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 4, 2020

CTS CORPORATION

(Exact Name of Registrant as Specified in its Charter)

IN	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 2.02     Results of Operations and Financial Condition.

On February 4, 2020, CTS Corporation (the "Registrant") issued a press release providing certain results for the quarter and year ended December 31, 2019, as more fully described in the press release. A copy of the press release is attached hereto as Exhibit 99.l and is incorporated by reference herein.

The information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.l hereto, is being "furnished" to the Securities and Exchange Commission and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act" ) or otherwise subject to the liabilities of that section. Furthermore, the information contained in Item 2.02 of this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any filing made by the Registrant under the Securities Act of 1933 or the Exchange Act, except as set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit	Description
99.1	Press Release dated February 4, 2020
104	Cover Page Interactive Data File (embedded within the Inline XBRL 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: February 4, 2020		CTS CORPORATION
	By:	/s/ William M. Cahill
		William M. Cahill
		Chief Accounting Officer
		(Principal Accounting Officer)

EX-99.1

	Press Release
February 4, 2020	FOR IMMEDIATE RELEASE

CTS Announces Fourth Quarter and Full Year 2019 Results

Addressing performance in a challenging market

Lisle, Ill. - CTS Corporation (NYSE: CTS) today announced fourth quarter and full year 2019 results.

Fourth Quarter 2019 Results

• Sales were $115.0 million, down 4.2% year-over-year. Sales to transportation customers declined 11.0%, and sales to other end markets grew 7.9%. The QTI acquisition added $5.6 million of sales in the fourth quarter of 2019.

• Net earnings were $10.1 million or $0.31 per diluted share versus $17.6 million or $0.52 last year.

• Adjusted diluted EPS was $0.37 compared to $0.41 in the fourth quarter of 2018.

Full Year 2019 Results

• Sales were $469.0 million, essentially flat to 2018. Sales to transportation customers declined 0.4%, and sales to other end markets decreased 0.2%. The QTI acquisition added $9.3 million of sales in 2019.

• Net earnings were $36.1 million or $1.09 per diluted share versus $46.5 million or $1.39 last year.

• Adjusted diluted EPS was $1.45 compared to $1.53 in 2018.

• Free cash flow was $42.7 million, up 44% from $29.7 million in 2018.

• Total booked business grew $16 million in 2019 to $1.88 billion.

“2019 was a challenging year driven by market softness. We took actions to reduce operating expenses and improve our performance. We also delivered strong growth in cash flow,” said Kieran O’Sullivan, CEO of CTS Corporation. “We anticipate a soft first half of 2020, with improvement in market conditions in the second half of the year. Our strategic priorities remain the same, driving profitable growth, margin improvement and advancing our end market profile.”

2020 Guidance

Full year 2020 sales are expected to be in the range of $450 to $480 million. Adjusted earnings per diluted share for 2020 are expected to be in the range of $1.35 to $1.60.

www.ctscorp.com

Conference Call

As previously announced, the Company has scheduled a conference call at 11:00 a.m. (EST) today to discuss the fourth quarter and full year financial results. The dial-in number is 800-309-1256 (720-543-0314, if calling from outside the U.S.). The passcode is 488435. There will be a replay of the conference call from 2:00 p.m. (EST) today through 2:00 p.m. (EST) on Tuesday, February 18, 2020. The telephone number for the replay is 888-203-1112 (719-457-0820, if calling from outside the U.S.). The replay passcode is 6906039. A live audio webcast of the conference call will be available and can be accessed directly from the Investors section of the website of CTS Corporation at www.ctscorp.com.

About CTS

CTS (NYSE: CTS) is a leading designer and manufacturer of products that Sense, Connect, and Move. The company manufactures sensors, actuators, and electronic components in North America, Europe, and Asia, and provides engineered products to customers in the aerospace/defense, industrial, medical, telecommunications/IT, and transportation markets.

For more information, visit www.ctscorp.com.

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. 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.

Contact

Ashish Agrawal

Vice President and Chief Financial Officer

CTS Corporation

4925 Indiana Avenue

Lisle, IL 60532

USA

Telephone: +1 (630) 577-8800

E-mail: ashish.agrawal@ctscorp.com

###

www.ctscorp.com

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OFEARNINGS - UNAUDITED

(In thousands of dollars, except per share amounts)

	Three Months Ended						Twelve Months Ended
	December 31,			December 31,			December 31,			December 31,
	2019			2018			2019			2018
Net sales	$	115,040		$	120,073		$	468,999		$	470,483
Cost of goods sold	76,340			77,428			311,424			305,100
Gross Margin	38,700			42,645			157,575			164,973
Selling, general and administrative expenses	18,037			18,128			70,408			73,569
Research and development expenses	6,113			5,804			25,967			25,304
Restructuring charges	2,111			1,698			7,448			5,062
Loss (gain) on sale of assets	48			(2		)	(63		)	—
Operating earnings	12,391			17,017			53,815			61,038
Other (expense) income:
Interest expense	(903		)	(484		)	(2,648		)	(2,085		)
Interest income	341			459			1,737			1,826
Other income (expense), net	1,008			(119		)	(2,638		)	(2,676		)
Total other income (expense), net	446			(144		)	(3,549		)	(2,935		)
Earnings before income taxes	12,837			16,873			50,266			58,103
Income tax expense (benefit)	2,775			(691		)	14,120			11,571
Net earnings	$	10,062		$	17,564		$	36,146		$	46,532
Earnings per share:
Basic	$	0.31		$	0.53		$	1.11		$	1.41
Diluted	$	0.31		$	0.52		$	1.09		$	1.39
Basic weighted – average common shares outstanding:	32,554			32,983			32,700			33,024
Effect of dilutive securities	416			562			405			545
Diluted weighted – average common shares outstanding:	32,970			33,545			33,105			33,569
Cash dividends declared per share	$	0.04		$	0.04		$	0.16		$	0.16

www.ctscorp.com

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

	(Unaudited)
	December 31,			December 31,
	2019			2018
ASSETS
Current Assets
Cash and cash equivalents	$	100,241		$	100,933
Accounts receivable, net	78,008			79,518
Inventories, net	42,237			43,486
Other current assets	16,992			15,422
Total current assets	237,478			239,359
Property, plant and equipment, net	105,038			99,401
Operating lease assets, net	24,644			—
Other Assets
Prepaid pension asset	62,082			54,100
Goodwill	106,056			71,057
Other intangible assets, net	85,215			60,180
Deferred income taxes	19,795			22,201
Other	3,046			2,043
Total other assets	276,194			209,581
Total Assets	$	643,354		$	548,341
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	48,219		$	51,975
Operating lease obligations	2,787			—
Accrued payroll and benefits	9,564			14,671
Accrued expenses and other liabilities	36,378			37,347
Total current liabilities	96,948			103,993
Long-term debt	99,700			50,000
Long-term operating lease obligations	24,926			—
Long-term pension and other post-retirement obligations	6,632			6,510
Deferred income taxes	5,637			3,990
Other long-term obligations	4,292			5,919
Total Liabilities	238,135			170,412
Commitments and Contingencies
Shareholders’ Equity
Common stock	307,932			306,697
Additional contributed capital	43,689			42,820
Retained earnings	509,766			478,847
Accumulated other comprehensive loss	(91,726		)	(97,739		)
Total shareholders’ equity before treasury stock	769,661			730,625
Treasury stock	(364,442		)	(352,696		)
Total shareholders’ equity	405,219			377,929
Total Liabilities and Shareholders’ Equity	$	643,354		$	548,341

www.ctscorp.com

CTS CORPORATION AND SUBSIDIARIES

OTHER SUPPLEMENTAL INFORMATION - UNAUDITED

Earnings Per Share

The following table reconciles GAAP diluted earnings per share to adjusted diluted earnings per share for the Company:

	Three Months Ended						Twelve Months Ended
	December 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
GAAP diluted earnings per share	$	0.31		$	0.52		$	1.09		$	1.39
Tax affected charges to reported diluted earnings per share:
Restructuring charges	0.05			0.04			0.18			0.12
Foreign currency (gain) loss	(0.03		)	—			0.05			0.06
Costs of tax improvement initiatives	—			—			—			0.03
Environmental charges	0.05			—			0.05			0.02
Non-cash pension expense	0.01			—			0.02			—
Legal settlement	(0.01		)	—			(0.01		)	—
Decrease in foreign valuation allowances	—			(0.03		)	—			(0.03		)
Transaction costs	—			—			0.02			—
Discrete tax items	(0.01		)	(0.10		)	0.05			(0.04		)
Tax impact related to Tax Cuts and Job Acts	—			(0.02		)	—			(0.02		)
Adjusted diluted earnings per share	$	0.37		$	0.41		$	1.45		$	1.53

Additional Information

The following table includes other financial information not presented in the preceding financial statements.

	Three Months Ended				Twelve Months Ended
	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
Depreciation and amortization expense	$	6,581	$	6,165	$	24,619	$	22,514
Stock-based compensation expense	$	1,065	$	1,152	$	5,015	$	5,256

www.ctscorp.com

Non-GAAP Financial Measures

Adjusted earnings per share is a non-GAAP financial measure. The most directly comparable GAAP financial measure is diluted earnings per share.

CTS adjusts for these items because they are discrete events, which have a significant impact on comparable GAAP financial measures and could distort an evaluation of our normal operating performance.

CTS uses an adjusted earnings per share measure to evaluate overall performance, establish plans and perform strategic analysis. Using this measure avoids distortion in the evaluation of operating results by eliminating the impact of events which are not related to normal operating performance. Because this measure is based on the exclusion or inclusion 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 this measure is useful to its management, investors and stakeholders in that it:

• provides a meaningful measure of CTS' operating performance,

• reflects the results used by management in making decisions about the business, and

• helps review and project CTS' performance over time.

We recommend that investors consider both actual and adjusted measures in evaluating the performance of CTS with peer companies.

www.ctscorp.com

XML

Cover Document	Feb. 04, 2020
Cover page.
Amendment Flag	false
Entity Central Index Key	0000026058
Title of 12(b) Security	Common Stock, no par value
Entity Address, Address Line One	4925 Indiana Avenue
Entity Address, City or Town	Lisle
Entity Address, State or Province	IL
Entity Incorporation, State or Country Code	IN
Entity File Number	1-4639
Document Type	8-K
Document Period End Date	Feb. 04, 2020
Entity Registrant Name	CTS CORPORATION
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
Entity Emerging Growth Company	false
Entity Tax Identification Number	35-0225010
Entity Address, Postal Zip Code	60532
Trading Symbol	CTS
Security Exchange Name	NYSE