Summary ($ Millions, except percentages and Adjusted Diluted EPS) Q2 YTD 2019 2018 2017 2016 Net Sales $238.3 $470.5 $423.0 $396.7 Adjusted Gross Margin $81.8 $165.0 $145.2 $140.4 Adjusted Gross Margin % of Sales 34.3% 35.1% 34.3% 35.4% Depreciation and Amortization $11.9 $22.5 $20.7 $19.0 Adjusted EBITDA $46.9 $92.1 $80.0 $77.4 Adjusted EBITDA % of Sales 19.7% 19.6% 18.9% 19.5% Adjusted Diluted EPS $0.79 $1.53 $1.23 $1.08 Operating Cash Flow $24.2 $58.2 $58.0 $47.2 Total Debt / Capitalization 11.2% 11.7% 18.2% 22.1% Note: See Regulation G reconciliations from GAAP to Non-GAAP measures and adjustments. 20

Regulation G Schedules Adjusted Gross Margin ($ Millions, except percentages) Q2 Year-to-Date Full Year 2019 2018 2019 2018 2018 2017 2016 Gross margin $ 41.2 $ 41.8 $ 81.8 $ 80.2 $ 165.0 $ 140.4 $ 140.4 Adjustments to reported gross margin: Pension settlement charge - - - - - 4.8 - Adjusted gross margin $ 41.2 $ 41.8 $ 81.8 $ 80.2 $ 165.0 $ 145.2 $ 140.4 Sales $ 120.7 $ 118.0 $ 238.3 $ 231.6 $ 470.5 $ 423.0 $ 396.7 Adjusted gross margin as a % of sales 34.1% 35.4% 34.3% 34.7% 35.1% 34.3% 35.4% 21

Regulation G Schedules Adjusted EBITDA ($ Millions, except percentages) Q2 Year-to-Date Full Year 2019 2018 2019 2018 2018 2017 2016 Net earnings $ 11.9 $ 7.2 $ 23.4 $ 18.8 $ 46.5 $ 14.4 $ 34.4 Depreciation and amortization expense 6.0 5.5 11.9 11.0 22.5 20.7 19.0 Interest expense 0.5 0.6 0.9 1.1 2.1 3.3 3.7 Tax expense 4.0 4.4 6.9 8.1 11.6 25.8 22.9 EBITDA 22.4 17.6 43.1 38.9 82.7 64.2 80.0 Adjustments to EBITDA: Restructuring charges 0.9 1.2 3.0 2.4 4.6 4.1 3.0 Loss on sale-leaseback - - - - - - 0.1 Loss (gain) on sale of facilities, net of expenses - - - - - 0.7 (11.1) Non-recurring environmental charge - 1.0 - 1.0 1.0 - - Pension settlement charge - - - - - 13.4 - Non-cash pension expense 0.2 - 0.4 - - - - Transaction costs and other one-time costs - - - - - 0.3 0.8 Lease termination charge - - - - - 0.1 0.8 Foreign currency loss (gain) 0.8 2.9 0.4 0.9 2.6 (3.0) 3.8 Non-recurring costs of tax improvement initiatives - 0.5 - 0.8 1.2 0.2 - Total adjustments to reported operating earnings 1.9 5.6 3.8 5.1 9.4 15.8 (2.6) Adjusted EBITDA $ 24.3 $ 23.2 $ 46.9 $ 44.0 $ 92.1 $ 80.0 $ 77.4 Sales $ 120.7 $ 118.0 $ 238.3 $ 231.6 $ 470.5 $ 423.0 $ 396.7 Adjusted EBITDA as a % of sales 20.2% 19.6% 19.7% 19.0% 19.6% 18.9% 19.5% 22

Regulation G Schedules Adjusted Diluted EPS Q2 Year-to-Date Full Year 2019 2018 2019 2018 2018 2017 2016 Diluted earnings per share $ 0.36 $ 0.21 $ 0.70 $ 0.56 $ 1.39 $ 0.43 $ 1.03 Tax affected adjustments to reported diluted earnings per share: Restructuring charges 0.02 0.03 0.07 0.06 0.12 0.08 0.06 Increase in valuation allowance and revaluation of deferred taxes as a result of restructuring activities - - - - - - 0.07 Loss (gain) on sale of facilities, net of expenses - - - - - 0.01 (0.22) Non-recurring environmental charge - 0.02 - 0.02 0.02 - - Pension settlement charge - - - - - 0.26 - Non-cash pension expense - - 0.01 - - - - Transaction costs and other one-time costs - - - - - 0.01 0.02 Lease termination charge - - - - - - 0.02 Foreign currency loss (gain) 0.02 0.07 0.01 0.02 0.06 (0.07) 0.09 (Decrease) increase in recognition of valuation allowances - - - - (0.03) (0.05) 0.03 Tax impact of non-recurring stock compensation charge - - - - - - (0.02) Tax impact of U.S. tax reform - - - - (0.02) 0.54 - Tax impact of other foreign taxes - - - - - 0.02 - Discrete tax items - 0.05 - 0.05 (0.04) - - Non-recurring costs of tax improvement initiatives - 0.01 - 0.02 0.03 - - Adjusted diluted earnings per share $ 0.40 $ 0.39 $ 0.79 $ 0.73 $ 1.53 $ 1.23 $ 1.08 Total Debt to Capitalization Q2 As of December 31 ($ Millions, except percentages) 2019 2018 2018 2017 2016 Total debt (A) $ 50.0 $ 57.0 $ 50.0 $ 76.3 $ 90.1 Total shareholders' equity(B) $ 395.5 $ 363.8 $ 377.9 $ 343.8 $ 317.9 Total capitalization (A+B) $ 445.5 $ 420.8 $ 427.9 $ 420.1 $ 408.0 Total debt to capitalization 11.2% 13.5% 11.7% 18.2% 22.1% 23

XML

Cover Page .	Aug. 01, 2019
8K Cover Page [Abstract]
Document Type	8-K
Document Period End Date	Aug. 01, 2019
Entity Registrant Name	CTS CORPORATION
Entity Incorporation, State or Country Code	IN
Entity File Number	1-4639
Entity Tax Identification Number	35-0225010
Entity Address, Address Line One	4925 Indiana Avenue
Entity Address, Address Description	Lisle,
Entity Address, State or Province	IL
Entity Address, Postal Zip Code	60532
City Area Code	630
Local Phone Number	577-8800
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, no par value
Trading Symbol	CTS
Security Exchange Name	NYSE
Entity Emerging Growth Company	false
Entity Central Index Key	0000026058
Amendment Flag	false