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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For Fiscal Year Ended December 31, 1994
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number: 1-4639
CTS CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-0225010
(State or other jurisdiction of (IRS Employer Identifi-
incorporation or organization) cation Number)
905 West Boulevard North, Elkhart, Indiana 46514
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 219-293-7511
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common stock, without par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant has: (1) filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
X
There were 5,193,854 shares of Common Stock, without par value,
outstanding on March 10, 1995.
The aggregate market value of the voting stock held by non-affiliates
of CTS Corporation was approximately $80 million on March 10, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the CTS Corporation 1994 Annual Report for
the fiscal year ended December 31, 1994, incorporated by
reference in Part I and Part II.
(2) Portions of the 1995 Proxy Statement for annual meeting
of stockholders to be held on April 28, 1995,
incorporated by reference in Part III.
(3) Certain portions of the CTS Corporation Form 10-K for the
1987 fiscal year ended January 3, 1988, incorporated by
reference in Part IV.
(4) Certain portions of Registration Statement No. 33-27749,
effective March 23, 1989, incorporated by reference in
Part IV.
(5) Certain portions of the 1989 Proxy Statement for annual
meeting of stockholders held April 28, 1989, incorporated
by reference in Part IV.
(6) Certain portions of the CTS Corporation Form 10-K for the
1989 fiscal year ended December 31, 1989, incorporated by
reference in Part IV.
(7) Certain portions of the CTS Corporation Form 10-K for the
1991 fiscal year ended December 31, 1991, incorporated by
reference in Part IV.
(8) Certain portions of the CTS Corporation Form 10-K for the
1992 fiscal year ended December 31, 1992, incorporated by
reference in Part IV.
EXHIBIT INDEX -- PAGES 17 AND 18
Part I
Item 1. Business
INTRODUCTION AND GENERAL DEVELOPMENT OF BUSINESS
The registrant, CTS Corporation (CTS or Company), is an Indiana
corporation incorporated in 1929 as a successor to a company
started in 1896. CTS' principal executive offices are located at
905 West Boulevard North, Elkhart, Indiana 46514, telephone number
(219) 293-7511.
CTS designs, manufactures and sells electronic components. The
engineering and manufacturing of CTS products is performed at 16
facilities worldwide. CTS products are sold through sales
engineers, sales representatives, agents and distributors.
In March 1987, a settlement was announced between CTS and Dynamics
Corporation of America (DCA), terminating the sale process of the
Company and resolving all disputes between CTS and DCA.
Subsequently, the United States Supreme Court held that the Control
Share Acquisition Chapter of the Indiana Business Corporation Law
was constitutional. As a result of the Court's decision, the issue
of voting rights of 1,020,000 shares of CTS common stock acquired
by DCA in 1986 was submitted to a vote of CTS stockholders at the
1987 annual meeting. The affirmative vote of the majority of all
shares eligible to vote was necessary to grant voting rights. DCA
was not eligible to vote on the issue. The stockholders voted not
to grant voting rights to DCA on these shares. The Court's
decision did not have an impact on the voting rights in additional
shares of CTS common stock previously or subsequently acquired by
DCA. In May 1988, the settlement agreement expired pursuant to its
terms. At the end of 1994, DCA owned 2,222,100 shares (42.9%) of
CTS common stock, including the 1,020,000 shares without voting
rights.
In January 1990, the Company formally announced the closing of its
Switch Division located in Paso Robles, California. The Paso Robles
manufacturing operations were relocated to the Company's facilities
in Taiwan and Bentonville, Arkansas. During 1992, the Company
completed the sale of the Paso Robles manufacturing plant and most
of the associated real estate for $1.9 million. A pretax-tax gain
of $0.9 was realized from the sale. The manufacturing operations
for certain variable resistor and selector switch products, which
formerly were performed in Elkhart, Indiana, were also transferred
to Bentonville in 1990, to take advantage of any efficiencies to be
gained in consolidating such operations in Bentonville. The
buildings located in Elkhart which housed the plastics molding, and
element production, were vacated, with these manufacturing
operations being consolidated into the main Elkhart plant.
CTS announced in July 1990 that its facility near Glasgow,
Scotland, would be expanded in order to manufacture and sell
additional electronic products in Europe. The total capital
investment has been approximately $11 million as of December 31,
1994. Automotive throttle position sensors and precision and clock
oscillators were added to the product lines already manufactured in
Scotland. The decision to expand the Scottish facility was based
on several factors, including the excellent business climate and
skills base in Scotland and the anticipated full participation of
the United Kingdom in the European Economic Community. The
expansion of the Scotland facility represents a major effort by CTS
to serve the large and rapidly growing European market on a direct
basis.
In November 1991, construction was completed on a 53,000 square
foot manufacturing facility in Bangkok, Thailand. During 1992, the
Company idled operations at this facility. During 1994, a three-
year lease was finalized with an international computer peripheral
manufacturer for this property. The annual rental amount is
approximately U.S. $345,000.
Also during 1991, the Company significantly reduced the operating
activities at its Brownsville, Texas, facility and plans to sell
this property. A portion of the Brownsville facility is currently
under a leasing arrangement which expires in 1999, at an annual
rental amount of approximately $60,000.
The manufacturing space owned by CTS in Hong Kong, which consisted
of two floors in a multi-story building, was sold in March 1991.
One floor was leased back by CTS for the continuation of its
manufacturing operations in Hong Kong. During 1992, the Company
terminated this lease and discontinued its manufacturing operations
in Hong Kong.
During 1994, the Company purchased the assets of AT&T
Microelectronics' light emitting diode based optic data link
products business. The transaction also included sales contracts,
backlog, intellectual property, trademarks, and the design and
manufacturing technology. These products will be manufactured in
the Microelectronics West Lafayette, Indiana, facility.
FINANCIAL INFORMATION ON INDUSTRY SEGMENTS
All of the Company's products are considered one industry segment.
Sales to unaffiliated customers, operating profit and identifiable
assets, by geographic area, are contained in "Note I - Business
Segment and Non-U.S. Operations," pages 21-23, of the CTS
Corporation 1994 Annual Report, and is incorporated herein by
reference.
PRINCIPAL BUSINESS AND PRODUCTS OF CTS
CTS is primarily in the business of developing, manufacturing and
selling a broad line of electronic components principally serving
the electronic needs of original equipment manufacturers (OEMs).
The Company sells classes of similar products consisting of the
following:
Automotive control devices Loudspeakers
Electronic connectors Programmable switches
Frequency control devices Resistor networks
Hybrid microcircuits Selector switches
Industrial electronics Variable resistors
Most products within these product classes are manufactured by CTS
from purchased raw materials or subassemblies. Some products sold
by CTS are purchased and resold under the Company's name.
During the past three years, five classes of similar product lines
accounted for 10% or more of consolidated revenue during one or
more years, as follows:
Percent of Consolidated Revenue
Class of Similar Products 1994 1993 1992
Automotive Control Devices 30 26 20
Electronic Connectors 17 14 17
Frequency Control Devices 15 15 17
Resistor Networks 11 14 16
Hybrid Microcircuits 10 14 11
Other 17 17 19
Total 100% 100% 100%
MARKETS
CTS estimates that its products have been sold in the following
segments of the electronics OEM and distribution markets and in the
following percentages during the preceding three fiscal years:
Percent of Consolidated Revenue
Markets 1994 1993 1992
Automotive 38 32 25
Data Processing 17 22 20
Communications Equipment 17 17 18
Defense and Aerospace 11 12 17
Instruments and Controls 9 9 12
Distribution 5 4 5
Consumer Electronics 3 4 3
Total 100% 100% 100%
Products for the automotive market include throttle position
sensors, switch assemblies for operator interface, exhaust gas
recirculation subsystems, variable resistors and switches for
automotive entertainment systems and other applications, and
loudspeakers.
Products for the data processing market include resistor networks,
frequency control devices, programmable switches and hybrid
microcircuits. Products for this market are principally used in
computers and computer peripheral equipment.
In the communications equipment market, CTS products include
frequency control devices, hybrid microcircuits, switches and
resistor networks. Products for this market are principally used
in telephone equipment and in telephone switching systems.
CTS products for the defense and aerospace market, usually procured
through government contractors or subcontractors, are electronic
connectors, hybrid microcircuits, backpanels, frequency control
devices and programmable key storage devices.
Products for the instruments and controls market include hybrid
microcircuits, variable resistors and switches. Principal end uses
are medical electronic devices and electronic testing, measuring
and servicing instruments.
In the distribution market, CTS' primary products include program-
mable switches, resistor networks and frequency control devices.
In this market, standard CTS products are sold for a wide variety
of applications.
Products for the consumer electronics market, primarily variable
resistors and switches, are principally used in home entertainment
equipment and appliances.
MARKETING AND DISTRIBUTION
Sales of CTS electronic components to original equipment
manufacturers are principally by CTS sales engineers and
manufacturers' representatives. CTS maintains sales offices in
Elkhart, Indiana; Detroit, Michigan; and in the United Kingdom,
Hong Kong, Taiwan and Japan. Various regions of the United States
are serviced by sales engineers working out of their homes. The
sale of electronic components is relatively integrated such that
most of the product lines of CTS are sold through the same field
sales force. Approximately 40% of net sales in 1994 were
attributable to coverage by CTS sales engineers.
Generally, CTS sales engineers service the Company's largest
customers with application specific products. CTS sales engineers
work closely with major customers in determining customer require-
ments and in designing CTS products to be provided to such
customers.
CTS uses the services of independent sales representatives and
distributors in the United States and other countries for customers
not serviced by CTS sales engineers. Sales representatives receive
commissions from CTS. During 1994, about 55% of net sales were at-
tributable to coverage by sales representatives. Independent
distributors purchase products from CTS for resale to customers.
In 1994, independent distributors accounted for about 5% of net
sales.
RAW MATERIALS
Generally, CTS' major raw materials are steel, copper, brass,
certain precious metals, resistive and conductive inks, passive
components and semiconductors, used in several CTS products;
ceramic materials used particularly in resistor networks and hybrid
microcircuits; synthetic quartz used in frequency control devices;
and laminate material used in printed circuit boards. These raw
materials are purchased from several vendors, and except for
certain semiconductors, CTS does not believe that it is dependent
on one or on a very few vendors. In 1994, all of these materials
were available in adequate quantities to meet CTS' production
demands.
The Company does not presently anticipate any raw material short-
ages which would significantly affect production. However, the
lead times between the placement of orders for certain raw mater-
ials and actual delivery to CTS are quite variable, and the Company
may from time to time be required to order raw materials in
quantities and at prices less than optimal to compensate for the
variability of lead times for delivery.
Precious metals prices have a significant effect on the manufactur-
ing cost and selling prices of many CTS products, particularly some
programmable switches, electronic connectors and resistor networks.
CTS has continuing programs to reduce the precious metals content
of several products, when consistent with customer specifications.
WORKING CAPITAL
CTS does not usually buy inventories or manufacture products
without actual or reasonably anticipated customer orders, except
for some standard, off-the-shelf distributor products. The Company
is not generally required to carry significant amounts of inven-
tories to meet rapid delivery requirements because most customer
orders are for custom products. CTS has entered into "just-in-
time" arrangements with certain major customers in order to meet
customers' just-in-time delivery needs.
CTS carries raw materials, including certain semiconductors, and
certain work-in-process and finished goods inventories which are
unique to a particular customer or to a small number of customers,
and in the event of reductions in or cancellations of orders, some
inventories are not useable or cannot be returned to vendors for
credit. CTS generally imposes charges for the reduction or
cancellation of orders by customers, and these charges are usually
sufficient to cover the financial exposure of CTS to inventories
which are unique to a customer. CTS does not customarily grant
special return privileges or payment privileges to customers,
although CTS' distributor program permits certain returns. CTS'
working capital requirements are generally cyclical but not
seasonal.
Working capital requirements are generally dependent on the overall
business level. During 1994, working capital increased
significantly to $65.9 million, as receivables and inventories
increased in response to the greater sales. Also, short-term debt
was reduced, generally being replaced by long-term obligations at
relatively more favorable borrowing rates. Cash represents a
significant part of the Company's working capital. Cash of various
non-U.S. subsidiaries was held in U.S.-denominated cash equivalents
at December 31, 1994. The cash, other than approximately $4.6
million, is generally available to the parent Company.
PATENTS, TRADEMARKS AND LICENSES
CTS maintains a program of obtaining and protecting U.S. and non-
U.S. patents and trademarks. CTS believes that the success of its
business is not materially dependent on the existence or duration
of any patent, group of patents or trademarks.
CTS licenses the manufacture of several electronic products to
companies in the United States and non-U.S. countries. In 1994
license and royalty income was less than 1% of net sales. CTS
believes that the success of its business is not materially
dependent upon any licensing arrangement where CTS is either the
licensor or licensee.
MAJOR CUSTOMERS
CTS' 15 largest customers represented about 62%, 62% and 58% of net
sales in 1994, 1993 and 1992, respectively.
Of the net sales to unaffiliated customers, approximately $49.4
million, $40.1 million and $30.7 million were derived from sales to
General Motors Corporation in 1994, 1993 and 1992, respectively.
During 1993 and 1992, $24.0 million and $19.3 million were derived
from sales to International Business Machines Corporation.
However, during 1994 sales to this customer decreased to $4.4
million. CTS is dependent upon these and other customers for a
significant percentage of its sales and profits, and the loss of
one or more of these customers or reduction of orders by one or
more of these customers could have a materially adverse effect upon
the Company.
BACKLOG OF ORDERS
Backlog of orders does not necessarily provide an accurate indica-
tion of present or future business levels for CTS. For many
electronic products, the period between receipt of orders and
delivery is relatively short. For large orders from major
customers that may constitute backlog over an extended period of
time, production scheduling and delivery are subject to change or
cancellation by the customers on relatively short notice. At the
end of 1994, the Company's backlog of orders was $82.7 million,
compared with $70.5 million at the end of 1993. This increase was
primarily attributable to increased demand from automotive
and microelectronics customers.
The backlog of orders at the end of 1994 will generally be filled
during the 1995 fiscal year.
GOVERNMENT CONTRACTS
CTS believes that about 11% of its net sales are associated with
purchases by the U.S. Government or non-U.S. governments,
principally for defense and aerospace applications. Because most
CTS products procured through government contractors and
subcontractors are for military end uses, the level of defense and
aerospace market sales by CTS is dependent upon government
budgeting and funding of programs utilizing electronic systems.
Almost all CTS sales involving government purchases are to primary
government contractors or subcontractors. CTS is usually subject
to contract provisions permitting termination of the contract,
usually with penalties payable by the government; maintenance of
specified accounting procedures; limitations on and renegotiations
of profits; priority production scheduling; and possible penalties
or fines against CTS for late delivery or substandard quality. Such
contract provisions have not previously resulted in material
uncertainties or disruptions for CTS.
COMPETITION
CTS competes with many domestic and non-U.S. manufacturers prin-
cipally on the basis of product features, price, engineering,
quality, reliability, delivery and service. Most product lines of
CTS encounter significant competition. The number of significant
competitors varies from product line to product line. No single
competitor competes with CTS in every product line, but many com-
petitors are larger and more diversified than CTS. Some com-
petitors are divisions or affiliates of customers. CTS is subject
to competitive risks typical in the electronics industry such as
shorter product life cycles and new products causing existing
products to become obsolete.
Some customers have reduced or plan to reduce the number of
suppliers while increasing the volume of purchases from independent
suppliers. Most customers are demanding higher quality,
reliability and delivery standards from CTS as well as competitors.
These trends may create opportunities for CTS while also increasing
the risk of loss of business to competitors.
The Company believes that it competes most successfully in custom
products manufactured to meet specific applications of major
original equipment manufacturers.
CTS believes that it has some advantages over certain competitors
because of its ability to apply a broad range of technologies and
materials capabilities to develop products for the special require-
ments of customers. CTS also believes that it has an advantage
over some competitors in its capability to sell a broad range of
products manufactured to relatively consistent standards of quality
and delivery. CTS believes that the relative breadth of its
product lines and relative consistency in quality and delivery
across product lines is an advantage to CTS in selling products to
customers.
CTS believes that it is one of the largest manufacturers of
automotive throttle position sensors.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES
Information about revenue from sales to unaffiliated customers,
operating profit and identifiable assets, by geographic area, is
contained in "Note I - Business Segment and Non-U.S. Operations,"
pages 21-23, of the CTS Corporation 1994 Annual Report, and is
incorporated herein by reference.
In 1994, approximately 34% of net sales to unaffiliated customers,
after eliminations, were attributable to non-U.S. operations. This
represents an increase from 28% of net sales attributable to non-
U.S. operations in 1993. About 32% of total CTS assets, after
eliminations, are non-U.S. Except for cash and equivalents, a
substantial portion of these assets cannot readily be liquidated.
CTS believes that the business risks attendant to its present non-
U.S. operations, though substantial, are normal risks for non-U.S.
businesses, including expropriation, currency controls and changes
in currency exchange rates and government regulations.
RESEARCH AND DEVELOPMENT ACTIVITIES
In 1994, 1993 and 1992, CTS spent $7.1, $5.7 and $6.1 million,
respectively, for research and development. Most CTS research and
development activities relate to new product and process develop-
ments or the improvement of product materials. Many such research
and development activities are for the benefit of one or a limited
number of customers or potential customers.
During 1994, except for the purchase of the light emitting diode
based optic data link products assets, the Company did not enter
into any new, significant product lines, but continued to introduce
additional versions of existing products in response to present and
future customer requirements.
ENVIRONMENTAL PROTECTION LAWS
In complying with federal, state and local environmental protection
laws, CTS has modified certain manufacturing processes and expects
to continue to make additional modifications. Such modifications
that have been performed have not materially affected the capital
expenditures, earnings or competitive position of CTS.
Certain processes in the manufacture of the Company's current and
past products create hazardous waste by-products as currently
defined by federal and state laws and regulations. The Company has
been notified by the U.S. Environmental Protection Agency, state
environmental agencies and, in some cases, generator groups, that
it is or may be a Potentially Responsible Party (PRP) regarding
hazardous waste remediation at several non-CTS sites. The factual
circumstances of each site are different; the Company has
determined that its role as a PRP with respect to these sites, even
in the aggregate, will not have a material adverse effect on the
Company's business or financial condition, based on the following:
1) the Company's status as a de minimis party; 2) the large number
of other PRPs identified; 3) the identification and participation
of many larger PRPs who are financially viable; 4) defenses
concerning the nature and limited quantities of materials sent by
the Company to certain of the sites; and 5) the Company's
experience to-date in relation to the determination of its
allocable share. In addition to these non-CTS sites, the Company
has an ongoing practice of providing reserves for probable
remediation activities at certain of its manufacturing locations
and for claims and proceedings against the Company with respect to
other environmental matters. In the opinion of management, based
upon presently available information, either adequate provision for
probable costs has been made, or the ultimate costs resulting will
not materially affect the consolidated financial position or
results of operations of the Company.
There are claims against the Company with respect to environmental
matters which the Company contests. In the opinion of management,
based upon presently available information, either adequate
provision for potential costs has been made, or the costs which
ultimately might result will not materially affect the consolidated
financial position or results of operations of the Company.
EMPLOYEES
CTS employed an average of 4,056 persons during 1994. About 45% of
these persons were employed outside the United States at the end of
1994. Approximately 370 employees in the United States were
covered by collective bargaining agreements as of December 31,
1994. One of the two collective bargaining agreements covering
these employees will expire in 1995. The other agreement will
expire in 1999.
Item 2. Properties
CTS operations or facilities are at the following locations. The
owned properties are not subject to material liens or encumbrances.
Location
Elkhart, IN 521,813 Owned -
Berne, IN 248,726 Owned -
Singapore 158,926 Owned* -
Kaohsiung, Taiwan 132,887 Owned* -
Streetsville,
Ontario, Canada 111,740 Owned -
West Lafayette, IN 105,983 Owned -
Sandwich, IL 94,173 Owned -
Brownsville, TX 84,679 Owned -
Bentonville, AR 72,000 Owned -
Glasgow, Scotland 75,000 Owned -
New Hope, MN 55,000 Leased December
(Science Center Dr.) 1998
Bangkok, Thailand 53,000 Owned -
Matamoros, Mexico 50,590 Owned* -
Baldwin, WI 39,050 Owned -
Cokato, MN 36,000 Owned -
Burlington, WI 5,000 Leased March
1995
TOTAL 1,844,567
* Buildings are located on land leased under renewable leases.
The Company is currently seeking to sell some, or all, of the
Streetsville, Ontario, Canada, facility and related property, and
the Brownsville, Texas, manufacturing building. A portion of the
Brownsville facility is currently under a leasing arrangement which
expires in 1999. The annual rental income is approximately
$60,000. Also, a portion of the New Hope, Minnesota, facility is
currently under a sublease arrangement, which expires in 1998. The
annual rental income is approximately $88,400.
The Company constructed the Bangkok, Thailand, facility during
1991. This facility was idled during 1992 and was idle for all of
1993. During 1994, the Company entered a three-year lease on this
property at an annual rental amount of approximately U.S. $345,000.
The Company regularly assesses the adequacy of its manufacturing
facilities for manufacturing capacity, available labor and location
to the markets and major customers for the Company's products. CTS
also reviews the operating costs of its facilities and may from
time to time relocate facilities or certain manufacturing
activities in order to achieve operating cost reductions and
improved asset utilization and cash flow.
Item 3. Legal Proceedings
Contested claims involving various matters, including environmental
claims brought by government agencies, are being litigated by CTS,
both in legal and administrative forums. In the opinion of
management, based upon currently available information, adequate
provision for potential costs has been made, or the costs which
might ultimately result from such litigation or administrative
proceedings will not materially affect the consolidated financial
position of the Company or the results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 1994, no issue was submitted to a vote
of CTS stockholders.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The principal market for CTS common stock is the New York Stock
Exchange. Information relative to the high and low trading prices
for CTS Common Stock for each quarter of the past two years and the
frequency and amount of dividends declared during the previous two
years can be located in "Stockholder Information," page 10, of the
CTS Corporation 1994 Annual Report, incorporated herein by
reference. On March 10, 1995, there were approximately 1,120
holders of record of CTS common stock.
The Company intends to continue a policy of considering dividends
on a quarterly basis. The declaration of a dividend and the amount
of any such dividend are subject to earnings, anticipated working
capital, capital expenditure and other investment requirements, the
financial condition of CTS and such other factors as the Board of
Directors deems relevant.
Item 6. Selected Financial Data
A summary of selected financial data for CTS, for each of the
previous five fiscal years, is contained in the "Five-Year
Summary," page 11, of the CTS Corporation 1994 Annual Report,
incorporated herein by reference.
Certain divestitures and closures of businesses and certain
accounting changes affect the comparability of information con-
tained in the "Five-Year Summary."
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Information about liquidity, capital resources and results of
operations, for the three previous fiscal years, is contained in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations (1992-1994)," pages 25-27, of the CTS
Corporation 1994 Annual Report, incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Consolidated financial statements, meeting the requirements of
Regulation S-X, and the Report of Independent Accountants, are
contained in pages 12-24 of the CTS Corporation 1994 Annual Report,
incorporated herein by reference. Quarterly per share financial
data is provided in "Stockholder Information," under the
subheadings, "Quarterly Results of Operations" and "Per Share
Data," on page 10 of the CTS Corporation 1994 Annual Report, and is
incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
There were no disagreements.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information responsive to Items 401(a) and 401(e) of Regulation S-K
pertaining to directors of CTS is contained in the 1995 Proxy
Statement under the caption "Election of Directors," page 6, filed
with the Securities and Exchange Commission, and is incorporated
herein by reference.
Information responsive to Item 405 of Regulation S-K pertaining to
compliance with Section 16(a) of the Securities Exchange Act of
1934 is contained in the 1995 Proxy Statement under the caption
"Compliance with Section 16(a) of the Securities Exchange Act of
1934," page 7, filed with the Securities and Exchange Commission,
and is incorporated herein by reference.
The individuals listed were elected as executive officers of CTS at
the annual meeting of the Board of Directors on April 29, 1994, and
are expected to serve as executive officers until the next annual
meeting of the Board of Directors, scheduled on April 28, 1995, at
which time the election of officers will be considered again by the
Board of Directors.
Name Age Position and Offices
Joseph P. Walker 56 Director, Chairman,
President and Chief
Executive Officer
Philip T. Christ 63 Group Vice President
Stanley J. Aris 54 Vice President Finance and
Chief Financial Officer
Jeannine M. Davis 46 Vice President, Secretary
and General Counsel
James L. Cummins 39 Vice President Human Resources
George T. Newhart 52 Corporate Controller
Gary N. Hoipkemier 40 Treasurer
James N. Hufford 55 Vice President Research,
Development and Engineering
Donald R. Schroeder 46 Vice President Sales and
Marketing
Joseph P. Walker has served as Chairman of the Board, President and
Chief Executive Officer of CTS since 1988. Mr. Walker is a
Director of NBD Bank, N.A.
Philip T. Christ has served as Group Vice President since 1990.
Mr. Christ served as a Senior Vice President at Simplex Time
Recorder from 1976-1986.
Stanley J. Aris has served as Vice President, Finance and Chief
Financial Officer since May 18, 1992. Prior to joining CTS, Mr.
Aris worked for two years as a business consultant. From 1989 to
1990 Mr. Aris served as Vice President, Finance of Hypres
Corporation.
Jeannine M. Davis has served as Vice President, General Counsel
and Secretary since 1988. Between 1980 and 1988, she served as
legal counsel, Assistant Secretary, Assistant General Counsel and
General Counsel of the Corporation.
James L. Cummins was elected Vice President Human Resources on
February 25, 1994. Prior to this appointment, he served as
Director, Human Resources, CTS Corporation from 1991-1994. From
1990-1991, Mr. Cummins served as Human Resources Director, CTS
Corporation Electromechanical Group and in 1991 was appointed
Assistant Human Resources Director, CTS Corporation.
George T. Newhart has served as Corporate Controller since 1989.
Prior to joining the Company in June 1989, he was Chief Financial
and Administrative Officer of the Chelsea Electronic Distribution
Group from 1987-1989.
Gary N. Hoipkemier has served as Treasurer since 1989. He served
as Chief Financial Officer of Riblet Products Corporation from
1988-1989.
James N. Hufford was elected Vice President Research, Development
and Engineering on February 17, 1995. During the four years prior
to this appointment, Mr. Hufford served as Manager and then
Director of Corporate Research, Development and Engineering for the
Corporation. From 1981 through 1991, Mr. Hufford held key
engineering positions at the Corporation's Elkhart manufacturing
facility.
Donald R. Schroeder was elected Vice President Sales and Marketing
on February 17, 1995. During the six years prior to this
appointment, Mr. Schroeder served as Business Development Manager
for innovative and new technology for the CTS Microelectronics
business unit in West Lafayette, Indiana. Prior to 1989, Mr.
Schroeder held several other management and marketing positions
with various operating units of the Corporation.
Item 11. Executive Compensation
Information responsive to Item 402 of Regulation S-K pertaining to
management remuneration is contained in the 1995 Proxy Statement in
the captions "Executive Compensation," pages 8-9 and "Director
Compensation," page 14, filed with the Securities and Exchange
Commission, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information responsive to Item 403 of Regulation S-K pertaining to
security ownership of certain beneficial owners and management is
contained in the 1995 Proxy Statement in the caption "Securities
Beneficially Owned by Principal Stockholders and Management," pages
3-5 filed with the Securities and Exchange Commission, and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Dynamics Corporation of America (DCA) owned 2,222,100 (42.9%) of
the Company's outstanding common stock as of December 31, 1994.
CTS purchased products from DCA totalling about $233,000 in 1994,
$145,000 in 1993 and $93,000 in 1992, principally consisting of
certain component parts used by CTS in the manufacture of frequency
control devices. CTS had minimal sales to DCA in 1994, and no
sales in 1993 and 1992.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) (1) and (2)
The list of financial statements and financial statement schedules
required by Item 14 (a)(1) and (2) is contained on page S-1 herein.
(a)(3) Exhibits
(3)(a) Articles of Incorporation, as amended April 16,
1973, previously filed as exhibit (3)(a) to the
Company's Form 10-K for 1987, and incorporated
herein by reference.
(3)(b) Bylaws, as amended and effective June 25, 1992,
previously filed as exhibit (3)(b) to the Company's
Form 10-K for 1992, and incorporated herein by
reference.
(10)(a) Employment agreement dated June 24, 1994, between
CTS and Joseph P. Walker, filed as exhibit (10)(a)
to the Company's Form 10-K for 1994, and
incorporated herein by reference.
(10)(b) Prototype indemnification agreement, with
Lawrence J. Ciancia, Patrick J. Dorme, Gerald H.
Frieling, Jr., Andrew Lozyniak, Joseph P. Walker,
Philip T. Christ, Stanley J. Aris, Jeannine M.
Davis, James L. Cummins, George T. Newhart and Gary
N. Hoipkemier, previously filed as exhibit (10)(b)
to the Company's Form 10-K for 1991, and
incorporated herein by reference.
(10)(c) CTS Corporation 1982 Stock Option Plan, as amended
February 24, 1989, was previously filed as exhibit
(10)(d) to the Company's Form 10-K for 1989, and is
incorporated herein by reference.
(10)(d) CTS Corporation 1986 Stock Option Plan, approved by
the stockholders at the reconvened annual meeting
on May 30, 1986. The CTS Corporation 1986 Stock
Option Plan is contained in Exhibit 4 to
Registration Statement No. 33-27749, effective
March 23, 1989, and is incorporated herein by
reference.
(10)(e) CTS Corporation 1988 Restricted Stock and Cash
Bonus Plan, as adopted by the CTS Board of
Directors on December 16, 1988, and approved by
stockholders at the 1989 annual meeting of stock-
holders on April 28, 1989. The CTS Corporation
1988 Restricted Stock and Cash Bonus Plan is
contained in Appendix A, pages 11-15, of the 1989
Proxy Statement for the annual meeting of
stockholders held April 28, 1989, under the caption
"CTS Corporation 1988 Restricted Stock and Cash
Bonus Plan," previously filed with the Securities
and Exchange Commission, and is incorporated herein
by reference.
(13) CTS Corporation 1994 Annual Report.
(21) Subsidiaries of CTS Corporation.
(23) Consent of Price Waterhouse to incorporation by
reference of this Annual Report on Form 10-K for
the fiscal year 1994 to Registration Statement 2-
84230 on Form S-8 and Registration Statement 33-
27749 on Form S-8.
Indemnification Undertaking
For the purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the
Securities Act of 1933, the undersigned registrant hereby
undertakes as follows, which undertaking shall be incorporated
by reference into registrant's Registration Statements on Form
S-8 Nos. 2-84230 (filed June 13, 1983) and 33-27749 (filed
March 23, 1989):
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to directors, officers and controlling persons of
the registrant pursuant to the foregoing provision,
or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange
Commission such indemnification is against public
policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event
that a claim for indemnification against such
liabilities (other than the payment by the
registrant of expenses incurred or paid by a
director, officer or controlling person of the
registrant in the successful defense of any action,
suit or proceeding) is asserted by such director,
officer or controlling person in connection with
the securities being registered, the registrant
will, unless in the opinion of its counsel the
matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question whether such indemnification by it is
against public policy as expressed in the Act and
will be governed by the final adjudication of such
issue.
ANNUAL REPORT ON FOR 10-K
ITEM 14(a) (1) AND (2) AND ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1994
CTS CORPORATION AND SUBSIDIARIES
ELKHART, INDIANA
FORM 10-K - ITEM 14(a) (1) AND (2)
CTS CORPORATION AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of CTS Corporation
and subsidiaries included in the annual report of the registrant to
its shareholders for the year ended December 31, 1994, are incorpo-
rated by reference in Item 8:
Consolidated balance sheets - December 31, 1994, and
December 31, 1993
Consolidated statements of earnings - Years ended
December 31, 1994, December 31, 1993, and December 31,
1992
Consolidated statements of stockholders' equity - Years
ended December 31, 1994, December 31, 1993, and Decem-
ber 31, 1992
Consolidated statements of cash flows - Years ended
December 31, 1994, December 31, 1993, and December 31,
1992
Notes to consolidated financial statements
The following consolidated financial statement schedules of CTS
Corporation and subsidiaries, are included in item 14(d):
Page
Schedule II - Valuation and qualifying accounts S-3
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
have been omitted because they are inapplicable, not required or
the information is included in the consolidated financial state-
ments or notes thereto.
S-1
EXHIBIT 22
CTS CORPORATION AND SUBSIDIARIES
CTS Corporation (Registrant), an Indiana corporation
Subsidiaries
CTS Corporation, a Delaware corporation
CTS Singapore, Pte. Ltd., a Republic of Singapore corporation
CTS of Panama, Inc., a Republic of Panama corporation
CTS Components Taiwan, Ltd.,1 a Taiwan, Republic of China
corporation
CTS de Mexico S.A.,1 a Republic of Mexico corporation
CTS Export Corporation, a Virgin Islands corporation
CTS of Canada, Ltd., a Province of Ontario (Canada) corporation
CTS Manufacturing (Thailand) Ltd.,1 a Thailand corporation
CTS Electronics Hong Kong Ltd.,1 a Republic of Hong Kong corpora-
tion
CTS Corporation U.K. Ltd., a United Kingdom corporation
CTS Printex, Inc., a California corporation
CTS Micro Peripherals, Inc., a California corporation
Micro Peripherals Singapore (Private) Limited, a Republic of
Singapore corporation
Corporations whose names are indented are subsidiaries of the
preceding non-indented corporations. Except as indicated, each of
the above subsidiaries is 100% owned by its parent company.
Operations of all subsidiaries and divisions are consolidated in
the financial statements filed.
1 Less than 1% of the outstanding shares of stock is owned of record
by nominee shareholders pursuant to national laws regarding resident
or nominee ownership.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date March 17, 1995 By /S/ Stanley J. Aris
Stanley J. Aris
Vice President Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Date March 17, 1995 By /S/ Lawrence J. Ciancia
Lawrence J. Ciancia,
Director
Date March 17, 1995 By /S/ Patrick J. Dorme
Patrick J. Dorme,
Director
Date March 17, 1995 By /S/ Gerald H. Frieling, Jr.
Gerald H. Frieling, Jr.,
Director
Date March 17, 1995 By /S/ Andrew Lozyniak
Andrew Lozyniak,
Director
Date March 17, 1995 By /S/ Joseph P. Walker
Joseph P. Walker,
Director
Date March 17, 1995 By /S/ George T. Newhart
George T. Newhart,
Corporate Controller
and principal accounting
officer
Date March 17, 1995 By /S/ Jeannine M. Davis
Jeannine M. Davis,
Vice President, Secretary
and General Counsel
CTS CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands of dollars)
Additions
Balance at Charged to Charged to
Beginning of Costs and Other Balance at
Classification Period Expenses Accounts Deductions End of Period
Year ended December 31, 1994:
Allowance for
doubtful receivables $ 709 $ 277 $ 0 $ 117 $ 869
Year ended December 31, 1993:
Allowance for
doubtful receivables $ 303 $ 521 $ 85 $ 200 $ 709
Year ended December 31, 1992:
Allowance for
doubtful receivables $ 420 $ 157 $ 7(a) $ 281(b) $ 303
(a) Recoveries.
(b) Uncollectible accounts written off.
S-3
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (No. 2-84230 and No. 33-
27749) of CTS Corporation of our report dated February 2, 1995,
appearing within the 1994 CTS Corporation Annual Report to
Stockholders which is incorporated in the Annual Report on Form
10-K. We also consent to the incorporation by reference of our
report on the Financial Statement Schedule, which appears on page
S-2 of this Form 10-K.
PRICE WATERHOUSE LLP
South Bend, Indiana
March 17, 1995
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of CTS Corporation
Our audits of the consolidated financial statements referred to
in our report dated February 2, 1995, appearing within the CTS
Corporation 1994 Annual Report to Stockholders, (which report and
consolidated financial statements are incorporated by reference
in the Annual Report on Form 10-K) also included an audit of the
Financial Statement Schedule listed in item 14(a) of this Form
10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated
financial statements.
PRICE WATERHOUSE LLP
South Bend, Indiana
February 2, 1995