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 21, 2002 (August 13, 2002)
CTS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Indiana 1-4639 35-0225010
(State or Other Jurisdiction (Commission File Numbers) (I.R.S. Employer
of Incorporation) Identification Nos.)
905 West Boulevard North
Elkhart, Indiana 46514
(Address of Principal Executive Offices) (Zip Code)
Registrants' Telephone Number, Including Area Code: (574) 293-7511
--------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
On August 13, 2002, CTS Corporation issued a press
release announcing that it was evaluating further
restructuring actions to improve profitability, a copy of
which is filed herewith as Exhibit 99.1 and which information
is incorporated herein by reference. On August 16, 2002, CTS
issued a press release describing a cost reduction and
restructuring plan, as more fully described in the press
release, a copy of which is filed as Exhibit 99.2 hereto and
which information is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
The following exhibits are filed with this report:
Exhibit No. Exhibit Description
----------- -------------------
99.1 Press Release dated August 13, 2002
99.2 Press Release dated August 16, 2002
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 thereunto duly authorized.
CTS CORPORATION
/S/ Richard G. Cutter
---------------------------------------------
By: Richard G. Cutter
Vice President, Secretary and General Counsel
Date: August 21, 2002
EXHIBIT INDEX
Exhibit No. Exhibit Description
----------- -------------------
99.1 Press Release dated August 13, 2002
99.2 Press Release dated August 16, 2002
Exhibit 99.1
newsrelease
CTS CORPORATION Elkhart,Indiana 46514 (574) 293-7511
August 13, 2002
FOR RELEASE: Immediately
CTS CONSIDERING FURTHER PROFIT IMPROVEMENT ACTIONS
Severance charge and asset write-down possible in third quarter
Cash impact in 2002 expected to be positive
Elkhart, IN...CTS Corporation (NYSE:CTS) today stated that while CTS does not
normally comment on market activity in CTS stock, in view of recent trading
activity CTS wanted to make public the fact that it has been evaluating further
restructuring actions to improve profitability. CTS does not normally announce
these types of actions until approved for implementation.
Actions under consideration include the possible "end-of-life" of certain older
and low margin product lines within the Communications Components business.
Under the plan being considered, CTS would continue production of those older
and low margin products as long as required by current customers, but would no
longer design custom variations of those product lines. CTS noted that this plan
remains subject to Board approval before being implemented.
Consistent with its previously announced intent to continue to aggressively
reduce its cost structure, CTS expects to eliminate over 150 indirect and
salaried positions during the third quarter. All of these positions are within
the Communication Components business and include SG&A, R&D and manufacturing
overhead reductions. Most of these reductions are made possible through a
combination of process improvements and organizational consolidations.
In conjunction with the above, CTS expects to take a charge for the impairment
of certain assets within the Communications Components business to reflect the
impact of the above described actions, as well as market conditions.
Total restructuring charges associated with the above described actions are
expected to be in the range of $14 to $16 million pretax, most of which is
expected to be taken in the third quarter. Of this amount, $12 to $14 million is
expected to be a non-cash charge. Annualized pretax savings from the above
actions are estimated to be in the range of $10 to $12 million with $6 to $7
million of this being cash savings. Cash impact in 2002 is expected to be
positive.
"CTS continues to aggressively pursue steps to return to profitability," noted
Donald Schwanz, CTS Chairman and Chief Executive Officer. "While it is unclear
how quickly the communication markets will recover, we continue to re-size our
operation to current market realities and to focus our resources on those
product and market opportunities offering the best future growth and profit
potential," added Schwanz.
Exhibit 99.1
# # # #
Statements about the Company's earnings outlook and its plans, estimates and
beliefs concerning the future are forward-looking statements, within the meaning
of the Private Securities Litigation Reform Act of 1995, based on the Company's
current expectations. Actual results may differ materially from those stated in
the forward-looking statements due to a variety of factors which could affect
the Company's operating results, liquidity and financial condition. We undertake
no obligations to publicly update or revise any forward-looking statements.
Factors that could impact future results include among others: the general
market conditions in the communications, computer and automotive markets, and in
the overall economy; whether the Company is able to implement measures to
improve its financial condition and flexibility; the Company's successful
execution of its restructurings, consolidation and cost-reduction plans; pricing
pressures and demand for the Company's products, especially if economic
conditions worsen or do not recover in the key markets for the Company's
products; and risks associated with our international operations, including
trade and tariff barriers, exchange rates and political risks. Investors are
encouraged to examine the Company's SEC filings, which more fully describe the
risks and uncertainties associated with the Company's business.
# # # #
CTS Corporation is a leading designer and manufacturer of electronic components
and assemblies for the communications, computer and automotive markets. The
Company manufactures products in North America, Europe and Asia. Worldwide sales
coverage is accomplished through a network of direct sales personnel,
independent manufacturers' representatives and electronic distributors. The
Company's stock is traded on the NYSE under the ticker symbol "CTS." To find out
more, visit the Company's website at www.ctscorp.com.
Contact: Vinod M. Khilnani, Sr. Vice President and Chief Financial Officer, or
George T. Newhart, Vice President Investor Relations
CTS Corporation
905 West Boulevard North
Elkhart, In 46514
Telephone (574) 293-7511 FAX (574) 293-6146
www.ctscorp.com
Exhibit 99.2
newsrelease
CTS CORPORATION Elkhart,Indiana 46514 (574) 293-7511
August 16, 2002
FOR RELEASE: Immediately
CTS confirms additional profit improvement actions
Restructuring charges planned in third quarter
Annual pretax savings of $11 million expected
Elkhart, IN...CTS Corporation (NYSE: CTS) today confirmed that it is proceeding
with the cost reduction and restructuring plan first announced August 13, 2002.
Total restructuring charges associated with these actions are expected to be in
the range of $15 - $17 million pretax, all of which are planned to be taken in
the third quarter. Of this amount, approximately $2 million is a cash charge,
primarily for severance expenses, and the remaining $13 - $15 million is a
non-cash charge, primarily related to the write-down of certain manufacturing
equipment. The resulting net cash impact in 2002 is expected to be positive. CTS
anticipates about $11 million in annualized pretax savings from these actions.
Approximately $2.5 million in savings will be realized in 2002, primarily from
the headcount reductions.
Operational improvements and related organizational realignments in the
Communications Components operations have allowed the elimination of
approximately 140 indirect and salaried positions in SG&A, R&D and manufacturing
overhead, most of which will be completed during the third quarter. These
reductions are part of the Company's ongoing initiatives to dramatically reduce
its cost structure and restore profitability.
Additionally, CTS confirmed its intent to stop the design of new custom
variations of certain product lines within its Communications Components
operations. Product lines included are the older 9x11mm and 5x7mm Temperature
Compensated Crystal Oscillators and Voltage Controlled Oscillators. CTS will
continue to manufacture existing designs of these products to satisfy current
customer needs and will work with those customers to ensure no adverse impact on
their operations. "Demand for these product lines has been declining and margins
on the products no longer justify the investment of Company resources," said
Donald Schwanz, CTS Chairman and Chief Executive Officer. As a result, CTS will
reduce its engineering, sales and administrative support to these product lines
by the additional elimination of approximately 20 positions while refocusing
others on more profitable product lines.
"The operational consolidation and reorganization initiatives begun last year in
our Communications Components operations laid the foundation for further process
improvements, operational streamlining and efficiencies. These structural cost
reductions, along with aggressive product cost reduction initiatives, are
anticipated to drive continued profit improvement over the next several quarters
and contribute to the Company's expected return to profitable operation by the
end of this year," added Schwanz.
Exhibit 99.2
General Comments:
o Sales volumes for those product lines being de-emphasized are
anticipated to be approximately $20 million in 2002 and are expected
to phase out by 2004. Operating margins on these product lines are
currently negative.
o Total headcount reductions are estimated to be about 160 with
approximately 40% of these related to manufacturing overhead positions and
the remainder related to SG&A and R&D positions.
# # # #
Statements about the Company's earnings outlook and its plans, estimates and
beliefs concerning the future are forward-looking statements, within the meaning
of the Private Securities Litigation Reform Act of 1995, based on the Company's
current expectations. Actual results may differ materially from those stated in
the forward-looking statements due to a variety of factors which could affect
the Company's operating results, liquidity and financial condition. We undertake
no obligations to publicly update or revise any forward-looking statements.
Factors that could impact future results include among others: the general
market conditions in the communications, computer and automotive markets, and in
the overall economy; whether the Company is able to implement measures to
improve its financial condition and flexibility; the Company's successful
execution of its restructurings, consolidation and cost-reduction plans; pricing
pressures and demand for the Company's products, especially if economic
conditions worsen or do not recover in the key markets for the Company's
products; and risks associated with our international operations, including
trade and tariff barriers, exchange rates and political risks. Investors are
encouraged to examine the Company's SEC filings, which more fully describe the
risks and uncertainties associated with the Company's business.
# # # #
CTS Corporation is a leading designer and manufacturer of electronic components
and assemblies for the communications, computer and automotive markets. The
Company manufactures products in North America, Europe and Asia. Worldwide sales
coverage is accomplished through a network of direct sales personnel,
independent manufacturers' representatives and electronic distributors. The
Company's stock is traded on the NYSE under the ticker symbol "CTS." To find out
more, visit the Company's website at www.ctscorp.com.
Contact: Vinod M. Khilnani, Sr. Vice President and Chief Financial Officer, or
George T. Newhart, Vice President Investor Relations
CTS Corporation
905 West Boulevard North
Elkhart, In 46514
Telephone (574) 293-7511 FAX (574) 293-6146
www.ctscorp.com