CTSの四半期報告

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended June 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number: 1-4639

CTS CORPORATION

(Exact name of registrant as specified in its charter)

IN

35-0225010

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification Number)


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

Registrant’s telephone number, including area code: (630) 577-8800

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


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common stock, without par value	CTS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of July 20, 2023: 31,355,377.

CTS CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS


			Page

PART I. FINANCIAL INFORMATION

	Item 1.	Financial Statements	3

		Condensed Consolidated Statements of Earnings (Unaudited) For the Three and Six Months Ended June 30, 2023 and June 30, 2022	3

		Condensed Consolidated Statements of Comprehensive Earnings (Unaudited) For the Three and Six Months Ended June 30, 2023 and June 30, 2022	4

		Condensed Consolidated Balance Sheets As of June 30, 2023 (Unaudited) and December 31, 2022	5

		Condensed Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, 2023 and June 30, 2022	6

		Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) For the Three and Six Months Ended June 30, 2023 and June 30, 2022	7

		Notes to Condensed Consolidated Financial Statements ‑ (Unaudited)	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32

	Item 4.	Controls and Procedures	33

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	33

	Item 1A.	Risk Factors	33

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

	Item 5.	Other Information	34

	Item 6.	Exhibits	35

SIGNATURES			36

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED

(In thousands of dollars, except per share amounts)


	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2023			2022			2023			2022
Net sales	$	145,182		$	144,982		$	291,176		$	292,677
Cost of goods sold		94,440			93,134			188,782			186,489
Gross margin		50,742			51,848			102,394			106,188
Selling, general and administrative expenses		23,694			22,238			45,673			44,026
Research and development expenses		6,721			6,294			13,307			12,488
Restructuring charges		1,895			630			2,807			942
Operating earnings		18,432			22,686			40,607			48,732
Other income (expense):
Interest expense		(818	)		(602	)		(1,512	)		(1,148	)
Interest income		1,072			263			2,135			443
Other income, net		(2,606	)		(5,425	)		(2,441	)		(5,359	)
Total other expense, net		(2,352	)		(5,764	)		(1,818	)		(6,064	)
Earnings before income taxes		16,080			16,922			38,789			42,668
Income tax expense		3,183			4,324			7,548			9,831
Net earnings	$	12,897		$	12,598		$	31,241		$	32,837
Earnings per share:
Basic	$	0.41		$	0.39		$	0.99		$	1.02
Diluted	$	0.41		$	0.39		$	0.98		$	1.02
Basic weighted – average common shares outstanding:		31,488			32,039			31,560			32,096
Effect of dilutive securities		197			204			224			218
Diluted weighted – average common shares outstanding:		31,685			32,243			31,784			32,314
Cash dividends declared per share	$	0.04		$	0.04		$	0.08		$	0.08

See notes to unaudited condensed consolidated financial statements.

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS ‑ UNAUDITED

(In thousands of dollars)


	Three Months Ended					Six Months Ended
	June 30,		June 30,			June 30,			June 30,
	2023		2022			2023			2022
Net earnings	$	12,897	$	12,598		$	31,241		$	32,837
Other comprehensive earnings (loss):
Changes in fair market value of derivatives, net of tax		830		705			1,209			1,940
Changes in unrealized pension cost, net of tax		4		2,082			(30	)		2,176
Cumulative translation adjustment, net of tax		2,159		(2,012	)		3,183			(2,261	)
Other comprehensive earnings	$	2,993	$	775		$	4,362		$	1,855
Comprehensive earnings	$	15,890	$	13,373		$	35,603		$	34,692

See notes to unaudited condensed consolidated financial statements.

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)


	(Unaudited)
	June 30,			December 31,
	2023			2022
ASSETS
Current Assets
Cash and cash equivalents	$	150,878		$	156,910
Accounts receivable, net		97,519			90,935
Inventories, net		62,556			62,260
Other current assets		18,924			15,655
Total current assets		329,877			325,760
Property, plant and equipment, net		94,956			97,300
Operating lease assets, net		25,768			22,702
Other Assets
Goodwill		155,931			152,361
Other intangible assets, net		108,717			108,053
Deferred income taxes		22,831			23,461
Other		17,826			18,850
Total other assets		305,305			302,725
Total Assets	$	755,906		$	748,487
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	53,119		$	53,211
Operating lease obligations		4,293			3,936
Accrued payroll and benefits		14,389			20,063
Accrued expenses and other liabilities		35,381			35,322
Total current liabilities		107,182			112,532
Long-term debt		77,040			83,670
Long-term operating lease obligations		24,534			21,754
Long-term pension obligations		5,017			5,048
Deferred income taxes		15,780			16,010
Other long-term obligations		4,958			3,249
Total Liabilities		234,511			242,263
Commitments and Contingencies (Note 11)
Shareholders’ Equity
Common stock		319,111			316,803
Additional contributed capital		43,488			46,144
Retained earnings		575,422			546,703
Accumulated other comprehensive income (loss)		3,691			(671	)
Total shareholders’ equity before treasury stock		941,712			908,979
Treasury stock		(420,317	)		(402,755	)
Total shareholders’ equity		521,395			506,224
Total Liabilities and Shareholders’ Equity	$	755,906		$	748,487

See notes to unaudited condensed consolidated financial statements.

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ‑ UNAUDITED

(In thousands of dollars)


	Six Months Ended
	June 30,			June 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	31,241		$	32,837
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		14,175			13,765
Non-cash inventory charges		—			1,113
Pension and other post-retirement plan expense		61			182
Stock-based compensation		3,235			3,566
Asset impairment charges		1,324			—
Deferred income taxes		(553	)		1,277
Gain on foreign currency hedges, net of cash		228			(12	)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		(6,737	)		(12,861	)
Inventories		(349	)		(7,177	)
Operating lease assets		(3,066	)		1,515
Other assets		(599	)		2,513
Accounts payable		1,004			5,087
Accrued payroll and benefits		(6,423	)		(4,458	)
Operating lease liabilities		3,136			(1,658	)
Accrued expenses and other liabilities		(2,017	)		93
Pension and other post-retirement plans		(53	)		(430	)
Net cash provided by operating activities		34,607			35,352
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(8,487	)		(6,991	)
Payments for acquisitions, net of cash acquired		(3,359	)		(96,528	)
Net cash used in investing activities		(11,846	)		(103,519	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt		(249,732	)		(300,000	)
Proceeds from borrowings of long-term debt		243,102			341,027
Purchase of treasury stock		(17,562	)		(11,668	)
Dividends paid		(2,535	)		(2,576	)
Payments of contingent consideration		—			(900	)
Taxes paid on behalf of equity award participants		(3,240	)		(1,491	)
Net cash (used in) provided by financing activities		(29,967	)		24,392
Effect of exchange rate changes on cash and cash equivalents		1,174			1,049
Net decrease in cash and cash equivalents		(6,032	)		(42,726	)
Cash and cash equivalents at beginning of period		156,910			141,465
Cash and cash equivalents at end of period	$	150,878		$	98,739
Supplemental cash flow information:
Cash paid for interest	$	1,720		$	969
Cash paid for income taxes, net	$	9,732		$	7,606
Non-cash financing and investing activities:
Capital expenditures incurred but not paid	$	1,565		$	1,397

See notes to unaudited condensed consolidated financial statements.

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - UNAUDITED

(in thousands of dollars)

The following summarizes the changes in total equity for the three and six months ended June 30, 2023:


	Common Stock		Additional Contributed Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
Balances at December 31, 2022	$	316,803	$	46,144		$	546,703		$	(671	)	$	(402,755	)	$	506,224
Net earnings		—		—			18,344			—			—			18,344
Changes in fair market value of derivatives, net of tax		—		—			—			379			—			379
Changes in unrealized pension cost, net of tax		—		—			—			(34	)		—			(34	)
Cumulative translation adjustment, net of tax		—		—			—			1,024			—			1,024
Cash dividends of $0.04 per share		—		—			(1,260	)		—			—			(1,260	)
Acquired 198,271 shares of treasury stock		—		—			—			—			(8,802	)		(8,802	)
Issued shares on vesting of restricted stock units		1,982		(5,125	)		—			—			—			(3,143	)
Stock compensation		—		1,404			—			—			—			1,404
Balances at March 31, 2023	$	318,785	$	42,423		$	563,787		$	698		$	(411,557	)	$	514,136
Net earnings		—		—			12,897			—			—			12,897
Changes in fair market value of derivatives, net of tax		—		—			—			830			—			830
Changes in unrealized pension cost, net of tax		—		—			—			4			—			4
Cumulative translation adjustment, net of tax		—		—			—			2,159			—			2,159
Cash dividends of $0.04 per share		—		—			(1,262	)		—			—			(1,262	)
Acquired 197,716 shares of treasury stock		—		—			—			—			(8,760	)		(8,760	)
Issued shares on vesting of restricted stock units		326		(423	)		—			—			—			(97	)
Stock compensation		—		1,488			—			—			—			1,488
Balances at June 30, 2023	$	319,111	$	43,488		$	575,422		$	3,691		$	(420,317	)	$	521,395

See notes to unaudited condensed consolidated financial statements.

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - UNAUDITED

(in thousands of dollars)

The following summarizes the changes in total equity for the three and six months ended June 30, 2022:


	Common Stock		Additional Contributed Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
Balances at December 31, 2021	$	314,620	$	42,549		$	492,242		$	(4,525	)	$	(381,308	)	$	463,578
Net earnings		—		—			20,239			—			—			20,239
Changes in fair market value of derivatives, net of tax		—		—			—			1,235			—			1,235
Changes in unrealized pension cost, net of tax		—		—			—			94			—			94
Cumulative translation adjustment, net of tax		—		—			—			(249	)		—			(249	)
Cash dividends of $0.04 per share		—		—			(1,284	)		—			—			(1,284	)
Acquired 116,176 shares of treasury stock		—		—			—			—			(3,920	)		(3,920	)
Issued shares on vesting of restricted stock units		1,876		(3,289	)		—			—			—			(1,413	)
Stock compensation		—		1,898			—			—			—			1,898
Balances at March 31, 2022	$	316,496	$	41,158		$	511,197		$	(3,445	)	$	(385,228	)	$	480,178
Net earnings		—		—			12,598			—			—			12,598
Changes in fair market value of derivatives, net of tax		—		—			—			705			—			705
Changes in unrealized pension cost, net of tax		—		—			—			2,082			—			2,082
Cumulative translation adjustment, net of tax		—		—			—			(2,012	)		—			(2,012	)
Cash dividends of $0.04 per share		—		—			(1,289	)		—			—			(1,289	)
Acquired 216,252 shares of treasury stock		—		—			—			—			(7,748	)		(7,748	)
Issued shares on vesting of restricted stock units		6		(84	)		—			—			—			(78	)
Stock compensation		—		1,511			—			—			—			1,511
Balances at June 30, 2022	$	316,502	$	42,585		$	522,506		$	(2,670	)	$	(392,976	)	$	485,947

See notes to unaudited condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

(in thousands except for share and per share data)

June 30, 2023

NOTE 1 — Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by CTS Corporation (“CTS”, "we", "our", "us" or the "Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The unaudited condensed consolidated financial statements should be read in conjunction with the financial statements, notes thereto, and other information included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2022.

The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring items) necessary for a fair statement, in all material respects, of the financial position and results of operations for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year.

There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

NOTE 2 – Revenue Recognition

The core principle of Accounting Standard Codification (“ASC”) Topic 606 Revenue from Contracts with Customers is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step process to achieve that core principle:

•

Identify the contract(s) with a customer

•

Identify the performance obligations

•

Determine the transaction price

•

Allocate the transaction price

•

Recognize revenue when the performance obligations are met

We recognize revenue when the performance obligations specified in our contracts have been satisfied, after considering the impact of variable consideration and other factors that may affect the transaction price. Our contracts normally contain a single performance obligation that is fulfilled on the date of delivery or shipment based on shipping terms stipulated in the contract. We usually expect payment within 30 to 90 days from the shipping date, depending on our terms with the customer. None of our contracts as of June 30, 2023 contained a significant financing component. Differences between the amount of revenue recognized and the amount invoiced, collected from, or paid to our customers are recognized as contract assets or liabilities. Contract assets will be reviewed for impairment when events or circumstances indicate that they may not be recoverable.

To the extent the transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing the most likely amount method based on an analysis of historical experience and current facts and circumstances, which requires significant judgment. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

Disaggregated Revenue

The following table presents revenues disaggregated by the major markets we serve:


	Three months ended				Six months ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Transportation	$	82,142	$	74,690	$	156,418	$	153,824
Industrial		32,711		41,402		73,384		81,409
Medical		17,006		17,030		34,351		32,897
Aerospace & Defense		13,323		11,860		27,023		24,547
Total	$	145,182	$	144,982	$	291,176	$	292,677

NOTE 3 – Business Acquisitions

TEWA Temperature Sensors SP. Zo.o. Acquisition

On February 28, 2022, we acquired 100% of the outstanding shares of TEWA Temperature Sensors SP. Zo.o. (“TEWA”). TEWA is a designer and manufacturer of high-quality temperature sensors. TEWA has complementary capabilities with our existing temperature sensing platform, and the acquisition supports our end market diversification strategy and expands our presence in Europe.

The final purchase price of $23,721, net of cash acquired of $2,979, has been allocated to the fair values of assets and liabilities acquired as of February 28, 2022. The purchase price was reduced by $794 for the final settlement of net working capital during the first quarter of 2023. The following table summarizes the consideration paid, the fair values of the assets acquired, and the liabilities assumed as of the date of acquisition:


	Fair Values at February 28, 2022
Accounts receivable	$	2,521
Inventory		3,136
Other current assets		69
Property, plant and equipment		654
Other assets		27
Goodwill		8,473
Intangible assets		13,650
Fair value of assets acquired		28,530
Less fair value of liabilities acquired		(4,809	)
Purchase price	$	23,721

Goodwill represents value the Company expects to be created by combining the operations of the acquired business with the Company's operations, including the expansion of customer relationships, access to new customers, and potential cost savings and synergies. Goodwill related to the acquisition is expected to be deductible for tax purposes.

The Company recorded a $1,180 step-up of inventory to its fair value as of the acquisition date. The step-up was amortized as a non-cash charge to cost of goods sold as the acquired inventory was sold with the full $1,180 recognized in the first half of 2022.

The following table summarizes the carrying amounts and weighted average lives of the acquired intangible assets:


	Carrying Value		Weighted Average Amortization Period
Customer lists/relationships	$	13,000		12.0
Technology and other intangibles		650		3.0
Total	$	13,650

Ferroperm Piezoceramics A/S Acquisition

On June 30, 2022, we acquired 100% of the outstanding shares of Ferroperm Piezoceramics A/S (“Ferroperm”). Ferroperm specializes in the design and manufacture of high performance piezoceramic components for use in complex and demanding medical, industrial, and aerospace applications. Ferroperm has complementary capabilities with our existing medical diagnostics and imaging product lines. The acquisition supports our end market diversification strategy and expands our presence in European end markets.

The final purchase price of $72,340, net of cash acquired of $5,578, has been allocated to the fair values of assets and liabilities acquired as of June 30, 2022. The valuation of intangible assets and associated deferred tax liability was finalized in the first quarter of 2023. The following table summarizes the final consideration paid, the fair values of the assets acquired, and the liabilities assumed as of the date of acquisition:


	Fair Values at June 30, 2023
Accounts receivable	$	3,073
Inventory		6,848
Other current assets		1,003
Property, plant and equipment		3,953
Other assets		158
Goodwill		31,985
Intangible assets		38,100
Fair value of assets acquired		85,120
Less fair value of liabilities acquired		(12,780	)
Purchase price	$	72,340

The Company recorded a $3,012 step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold as the acquired inventory was sold in the third and fourth quarters of 2022.

The following table summarizes the carrying amounts and weighted average lives of the acquired intangible assets:


	Carrying Value		Weighted Average Amortization Period
Customer lists/relationships	$	31,800		16.0
Technology and other intangibles		6,300		14.0
Total	$	38,100

Maglab AG Acquisition

On February 6, 2023, we acquired 100% of the outstanding shares of Maglab AG ("Maglab"). Maglab has deep expertise in magnetic system design and current measurement solutions for use in e-mobility, industrial automation, and renewable energy applications. Maglab's domain expertise coupled with CTS’ commercial, technical and operational capabilities position us to advance our status as a recognized innovator in electric motor sensing and controls markets.

The final purchase price of $7,717 has been allocated to the fair values of assets and liabilities acquired as of February 6, 2023. The purchase price was increased by $3 for the final settlement of net working capital in the quarter. The following table summarizes the final consideration paid, the fair values of the assets acquired, and the liabilities assumed as of the date of acquisition:


	Consideration Paid
Cash paid, net of cash acquired of $14	$	4,153
Contingent consideration		3,564
Purchase price	$	7,717


	Fair Values at February 6, 2023
Accounts receivable	$	348
Inventory		43
Other current assets		41
Property, plant and equipment		35
Goodwill		4,997
Intangible assets		2,860
Fair value of assets acquired		8,324
Less fair value of liabilities acquired		(607	)
Purchase price	$	7,717

The following table summarizes the carrying amounts and weighted average lives of the acquired intangible assets:


	Carrying Value		Weighted Average Amortization Period
Customer lists/relationships	$	2,800		13.0
Technology and other intangibles		60		3.0
Total	$	2,860

All contingent consideration is payable in cash and is based on success factors related to the integration process as well as upon the achievement of annual revenue and customer order targets through the fiscal year ending December 31, 2025. The Company recorded $3,564 as the acquisition date fair value of the contingent consideration based on the estimate of the probability of achieving the performance targets. This amount is also reflected as an addition to the purchase price.

NOTE 4 – Accounts Receivable, net

The components of accounts receivable, net are as follows:


	As of
	June 30,			December 31,
	2023			2022
Accounts receivable, gross	$	98,666		$	92,171
Less: Allowance for credit losses		(1,147	)		(1,236	)
Accounts receivable, net	$	97,519		$	90,935

NOTE 5 – Inventories, net

Inventories, net consists of the following:


	As of
	June 30,			December 31,
	2023			2022
Finished goods	$	13,103		$	12,865
Work-in-process		22,076			22,819
Raw materials		38,621			37,362
Less: Inventory reserves		(11,244	)		(10,786	)
Inventories, net	$	62,556		$	62,260

NOTE 6 – Property, Plant and Equipment, net

Property, plant and equipment, net is comprised of the following:


	As of
	June 30,			December 31,
	2023			2022
Land and land improvements	$	536		$	1,100
Buildings and improvements		72,956			71,938
Machinery and equipment		260,012			258,159
Less: Accumulated depreciation		(238,548	)		(233,897	)
Property, plant and equipment, net	$	94,956		$	97,300

Depreciation expense for the three months ended June 30, 2023 and June 30, 2022 was $4,400 and $4,479, respectively. Depreciation expense for the six months ended June 30, 2023 and June 30, 2022 was $8,807 and $8,847, respectively.

We recorded a charge of $1,324 during the second quarter of 2023 due to the impairment of a specific asset group as a result of certain restructuring actions being taken. See Note 9 “Costs Associated with Exit and Restructuring Activities.”

NOTE 7 – Retirement Plans

Pension Plans

Net pension expense for our domestic and foreign plans included in other expense, net in the Condensed Consolidated Statements of Earnings is as follows:


	Three months ended				Six months ended
	June 30,		June 30,		June 30,		June 30,
	2023		2022		2023		2022
Net pension expense	$	66	$	65	$	133	$	130

The components of net pension expense for our domestic and foreign plans include the following:


	Domestic Pension Plans				Foreign Pension Plans
	Three Months Ended				Three Months Ended
	June 30,		June 30,		June 30,			June 30,
	2023		2022		2023			2022
Service cost	$	—	$	—	$	5		$	6
Interest cost		10		5		9			4
Expected return on plan assets(1)		—		—		(6	)		(3	)
Amortization of loss		5		8		43			45
Total expense, net	$	15	$	13	$	51		$	52

(1)

Expected return on plan assets is net of expected investment expenses and certain administrative expenses.


	Domestic Pension Plans				Foreign Pension Plans
	Six Months Ended				Six Months Ended
	June 30,		June 30,		June 30,			June 30,
	2023		2022		2023			2022
Service cost	$	—	$	—	$	11		$	12
Interest cost		19		10		19			8
Expected return on plan assets(1)		—		—		(13	)		(6	)
Amortization of loss		11		16		86			90
Total expense, net	$	30	$	26	$	103		$	104

(1)

Expected return on plan assets is net of expected investment expenses and certain administrative expenses.

Other Post-retirement Benefit Plan

Net post-retirement expense for our other post-retirement plan includes the following components:


	Three Months Ended					Six Months Ended
	June 30,			June 30,		June 30,			June 30,
	2023			2022		2023			2022
Service cost	$	—		$	—	$	—		$	—
Interest cost		48			26		96			52
Amortization of gain		(84	)		—		(168	)		—
Total (income) expense, net	$	(36	)	$	26	$	(72	)	$	52

NOTE 8 – Goodwill and Other Intangible Assets

Goodwill

Changes in the net carrying amount of goodwill were as follows:


	Total
Goodwill as of December 31, 2022	$	152,361
Changes from acquisition purchase accounting		2,914
Foreign exchange impact		656
Goodwill as of June 30, 2023	$	155,931

Other Intangible Assets

Other intangible assets, net consist of the following components:


	As of
	June 30, 2023
	Gross Carrying Amount		Accumulated Amortization			Net Amount
Customer lists/relationships	$	143,844	$	(59,005	)	$	84,839
Technology and other intangibles		53,972		(30,094	)		23,878
Other intangible assets, net	$	197,816	$	(89,099	)	$	108,717


	As of
	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Amount
Customer lists/relationships	$	148,899	$	(59,603	)	$	89,296
Technology and other intangibles		45,255		(26,498	)		18,757
Other intangible assets, net	$	194,154	$	(86,101	)	$	108,053

Amortization expense for the three months ended June 30, 2023 and June 30, 2022 was $2,857 and $2,536, respectively. Amortization expense for the six months ended June 30, 2023 and June 30, 2022 was $5,368 and $4,918, respectively.

The changes in the gross carrying amounts of intangible assets are primarily due to business acquisition and purchase accounting activity in the quarter as discussed in Note 3 “Business Acquisitions.”

Remaining amortization expense for other intangible assets as of June 30, 2023 is as follows:


	Amortization expense
2023	$	5,648
2024		11,146
2025		10,658
2026		10,501
2027		10,443
Thereafter		60,321
Total amortization expense	$	108,717

NOTE 9 – Costs Associated with Exit and Restructuring Activities

Restructuring charges are reported as a separate line within operating earnings in the Condensed Consolidated Statements of Earnings.

Total restructuring charges are as follows:


	Three Months Ended
	June 30, 2023		June 30, 2022
Restructuring charges	$	1,895	$	630


	Six Months Ended
	June 30, 2023		June 30, 2022
Restructuring charges	$	2,807	$	942

September 2020 Plan

In September 2020, we initiated a restructuring plan focused on optimizing our manufacturing footprint and improving operational efficiency by better utilizing our systems capabilities (the "September 2020 Plan"). This plan includes transitioning certain administrative functions to a shared service center, realignment of manufacturing locations, and certain other efficiency improvement actions. The restructuring cost of the September 2020 Plan is estimated to be in the range of $3,500 to $4,500, including workforce reduction charges, building and equipment relocation charges and other contract and asset-related costs. We have incurred $3,767 in program costs to date. During the three months ended June 30, 2023, we recorded $1,488 in restructuring costs comprised of $164 and $1,324 in workforce reduction and asset impairment charges, respectively. During the six months ended June 30, 2023, we recorded $1,708 in restructuring costs, comprised of $384 and $1,324 in workforce reduction and asset impairment charges, respectively. The total restructuring liability associated with these actions was $49 as of June 30, 2023.

The total restructuring liability associated with these actions was $634 as of December 31, 2022.

Other Restructuring Activities

From time to time, we undertake other restructuring activities that are not part of a formal plan. During the three and six months ended June 30, 2023, we incurred restructuring charges of $407 and $1,099, respectively. During the three and six months ended June 30, 2022, we incurred restructuring charges of $470 and $782, respectively. The total restructuring liability associated with these actions was $375 at June 30, 2023 and $235 at December 31, 2022.

During the first quarter of 2023, we announced the shutdown of our Juarez manufacturing facility. As a part of this activity, operations from the Juarez plant will be consolidated into our expanded Matamoros facility. We expect the completion of these activities to occur in 2024. The total restructuring cost of the activities associated with the closure and consolidation is estimated to be in the range of $1,500 and $3,000, including workforce reduction charges, building and equipment relocation charges and other contract and asset-related costs. During the three and six months ended June 30, 2023, we incurred costs associated with the planned activities of the Juarez shutdown of $151 and $253, respectively. The restructuring liability associated with the shutdown is $83 as of June 30, 2023. These balances are included in our other restructuring activity amounts referenced in the preceding paragraph.

The following table displays the restructuring liability activity included in accrued expenses and other liabilities for all plans for the six months ended June 30, 2023:


Restructuring liability at January 1, 2023	$	869
Restructuring charges		2,807
Costs paid		(1,891	)
Other activity(1)		(1,361	)
Restructuring liability at June 30, 2023	$	424

(1)

Other activity includes non-cash asset impairment charges.

NOTE 10 – Accrued Expenses and Other Liabilities

The components of accrued expenses and other liabilities are as follows:


	As of
	June 30,		December 31,
	2023		2022
Accrued product related costs	$	2,251	$	2,368
Accrued income taxes		7,548		9,630
Accrued property and other taxes		1,938		2,142
Accrued professional fees		1,057		1,472
Accrued customer related liabilities		2,418		2,837
Dividends payable		1,256		1,272
Remediation reserves		12,811		11,048
Derivative liabilities		702		357
Other accrued liabilities		5,400		4,196
Total accrued expenses and other liabilities	$	35,381	$	35,322

NOTE 11 – Commitments and Contingencies

Certain processes in the manufacture of our current and past products create by-products classified as hazardous waste. We have been notified by the U.S. Environmental Protection Agency (”EPA”), state environmental agencies, and in some cases, groups of potentially responsible parties, that we may be potentially liable for environmental contamination at several sites currently and formerly owned or operated by us. Two of those sites, Asheville, North Carolina and Mountain View, California, are designated National Priorities List sites under the EPA’s Superfund program. We accrue a liability for probable remediation activities, claims and proceedings against us with respect to environmental matters if the amount can be reasonably estimated, and provide disclosures including the nature of a loss whenever it is probable or reasonably possible that a potentially material loss may have occurred but cannot be estimated.

We record contingent loss accruals on an undiscounted basis.

A roll-forward of remediation reserves included in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets is comprised of the following:


	As of
	June 30,			December 31,
	2023			2022
Balance at beginning of period	$	11,048		$	10,979
Remediation expense		2,756			2,750
Net remediation payments		(990	)		(2,661	)
Other activity(1)		(3	)		(20	)
Balance at end of the period	$	12,811		$	11,048

(1)

Other activity includes currency translation adjustments not recorded through remediation expense.

The Company operates under and in accordance with a federal consent decree, dated March 7, 2017, with the EPA for the CTS of Asheville, Inc. Superfund Site (“Asheville Site”). On February 8, 2023, the Company received a letter from the EPA (the “EPA Letter”) seeking reimbursement of its past response costs and interest thereon relating to any release or threatened release of hazardous substances at the Asheville Site in the aggregate amount of $9,955 from the three potentially responsible parties associated with the Asheville Site, including the Company. The Company expects its potential exposure to be between $1,900 and $9,955. We have determined that no point within this range is more likely than another and therefore we have recorded a loss estimate of $1,900 as of June 30, 2023 in the Consolidated Statements of Earnings.

Unrelated to the environmental claims described above, from time to time, the Company has been threatened with, or named as a defendant in, various legal or regulatory actions in the ordinary course of business. The Company records a loss contingency liability when a loss is considered probable and the amount can be reasonably estimated. Although the potential liability with respect to certain of such legal or regulatory actions cannot be reasonably estimated, none of such matters is expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows. The Company’s legal costs associated with defending itself are recorded to expense as incurred.

We provide product warranties when we sell our products and accrue for estimated liabilities at the time of sale. Warranty estimates are forecasts based on the best available information and historical claims experience. We accrue for specific warranty claims if we believe that the facts of a specific claim make it probable that a liability in excess of our historical experience has been or will be incurred, and provide disclosures for specific claims whenever it is reasonably possible that a material loss may be incurred which cannot be estimated.

We cannot provide assurance that the ultimate disposition of environmental, legal, and product warranty claims will not materially exceed the amount of our accrued losses and adversely impact our consolidated financial position, results of operations, or cash flows. Our accrued liabilities and disclosures will be adjusted accordingly if additional information becomes available in the future.

NOTE 12 - Debt

Long-term debt is comprised of the following:


	As of
	June 30,			December 31,
	2023			2022
Total credit facility	$	400,000		$	400,000
Balance outstanding		77,040			83,670
Standby letters of credit		1,640			1,640
Amount available, subject to covenant restrictions	$	321,320		$	314,690
Weighted-average interest rate		5.74	%		2.96	%

On December 15, 2021, we entered into a second amended and restated five-year credit agreement with a group of banks (the “Revolving Credit Facility”) to (i) increase the total credit facility to $400,000, which may be increased by $200,000 at the request of the Company, subject to the administrative agent's approval, (ii) extend the maturity of the Revolving Credit Facility from February 12, 2024 to December 15, 2026, (iii) replace LIBOR with SOFR as the primary reference rate used to calculate interest on the loans under the Revolving Credit Facility, (iv) increase available sublimits for letters of credit, and swingline loans as well as providing for additional alternative currency borrowing capabilities, and (v) modify the financial and non-financial covenants to provide the Company additional flexibility.

Borrowings in U.S. dollars under the Revolving Credit Facility bear interest, at a per annum rate equal to the applicable Term SOFR rate (but not less than 0.0%), plus the Term SOFR adjustment, and plus an applicable margin, which ranges from 1.00% to 1.75%, based on our net leverage ratio. Similarly, borrowings of alternative currencies under the Revolving Credit Facility bear interest equal to a defined risk-free reference rate, plus the applicable risk-free rate adjustment and plus an applicable margin, which ranges from 1.00% to 1.75%, based on our net leverage ratio.

The Revolving Credit Facility includes a swing line sublimit of $20,000 and a letter of credit sublimit of $20,000. We also pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility. The commitment fee ranges from 0.175% to 0.25% based on our net leverage ratio. The Revolving Credit Facility requires, in addition to customary representations and warranties, that we comply with a maximum net leverage ratio and a minimum interest coverage ratio. Failure to comply with these covenants could reduce the borrowing availability under the Revolving Credit Facility. We were in compliance with all debt covenants at June 30, 2023. The Revolving Credit Facility requires that we deliver quarterly financial statements, annual financial statements, auditor certifications, and compliance certificates within a specified number of days after the end of a quarter and year. Additionally, the Revolving Credit Facility contains restrictions limiting our ability to: dispose of assets; incur certain additional debt; repay other debt or amend subordinated debt instruments; create liens on assets; make investments, loans or advances; make acquisitions or engage in mergers or consolidations; engage in certain transactions with our subsidiaries and affiliates; and make stock repurchases and dividend payments.

We have debt issuance costs related to our long-term debt that are being amortized using the straight-line method over the life of the debt, which approximates the effective interest method. Amortization expense for the three and six months ended June 30, 2023 was $48 and $97, respectively. Amortization expense for the three and six months ended June 30, 2022 was $48 and $97, respectively. These costs are included in interest expense in our Consolidated Statements of Earnings.

Note 13 - Derivative Financial Instruments

Our earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates and interest rates. We selectively use derivative financial instruments including foreign currency forward contracts as well as interest rate and cross-currency swaps to manage our exposure to these risks.

The use of derivative financial instruments exposes the Company to credit risk, which relates to the risk of nonperformance by a counterparty to the derivative contracts. We manage our credit risk by entering into derivative contracts with only highly rated financial institutions and by using netting agreements.

The effective portion of derivative gains and losses are recorded in accumulated other comprehensive loss until the hedged transaction affects earnings upon settlement, at which time they are reclassified to cost of goods sold or net sales. If it is probable that an anticipated hedged transaction will not occur by the end of the originally specified time period, we reclassify the gains or losses related to that hedge from accumulated other comprehensive income (loss) to other income (expense), net.

We assess hedge effectiveness qualitatively by verifying that the critical terms of the hedging instrument and the forecasted transaction continue to match, and that there have been no adverse developments that have increased the risk that the counterparty will default. No recognition of ineffectiveness was recorded in our Condensed Consolidated Statements of Earnings for the three and six months ended June 30, 2023.

Foreign Currency Hedges

We use forward contracts to mitigate currency risk related to a portion of our forecasted foreign currency revenues and costs. The currency forward contracts are designed as cash flow hedges and are recorded in the Condensed Consolidated Balance Sheets at fair value.

We continue to monitor the Company’s overall currency exposure and may elect to add cash flow hedges in the future. At June 30, 2023, we had a net unrealized gain of $2,387 in accumulated other comprehensive (loss) income, $2,387 of which is expected to be reclassified to earnings within the next 12 months. The notional amount of foreign currency forward contracts outstanding was $16,538 at June 30, 2023.

Interest Rate Swaps

We use interest rate swaps to convert a portion of our Revolving Credit Facility’s outstanding balance from a variable rate of interest to a fixed rate. As of June 30, 2023, we have agreements to fix interest rates on $50,000 of long-term debt until December 2026. The difference to be paid or received under the terms of the swap agreements will be recognized as an adjustment to interest expense when settled.

These swaps are treated as cash flow hedges and consequently, the changes in fair value are recorded in other comprehensive (loss) income. The estimated net amount of the existing gains that are reported in accumulated other comprehensive (loss) income that are expected to be reclassified into earnings within the next twelve months is approximately $1,629.

Cross-Currency Swap

The Company has operations and investments in various international locations and is subject to risks associated with changing foreign exchange rates. In order to hedge the Krone-based purchase price of the Ferroperm acquisition, the Company entered into a cross-currency interest rate swap agreement on June 27, 2022 that synthetically swapped $25,000 of variable rate debt to Krone denominated variable rate debt. Upon completion of the Ferroperm acquisition on June 30, 2022, the transaction was designated as a net investment hedge for accounting purposes and will mature on June 30, 2027.

Accordingly, any gains or losses on this derivative instrument are included in the foreign currency translation component of other comprehensive income until the net investment is sold, diluted or liquidated. At June 30, 2023, we had a net unrealized loss of $1,003 in accumulated other comprehensive (loss) income. Interest payments received for the cross-currency swap are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense in the Condensed Consolidated Statements of Earnings. The assumptions used in measuring fair value of the cross-currency swap are considered level 2 inputs, which are based upon the Krone to United States Dollar exchange rate market.

The location and fair values of derivative instruments designated as hedging instruments in the Condensed Consolidated Balance Sheets as of June 30, 2023 are shown in the following table:


	As of
	June 30,			December 31,
	2023			2022
Interest rate swaps reported in Other current assets	$	1,629		$	1,561
Interest rate swaps reported in Other assets	$	1,463		$	1,434
Cross-currency swap reported in Accrued expenses and other liabilities	$	(701	)	$	(357	)
Foreign currency hedges reported in Other current assets	$	2,095		$	945

The Company has elected to net its foreign currency derivative assets and liabilities in the balance sheet in accordance with ASC 210-20 (Balance Sheet, Offsetting). On a gross basis, there were foreign currency derivative assets of $2,233 and foreign currency derivative liabilities of $138 at June 30, 2023.

The effect of derivative instruments on the Condensed Consolidated Statements of Earnings is as follows:


	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2023			2022			2023			2022
Foreign Exchange Contracts:
Amounts reclassified from AOCI to earnings:
Net sales	$	(63	)	$	—		$	(97	)	$	—
Cost of goods sold		589			162			844			308
Total gain reclassified from AOCI to earnings		526			162			747			308
Total derivative gain on foreign exchange contracts recognized in earnings	$	526		$	162		$	747		$	308
Interest Rate Swaps:
Income (expense) recorded in Interest expense	$	441		$	(101	)	$	817		$	(273	)
Cross-Currency Swap:
Income recorded in Interest expense	$	136		$	—		$	295		$	—
Total net gains on derivatives	$	1,103		$	61		$	1,859		$	35

NOTE 14 – Accumulated Other Comprehensive Income (Loss)

Shareholders’ equity includes certain items classified as accumulated other comprehensive loss (“AOCI”) in the Condensed Consolidated Balance Sheets, including:

•

Unrealized gains (losses) on hedges relate to interest rate swaps to convert a portion of our Revolving Credit Facility's outstanding balance from a variable rate of interest into a fixed rate, foreign currency forward contracts used to hedge our exposure to changes in exchange rates affecting certain revenues and costs denominated in foreign currencies, as well as a cross-currency swap that synthetically converts our U.S. Dollar variable rate debt to Krone denominated variable rate debt. These hedges are designated as cash flow hedges, and we have deferred income statement recognition of gains and losses until the hedged transactions occur, at which time amounts are reclassified into earnings. Further information related to our derivative financial instruments is included in Note 13 – “Derivative Financial Instruments” and Note 17 – “Fair Value Measurements”.

•

Unrealized gains (losses) on pension obligations are deferred from income statement recognition until the gains or losses are realized. Amounts reclassified to income from AOCI are included in net periodic pension income (expense). Further information related to our pension obligations is included in Note 7 – “Retirement Plans”.

•

Cumulative translation adjustments relate to our non-U.S. subsidiary companies that have designated a functional currency other than the U.S. Dollar. We are required to translate the subsidiary functional currency financial statements to dollars using a combination of historical, period-end, and average foreign exchange rates.

This combination of rates creates the foreign currency translation adjustment component of other comprehensive income.

Changes in exchange rates between the functional currency and the currency in which a transaction is denominated are foreign exchange transaction gains or losses. Transaction losses for the three and six months ended June 30, 2023 were $2,750 and $2,683, respectively. Transaction losses for the three and six months ended June 30, 2022 were $3,817 and $3,529, respectively. The impact of these changes have been included in other income (expense) in the Condensed Consolidated Statements of Earnings.

The components of accumulated other comprehensive income (loss) for the three months ended June 30, 2023 are as follows:


							(Gain) Loss
	As of			Gain (Loss)			Reclassified			As of
	March 31,			Recognized			from AOCI			June 30,
	2023			in OCI			to Earnings			2023
Changes in fair market value of derivatives:
Gross	$	4,403		$	2,046		$	(967	)	$	5,482
Income tax benefit (expense)		(1,012	)		(471	)		222			(1,261	)
Net		3,391			1,575			(745	)		4,221
Changes in unrealized pension cost:
Gross		(1,226	)		—			7			(1,219	)
Income tax benefit (expense)		389			—			(3	)		386
Net		(837	)		—			4			(833	)
Cumulative translation adjustment:
Gross		(1,856	)		2,159			—			303
Income tax benefit (expense)		—			—			—			—
Net		(1,856	)		2,159			—			303
Total accumulated other comprehensive (loss) income	$	698		$	3,734		$	(741	)	$	3,691

The components of accumulated other comprehensive income (loss) for the three months ended June 30, 2022 are as follows:


							(Gain) Loss
	As of			Gain (Loss)			Reclassified			As of
	March 31,			Recognized			from AOCI			June 30,
	2022			in OCI			to Earnings			2022
Changes in fair market value of derivatives:
Gross	$	969		$	976		$	(61	)	$	1,884
Income tax benefit (expense)		(221	)		(224	)		14			(431	)
Net		748			752			(47	)		1,453
Changes in unrealized pension cost:
Gross		(2,624	)		1,977			143			(504	)
Income tax benefit (expense)		712			—			(38	)		674
Net		(1,912	)		1,977			105			170
Cumulative translation adjustment:
Gross		(2,281	)		(2,012	)		—			(4,293	)
Income tax benefit (expense)		—			—			—			—
Net		(2,281	)		(2,012	)		—			(4,293	)
Total accumulated other comprehensive (loss) income	$	(3,445	)	$	717		$	58		$	(2,670	)

The components of accumulated other comprehensive income (loss) for the six months ended June 30, 2023 are as follows:


							(Gain) Loss
	As of			Gain (Loss)			Reclassified			As of
	December 31,			Recognized			from AOCI			June 30,
	2022			in OCI			to Earnings			2023
Changes in fair market value of derivatives:
Gross	$	3,911		$	3,135			(1,564	)	$	5,482
Income tax benefit (expense)		(899	)		(721	)		359			(1,261	)
Net		3,012			2,414			(1,205	)		4,221
Changes in unrealized pension cost:
Gross		(1,179	)		—			(40	)		(1,219	)
Income tax benefit (expense)		376			—			10			386
Net		(803	)		—			(30	)		(833	)
Cumulative translation adjustment:
Gross		(2,880	)		3,183			—			303
Income tax benefit (expense)		—			—			—			—
Net		(2,880	)		3,183			—			303
Total accumulated other comprehensive (loss) income	$	(671	)	$	5,597		$	(1,235	)	$	3,691

The components of accumulated other comprehensive income (loss) for the six months ended June 30, 2022 are as follows:


							(Gain) Loss
	As of			Gain (Loss)			Reclassified			As of
	December 31,			Recognized			from AOCI			June 30,
	2021			in OCI			to Earnings			2022
Changes in fair market value of derivatives:
Gross	$	(635	)	$	2,554			(35	)	$	1,884
Income tax benefit (expense)		147			(587	)		9			(431	)
Net		(488	)		1,967			(26	)		1,453
Changes in unrealized pension cost:
Gross		(2,744	)		1,977			263			(504	)
Income tax benefit (expense)		738			—			(64	)		674
Net		(2,006	)		1,977			199			170
Cumulative translation adjustment:
Gross		(2,032	)		(2,261	)		—			(4,293	)
Income tax benefit (expense)		—			—			—			—
Net		(2,032	)		(2,261	)		—			(4,293	)
Total accumulated other comprehensive (loss) income	$	(4,526	)	$	1,683		$	173		$	(2,670	)

NOTE 15 – Shareholders’ Equity

Share count and par value data related to shareholders’ equity are as follows:


	As of
	June 30,		December 31,
	2023		2022
Preferred Stock
Par value per share	No par value		No par value
Shares authorized		25,000,000		25,000,000
Shares outstanding		—		—
Common Stock
Par value per share	No par value		No par value
Shares authorized		75,000,000		75,000,000
Shares issued		57,440,235		57,330,761
Shares outstanding		31,394,377		31,680,890
Treasury stock
Shares held		26,045,858		25,649,871

On February 9, 2023, the Board of Directors approved a new share repurchase program that authorizes the Company to repurchase up to $50,000 of the Company’s common stock. The repurchase program has no set expiration date and replaces the repurchase program approved by the Board of Directors on May 13, 2021. During the three and six months ended June 30, 2023, 197,716 and 395,987 shares of common stock were repurchased for $8,760 and $17,562, respectively. During the three and six months ended June 30, 2022, 216,252 and 332,428 shares of common stock were repurchased for $7,748 and $11,668, respectively. As of June 30, 2023, approximately $36,633 remains available for future purchases.

A roll-forward of common shares outstanding is as follows:


	Six months ended
	June 30,			June 30,
	2023			2022
Balance at the beginning of the year		31,680,890			32,178,715
Repurchases		(395,987	)		(332,428	)
Restricted share issuances		109,474			65,114
Balance at the end of the period		31,394,377			31,911,401

Certain potentially dilutive restricted stock units are excluded from diluted earnings per share because they are anti-dilutive. The number of outstanding awards that were anti-dilutive for the six months ended June 30, 2023 was 5,000. The number of outstanding awards that were anti-dilutive for the three and six months ended June 30, 2022 were 2,500 and 2,500, respectively. There were no anti-dilutive shares for the three months ended June 30, 2023.

NOTE 16- Stock-Based Compensation

At June 30, 2022, we had five active stock-based compensation plans: the Non-Employee Directors’ Stock Retirement Plan (“Directors’ Plan”), the 2004 Omnibus Long-Term Incentive Plan (“2004 Plan”), the 2009 Omnibus Equity and Performance Incentive Plan (“2009 Plan”), the 2014 Performance and Incentive Compensation Plan (“2014 Plan”), and the 2018 Equity and Incentive Compensation Plan ("2018 Plan"). Future grants can only be made under the 2018 Plan.

These plans allow for grants of stock options, stock appreciation rights, restricted stock, restricted stock units ("RSUs"), performance shares, performance units, and other stock awards subject to the terms of the specific plans under which the awards are granted.

The following table summarizes the compensation expense included in selling, general and administrative expenses in the Condensed Consolidated Statements of Earnings related to stock-based compensation plans:


	Three months ended				Six months ended
	June 30,		June 30,		June 30,		June 30,
	2023		2022		2023		2022
Service-based RSUs	$	765	$	691	$	1,535	$	1,368
Performance-based RSUs		723		820		1,357		2,041
Cash-settled RSUs		161		105		343		157
Total	$	1,649	$	1,616	$	3,235	$	3,566
Income tax benefit		379		372		744		820
Net expense	$	1,270	$	1,244	$	2,491	$	2,746

The following table summarizes the unrecognized compensation expense related to non-vested RSUs by type and the weighted-average period in which the expense is to be recognized:


	Unrecognized
	Compensation		Weighted-
	Expense at		Average
	June 30, 2023		Period (years)
Service-based RSUs	$	2,993		1.47
Performance-based RSUs		5,252		1.88
Total	$	8,245		1.73

We recognize expense on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.

The following table summarizes the status of these plans as of June 30, 2023:


	2018 Plan		2014 Plan		2009 Plan		2004 Plan		Directors' Plan
Awards originally available		2,500,000		1,500,000		3,400,000		6,500,000	N/A
Maximum potential awards outstanding		787,638		35,100		30,000		14,545		4,722
RSUs and cash-settled awards vested and released		441,812		—		—		—		—
Awards available for grant		1,270,550		—		—		—		—

Service-Based Restricted Stock Units

The following table summarizes the service-based RSU activity for the six months ended June 30, 2023:


	Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		282,124		$	27.44
Granted		64,046			43.77
Vested and released		(68,848	)		32.30
Forfeited		(7,540	)		36.97
Outstanding at June 30, 2023		269,782		$	29.81
Releasable at June 30, 2023		131,867		$	20.30

Performance and Market-Based Restricted Stock Units

The following table summarizes the performance and market-based RSU activity for the six months ended June 30, 2023:


	Units			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		260,306		$	33.20
Granted		71,832			43.80
Attained by performance		53,035			32.11
Released		(113,385	)		32.11
Forfeited		(10,429	)		37.59
Outstanding at June 30, 2023		261,359		$	36.19
Releasable at June 30, 2023		—		$	—

Cash-Settled Restricted Stock Units

Cash-Settled RSUs entitle the holder to receive the cash equivalent of one share of common stock for each unit when the unit vests. These RSUs are issued to key employees residing in foreign locations as direct compensation. Generally, these RSUs vest over a three-year period. Cash-Settled RSUs are classified as liabilities and are remeasured at each reporting date until settled. At June 30, 2023 and December 31, 2022, we had 49,347 and 46,641 Cash-Settled RSUs outstanding, respectively. At June 30, 2023 and December 31, 2022, liabilities of $547 and $566, respectively, were included in accrued expenses and other liabilities on our Condensed Consolidated Balance Sheets.

NOTE 17 — Fair Value Measurements

The table below summarizes our financial assets and liabilities that were measured at fair value on a recurring basis at June 30, 2023:


	Asset (Liability) Carrying Value at June 30, 2023			Quoted Prices in Active Markets for Identical (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Interest rate swaps	$	3,092		$	—	$	3,092		$	—
Foreign currency hedges	$	2,095		$	—	$	2,095		$	—
Cross-currency swap	$	(701	)	$	—	$	(701	)	$	—
Qualified replacement plan assets	$	14,218		$	14,218	$	—		$	—
Contingent consideration	$	(3,564	)	$	—	$	—		$	(3,564	)

The table below summarizes the financial assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2022:


	Asset (Liability) Carrying Value at December 31, 2022			Quoted Prices in Active Markets for Identical (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Interest rate swaps	$	2,995		$	—	$	2,995		$	—
Foreign currency hedges	$	945		$	—	$	945		$	—
Cross-currency swap	$	(357	)	$	—	$	(357	)	$	—
Qualified replacement plan assets	$	15,249		$	15,249	$	—		$	—

We use interest rate swaps to convert a portion of our Revolving Credit Facility’s outstanding balance from a variable rate of interest into a fixed rate and foreign currency forward contracts to hedge the effect of foreign currency changes on certain revenues and costs denominated in foreign currencies. The Company entered into a cross-currency swap agreement in order to manage its exposure to changes in interest rates related to foreign debt. These derivative financial instruments are measured at fair value on a recurring basis. The fair value of our interest rate swaps and foreign currency hedges were measured using standard valuation models using market-based observable inputs over the contractual terms, including forward yield curves, among others. There is a readily determinable market for these derivative instruments, but that market is not active and therefore they are classified within Level 2 of the fair value hierarchy.

The fair value of the contingent consideration requires significant judgment. The Company's fair value estimates used in the contingent consideration valuation are considered Level 3 fair value measurements. The fair value estimates were based on assumptions management believes to be reasonable, but that are inherently uncertain, including estimates of future revenues and timing of events and activities that are expected to take place. Refer to Note 3 “Business Acquisitions” for further discussion on contingent consideration.

A roll-forward of the contingent consideration is as follows:


	Contingent Consideration
Balance at December 31, 2022	$	—
Acquisition date fair value of contingent consideration		3,564
Balance at June 30, 2023	$	3,564

As of June 30, 2023, approximately $1,424 was recorded in accrued expenses and other liabilities with the remainder in other long-term obligations.

Our long-term debt consists of the Revolving Credit Facility, which is recorded at its carrying value. There is a readily determinable market for our long-term debt and it is classified within Level 2 of the fair value hierarchy as the market is not deemed to be active. The fair value of long-term debt approximates its carrying value and was determined by valuing a similar hypothetical coupon bond and attributing that value to our long-term debt under the Revolving Credit Facility.

The qualified replacement plan assets consist of investment funds maintained for future contributions to the Company’s U.S. 401(k) program. The investments are Level 1 marketable securities and are recorded in Other Assets on our Condensed Consolidated Balance Sheets.

NOTE 18 — Income Taxes

The effective income tax rates for the three and six months ended June 30, 2023 and 2022 are as follows:


	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2023			2022			2023			2022
Effective tax rate		19.8	%		25.6	%		19.5	%		23.0	%

Our effective income tax rate was 19.8% and 25.6% in the second quarters of 2023 and 2022, respectively. The decrease in the effective income tax rate is primarily attributed to tax benefits from amended U.S. federal income tax returns. The second quarter 2023 effective income tax rate was lower than the U.S. statutory federal tax rate primarily due to the same reason as noted above. The second quarter 2022 effective income tax rate was higher than the U.S. statutory federal tax rate primarily due to the impact of foreign withholding taxes and state taxes.

Our effective income tax rate was 19.5% and 23.0% in the six months ended June 30, 2023 and 2022, respectively. The decrease is primarily attributed to tax benefits recorded upon vesting of restricted stock and tax benefits from amended U.S. federal income tax returns. The tax rate in the first six months of 2023 was lower than the U.S. statutory federal tax rate primarily for the same reason as noted above. The tax rate in the first six months of 2022 was higher than the U.S. statutory federal tax rate primarily due to the impact of foreign withholding taxes and state taxes.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

(in thousands of dollars, except percentages and per share amounts)

The following discussion should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and notes included under Item 1, as well as our Consolidated Financial Statements and notes and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Overview

CTS Corporation ("CTS", "we", "our" or "us") is a leading designer and manufacturer of products that Sense, Connect and Move. Our vision is to be a leading provider of sensing and motion devices as well as connectivity components, enabling an intelligent and seamless world. These devices are categorized by their ability to Sense, Connect or Move. Sense products provide vital inputs to electronic systems. Connect products allow systems to function in synchronization with other systems. Move products ensure required movements are effectively and accurately executed. We are committed to achieving our vision by continuing to invest in the development of products, technologies and talent within these categories.

We manufacture sensors, actuators, and connectivity components in North America, Europe, and Asia. CTS provides engineered products to OEMs and tier one suppliers in the aerospace and defense, industrial, medical, and transportation markets.

There is an increasing proliferation of sensing and motion applications within various markets we serve. In addition, the increasing connectivity of various devices to the internet results in greater demand for communication bandwidth and data storage, increasing the need for our connectivity products. Our success is dependent on the ability to execute our strategy to support these trends. We are subject to a number of challenges including, without limitation, periodic market softness, competition from other suppliers, changes in technology, and the ability to add new customers, launch new products or penetrate new markets. Many of these, and other risks and uncertainties relating to the Company and our business, are discussed in further detail in Item 1A. of our Annual Report on Form 10-K and other filings made with the SEC.

On February 6, 2023, we acquired 100% of the outstanding shares of Maglab AG ("Maglab") for $4,167 in cash subject to additional earnout payments based on future performance. Maglab has deep expertise in magnetic system design and current measurement solutions for use in e-mobility, industrial automation, and renewable energy applications. Maglab's domain expertise coupled with CTS’ commercial, technical and operational capabilities position us to advance our status as a recognized innovator in electric motor sensing and controls markets.

Supply Chain Uncertainties

The COVID-19 pandemic and subsequent supply chain uncertainties had a significant negative impact on the global economy in 2022 and 2021. These events disrupted the financial markets, negatively impacted the global supply chain and increased the cost of materials and operations, particularly within the global automotive industry. While supply chain conditions have eased, material shortages could still impact our or our customers’ production schedules. With customers changing orders on short notice, we run the risk of carrying excess inventory in these situations. These developments are outside of our control, remain uncertain, and cannot be predicted. We continue to actively monitor the ongoing impacts of the supply chain uncertainties and will seek to mitigate and minimize their impact on our business, when possible.

Results of Operations: Second Quarter 2023 versus Second Quarter 2022

The following table highlights changes in significant components of the Unaudited Condensed Consolidated Statements of Earnings for the quarters ended June 30, 2023 and June 30, 2022:


	Three Months Ended
	June 30, 2023			June 30, 2022			Percent Change			Percentage of Net Sales – 2023			Percentage of Net Sales – 2022
Net sales	$	145,182		$	144,982			0.1	%		100.0	%		100.0	%
Cost of goods sold		94,440			93,134			1.4			65.0			64.2
Gross margin		50,742			51,848			(2.1	)		35.0			35.8
Selling, general and administrative expenses		23,694			22,238			6.5			16.3			15.3
Research and development expenses		6,721			6,294			6.8			4.6			4.3
Restructuring charges		1,895			630			200.8			1.3			0.4
Total operating expenses		32,310			29,162			10.8			22.3			20.1
Operating earnings		18,432			22,686			(18.8	)		12.7			15.6
Total other expense, net		(2,352	)		(5,764	)		(59.2	)		(1.6	)		(4.0	)
Earnings before income taxes		16,080			16,922			(5.0	)		11.1			11.7
Income tax expense		3,183			4,324			(26.4	)		2.2			3.0
Net earnings	$	12,897		$	12,598			2.4			8.9	%		8.7	%
Earnings per share:
Diluted net earnings per share	$	0.41		$	0.39

Net sales were $145,182 in the second quarter of 2023, an increase of $200 or 0.1% from the second quarter of 2022. Net sales to the transportation market increased $7,452 or 10.0% while net sales to non-transportation markets decreased $7,252 or 10.3%, primarily due to inventory reduction related softness in distribution and the industrial end market. Changes in foreign exchange rates decreased net sales by $1,092 year-over-year.

Gross margin was $50,742 in the second quarter of 2023, a decrease of $1,106 or 2.1% from the second quarter of 2022. The year over year decrease was driven by end market sales mix, increased material and freight costs and unfavorable impacts from foreign exchange rates of $1,720 year-over-year.

Selling, general and administrative ("SG&A") expenses were $23,694 or 16.3% of net sales in the second quarter of 2023 versus $22,238 or 15.3% of net sales in the second quarter of 2022. The increase in SG&A expenses was primarily caused by higher environmental costs in the second quarter of 2023. See Note 11 “Commitments and Contingencies” in the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further information on the environmental liability.

Research and development (“R&D”) expenses were $6,721 or 4.6% of net sales in the second quarter of 2023 compared to $6,294 or 4.3% of net sales in the comparable quarter of 2022, in line with our commitment to continue investing in research and product development to drive organic growth.

Restructuring charges were $1,895 or 1.3% of net sales in the second quarter of 2023 compared to $630 or 0.4% of net sales in the second quarter of 2022. We continue to implement certain restructuring actions to improve our cost structure.

Other income and expense items are summarized in the following table:


	Three Months Ended
	June 30,			June 30,
	2023			2022
Interest expense	$	(818	)	$	(602	)
Interest income		1,072			263
Other expense, net		(2,606	)		(5,425	)
Total other expense, net	$	(2,352	)	$	(5,764	)

The reduction in total other expense, net was primarily driven by higher interest income from our short-term investments classified as cash equivalents in line with market rate increases seen recently. Other expense, net for 2022 also includes $1,776 in derivative losses associated with the acquisition of Ferroperm Piezoceramics A/S (“Ferroperm”).


	Three Months Ended
	June 30,			June 30,
	2023			2022
Effective tax rate		19.8	%		25.6	%

Results of Operations: Six Months ended June 30, 2023 versus Six Months Ended June 30, 2022

The following table highlights changes in significant components of the Unaudited Condensed Consolidated Statements of Earnings for the six months ended June 30, 2023, and June 30, 2022:


	Six Months Ended
	June 30, 2023			June 30, 2022			Percent Change			Percentage of Net Sales – 2023			Percentage of Net Sales – 2022
Net sales	$	291,176		$	292,677			(0.5	)%		100.0	%		100.0	%
Cost of goods sold		188,782			186,489			1.2			64.8			63.7
Gross margin		102,394			106,188			(3.6	)		35.2			36.3
Selling, general and administrative expenses		45,673			44,026			3.7			15.7			15.0
Research and development expenses		13,307			12,488			6.6			4.6			4.3
Restructuring charges		2,807			942			198.0			1.0			0.3
Total operating expenses		61,787			57,456			7.5			21.2			19.6
Operating earnings		40,607			48,732			(16.7	)		13.9			16.7
Total other expense, net		(1,818	)		(6,064	)		(70.0	)		(0.6	)		(2.1	)
Earnings before income taxes		38,789			42,668			(9.1	)		13.3			14.6
Income tax expense		7,548			9,831			(23.2	)		2.6			3.4
Net earnings	$	31,241		$	32,837			(4.9	)%		10.7	%		11.2	%
Earnings per share:
Diluted net earnings per share	$	0.98		$	1.02

Net sales were $291,176 in the six months ended June 30, 2023, a decrease of $1,501 or 0.5% from the six months ended June 30, 2022. Net sales to the transportation market increased $2,594 or 1.7% while net sales to non-transportation markets decreased $4,095 or 2.9%. Changes in foreign exchange rates decreased net sales by $3,413 year-over-year.

Gross margin was $102,394 for the six months ended June 30, 2023, a decrease of $3,794 or 3.6% from the six months ended June 30, 2022. The year over year decrease in gross margin was driven by end market sales mix, increased material and freight costs and unfavorable impacts from foreign exchange rates of $3,497 year-over-year.

SG&A expenses were $45,673 or 15.7% of net sales for the six months ended June 30, 2023 versus $44,026 or 15.0% of net sales for the six months ended June 30, 2022. The increase in SG&A expenses was caused by higher environmental costs in the second quarter of 2023 as well as expenses related to acquisition activity. See Note 11 “Commitments and Contingencies” in the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further information on the environmental costs.

R&D expenses were $13,307 or 4.6% of net sales for the six months ended June 30, 2023 compared to $12,488 or 4.3% of net sales for the six months ended June 30, 2022, in line with our commitment to continue investing in research and product development to drive organic growth.

Restructuring charges were $2,807 or 1.0% of net sales for the six months ended June 30, 2023 compared to $942 or 0.3% of net sales for the six months ended June 30, 2022. We continue to implement certain restructuring actions to improve our cost structure.

Other income and expense items are summarized in the following table:


	Six Months Ended
	June 30,			June 30,
	2023			2022
Interest expense	$	(1,512	)	$	(1,148	)
Interest income		2,135			443
Other expense, net		(2,441	)		(5,359	)
Total other expense, net	$	(1,818	)	$	(6,064	)


	Six Months Ended
	June 30,			June 30,
	2023			2022
Effective tax rate		19.5	%		23.0	%

Our effective income tax rate was 19.5% and 23.0% for the six months ended June 30, 2023 and 2022, respectively. The decrease is primarily attributed to tax benefits recorded upon vesting of restricted stock and tax benefits from amended U.S. federal income tax returns.

Liquidity and Capital Resources

We have historically funded our capital and operating needs primarily through cash flows from operating activities, supported by available credit under our Revolving Credit Facility (as defined below). We believe that cash flows from operating activities and available borrowings under our Revolving Credit Facility will be adequate to fund our working capital needs, capital expenditures, investments, and debt service requirements for at least the next twelve months and for the foreseeable future thereafter. However, we may choose to pursue additional equity and debt financing to provide additional liquidity or to fund acquisitions.

Cash and cash equivalents were $150,878 at June 30, 2023, and $156,910 at December 31, 2022, of which $102,830 and $90,244, respectively, were held outside the United States. Total long-term debt was $77,040 as of June 30, 2023 and $83,670 as of December 31, 2022.

Cash Flow Overview

Cash Flows from Operating Activities

Net cash provided by operating activities was $34,607 during the six months ended June 30, 2023. Components of net cash provided by operating activities included net earnings of $31,241, depreciation and amortization expense of $14,175, other net non-cash items of $4,295, and a net cash outflow from changes in assets and liabilities of $15,104 primarily driven by the annual bonus payout for 2022 and an increase in accounts receivable.

Cash Flows from Investing Activities

Net cash used in investing activities for the six months ended June 30, 2023 was $(11,846), driven by payments for the Maglab acquisition and finalization of the TEWA Temperature Sensors SP. Zo.o. (“TEWA”) net working capital adjustment of $3,359 and capital expenditures of $8,487. See Note 3 "Business Acquisitions" in the Notes to the Condensed Consolidated Financial Statements.

Cash Flows from Financing Activities

Net cash used in financing activities for the six months ended June 30, 2023 was $(29,967). The net cash outflow was the result of treasury stock purchases of $17,562, net cash used in the paydown of long-term debt of $6,630, taxes paid on behalf of equity award participants of $3,240, and dividends paid of $2,535.

Capital Resources

Revolving Credit Facility

Long‑term debt is comprised of the following:


	As of
	June 30,		December 31,
	2023		2022
Total credit facility	$	400,000	$	400,000
Balance outstanding		77,040		83,670
Standby letters of credit		1,640		1,640
Amount available, subject to covenant restrictions	$	321,320	$	314,690

On December 15, 2021, we entered into a second amended and restated five-year credit agreement with a group of banks (the “Revolving Credit Facility”) to (i) increase the total credit facility availability to $400,000, which may be increased by $200,000 at the request of the Company, subject to the administrative agent's approval, (ii) extend the maturity of the Revolving Credit Facility from February 12, 2024 to December 15, 2026, (iii) replace LIBOR with SOFR as the primary reference rate used to calculate interest on the loans under the Revolving Credit Facility, (iv) increase available sublimits for letters of credit, and swingline loans as well as providing for additional alternative currency borrowing capabilities, and (v) modify the financial and non-financial covenants to provide the Company additional flexibility. This new unsecured credit facility replaced the prior $300,000 unsecured credit facility, which would have expired February 12, 2024.

Borrowings in U.S. Dollars under the Revolving Credit Facility bear interest, at a per annum rate equal to the applicable Term SOFR rate (but not less than 0.0%), plus the Term SOFR adjustment, and plus an applicable margin, which ranges from 1.00% to 1.75%, based on our net leverage ratio. Similarly, borrowings of alternative currencies under the Revolving Credit Facility bear interest equal to a defined risk-free reference rate, plus the applicable risk-free rate adjustment and plus an applicable margin, which ranges from 1.00% to 1.75%, based on our net leverage ratio.

The Revolving Credit Facility includes a swing-line sublimit of $20,000 and a letter of credit sublimit of $20,000. We also pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility. The commitment fee ranges from 0.175% to 0.25% based on our net leverage ratio. We were in compliance with all debt covenants at June 30, 2023.

Acquisitions

On February 6, 2023, we acquired 100% of the outstanding shares of Maglab for $4,167 in cash subject to additional earnout payments based on future performance. The acquisition was funded from cash on hand.

Critical Accounting Policies and Estimates

The Company’s Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP. In connection with the preparation of the condensed consolidated financial statements, the Company uses estimates and makes judgments and assumptions about future events that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures. The assumptions, estimates, and judgments are based on historical experience, current trends, and other factors the Company believes are relevant at the time it prepares the Condensed Consolidated Financial Statements.

The critical accounting policies and estimates are consistent with those discussed in Note 1, Summary of Significant Accounting Policies, to the Consolidated Financial Statements and the MD&A section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. During and as of the three and six months ended June 30, 2023, there were no significant changes in the application of critical accounting policies or estimates.

Significant Customers

Our net sales to customers representing at least 10% of total net sales is as follows:


	Three months ended						Six months ended
	June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Cummins Inc.		18.6	%		15.9	%		16.4	%		15.9	%
Toyota Motor Corporation		12.6	%		11.3	%		11.7	%		11.4	%

No other customer accounted for 10% or more of total net sales during these periods. We continue to focus on broadening our customer base to diversify our non-transportation end market exposure.

Forward‑Looking Statements

This document contains statements that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, any financial or other guidance, statements that reflect our current expectations concerning future results and events, and any other statements that are not based solely on historical fact. Forward-looking statements are based on management’s expectations, certain assumptions, and currently available information. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. These forward-looking statements are made subject to certain risks, uncertainties, and other factors, which could cause CTS’ actual results, performance, or achievements to differ materially from those presented in the forward-looking statements. Examples of factors that may affect future operating results and financial condition include, but are not limited to: supply chain disruptions; changes in the economy generally, including inflationary and/or recessionary conditions, and in respect to the business in which CTS operates; unanticipated issues in integrating acquisitions; the results of actions to reposition CTS’ business; rapid technological change; general market conditions in the transportation, as well as conditions in the industrial, aerospace and defense, and medical markets; reliance on key customers; unanticipated public health crises (including the ultimate impact of the COVID-19 pandemic on CTS’ business, results of operations or financial condition), natural disasters or other events; environmental compliance and remediation expenses; the ability to protect CTS’ intellectual property; pricing pressures and demand for CTS’ products; and risks associated with CTS’ international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks (including, without limitation, the potential impact U.S./China relations and the conflict between Russia and Ukraine may have on our business, results of operations and financial condition). Many of these, and other risks and uncertainties, are discussed in further detail in Item 1A. of CTS’ most recent Annual Report on Form 10-K and other filings made with the SEC. CTS undertakes no obligation to publicly update CTS’ forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of our Annual Report on Form 10-K for the year ended December 31, 2022. During the three months ended June 30, 2023, there have been no material changes in our exposure to market risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q were effective in providing reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within CTS have been detected.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting for the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we are involved in litigation with respect to matters arising from the ordinary conduct of our business, and currently certain claims are pending against us. In the opinion of management, we believe we have established adequate accruals pursuant to U.S. generally accepted accounting principles for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based on presently available information. However, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition, or cash flows.

See Note 11 "Commitments and Contingencies" in the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

There have been no significant changes to our risk factors from those contained in our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity

On February 9, 2023, the Board approved a new share repurchase program that authorizes the Company to repurchase up to $50 million of its common stock. The repurchase program has no set expiration date and supersedes and replaces the repurchase program approved by the Board in May 2021.


					Total Number		Maximum Dollar
					of Shares		Value of Shares
					Purchased as		That May Yet Be
	Total Number				Part of Publicly		Purchased Under
	of Shares		Average Price		Announced		Publicly Announced
	Purchased		Paid per Share		Programs		Plans or Programs
April 1, 2023 through April 30, 2023		56,716	$	45.80		56,716	$	42,801,450
May 1, 2023 through May 31, 2023		78,000	$	42.50		78,000	$	39,486,452
June 1, 2023 through June 30, 2023		63,000	$	45.29		63,000	$	36,633,072
Total		197,716				197,716

Item 5. Other Information

From time to time, our directors and officers may purchase or sell shares of our common stock in the market, including pursuant to plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended (“Rule 10b5-1 Plans”).

Kieran O’Sullivan, President, Chief Executive Officer and Chairman of the Board, entered into a Rule 10b5-1 Plan on May 23, 2023 for the sale of up to 65,000 shares of our common stock, which plan is scheduled to terminate no later than May 23, 2025.

Ashish Agrawal, Vice President and Chief Financial Officer, entered into a Rule 10b5-1 Plan on June 2, 2023 for the sale of up to 25,000 shares of our common stock, which plan is scheduled to terminate no later than August 30, 2024.

Item 6. Exhibits


3(1)	Amended and Restated Bylaws of CTS Corporation.

(31)(a)	Certification pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.

(31)(b)	Certification pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.

(32)(a)	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.

(32)(b)	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.

101.1	The following information from CTS Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 formatted in Inline XBRL: (i) Condensed Consolidated Statements of Earnings; (ii) Condensed Consolidated Statements of Comprehensive Earnings; (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Shareholders’ Equity; (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

104	The cover page from this Current Report on Form 10-Q formatted as inline XBRL

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.


CTS Corporation		CTS Corporation

/s/ Thomas M. White		/s/ Ashish Agrawal
Thomas M. White		Ashish Agrawal
Corporate Controller (Principal Accounting Officer)		Vice President and Chief Financial Officer (Principal Financial Officer)


Dated: July 25, 2023		Dated: July 25, 2023

EX-3.1 2 cts-ex3_1.htm EX-3.1 EX-3.1

Ex. 3.1

CTS CORPORATION

AMENDED AND RESTATED BY LAWS

(Amended and Restated as of May 11, 2023)

ARTICLE I.

Officers

The officers of CTS Corporation (the “Corporation”) shall be a President, one or more Vice Presidents, a Secretary, a Treasurer and a Controller. The Board of Directors may also elect one or more Assistant Secretaries, Assistant Treasurers and Assistant Controllers, and such other officers as may be determined, from time to time, by the Board of Directors.

The President shall be a director of the Corporation. Any offices, other than those of President and Secretary, may be held by the same person.

The officers of the Corporation shall be elected by the Board of Directors at the annual meeting of the Board of Directors for the term of one year and until their successors have been elected and qualified. Any vacancy occurring among the above offices may be filled for the remainder of the term by the Board of Directors at any regular or special meeting, and officers so elected shall hold office until the next annual meeting of the Board of Directors and until their successors have been elected and qualified.

ARTICLE II.

Board of Directors Organization

Section 1. The Board of Directors shall elect, from the members of the Board of Directors who are not officers of the Corporation, an Audit Committee consisting of not less than two members. The members of the Audit Committee shall be elected at each annual meeting of the Board of Directors to serve, while qualified, at the pleasure of the Board of Directors, or if longer, for one year and until their successors have been elected and qualified.

The Audit Committee shall be responsible directly to the Board of Directors and, in addition to such authority and duties specifically delegated by the Board of Directors, shall have the authority to review the conduct and the report of the independent financial audit of the Corporation and shall report to the Board of Directors the findings, conclusions and recommendations of the Audit Committee regarding the conduct and report of the independent financial audit.

Ex. 3.1

Unless the Board of Directors designates a Chairman, a majority of the members of the Audit Committee may designate one member of the Audit Committee as Chairman of the Audit Committee to preside at all meetings of the Audit Committee.

Section 2. The Board of Directors shall elect from members of the Board of Directors, who are not officers of the Corporation, a Compensation Committee consisting of not less than two members. The members of the Compensation Committee shall be elected at each annual meeting of the Board of Directors to serve, while qualified, at the pleasure of the Board of Directors, or if longer, for one year and until their successors have been elected and qualified.

The Compensation Committee shall be responsible directly to the Board of Directors and, in addition to such authority and duties specifically delegated by the Board of Directors, shall have authority to review, and make recommendations to the Board of Directors regarding the compensation, including fringe benefits and stock options, for the officers of the Corporation.

Unless the Board of Directors designates a Chairman, a majority of the members of the Compensation Committee may designate one member of the Compensation Committee as Chairman of the Compensation Committee to preside at all meetings of the Compensation Committee.

Section 3. The Board of Directors shall designate from members of the Board of Directors, a Chairman of the Board, who shall preside at meetings of shareholders and of the Board of Directors unless the Chairman shall designate an officer or other director of the Corporation to do so. The Chairman of the Board shall have such additional authority as granted by the Board of Directors and shall perform such other duties as are assigned from time to time by the Board of Directors.

ARTICLE III.

Corporate Officers

Section 1. The President shall exercise specific authority and supervision over, and shall be responsible for the direction of, the business and affairs of the Corporation, subject to the direction of the Board of Directors. In addition, the President may be designated the Chief Executive Officer and, if so, shall have the additional authority and duties and responsibilities specified in these Bylaws. The President shall also perform such other duties as may be assigned from time to time, by the Board of Directors. The President shall perform all the duties of the Chairman of the Board in the absence or during any disability of the Chairman.

Section 2. The Board of Directors shall designate the Chairman of the Board or the President as the Chief Executive Officer of the Corporation. In addition to other duties as an officer, the Chief Executive Officer shall exercise general authority and supervision over, and shall be responsible for, management of the business and affairs of the Corporation, subject to the direction of the Board of Directors.

Ex. 3.1

The Chief Executive Officer shall determine the organization of the officers of the Corporation, shall designate to whom such officers shall report and be responsible, and subject to the direction of the Board of Directors shall determine their respective duties and responsibilities.

Section 3. Each Vice President shall perform such duties as may be assigned from time to time by the President and shall report to and be responsible to such officer as the President shall designate. Each Vice President shall also have such additional authority and shall perform such other duties assigned from time to time, by the Board of Directors.

The Board of Directors may designate a word or words to be placed before or after the title of Vice President to indicate organizational or functional authority or duty.

Section 4. The Secretary shall attend all meetings of the shareholders and Board of Directors and all committees, and shall keep minutes of each meeting. The Secretary shall give proper notice of all meetings of shareholders, directors and committees, required in these Bylaws. The Secretary shall maintain proper records of ownership and transfer of the stock of the Corporation. The Secretary shall have the custody of, and affix, the seal of the Corporation and perform such other duties as may be assigned from time to time by the Board of Directors.

Section 5. The Vice President Finance/Chief Financial Officer, shall be responsible for the financial affairs of the Corporation, shall submit to the annual meeting of shareholders a statement of the financial condition of the Corporation, and whenever required by the Board of Directors, shall give account of all transactions and of the financial condition of the Corporation. The Treasurer shall report to the Vice President Finance/Chief Financial Officer. The Treasurer shall establish and maintain appropriate banking relations and arrangements on behalf of the Corporation. The Treasurer shall receive and have custody of, and shall disburse, all moneys of the Corporation, and in the name of the Corporation, shall deposit all moneys in, and disburse all moneys from, such bank, or banks, as the Board of Directors shall designate, from time to time, as the depositories of the Corporation. The Treasurer shall perform such other duties and render such services for, and on behalf of, the Corporation as may be assigned from time to time by the Vice President Finance, Chief Financial Officer.

Section 6. The Controller shall be the accounting officer of the Corporation and shall formulate accounting procedures to record expenses, losses, gains, assets and liabilities of the Corporation, to report and interpret results of operations of the Corporation and to assure protection of the assets of the Corporation. The Controller shall prepare and submit to the Board of Directors and the Chief Executive Officer such periodic balance sheets, profit and loss statements and other financial statements as may be required to keep such persons currently informed of the operations and the financial condition of the Corporation. The Controller shall perform such other duties assigned from time to time by the Chief Executive Officer.

Section 7. The Assistant Secretary or Secretaries, Assistant Treasurer or Treasurers, and the Assistant Controller or Controllers shall perform the duties of the Secretary, of the Treasurer, and of the Controller, respectively, in the absence of those officers and shall have such further authority and perform such other duties as may be assigned.

Ex. 3.1

ARTICLE IV.

Duties of Officers Delegated

In the absence or disability of any officer of the Corporation, the Board of Directors may delegate the powers and duties of any such officer to any other officer or director of the Corporation for such period of time as said Board of Directors may determine.

ARTICLE V.

Bonds

The Board of Directors or the Chief Executive Officer may require any officer, agent, or employee of the Corporation to furnish the Corporation a bond for the faithful performance of duties and for the accounting of all moneys, securities, records, or other property of the Corporation coming into the hands of such agent or employee.

ARTICLE VI.

Meetings of Shareholders

Section 1. Meetings of the shareholders of the Corporation shall be held at the place, either within or without the State of Indiana, stated in the notice of said meeting. The Board may postpone and reschedule any previously scheduled annual or special meeting of the shareholders.

Section 2. The annual meeting of shareholders of the Corporation shall be held on the last Friday in April of each year or at such other time established for such meeting by the directors.

Section 3. A complete list of the shareholders entitled to vote at any shareholders’ meeting, arranged in alphabetical order and containing the address and number of shares of stock so held by each shareholder who is entitled to vote at said meeting, shall be prepared by the Secretary and shall be subject to the inspection by any shareholder at the time and place of an annual meeting and at the principal office of the Corporation for five (5) days prior thereto.

Section 4. At all shareholders’ meetings a quorum shall consist of a majority of all of the shares of stock outstanding and entitled by the Articles of Incorporation to vote on the business to be transacted at said meeting, but a meeting composed of less than a quorum may adjourn the meeting from day to day thereafter or until some future time.

Section 5. At the annual meeting of the shareholders, there shall be elected a Board of Directors, who shall hold office until the next annual meeting of shareholders and until their successors have been elected and qualified.

Ex. 3.1

The classes and terms of the directors shall not be governed by Indiana Code §23-1-33-6(c).

Section 6. At all shareholders’ meetings, each shareholder shall be entitled to one (1) vote in person or by proxy for each share of common stock registered in the shareholder’s name on the books of the Corporation as of the record date which shall be as fixed by the Board of Directors and entitled, by the Articles of Incorporation, to vote on the business to be transacted at said meeting.

Section 7. The shareholders may be represented at any meeting thereof by their duly appointed Attorney-in-Fact provided the proxy so appointing said Attorney-in-Fact shall be filed with the Secretary prior to the meeting.

Section 8. Special meetings of the shareholders of the Corporation (i) may be called by the Chairman of the Board, the President or the Board of Directors, whenever in the opinion of such person or body such meeting is necessary and (ii) will be called by the Board of Directors, upon the written request of shareholders owning at least 15% of the then-outstanding shares of common stock of the Corporation.

Section 9. Written notice of each meeting of the shareholders shall be given by the Secretary to each shareholder of record at least ten (10) days prior to the time fixed for the holding of such meeting; said notice shall state the place, day and hour and the purpose for which said meeting is called, and said notice shall be addressed to the last known place of residence of each shareholder as shown by the stock books of the Corporation. The ten (10) days shall be computed from the date upon which said notice is deposited in the mails.

Section 10. No shares of stock shall be voted at any annual or special meeting of shareholders upon which any installment is due and unpaid or which are owned by the Corporation.

Section 11. The Chairman of the Board, or such other officer of the Corporation designated by the Board, will call meetings of the shareholders to order and will act as presiding officer thereof. Unless otherwise determined by the Board prior to the meeting, the presiding officer of the meeting of the shareholders will also determine the order of business and have the authority in his or her sole discretion to regulate the conduct of any such meeting, including without limitation by: imposing restrictions on the persons (other than shareholders of the Corporation or their duly appointed proxies) who may attend any such shareholders’ meeting, ascertaining whether any shareholder or his proxy may be excluded from any meeting of the shareholders based upon any determination by the presiding officer, in his sole discretion, that any such person has unduly disrupted or is likely to disrupt the proceedings thereat, and determining the circumstances in which any person may make a statement or ask questions at any meeting of the shareholders.

At an annual meeting of the shareholders, only such business will be conducted or considered as is properly brought before the meeting in accordance with the following procedures:

Ex. 3.1

(a) To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given at the direction of the Board in accordance with Section 9 of this Article, (ii) otherwise properly brought before the meeting by the presiding officer or by or at the direction of the Board, or (iii) otherwise properly requested to be brought before the meeting by a shareholder of the Corporation in accordance with this Section 11.

(b) For business to be properly requested by a shareholder to be brought before an annual meeting, the shareholder must (i) be a shareholder of the Corporation of record at the time of the giving of the notice for such annual meeting provided for in these Bylaws, (ii) be entitled to vote at such meeting, and (iii) have given timely notice thereof in writing to the Secretary.

(c) To be timely, a shareholder’s notice must be delivered or mailed to and received at the principal executive offices of the Corporation not less than 90 calendar days nor more than 135 calendar days prior to the anniversary date of the immediately preceding annual meeting; provided, however, that in the event of a public announcement that the date of the annual meeting will be held on a date that is not within 30 days before or after such anniversary date, to be timely, notice by the shareholder must be so received not later than the close of business on the 10th calendar day following the day on which such public announcement of the date of the annual meeting is first made. The public announcement of a postponement or adjournment of an annual meeting shall not commence a new time period for the giving of a shareholder’s notice as described above.

(d) A shareholder’s notice to the Secretary must set forth as to each matter the shareholder proposes to bring before the annual meeting: (i) a description in reasonable detail of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address, as they appear on the Corporation’s books, of the shareholder proposing such business and the current name and business address, if different, of each Shareholder Associated Person; (iii) the class and number of shares or other securities of the Corporation that are owned beneficially and of record by the shareholder proposing such business and any Shareholder Associated Person, as well as the date on which such securities of the Corporation were acquired and the investment intent of such acquisition, and whether there exists any short interest (including any opportunity to profit or share in any benefit from any decrease in the price of such stock or other security) in the securities of the Corporation by any such persons; (iv) the nominee holder for, and number of, any securities of the Corporation owned beneficially but not of record by such shareholder or Shareholder Associated Person; (v) whether and the extent to which such shareholder or Shareholder Associated Person, directly or indirectly (through brokers, nominees or otherwise), is subject to or during the last six months has engaged in any hedging, derivative or other transaction or series of transactions or entered into any other agreement, arrangement or understanding (including any short interest, any borrowing or lending of securities or any proxy or voting agreement), the effect or intent of which is to (1) manage risk or benefit of changes in the price of securities of the corporation for such shareholder or Shareholder Associated Person or (2) increase or decrease the voting power of such shareholder or Shareholder Associated Person in the Corporation disproportionately to such person’s economic interest in the Corporation’s securities; (vi) any substantial interest, direct or indirect (including, without limitation, any existing or prospective commercial, business or contractual relationship with the Corporation), by security holdings or otherwise, of such shareholder or Shareholder Associated Person, in the Corporation, other than an interest arising from the ownership of securities of the Corporation where such shareholder or Shareholder Associated Person receives no extra or special benefit not shared on a pro rata basis by all other holders of the same class or series; (vii) a description of all other arrangements or understandings between or among the shareholder giving the notice, and any Shareholder Associated Person, as well as the investment strategy or objective, if any, of such shareholder and each such Shareholder Associated Person who is not an individual and a copy of the prospectus, offering memorandum or similar document, if any, provided to investors or potential investors in such shareholder and each such Shareholder Associated Person; and (viii) to the extent known by the shareholder giving the notice, the name and address of any other shareholder supporting the proposal on the date of such notice.

Ex. 3.1

Notwithstanding the foregoing provisions of this paragraph, a shareholder must also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this paragraph. For purposes of this paragraph and Article VII, “public announcement” means disclosure in a press release reported by the Dow Jones News Service, Associated Press, or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended, or furnished to shareholders. Nothing in this paragraph will be deemed to affect any rights of shareholders to request inclusion or proposals in the Corporation’s proxy statement in accordance with the provisions of Rule 14a-8 under the Securities Exchange Act of 1934, as amended.

(e) For purposes of this Section 11, “Shareholder Associated Person” of any shareholder means (i) any person acting in concert with such shareholder, (ii) any beneficial owner of shares of stock of the Corporation as defined in Indiana Code §23-1-20-3.5, and (iii) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such shareholder or such Shareholder Associated Person.

At a special meeting of shareholders, only such business may be conducted or considered as is properly brought before the meeting in accordance with the following procedures:

(a) To be properly brought before a special meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Chairman of the Board, President or the Board in accordance with Section 9 of this Article or (ii) otherwise properly brought before the meeting by the presiding officer or by or at the direction of the Board.

The determination of whether any business sought to be brought before any annual or special meeting of the shareholders is properly brought before such meeting in accordance with this Section 11 will be made by the presiding officer of such meeting. If the presiding officer determines that any business is not properly brought before such meeting, he or she will so declare to the meeting and any such business will not be conducted or considered.

ARTICLE VII.

Directors

Ex. 3.1

Section 1.

(a) The property and business affairs of the Corporation shall be managed under the direction of the Board of Directors. The classes and terms of the directors shall not be governed by Indiana Code §23-1-33-6(c).

(b) Subject to the rights of the holders of preferred stock to elect any Directors voting separately as a class or series, at each annual meeting of shareholders or special meeting of shareholders held for the election of Directors, each Director shall be elected by a majority of the votes cast with respect to the Director by the shares represented in person or by proxy and entitled to vote at the meeting, provided a quorum is present; provided, however, that if the number of Director nominees exceeds the number of Directors to be elected, then each Director shall be elected by a vote of the plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of Directors, provided a quorum is present. For purposes of this Section 1, a “majority of the votes cast” means that the number of shares voted “for” a Director must exceed the number of votes cast “against” that Director (with abstentions not considered votes cast). If a Director nominee fails to receive the required vote and is an incumbent Director, the Director shall promptly tender his or her resignation to the Board of Directors, subject to acceptance by the Board of Directors. The Nominating, Governance and Sustainability Committee of the Board of Directors (the “Corporate Governance Committee”) shall promptly consider the tendered resignation and make a recommendation to the Board of Directors whether to accept or reject the tendered resignation, or determine whether other action should be taken. The Board of Directors shall act on the tendered resignation, taking into account the Corporate Governance Committee’s recommendation, and publicly disclose (by a press release, a filing with the Securities and Exchange Commission, or other broadly disseminate means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the certification of the election results. The Corporate Governance Committee, in making its recommendation, and the Board of Directors, in making its decision, may each consider any factors or other information they may consider appropriate and relevant. The Director who tenders his or her resignation will not participate in the recommendation of the Corporate Governance Committee or the decision of the Board of Directors with respect to his or her resignation. If an incumbent Director’s resignation is not accepted by the Board of Directors, such Director shall continue to serve until the next annual meeting of shareholders and until his or her successor is duly elected, or his or her earlier resignation or removal. If a Director’s resignation is accepted by the Board of Directors, or if a Director nominee fails to receive the required vote and the nominee is not an incumbent Director, then the Board of Directors may fill the resulting vacancy pursuant to the provisions of Section 2 of this Article VII or may decrease the size of the Board of Directors pursuant to the provisions of this Section 1(b). Directors shall hold office for a term of one year or until their successors are elected and qualified. In case of the failure to hold the annual meeting on the date fixed herein for the same to be held, the directors shall hold over until the next annual meeting, unless prior to said meeting a special meeting of the shareholders for the purpose of electing directors has been held. Subject to the rights, if any, of any series of Preferred Stock to elect additional directors under circumstances specified in the Articles of Incorporation and to the minimum and maximum number of authorized directors provided in the Articles of Incorporation, the authorized number of directors will be as determined from time to time by the Board of Directors.

Ex. 3.1

If no determination of the number of directors has been made by the Board of Directors, the number of directors shall be seven.

Section 2. Any vacancy occurring in the Board of Directors caused by resignation, death or other incapacity, shall be filled by majority vote of the remaining members of the Board until the next annual meeting of shareholders; provided, however, that if the vote of the remaining members of the Board of Directors shall result in a tie, such vacancy shall be filled by the shareholders at the next annual meeting of the shareholders or at a special meeting of the shareholders called for that purpose.

Section 3. Any vacancy occurring in the Board of Directors, caused by an increase in the number of directors, shall be filled by a majority vote of the members of the Board until the next annual meeting of shareholders; provided, however, that if the vote of the members of the Board of Directors shall result in a tie, such vacancy shall be filled by the shareholders at the next annual meeting of the shareholders or at a special meeting of the shareholders called for that purpose. No decrease in the number of directors constituting the Board will shorten the term of an incumbent director.

Section 4. Subject to the rights, if any, of the holders of any series of Preferred Stock to elect additional directors under circumstances specified in the Articles of Incorporation, only persons who are nominated in accordance with the following procedures will be eligible for election at a meeting of shareholders as directors of the Corporation:

(a) Nominations of persons for election as directors of the Corporation may be made only at an annual meeting of shareholders (i) by or at the direction of the Board or (ii) by any shareholder who is a shareholder of record at the time of giving of notice provided for in this Section 4, who is entitled to vote for the election of directors at such meeting and who complies with the procedures set forth in this Section 4. All nominations by shareholders must be made pursuant to timely notice in proper written form to the Secretary.

(b) To be timely, a shareholder’s notice must be delivered or mailed to and received at the principal executive offices of the Corporation not less than 90 calendar days nor more than 135 calendar days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event of a public announcement that the annual meeting will be held on a date that is not within 30 days before or after such anniversary date, notice by the shareholder to be timely must be so received not later than the close of business on the 10th calendar day following the day on which such public announcement is first made. The public announcement of a postponement or adjournment of an annual meeting shall not commence a new time period for the giving of a shareholder’s notice as described above.

Ex. 3.1

(c) To be in proper written form, such shareholder’s notice must set forth or include: (i) the name and address, as they appear on the Corporation’s books, of the shareholder giving the notice and the current name and business address, if different, of each Shareholder Associated Person and the nominee; (ii) a representation that the shareholder giving the notice is a holder of record of stock of the Corporation entitled to vote at such annual meeting and intends to appear in person or by proxy at the annual meeting to nominate the person or persons specified in the notice; (iii) the class and number of shares of stock or other securities of the Corporation owned beneficially and of record by the shareholder giving the notice, any Shareholder Associated Person, and the nominee, as well as the date on which such securities of the Corporation were acquired and the investment intent of such acquisition, and whether there exists any short interest (including any opportunity to profit or share in any benefit from any decrease in the price of such stock or other security) in the securities of the Corporation by any such persons; (iv) the nominee holder for, and number of, any securities of the Corporation owned beneficially but not of record by such shareholder, nominee, or Shareholder Associated Person; (v) whether and the extent to which such shareholder, nominee or Shareholder Associated Person, directly or indirectly (through brokers, nominees or otherwise), is subject to or during the last six months has engaged in any hedging, derivative or other transaction or series of transactions or entered into any other agreement, arrangement or understanding (including any short interest, any borrowing or lending of securities or any proxy or voting agreement), the effect or intent of which is to (1) manage risk or benefit of changes in the price of securities of the corporation for such shareholder, nominee, or Shareholder Associated Person or (2) increase or decrease the voting power of such shareholder, nominee, or Shareholder Associated Person in the Corporation disproportionately to such person’s economic interest in the Corporation’s securities; (vi) any substantial interest, direct or indirect (including, without limitation, any existing or prospective commercial, business or contractual relationship with the Corporation), by security holdings or otherwise, of such shareholder, nominee, or Shareholder Associated Person, in the Corporation, other than an interest arising from the ownership of securities of the Corporation where such shareholder, nominee, or Shareholder Associated Person receives no extra or special benefit not shared on a pro rata basis by all other holders of the same class or series; (vii) a description of all other arrangements or understandings between or among any of the shareholder giving the notice, any Shareholder Associated Person, and each nominee, as well as the investment strategy or objective, if any, of such shareholder and each such Shareholder Associated Person who is not an individual and a copy of the prospectus, offering memorandum or similar document, if any, provided to investors or potential investors in such shareholder and each such Shareholder Associated Person; (viii) to the extent known by the shareholder giving the notice, the name and address of any other shareholder supporting the nominee for election or reelection as a director on the date of such shareholder’s notice; (ix) such other information regarding each nominee proposed by the shareholder giving the notice as would be required to be included in a proxy statement filed in accordance with the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, by the Board; and (x) the signed consent of each nominee to serve as a director of the Corporation if so elected and signed certification that the nominee is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation in connection with service or action as a director that has not been disclosed to the Corporation.

(d) At the request of the Board, any person nominated by the Board for election as a director must furnish to the Secretary that information required to be set forth in a shareholder’s notice of nomination which pertains to the nominee.

Ex. 3.1

(e) The presiding officer of any annual meeting will, if the facts warrant, determine that a nomination was not made in accordance with the procedures prescribed by this Section 4, and if he or she should so determine, he or she will so declare to the meeting and the defective nomination will be disregarded.

(f) Notwithstanding the foregoing provisions of this Section 4, a shareholder must also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 4.

(g) For purposes of this Section 4, “Shareholder Associated Person” of any shareholder means (i) any person acting in concert with such shareholder, (ii) any beneficial owner of shares of stock of the Corporation as defined in Indiana Code §23-1-20-3.5, and (iii) any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such shareholder or such Shareholder Associated Person.

Article VIII.

Meetings of Directors

Section 1. Following the annual meeting of shareholders, the annual meeting of the Board of Directors shall be held without notice, each and every year hereafter, at the time and place determined by the directors.

Section 2. Regular meetings of the Board of Directors shall be held without notice at 9:00 A.M. on the last Friday of February, June, August, October and December at the offices of the Corporation, unless another time and place is designated.

Section 3. Special meetings of the Board of Directors may be called by the Chairman of the Board, by the President, or by three (3) members of the Board of Directors on three (3) days' notice by mail, or an twenty-four (24) hours' notice by telegraph, telephone, facsimile or other similar medium of communication to each director, which notice shall be addressed to the last known place of business or residence of each director, and said meetings may be held either at the office of the Corporation or at such other place as may be designated in the notice of said meeting.

Whenever a special meeting of the Board of Directors shall be called, in accordance with the provision of this section, by members of the Board of Directors, the call shall be in writing, signed by said directors and delivered to the secretary who shall thereupon issue the notice calling said meeting.

Section 4. Not less than one-half at the whole Board of Directors, shall constitute a quorum for the transaction of any business except the filling of vacancies, but a smaller number may adjourn, from time to time, until a future date or until a quorum is secured.

For the purpose only of filling a vacancy or vacancies in the Board of Directors, a quorum shall consist of a majority of the whole Board of Directors, less the vacancy or vacancies therein.

Ex. 3.1

The act of a majority at the directors present at a meeting duly called, at which a quorum is present shall be the act of the Board of Directors.

Section 5.

(a) Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if the action is taken by all directors. The action must be evidenced by one or more written consents describing the action to be taken, signed by each director, and included in the minutes or filed with the corporate records of the Corporation reflecting the action taken. Action taken under this section is effective when the last director signs the consent, unless the consent specifies a prior or subsequent effective date.

(b) Subject to satisfaction of the requirements set forth in Section 5(a), the Board of Directors may take action electronically as contemplated by the Indiana Uniform Electronic Transactions Act (“IUETA”). For the sake of clarity and avoidance of doubt, subject to the requirements of the IUETA, a written consent by the Board of Directors can be undertaken via email, or other electronic record communication, if the written consent setting forth the action to be taken is circulated to all directors via email, or other electronic record communication, and the directors indicate their approval unanimously by return email or other approved electronic record communication. The Corporation shall confirm with each director the electronic address or addresses, such as an email address or text message number, for that director to be used for purposes of sending and receiving email, text, or other electronic record communications, and for the purpose of notices to and from the Corporation, and shall maintain such information as part of the Corporation’s current corporate records, which may be maintained electronically. The Corporation shall provide its electronic address, and the electronic addresses of the other members of the Board of Directors, to be used for purposes of taking such action. The Board of Directors may provide for any particular requirements, method, or means for taking action electronically and for notices to and from the Corporation and its directors, in which case the action to be taken shall be taken in accordance with such requirements, method, or means.

ARTICLE IX.

Compensation of Directors and

Members of Committees

The members of the Board of Directors and members of committees of the Corporation, who are not salaried employees of the Corporation, shall receive such compensation for their services to be rendered as members of the Board of Directors, or of committees, as may, from time to time, be fixed by the Board of Directors and the compensation so fixed shall continue to be payable until the Board of Directors shall have thereafter fixed a different compensation, which it may do at any annual, regular or special meeting.

Ex. 3.1

ARTICLE X.

Certificates of Stock

Section 1. Certificates of stock shall be issued to those legally entitled thereto, as may be shown by the books of the Corporation, and shall be signed by the President and attested by the Secretary.

Section 2. The Corporation may appoint one or more transfer agents and/or registrars to issue, countersign, register, and transfer certificates representing its capital stock and signatures of the Corporation's officers and of the transfer agents on stock certificates may be facsimiles. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction on its books.

Section 3. The holder of any stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of the certificate for any such stock. A new certificate or certificates shall be issued upon the surrender of the mutilated certificate or, in case of loss, theft, or destruction, upon (a) delivery of an affidavit or affirmation, and (b) delivery of a bond in such sum and in such form and with such surety or sureties as the Board of Directors (by general or specific resolutions) or the President may approve, indemnifying the Corporation against any claim with respect to the certificate or certificates alleged to have been lost, stolen or destroyed. However, the Board may, in its discretion, refuse to issue new certificate or certificates, save upon the order of some Court having jurisdiction in such matters.

ARTICLE XI.

Transfer of Stock

Section 1. The stock transfer books of the Corporation may from time to time be closed by order of the Board of Directors for any lawful purpose and for such period consistent with law, but not exceeding thirty (30) days at any one time, as the Board of Directors may deem advisable. In lieu of closing the stock transfer books as aforesaid, the Board of Directors may, in its discretion, fix in advance a date not exceeding fifty (50) days or less than ten (10) days next preceding the date of any meeting of shareholders or the date for the payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect, as the record date for the determination of the shareholders entitled to notice of and to vote at any such meeting or entitled to receive any such dividend or to any such allotment of rights or to exercise the rights of any such change, conversion or exchange of capital stock; and, in such case, only such shareholders as shall be shareholders of record at the close of business on the date so fixed shall be entitled to notice of and to vote at such meeting or to receive such payment of dividend or to receive such allotment of rights or to exercise such rights as the case may be, notwithstanding any transfer of stock on the books of the Corporation after such record date fixed as aforesaid.

Ex. 3.1

In the event the Board of Directors fails to fix in advance the record date for the determination of the shareholders entitled to notice of and to vote at any meeting, no share of stock transferred on the books of the corporation within ten (10) days next preceding the date of a meeting shall be voted at such meeting.

Section 2. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the legal owner thereof and accordingly shall not be bound to recognize any equitable claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, save as expressly provided in the laws of the State of Indiana.

Section 3. The assignment of any certificate of stock shall constitute an assignment to the assignee of the shares so assigned and of all dividends on the shares assigned which are declared payable as of a record date subsequent to the date the assignment is recorded on the stock record books of the Corporation.

ARTICLE XII.

Fiscal Year

The fiscal year of the Corporation shall correspond to the calendar year.

ARTICLE XIII.

Checks for Money

All checks, drafts or other orders for the payment of funds of the Corporation shall be signed by either the Chairman of the Board, the President, or the Treasurer, or by such other individual or individuals as may hereafter, from time to time, be designated by the Board of Directors. No check, draft or other order for the payment of funds of the Corporation shall be signed in blank, either as to the amount of the check, draft or other order, or as to the name of the payee.

ARTICLE XIV.

Dividends

The Board of Directors may declare and pay dividends out of the unreserved and unrestricted earned surplus of the Corporation. Dividends may be declared at any annual, regular or special meeting of the Board of Directors. Dividends may be paid in cash, in property or in the shares of the capital stock of the Corporation, as provided by the Articles of Incorporation and the laws of the State of Indiana.

Ex. 3.1

ARTICLE XV.

Notices

Section 1. A notice required to be given under the provisions of these Bylaws to any shareholder, director, officer and member of any committee shall not be construed to mean personal notice but may be given in writing by depositing the same in a post office or letter box in a postpaid sealed wrapper addressed to such shareholder, director, officer and member of any committee at such address as appears upon the books of the Corporation, and such notice shall be deemed to be given at the time when the same shall be thus mailed.

Section 2. Any shareholder, director, officer and member of any committee may waive, in writing, any notice required to be given by these Bylaws, either before or after the time said notice should have been issued.

ARTICLE XVI.

Compensation of Officers

The officers of the Corporation shall receive such compensation for their services as may, from time to time, be fixed by the Board of Directors, and the compensation so fixed shall continue to be payable until the Board of Directors shall have fixed a different compensation, which it may do at any annual, regular, or special meeting.

ARTICLE XVII.

Corporate Seal

The seal of the Corporation shall be a plain circular disk having engraved thereon, near the outer edge thereof, at least the words, “CTS Corporation” and in the center thereof the word, “Seal”.

ARTICLE XVIII.

Indemnification

Section 1. General.

Ex. 3.1

Without limiting the generality or effect of Article XI of the Articles of Incorporation, the Corporation shall, to the fullest extent to which it is empowered to do so by the Indiana Business Corporation Law (hereinafter the “IBCL”), or any other applicable laws, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), indemnify and hold harmless any person who was or is involved in any manner (including without limitation as a party or a witness), or is threatened to be made so involved, in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (hereinafter a “proceeding”), by reason of the fact that such person is or was a director or officer of the Corporation, or who is or was serving at the request of the Board of Directors as a director, officer, partner or trustee of another corporation or a partnership, joint venture, trust, employee benefit plan or other entity, whether for profit or not for profit, (any such person hereinafter an “indemnitee”), whether or not the basis of such proceeding is alleged action in an official capacity while serving as a director, or officer, against all expense, liability and loss (including attorneys' fees and expenses, judgments, settlements, penalties, fines, and excise taxes assessed with respect to employee benefit plans) actually and reasonably incurred or suffered by such person in connection therewith; provided, however, that, except as provided in Section 3 of this Article XVIII with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

Section 2. Right to Advancement of Expenses. The right to indemnification conferred in Article XVIII shall include the right to be paid by the Corporation the expenses (including, without limitation, attorneys' fees and expenses) incurred in defending any such proceeding in advance of its final disposition (hereinafter an “advancement of expenses”); provided, however, that, if the IBCL so requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section 2 or otherwise.

The rights to indemnification and to the advancement of expenses conferred in Article XVIII shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of the indemnitee's heirs, executors and administrators. For purposes of Article XVIII, references to “the Corporation” shall include any domestic or foreign predecessor entity of the Corporation in a merger or other transaction in which the predecessor's existence ceased upon consummation of the transaction.

Section 3. Right of Indemnitee to Bring Suit. If a claim under Section 1 or Section 2 of this Article XVIII is not paid in full by the Corporation within 60 calendar days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 calendar days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit.

Ex. 3.1

In (a) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (b) any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the IBCL. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel or shareholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the IBCL, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel or shareholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article XVIII or otherwise shall be on the Corporation.

Section 4. Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Article XVIII shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Corporation's Articles of Incorporation, Bylaws, agreement, vote of shareholders or disinterested directors or otherwise.

Section 5. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the IBCL.

Section 6. Vested Right to Indemnification. The right of any individual to indemnification under this Article XVIII shall vest at the time of occurrence or performance of any event, act or omission giving rise to any Proceeding and once vested, shall not later be impaired as a result of any amendment, repeal, alteration or other modification of any or all of these Bylaws. Notwithstanding the foregoing, the indemnification afforded under this Article XVIII shall be applicable to all alleged prior acts or omissions of any individual seeking indemnification hereunder, regardless of the fact that such alleged acts or omissions may have occurred prior to the adoption of these Bylaws, and to the extent such prior acts or omissions cannot be deemed to be covered by these Bylaws, the right of any individual to indemnification shall be governed by the indemnification provisions in effect at the time of such prior acts or omissions.

Section 7. Indemnification of Employees and Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of this corporation, or to any individual who is or was serving at the request of the Board of Directors as an employee or agent of another corporation or a partnership, joint venture, trust, employee benefit plan or other entity, whether for profit or not for profit, to the fullest extent of the provisions of these Bylaws with respect to the indemnification and advancement of expenses of directors and officers of this corporation.

Ex. 3.1

Section 8. Business Expense. Any payments made to any indemnified party under these Bylaws or under any other right to indemnification shall be deemed to be an ordinary and necessary business expense of the Corporation, and payment thereof shall not subject any person responsible for the payment, or the Board, to any action for corporate waste or to any similar action.

Section 9. Severability. If any provision or provisions of Article XVIII is or are held to be invalid, illegal, or unenforceable for any reason whatsoever: (a) the validity, legality, and enforceability of the remaining provisions of such Article (including without limitation all portions of any paragraph of such Article containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) will not in any way be affected or impaired thereby and (b) to the fullest extent possible, the provisions of such Article (including without limitation all portions of any paragraph of such Article containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) will be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or illegal, or unenforceable.

ARTICLE XIX.

Amendments

Section 1. These Bylaws may be amended, altered, repealed, or added to at (a) any annual or regular meeting of the directors, or at any special meeting thereof; or (b) at any annual or special meeting of the shareholders by the affirmative vote of the holders of at least a majority of the then-outstanding shares of common stock of the Corporation.

Section 2. No amendment, alteration or addition to these Bylaws made pursuant to Article XIX, Section 1(a) shall become effective unless the same is adopted by the affirmative vote of a majority of the members of the Board of Directors.

ARTICLE XX.

Control Share Acquisitions

As provided for in Section 5 thereof, Chapter 42 of the Indiana Business Corporation Law, relating to control share acquisitions, shall not apply to control share acquisitions of shares of the corporation made after March 3, 1987.

ARTICLE XXI

Ex. 3.1

Authorized Procedures Pursuant to Indiana Code §23-1-22-4

Section 1. In adopting any rights, options or warrants under Indiana Code §23-1-26-5 relating to any transaction or proposed transaction that would, when consummated, result in a “change of control,” the Board of Directors may include provisions requiring, for a period not to exceed three years after the later of (a) the time that, for whatever reason, “continuing directors” no longer constitute a majority of the directors of the Corporation, or (b) the time that any person becomes an “interested shareholder,” the approval of the continuing directors of the Corporation for certain actions relating to the rights, options or warrants, including without limitation, the redemption or exchange of the rights, options or warrants, or the amendment of the contracts, warrants or instruments that evidence the rights, options or warrants.

Section 2. As used in this Article, “change of control” shall have the meaning contained in Indiana Code §23-1-22-4.

Section 3. As used in this Article, “interested shareholder” shall have the meaning contained in Indiana Code §23-1-43-10, or, if the Board so elects, shall mean any person or entity who or which, together with all affiliates and associates of such person or entity, is the beneficial owner of 15% or more of the then-outstanding shares of common stock of the Corporation. The Board of Directors of the Corporation may, at the time of adoption of the rights, options or warrants, provide for exceptions to the definition of “interested shareholder” in any rights, options or warrants adopted pursuant to this Article XXI, including without limitation that specified persons or entities will not be deemed to be interested shareholders or that specified transactions will not be deemed to cause a person to become an interested shareholder.

Section 4. As used in this Article, “continuing director” shall mean any director (a) who is not (i) an interested shareholder, (ii) an affiliate or associate of an interested shareholder or (iii) a representative or nominee of an interested shareholder, or any affiliate or associate thereof, and (b) who either (i) is a member of the Board of Directors of the Corporation as of the date of the issuance of the rights, options or warrants or (ii) subsequently becomes a member of the Board of Directors of the Corporation and whose election or nomination for election to the Board of Directors of the Corporation is approved or recommended by a vote of a majority of the Board of Directors of the Corporation, which majority includes a majority of the continuing directors then on the Board of Directors of the Corporation, but excluding for this clause (b)(ii) any member whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Securities Exchange Act of 1934, as amended) with respect to the election or removal of members of the Board of Directors of the Corporation or other actual or threatened solicitation of proxies or consents by or on behalf of a person or entity other than the Board of Directors of the Corporation.

EX-31.(A) 3 cts-ex31_a.htm EX-31.(A) EX-31.(A)

EXHIBIT (31)(a)

CERTIFICATION

I, Kieran O’Sullivan, certify that:

I have reviewed this quarterly report on Form 10-Q of CTS Corporation:

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

(b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for external purposes in accordance with generally accepted accounting principles; and

(c)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: July 25, 2023		/s/ Kieran O’Sullivan
		Kieran O’Sullivan
		Chairman, President and Chief Executive Officer

EX-31.(B) 4 cts-ex31_b.htm EX-31.(B) EX-31.(B)

EXHIBIT (31)(b)

CERTIFICATION

I, Ashish Agrawal, certify that:

I have reviewed this quarterly report on Form 10-Q of CTS Corporation:

(a)

(b)

(c)

(d)

(a)

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: July 25, 2023		/s/Ashish Agrawal
		Ashish Agrawal
		Vice President and Chief Financial Officer

EX-32.(A) 5 cts-ex32_a.htm EX-32.(A) EX-32.(A)

EXHIBIT (32)(a)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of CTS Corporation (the Company) on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: July 25, 2023		/s/ Kieran O’Sullivan
		Kieran O’Sullivan
		Chairman, President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to CTS Corporation and will be retained by CTS Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.(B) 6 cts-ex32_b.htm EX-32.(B) EX-32.(B)

EXHIBIT (32)(b)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: July 25, 2023		/s/Ashish Agrawal
		Ashish Agrawal
		Vice President and Chief Financial Officer