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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, 1993
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 Securit-
ies 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.
Yes X No
There were 5,169,354 shares of Common Stock, without par value,
outstanding on March 11, 1994.
The aggregate market value of the voting stock held by non-affi-
liates of CTS Corporation was approximately $68 million on March
11, 1994.
1
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the CTS Corporation 1993 Annual Report for
the fiscal year ended December 31, 1993, incorporated
by reference in Part I and Part II.
(2) Portions of the 1994 Proxy Statement for annual meeting
of stockholders to be held on April 29, 1994,
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 16 AND 17
2
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 15
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 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. A 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
with respect to voting rights on additional shares of CTS common
stock previously acquired by DCA. In May 1988, the settlement
agreement expired pursuant to its terms. At the end of 1993, DCA
owned 1,920,900 shares (37.3%) 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 pre-
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
3
investment has been approximately $10 million as of December 31,
1993. 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.
Also during 1991, the Company significantly reduced the operating
activities at its Brownsville, Texas, facility and plans to sell
this property.
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.
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 21-22 , of
the CTS Corporation 1993 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 (OEM).
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.
4
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 1993 1992 1991
Automotive Control Devices 26 20 18
Frequency Control Devices 15 17 16
Hybrid Microcircuits 14 11 7
Electronic Connectors 14 17 15
Resistor Networks 14 16 18
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 1993 1992 1991
Automotive 32 25 22
Data Processing 22 20 20
Communications Equipment 17 18 19
Defense and Aerospace 12 17 19
Instruments and Controls 9 12 11
Distribution 4 5 5
Consumer Electronics 4 3 4
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.
5
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, 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
programmable 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 36% of net
sales in 1993 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 requirements 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 foreign countries for
customers not serviced by CTS sales engineers. Sales represen-
tatives receive commissions from CTS. During 1993, about 60% of
net sales were attributable to coverage by sales representatives.
Independent distributors purchase products from CTS for resale to
customers. In 1993, independent distributors accounted for about
4% of net sales.
6
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 1993 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
manufacturing 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
inventories 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.
7
Working capital requirements are generally dependent on the
overall business level. During 1993, working capital decreased
slightly to $47.4 million. Cash represents a significant part of
the Company's working capital. Most of CTS' cash at December 31,
1993, was held in U.S.-denominated cash equivalents for the
credit of the various non-U.S. operations. The cash, other than
approximately $5 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 1993
license and royalty income was 0.03% 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%, 58% and 59% of
net sales in 1993, 1992 and 1991, respectively.
Of the net sales to unaffiliated customers, approximately $40.1
million, $30.7 million and $29.9 million were derived from sales
to General Motors Corporation in 1993, 1992 and 1991,
respectively. About $24.0 million, $19.3 million and $23.5
million were derived from sales to International Business
Machines Corporation in 1993, 1992 and 1991, respectively. 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 would have a materially adverse effect upon the
Company.
BACKLOG OF ORDERS
Backlog of orders does not necessarily provide an accurate
indication 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
8
time, production scheduling and delivery are subject to change or
cancellation by the customers on relatively short notice. At the
end of 1993, the Company's backlog of orders was $70.5 million,
compared with $64.0 million at the end of 1992. This increase
was primarily attributable to increased demand from automotive
customers.
The backlog of orders at the end of 1993 will generally be filled
during the 1994 fiscal year.
GOVERNMENT CONTRACTS
CTS believes that about 12% of its net sales are associated with
purchases by the U.S. Government or foreign 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 competitors are larger and more diversified than CTS. Some
competitors 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.
9
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
requirements 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 21-22 of the CTS Corporation 1993 Annual Report, and is
incorporated herein by reference.
In 1993 approximately 28% of net sales to unaffiliated customers,
after eliminations, were attributable to non-U.S. operations.
This represents an increase from 24% of net sales attributable to
non-U.S. operations in 1992. About 39% 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 1993, 1992 and 1991, CTS spent $5.7, $6.1 and $5.7 million,
respectively, for research and development. Most CTS research
and development activities relate to new product and process
developments 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 1993, 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.
10
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 3,975 persons during 1993. About 47%
of these persons were employed outside the United States at the
end of 1993. Approximately 309 employees in the United States
were covered by collective bargaining agreements as of December
31, 1993. The two collective bargaining agreements covering
these employees will expire in 1996.
11
Item 2. Properties
CTS operations or facilities are at the following locations. The
owned properties are not subject to material liens or
encumbrances.
Lease
Approximate Owned or Expiration
Location Square Feet Leased Date
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 December,
(Science Center Dr.) 55,000 Leased 1998
Bangkok, Thailand 53,000 Owned -
Matamoros, Mexico 50,590 Owned* -
Baldwin, WI 39,050 Owned -
Cokato, MN 36,000 Owned -
TOTAL 1,839,567
* Buildings are located on land leased under renewable leases.
12
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.
The Company constructed the Bangkok, Thailand, facility during
1991. This facility was idled during 1992 and was idle for all
of 1993.
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 manufac-
turing 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 1993, 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 1993 Annual Report,
incorporated herein by reference. On March 11, 1994, there were
approximately 1,182 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
13
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 1993 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 (1991-1993)," pages 25-27, of the CTS
Corporation 1993 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 1993 Annual
Report, incorporated herein by reference. Quarterly per share
financial data is provided in "Stockholder Information," under
the subheading, "Quarterly Results of Operations", and "Per Share
Data," on page 10 of the CTS Corporation 1993 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 1994 Proxy
Statement under the caption "Election of Directors," pages 4-5,
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
14
of 1934 is contained in the 1994 Proxy Statement under the
caption "Compliance with Section 16(a) of the Securities Exchange
Act of 1934," page 5, 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 30,
1993, and are expected to serve as executive officers until the
next annual meeting of the Board of Directors, scheduled on April
29, 1994, at which time the election of officers will be
considered again by the Board of Directors.
Name Age Position and Offices
Joseph P. Walker 55 Director, Chairman,
President and Chief
Executive Officer
Philip T. Christ 62 Group Vice President
Stanley J. Aris 53 Vice President Finance and
Chief Financial Officer
Jeannine M. Davis 45 Vice President, Secretary
and General Counsel
Gary N. Hoipkemier 39 Treasurer
George T. Newhart 51 Corporate Controller
Joseph P. Walker has served as Chairman of the Board, President
and Chief Operating Officer of CTS since 1988. Mr. Walker is a
Director of NBD Bank and NBD Bank,N.A. and the National Association
of Manufacturers.
Philip T. Christ was elected Group Vice President, effective
July 2, 1990. Mr. Christ served as a Senior Vice President at
Simplex Time Recorder from 1976-1986.
Stanley J. Aris was elected Vice President, Finance and Chief
Financial Officer, effective 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, an employee since 1980, served as legal
counsel from 1980-1983, Assistant Secretary from 1982-1983 and
Assistant General Counsel from 1983-1984. She was elected
Secretary in 1983, General Counsel in 1984 and Vice President in
1988.
15
Gary N. Hoipkemier became an employee in November 1989 and was
elected Treasurer on December 15, 1989. He served as Chief
Financial Officer of Riblet Products Corporation from 1988-1989.
George T. Newhart was elected Corporate Controller on June 19,
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.
Item 11. Executive Compensation
Information responsive to Item 402 of Regulation S-K pertaining
to management remuneration is contained in the 1994 Proxy
Statement in the captions "Executive Compensation," pages 6-7 and
"Director Compensation," page 11, 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 1994 Proxy Statement in the caption
"Securities Beneficially Owned by Principal Stockholders and
Management," pages 2-4 filed with the Securities and Exchange
Commission, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
DCA owned 1,920,900 (37.3%) of the Company's outstanding common
stock as of December 31, 1993. CTS purchased products from DCA
totalling about $145,000 in 1993, $93,000 in 1992 and $192,000 in
1991, principally consisting of certain component parts used by
CTS in the manufacture of frequency control devices. CTS had no
sales to DCA in 1993 or 1992, and sales to DCA were under $70,000
in 1991.
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.
16
(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 28, 1991, between
CTS and Joseph P. Walker, previously filed as
exhibit (10)(a) to the Company's Form 10-K for
1991, and incorporated herein by reference.
(10)(b) Prototype indemnification agreement, with
Lawrence J. Ciancia, Gerald H. Frieling, Jr.,
Andrew Lozyniak, Edward J. Mooney, Joseph P.
Walker, Philip T. Christ, Stanley J. Aris,
Jeannine M. Davis, Gary N. Hoipkemier and George
T. Newhart, 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 1993 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 1993 to Registration Statement 2-
84230 on Form S-8 and Registration Statement 33-
27749 on Form S-8.
17
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.
18
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
By_______________________________
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
B y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Lawrence J. Ciancia,
Director
Date
B y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Patrick J. Dorme,
Director
Date
By______________________________________________________________
Gerald H. Frieling, Jr.,
Director
Date
B y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Andrew Lozyniak,
Director
Date
B y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Joseph P. Walker,
Director
Date
B y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
George T. Newhart,
Corporate Controller
and principal accounting
officer
Date
B y _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Jeannine M. Davis,
Vice President, Secretary
and General Counsel
ANNUAL REPORT ON FORM 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, 1993
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 Corpora-
tion and subsidiaries included in the annual report of the
registrant to its shareholders for the year ended December 31,
1993, are incorporated by reference in Item 8:
Consolidated balance sheets - December 31, 1993, and
December 31, 1992
Consolidated statements of earnings - Years ended
December 31, 1993, December 31, 1992, and December 31,
1991
Consolidated statements of stockholders' equity - Years
ended December 31, 1993, December 31, 1992, and Decem-
ber 31, 1991
Consolidated statements of cash flows - Years ended
December 31, 1993, December 31, 1992, and December 31,
1991
Notes to consolidated financial statements
The following consolidated financial statement schedules of CTS
Corporation and subsidiaries, are included in item 14(d):
Page
Schedule V - Property, plant and equipment S-3
Schedule VI - Accumulated depreciation of
property, plant and equipment S-4
Schedule VIII - Valuation and qualifying
accounts S-5
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
corporation
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.
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.
CTS CORPORATIONSCHEDULE V - PROPERTY, PLANT AND EQUIPMENT(In thousands of dollars)
Balance at Other
Beginning of Additions Changes - Balance at
Classification Period at Cost Retirements Add (Deduct) End of Period
Year ended December 31, 1993:
Land $ 1,161 $ 1,161
Buildings and improvements 38,056 $ 1,566 $ 30 $ (84)(c) 39,508
Machinery and equipment 144,583 9,187 14,694 (466)(a) 138,328
(282)(c)
Construction-in-progress 2,780 943 (312)(a) 3,411
$186,580 $11,696 $14,724 $(1,144) $182,408
Year ended December 31, 1992:
Land $ 1,181 $ 20 $ 1,161
Buildings and improvements 34,312 $ 3,766 1,194 $ 1,832 (a) 38,056
(660)(c)
Machinery and equipment 152,488 7,851 12,351 (897)(a) 144,583
(2,508)(c)
Construction-in-progress 6,915 (2,786) (560)(a) 2,780
(789)(c)
$194,896 $ 8,831 $13,565 $(3,582) $186,580
Year ended December 31, 1991:
Land $ 881 $ 322 (a) $ 1,181
(22)(b)
Buildings and improvements 37,242 $ 811 $ 3,105 74 (a) 34,312
(649)(b)
(61)(c)
Machinery and equipment 146,245 11,477 7,202 2,154 (a) 152,488
(186)(c)
Construction-in-progress 4,012 3,679 (769)(a) 6,915
(7)(c)
$188,380 $15,967 $10,307 $ 856 $194,896
[FN]
(a) Changes in classification and miscellaneous adjustments.
(b) Items transferred to Property Not Used in Business.
(c) Currency translation adjustment.
S-3
CTS CORPORATION SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
(In thousands of dollars)
Additions
Balance at Charged to Other
Beginning of Costs and Changes - Balance at
Classification Period Expenses Retirements Add (Deduct) End of Period
Year ended December 31, 1993:
Buildings and improvements $ 19,960 $ 1,542 $ 30 $ (153)(c) $ 21,319
Machinery and equipment 118,091 9,663 13,959 (577)(a) 113,247
29 (c)
$138,051 $11,205 $13,989 $ (701) $134,566
Year ended December 31, 1992:
Buildings and improvements $ 20,173 $ 1,564 $ 1,673 $ (1)(a) $ 19,960
(103)(c)
Machinery and equipment 120,895 9,413 11,613 345 (a) 118,091
(949)(c)
$141,068 $10,977 $13,286 $ (708) $138,051
Year ended December 31, 1991:
Buildings and improvements $ 18,991 $ 1,532 $ 940 $1,175 (a) $ 20,173
(573)(b)
(12)(c)
Machinery and equipment 116,182 10,913 6,526 432 (a) 120,895
(106)(c)
$135,173 $12,445 $7,466 $ 916 $141,068
(a) Changes in classification and miscellaneous adjustments.
(b) Items transferred to Property Not Used in Business.
(c) Currency translation adjustment.
The following is a summarization of the estimated useful lives used in computing depreciation of property,
plant and equipment:
Estimated Life
Building and improvements 10 to 40 years
Machinery and equipment 3 to 15 years
/TABLE
S-4
CTS CORPORATION SCHEDULE VIII - 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, 1993:
Allowance for doubtful receivables $303 $521 $86 $200 $710
Year ended December 31, 1992:
Allowance for doubtful receivables $420 $157 $ 7 (a) $281 (b) $303
Year ended December 31, 1991:
Allowance for doubtful receivables $490 $ 47 $72 (a) $189 (b) $420
(a) Recoveries.
(b) Uncollectible accounts written off.
S-5