x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
Indiana
|
|
35-0225010
|
|
|
(State
or other jurisdiction of incorporation or organization)
|
|
(IRS
Employer Identification Number)
|
|
|
905
West Boulevard North, Elkhart, IN
|
|
46514
|
|
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
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Page
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Item
1.
|
3
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|
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|
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|
3
|
||
|
-
For the Three and Nine Months ended September 30, 2007 and October
1,
2006
|
||
|
|
|
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|
4
|
||
|
-
As of September 30, 2007 and December 31, 2006
|
||
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|
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|
5
|
||
|
-
For the Nine Months ended September 30, 2007 and October 1,
2006
|
||
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|
|
|
6
|
||
|
-
For the Three and Nine Months ended September 30, 2007 and October
1,
2006
|
||
|
|
|
|
|
7
|
||
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|
|
|
Item
2.
|
18
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|
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|
|
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Item
3.
|
27
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|
|
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|
Item
4.
|
27
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|
|
OTHER
INFORMATION
|
|||
|
|
|
|
|
Item
1.
|
28
|
|
Item
1A.
|
28
|
||
|
|
|
|
Item
2.
|
29
|
||
|
Item
6.
|
29
|
|
|
|
|
|
|
30
|
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||
|
September
30, 2007
|
October
1,
2006
|
September
30, 2007
|
October
1,
2006
|
||||||||||||
|
|
|
|
|
||||||||||||
Net
sales
|
$ |
174,790
|
$ |
165,676
|
$ |
507,672
|
$ |
482,094
|
||||||||
Costs
and expenses:
|
||||||||||||||||
Cost
of goods sold
|
140,997
|
136,571
|
410,597
|
391,180
|
||||||||||||
Selling,
general and administrative expenses
|
19,821
|
16,320
|
62,031
|
51,932
|
||||||||||||
Research
and development expenses
|
4,055
|
3,775
|
12,277
|
11,937
|
||||||||||||
Restructuring
charges
|
—
|
486
|
—
|
3,368
|
||||||||||||
Operating
earnings
|
9,917
|
8,524
|
22,767
|
23,677
|
||||||||||||
Other
(expense) income:
|
||||||||||||||||
Interest
expense
|
(869 | ) | (803 | ) | (2,241 | ) | (2,948 | ) | ||||||||
Interest
income
|
497
|
199
|
1,462
|
522
|
||||||||||||
Other
|
320
|
231
|
474
|
293
|
||||||||||||
Total
other expense
|
(52 | ) | (373 | ) | (305 | ) | (2,133 | ) | ||||||||
Earnings before
income taxes
|
9,865
|
8,151
|
22,462
|
21,544
|
||||||||||||
Income
tax expense — Note I
|
2,071
|
1,904
|
4,717
|
4,998
|
||||||||||||
Net
earnings
|
$ |
7,794
|
$ |
6,247
|
$ |
17,745
|
$ |
16,546
|
||||||||
Net
earnings per share
—
Note H
|
||||||||||||||||
Basic
|
$ |
0.22
|
$ |
0.17
|
$ |
0.50
|
$ |
0.46
|
||||||||
Diluted
|
$ |
0.20
|
$ |
0.16
|
$ |
0.46
|
$ |
0.43
|
||||||||
Cash
dividends declared per share
|
$ |
0.03
|
$ |
0.03
|
$ |
0.09
|
$ |
0.09
|
||||||||
Average
common shares outstanding:
|
||||||||||||||||
Basic
|
35,481
|
35,861
|
35,709
|
35,841
|
||||||||||||
Diluted
|
39,956
|
40,266
|
40,222
|
40,215
|
September
30, 2007
|
December
31, 2006*
|
|||||||
ASSETS
|
|
|
||||||
Current
Assets
|
|
|
||||||
Cash
and cash equivalents
|
$ |
44,956
|
$ |
38,630
|
||||
Accounts
receivable, less allowances (2007 - $1,486; 2006 - $2,139)
|
102,707
|
106,012
|
||||||
Inventories,
net — Note C
|
72,537
|
60,543
|
||||||
Other
current assets
|
23,624
|
22,435
|
||||||
Total
current assets
|
243,824
|
227,620
|
||||||
Property,
plant and equipment, less accumulated depreciation (2007 -
$268,233; 2006 - $259,548)
|
91,391
|
96,468
|
||||||
Other
Assets
|
||||||||
Prepaid
pension asset — Note E
|
107,365
|
100,666
|
||||||
Goodwill
|
24,657
|
24,657
|
||||||
Other
intangible assets, net
|
36,816
|
39,154
|
||||||
Deferred
income taxes — Note I
|
32,592
|
37,401
|
||||||
Other
|
1,417
|
1,867
|
||||||
Total
other assets
|
202,847
|
203,745
|
||||||
Total
Assets
|
$ |
538,062
|
$ |
527,833
|
||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
Current
Liabilities
|
||||||||
Notes
payable
|
$ |
1,934
|
$ |
5,425
|
||||
Current
portion of long-term debt — Note D
|
—
|
186
|
||||||
Accounts
payable
|
84,445
|
78,205
|
||||||
Accrued
liabilities
|
41,980
|
41,865
|
||||||
Total
current liabilities
|
128,359
|
125,681
|
||||||
Long-term
debt
—
Note D
|
60,000
|
60,635
|
||||||
Other
long-term obligations
|
20,081
|
22,494
|
||||||
Shareholders’
Equity
|
||||||||
Preferred
stock – authorized 25,000,000 shares without par value; none
issued
|
—
|
—
|
||||||
Common
stock — authorized 75,000,000 shares without par value;
53,911,117
shares issued at 2007 and 53,718,801 shares issued at 2006
|
278,821
|
276,553
|
||||||
Additional
contributed capital
|
27,789
|
27,899
|
||||||
Retained
earnings
|
329,911
|
315,370
|
||||||
Accumulated
other comprehensive loss
|
(28,381 | ) | (31,283 | ) | ||||
608,140
|
588,539
|
|||||||
Cost
of common stock held in treasury (18,603,959 shares at 2007 and 17,895,708
shares at 2006) — Note J
|
(278,518 | ) | (269,516 | ) | ||||
Total
shareholders’ equity
|
329,622
|
319,023
|
||||||
Total
Liabilities and Shareholders’ Equity
|
$ |
538,062
|
$ |
527,833
|
||||
*The
balance sheet at December 31, 2006 has been derived from
the audited
financial
statements at that date.
See
notes to unaudited condensed consolidated financial
statements.
|
Nine
Months Ended
|
||||||||
September
30, 2007
|
October
1,
2006
|
|||||||
Cash
flows from operating activities:
|
|
|
||||||
Net
earnings
|
$ |
17,745
|
$ |
16,546
|
||||
Adjustments
to reconcile net earnings to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
16,977
|
19,043
|
||||||
Prepaid
pension asset
|
(6,699 | ) | (4,697 | ) | ||||
Equity-based
compensation
|
2,526
|
2,960
|
||||||
Restructuring
charges
|
—
|
3,368
|
||||||
Loss/(gain)
on sales of assets
|
50
|
(2,124 | ) | |||||
Deferred
income taxes
|
(413 | ) |
—
|
|||||
Amortization
of retirement benefit adjustments
|
3,188
|
—
|
||||||
Changes
in assets and liabilities
|
||||||||
Accounts
receivable
|
3,305
|
(10,863 | ) | |||||
Inventories
|
(11,994 | ) | (6,243 | ) | ||||
Other
current assets
|
(708 | ) | (4,860 | ) | ||||
Accounts
payable and accrued liabilities
|
7,826
|
13,963
|
||||||
Other
|
(568 | ) |
1,397
|
|||||
Total
adjustments
|
13,490
|
11,944
|
||||||
Net
cash provided by operating activities
|
31,235
|
28,490
|
||||||
|
||||||||
Cash
flows from investing activities:
|
||||||||
Capital
expenditures
|
(9,295 | ) | (11,108 | ) | ||||
Proceeds
from sales of assets
|
39
|
14,453
|
||||||
Net
cash (used in) provided by investing activities
|
(9,256 | ) |
3,345
|
|||||
Cash
flows from financing activities:
|
||||||||
Payments
of long-term debt
|
(7,857 | ) | (81,562 | ) | ||||
Proceeds
from borrowings of long-term debt
|
7,000
|
73,850
|
||||||
Payments
of short-term notes payable
|
(43,756 | ) | (102,078 | ) | ||||
Proceeds
from borrowings of short-term notes payable
|
40,265
|
98,237
|
||||||
Dividends
paid
|
(3,204 | ) | (3,227 | ) | ||||
Purchase
of treasury stock
|
(8,922 | ) | (946 | ) | ||||
Other
|
303
|
(149 | ) | |||||
Net
cash used in financing activities
|
(16,171 | ) | (15,875 | ) | ||||
Effect
of exchange rate on cash and cash equivalents
|
518
|
1,734
|
||||||
Net
increase in cash and cash equivalents
|
6,326
|
17,694
|
||||||
Cash
and cash equivalents at beginning of year
|
38,630
|
12,029
|
||||||
Cash
and cash equivalents at end of period
|
$ |
44,956
|
$ |
29,723
|
||||
Supplemental
cash flow information
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ |
1,437
|
$ |
2,249
|
||||
Income
taxes—net
|
$ |
1,953
|
$ |
3,123
|
||||
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||
|
September
30, 2007
|
October
1,
2006
|
September
30, 2007
|
October
1,
2006
|
||||||||||||
Net
earnings
|
$ |
7,794
|
$ |
6,247
|
$ |
17,745
|
$ |
16,546
|
||||||||
Other
comprehensive earnings:
|
||||||||||||||||
Cumulative
translation adjustment
|
457
|
932
|
1,007
|
2,915
|
||||||||||||
Amortization
of retirement benefit
adjustments
(net of tax)
|
625
|
—
|
1,895
|
—
|
||||||||||||
Comprehensive
earnings
|
$ |
8,876
|
$ |
7,179
|
$ |
20,647
|
$ |
19,461
|
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
|
||||||||
($
in thousands)
|
|
September
30,
2007
|
|
October
1,
2006
|
|
September
30,
2007
|
|
October
1,
2006
|
|
||||
Stock
options
(1)
|
|
$
|
82
|
|
$
|
167
|
|
$
|
318
|
|
$
|
938
|
|
Restricted
stock units
|
|
|
777
|
|
|
680
|
|
|
2,093
|
|
|
1,856
|
|
Restricted
stock
|
|
|
31
|
|
|
48
|
|
|
115
|
|
|
166
|
|
Total
|
|
$
|
890
|
|
$
|
895
|
|
$
|
2,526
|
|
$
|
2,960
|
|
(1)
|
Stock
option expense includes $3 and $10 in the quarters ending
September 30, 2007 and October 1, 2006, respectively, and $11 and
$35 for
the nine-month periods ending September 30, 2007 and October 1, 2006,
respectively, related to non-employee director stock
options.
|
|
2004
Plan
|
2001
Plan
|
1996
Plan
|
|||||||||
Awards
originally available
|
6,500,000
|
2,000,000
|
1,200,000
|
|||||||||
Stock
options outstanding
|
313,850
|
846,938
|
290,050
|
|||||||||
Restricted
stock units outstanding
|
581,878
|
—
|
—
|
|||||||||
Awards
exercisable
|
160,863
|
808,004
|
290,050
|
|||||||||
Awards
available for grant
|
5,300,456
|
—
|
—
|
|
September
30, 2007
|
October
1, 2006
|
||||||||||||||
|
Options
|
Weighted-Average
Exercise
Price
|
Options
|
Weighted-Average
Exercise
Price
|
||||||||||||
Outstanding
at beginning of year
|
1,529,863
|
$ |
15.91
|
1,567,499
|
$ |
15.93
|
||||||||||
Granted
|
—
|
—
|
93,000
|
13.68
|
||||||||||||
Exercised
|
(42,900 | ) |
8.74
|
(37,624 | ) |
8.53
|
||||||||||
Expired
|
(20,400 | ) |
26.79
|
(52,150 | ) |
23.07
|
||||||||||
Forfeited
|
(15,725 | ) |
12.29
|
(8,950 | ) |
9.43
|
||||||||||
Outstanding
at end of period
|
1,450,838
|
$ |
16.01
|
1,561,775
|
$ |
15.76
|
||||||||||
|
||||||||||||||||
Exercisable
at end of period
|
1,258,917
|
$ |
16.54
|
1,220,275
|
$ |
16.94
|
Weighted-average
Remaining
Contractual Life
|
Aggregate
Intrinsic
Value
(in
thousands)
|
|
Options
outstanding
|
5.08
years
|
$2,864
|
Options
exercisable
|
4.76
years
|
$2,697
|
|
September
30, 2007
|
October
1, 2006
|
||||||||||||||
|
Options
|
Weighted-average
Grant-Date
Fair
Value
|
Options
|
Weighted-average
Grant-Date
Fair
Value
|
||||||||||||
Nonvested
at beginning of year
|
340,900
|
$ |
6.11
|
488,943
|
$ |
5.35
|
||||||||||
Granted
|
—
|
—
|
93,000
|
6.53
|
||||||||||||
Vested
|
(166,588 | ) |
5.69
|
(231,493 | ) |
4.74
|
||||||||||
Forfeited
|
(15,725 | ) |
7.58
|
(8,950 | ) |
4.52
|
||||||||||
Nonvested
at end of period
|
158,587
|
(1) | $ |
6.41
|
341,500
|
$ |
6.11
|
|
|
|
Options
Outstanding
|
|
Options
Exercisable
|
||||||||||||||||
|
Weighted-Average
|
||||||||||||||||||||
Range
of
|
Number
|
Remaining
|
Weighted-Average
|
Number
|
Weighted-Average
|
||||||||||||||||
Exercise
|
Outstanding
|
Contractual
|
Exercise
|
Exercisable
|
Exercise
|
||||||||||||||||
Prices
|
at
9/30/07
|
Life
(Years)
|
Price
|
at
9/30/07
|
Price
|
||||||||||||||||
$
|
7.70
– 11.11
|
814,613
|
|
|
|
5.88
|
|
|
$
|
9.41
|
|
|
|
723,876
|
$
|
9.20
|
|||||
|
13.68
– 16.24
|
227,800
|
|
|
|
5.99
|
|
|
|
14.12
|
|
|
|
126,616
|
|
14.33
|
|||||
|
23.00
– 33.63
|
306,675
|
|
|
|
3.28
|
|
|
|
24.62
|
|
|
|
306,675
|
|
24.62
|
|||||
|
35.97
– 79.25
|
101,750
|
|
|
|
2.96
|
|
|
|
47.12
|
|
|
|
101,750
|
|
47.12
|
|
September
30, 2007
|
October
1, 2006
|
||||||||||||||
|
RSUs
|
Weighted-average
Grant-Date
Fair
Value
|
RSUs
|
Weighted-average
Grant-Date
Fair
Value
|
||||||||||||
Outstanding
at beginning of year
|
658,938
|
$ |
12.43
|
525,898
|
$ |
11.49
|
||||||||||
Granted
|
192,950
|
12.18
|
236,700
|
13.67
|
||||||||||||
Settled
|
(211,987 | ) |
12.75
|
(100,110 | ) |
11.23
|
||||||||||
Cancelled
|
(58,023 | ) |
12.46
|
(22,570 | ) |
11.34
|
||||||||||
Outstanding
at end of period
|
581,878
|
$ |
12.23
|
639,918
|
$ |
12.11
|
||||||||||
|
||||||||||||||||
Weighted-average
remaining contractual life
|
4.6
years
|
4.2 years
|
($
in thousands)
|
September
30, 2007
|
December
31,
2006
|
||||||
Finished
goods
|
$ |
10,736
|
$ |
12,336
|
||||
Work-in-process
|
16,929
|
15,059
|
||||||
Raw
materials
|
44,872
|
33,148
|
||||||
Total
inventories
|
$ |
72,537
|
$ |
60,543
|
($
in thousands)
|
September
30, 2007
|
December
31,
2006
|
||||||
Revolving
credit agreement, weighted-average interest rate of 6.2%, due in
2011
|
$ |
—
|
$ |
—
|
||||
Convertible,
senior subordinated debentures at a weighted-average interest rate
of
2.125%, due in 2024
|
60,000
|
60,000
|
||||||
Term
loan, weighted-average interest rate of 8.0% (2007) and 7.3% (2006),
due
in 2011
|
—
|
821
|
||||||
|
60,000
|
60,821
|
||||||
Less
current maturities
|
—
|
186
|
||||||
Total
long-term debt
|
$ |
60,000
|
$ |
60,635
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
($
in thousands)
|
September
30, 2007
|
October
1,
2006
|
September
30, 2007
|
October
1,
2006
|
||||||||||||
PENSION
PLANS
|
||||||||||||||||
Service
cost
|
$ |
1,215
|
$ |
1,283
|
$ |
3,637
|
$ |
3,839
|
||||||||
Interest
cost
|
3,005
|
3,020
|
9,003
|
9,049
|
||||||||||||
Expected
return on plan assets
(1)
|
(6,346 | ) | (6,188 | ) | (19,026 | ) | (18,547 | ) | ||||||||
Amortization
of prior service cost
|
224
|
135
|
674
|
404
|
||||||||||||
Amortization
of (gain)/loss
|
835
|
645
|
2,513
|
1,933
|
||||||||||||
Curtailment
loss
|
—
|
—
|
—
|
325
|
||||||||||||
Net
pension income
|
$ | (1,067 | ) | $ | (1,105 | ) | $ | (3,199 | ) | $ | (2,997 | ) |
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||
($
in thousands)
|
September
30, 2007
|
October
1,
2006
|
September
30, 2007
|
October
1,
2006
|
||||||||||||
OTHER
POSTRETIREMENT BENEFIT PLAN
|
|
|
|
|
||||||||||||
Service
cost
|
$ |
5
|
$ |
5
|
$ |
16
|
$ |
14
|
||||||||
Interest
cost
|
83
|
75
|
250
|
224
|
||||||||||||
Amortization
of prior service cost
|
1
|
—
|
1
|
—
|
||||||||||||
Amortization
of (gain)/loss
|
—
|
—
|
—
|
—
|
||||||||||||
Curtailment
gain
|
—
|
—
|
—
|
(81 | ) | |||||||||||
Net
postretirement expense
|
$ |
89
|
$ |
80
|
$ |
267
|
$ |
157
|
($
in thousands)
|
|
EMS
|
|
|
Components
and Sensors
|
|
|
Total
|
|
|||
Third
Quarter of 2007
|
|
|||||||||||
Net
sales to external customers
|
$
|
106,000
|
$
|
68,790
|
$
|
174,790
|
|
|||||
Segment
operating earnings
|
3,952
|
5,965
|
9,917
|
|
||||||||
Total
assets
|
170,722
|
367,340
|
538,062
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Third
Quarter of 2006
|
|
|||||||||||
Net
sales to external customers
|
$
|
100,832
|
$
|
64,844
|
$
|
165,676
|
|
|||||
Segment
operating earnings
|
3,598
|
5,666
|
9,264
|
|
||||||||
Total
assets
|
169,403
|
392,310
|
561,713
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Nine Months of 2007
|
||||||||||||
Net
sales to external customers
|
$
|
298,559
|
$
|
209,113
|
$
|
507,672
|
||||||
Segment
operating earnings
|
6,309
|
16,458
|
22,767
|
|||||||||
Total
assets
|
170,722
|
367,340
|
538,062
|
|||||||||
First
Nine Months of 2006
|
||||||||||||
Net
sales to external customers
|
$
|
277,927
|
$
|
204,167
|
$
|
482,094
|
||||||
Segment
operating earnings
|
3,424
|
24,577
|
28,001
|
|||||||||
Total
assets
|
169,403
|
392,310
|
561,713
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||
($
in thousands)
|
September
30,
2007
|
October
1,
2006
|
September
30, 2007
|
October
1,
2006
|
||||||||||||
Total
segment operating earnings
|
$ |
9,917
|
$ |
9,264
|
$ |
22,767
|
$ |
28,001
|
||||||||
Restructuring
and related charges - Components and
Sensors
|
—
|
(265 | ) |
—
|
(3,849 | ) | ||||||||||
Restructuring
charge – EMS
|
—
|
(475 | ) |
—
|
(475 | ) | ||||||||||
Interest
expense
|
(869 | ) | (803 | ) | (2,241 | ) | (2,948 | ) | ||||||||
Other
income
|
817
|
430
|
1,936
|
815
|
||||||||||||
Earnings
before income taxes
|
$ |
9,865
|
$ |
8,151
|
$ |
22,462
|
$ |
21,544
|
($
in thousands, except per share amounts)
|
Net
Earnings
(Numerator)
|
Shares
(in
thousands) (Denominator)
|
Per
Share Amount
|
|||||||||
Third
Quarter 2007
|
||||||||||||
Basic
EPS
|
$ |
7,794
|
35,481
|
$ |
0.22
|
|||||||
Effect
of dilutive securities:
|
||||||||||||
Convertible
debt
|
251
|
4,000
|
||||||||||
Equity-based
compensation plans
|
—
|
475
|
||||||||||
Diluted
EPS
|
$ |
8,045
|
39,956
|
$ |
0.20
|
|||||||
|
||||||||||||
Third
Quarter 2006
|
||||||||||||
Basic
EPS
|
$ |
6,247
|
35,861
|
$ |
0.17
|
|||||||
Effect
of dilutive securities:
|
||||||||||||
Convertible
debt
|
240
|
4,000
|
||||||||||
Equity-based
compensation plans
|
405
|
|||||||||||
Diluted
EPS
|
$ |
6,487
|
40,266
|
$ |
0.16
|
|||||||
|
||||||||||||
First
Nine Months of 2007
|
||||||||||||
Basic
EPS
|
$ |
17,745
|
35,709
|
$ |
0.50
|
|||||||
Effect
of dilutive securities:
|
||||||||||||
Convertible
debt
|
753
|
4,000
|
||||||||||
Equity-based
compensation plans
|
—
|
513
|
||||||||||
Diluted
EPS
|
$ |
18,498
|
40,222
|
$ |
0.46
|
|||||||
|
||||||||||||
First
Nine Months of 2006
|
||||||||||||
Basic
EPS
|
$ |
16,546
|
35,841
|
$ |
0.46
|
|||||||
Effect
of dilutive securities:
|
||||||||||||
Convertible
debt
|
724
|
4,000
|
||||||||||
Equity-based
compensation plans
|
374
|
|||||||||||
Diluted
EPS
|
$ |
17,270
|
40,215
|
$ |
0.43
|
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||||
(Number
of Shares in Thousands)
|
September
30, 2007
|
October
1,
2006
|
September
30, 2007
|
October
1,
2006
|
||||||||||||
Stock
options where the assumed proceeds exceeds the
average
market price
|
636
|
701
|
609
|
750
|
||||||||||||
Securities
related to the 6.5% Debentures
(1)
|
—
|
—
|
—
|
159
|
·
|
Sales
increased by $9.1 million, or 5.5%, in the third quarter of 2007
from the
third quarter of 2006. Sales in the EMS segment increased by
5.1% compared to the third quarter of 2006, while sales in the Components
and Sensors segment increased by 6.1% compared to the third quarter
of
2006.
|
·
|
Gross
margin, as a percent of sales, was 19.3% and 17.6% in the third quarter
of
2007 and 2006, respectively. Gross margin within the Component
and Sensors segment was higher primarily due to improved product
mix and
lower automotive launch-related costs while EMS segment gross margins
were
higher due to favorable product mix and lower material
costs.
|
·
|
Selling,
general and administrative and research and development expenses
as a
percent of sales increased to 13.6% in the third quarter of 2007
compared
to 12.1% in the third quarter of 2006. In the third quarter of
2006, a $0.7 million pre-tax gain was realized for the sale/leaseback
of
CTS’ Albuquerque, New Mexico
building.
|
·
|
The
provision for income taxes for the nine months ended September 30,
2007
was calculated using an estimate full year rate of 21.0% compared
to 23.2%
for the nine months ending October 1, 2006 and an actual effective
rate of
21.1% for the full year 2006.
|
·
|
Net
earnings were $7.8 million, or $0.20 per diluted share, in the third
quarter of 2007 compared to $6.2 million, or $0.16 per diluted share,
in
the third quarter of 2006.
|
·
|
Estimating
inventory valuation, the allowance for doubtful accounts, and other
accrued liabilities
|
·
|
Valuation
of long-lived and intangible assets, and depreciation/amortization
periods
|
·
|
Income
taxes
|
·
|
Retirement
plans
|
·
|
Equity-based
compensation
|
($
in thousands)
|
Components
& Sensors
|
EMS
|
Consolidated
Total
|
|||||||||
Third
Quarter 2007
|
||||||||||||
Sales
|
$ |
68,790
|
$ |
106,000
|
$ |
174,790
|
||||||
Segment
operating earnings
|
5,965
|
3,952
|
9,917
|
|||||||||
%
of sales
|
8.7 | % | 3.7 | % | 5.7 | % | ||||||
|
||||||||||||
Third
Quarter 2006
|
||||||||||||
Sales
|
$ |
64,844
|
$ |
100,832
|
$ |
165,676
|
||||||
Segment
operating earnings
|
5,666
|
3,598
|
9,264
|
|||||||||
%
of sales
|
8.7 | % | 3.6 | % | 5.6 | % |
|
Three
Months Ended
|
|
||||||||||
($
in thousands, except net earnings per share)
|
September
30, 2007
|
October
1,
2006
|
Increase
(Decrease)
|
|||||||||
Net
sales
|
$ |
174,790
|
$ |
165,676
|
$ |
9,114
|
||||||
Restructuring-related
costs
|
-
|
254
|
(254 | ) | ||||||||
%
of net sales
|
- | % | 0.2 | % | (0.2 | )% | ||||||
|
||||||||||||
Gross
margin
|
33,793
|
29,105
|
4,688
|
|||||||||
%
of net sales
|
19.3 | % | 17.6 | % | 1.7 | % | ||||||
|
||||||||||||
Selling,
general and administrative expenses
|
19,821
|
16,320
|
3,501
|
|||||||||
%
of net sales
|
11.3 | % | 9.9 | % | 1.4 | % | ||||||
|
||||||||||||
Research
and development expenses
|
4,055
|
3,775
|
280
|
|||||||||
%
of net sales
|
2.3 | % | 2.3 | % | 0.0 | % | ||||||
|
||||||||||||
Restructuring
charge
|
-
|
486
|
(486 | ) | ||||||||
%
of net sales
|
- | % | 0.3 | % | (0.3 | )% | ||||||
|
||||||||||||
Operating
earnings
|
9,917
|
8,524
|
1,393
|
|||||||||
%
of net sales
|
5.7 | % | 5.1 | % | 0.6 | % | ||||||
|
||||||||||||
Income
tax expense
|
2,071
|
1,904
|
167
|
|||||||||
|
||||||||||||
Net
earnings
|
$ |
7,794
|
$ |
6,247
|
$ |
1,547
|
||||||
%
of net sales
|
4.5 | % | 3.8 | % | 0.7 | % | ||||||
|
||||||||||||
Net
earnings per share - diluted
|
$ |
0.20
|
$ |
0.16
|
$ |
0.04
|
($
in thousands)
|
Components
&
Sensors
|
EMS
|
Consolidated
Total
|
|||||||||
First
Nine Months 2007
|
||||||||||||
Sales
|
$ |
209,113
|
$ |
298,559
|
$ |
507,672
|
||||||
Segment
operating earnings
|
16,458
|
6,309
|
22,767
|
|||||||||
%
of sales
|
7.9 | % | 2.1 | % | 4.5 | % | ||||||
|
||||||||||||
First
Nine Months 2006
|
||||||||||||
Sales
|
$ |
204,167
|
$ |
277,927
|
$ |
482,094
|
||||||
Segment
operating earnings
|
24,577
|
3,424
|
28,001
|
|||||||||
%
of sales
|
12.0 | % | 1.2 | % | 5.8 | % |
Nine
Months Ended
|
||||||||||||
($ in thousands, except net earnings per share) |
September
30, 2007
|
October
1,
2006
|
Increse
(Decrease)
|
|||||||||
Net
sales
|
$ |
507,672
|
$ |
482,094
|
$ |
25,578
|
||||||
Restructuring-related
costs
|
-
|
956
|
(956 | ) | ||||||||
%
of net sales
|
- | % | 0.2 | % | (0.2 | )% | ||||||
Gross
margin
|
97,075
|
90,914
|
6,161
|
|||||||||
%
of net sales
|
19.1 | % | 18.9 | % | 0.2 | % | ||||||
|
||||||||||||
Selling,
general and administrative expenses
|
62,031
|
51,932
|
10,099
|
|||||||||
%
of net sales
|
12.2 | % | 10.8 | % | 1.4 | % | ||||||
Research
and development expenses
|
12,277
|
11,937
|
340
|
|||||||||
%
of net sales
|
2.4 | % | 2.5 | % | (0.1 | )% | ||||||
Restructuring
charge
|
-
|
3,368
|
(3,368 | ) | ||||||||
%
of net sales
|
- | % | 0.7 | % | (0.7 | )% | ||||||
Operating
earnings
|
22,767
|
23,677
|
(910 | ) | ||||||||
%
of net sales
|
4.5 | % | 4.9 | % | (0.4 | )% | ||||||
|
||||||||||||
Income
tax expense
|
4,717
|
4,998
|
(281 | ) | ||||||||
|
||||||||||||
Net
earnings
|
$ |
17,745
|
$ |
16,546
|
$ |
1,199
|
||||||
%
of net sales
|
3.5 | % | 3.4 | % | 0.1 | % | ||||||
Net
earnings per share - diluted
|
$ |
0.46
|
$ |
0.43
|
$ |
0.03
|
|
Nine
Months Ended
|
|||||||
($
in millions)
|
September
30,
2007
|
October
1,
2006
|
||||||
Net
cash provided by operations
|
$ |
31.2
|
$ |
28.5
|
||||
Capital
expenditures
|
(9.3 | ) | (11.1 | ) | ||||
Free
cash flow
|
$ |
21.9
|
$ |
17.4
|
·
|
Monitoring
and accountability over the operating effectiveness of controls including
effective operation of designed controls over reconciliations, journal
entry approval and oversight.
|
·
|
Ability
to set-up fictitious vendors and ability to make payments to vendors
without appropriate support and
approval.
|
·
|
Lack
of effectiveness of the internal audit function to obtain an understanding
of process and controls at the Moorpark and Santa Clara, California
locations.
|
·
|
Increased
review and approval of all manual journal entries by the entity
controllers.
|
·
|
Increased
review and approval of all account reconciliation activities by the
entity
controllers.
|
·
|
Added
a senior Corporate accountant to provide additional review and oversight
of all key accounting processes globally, including manual journal
entries
and key account reconciliations.
|
·
|
Increased
internal audit resources and revised internal audit programs to increase
the scope and frequency of audits.
|
·
|
Standardized
and strengthened the account reconciliation process at both Moorpark
and
Santa Clara.
|
·
|
Completed
a review of all Moorpark and Santa Clara
vendors.
|
·
|
Removed
the entity controllers’ ability to set-up vendors and make payments
through the financial information
system.
|
·
|
Removed
the entity controllers’ security access to record journal
entries.
|
·
|
Further
enhance the Moorpark and Santa Clara reporting system documentation
and
user training.
|
·
|
Continue
to strengthen operating policies, including policies around pricing
adjustments, customer returns and vendor disputes at all CTS
locations.
|
·
|
Institute
additional operational monitoring reports to review and track early
warning signs e.g. short payments, premium freight and customer rejects
at
all CTS locations.
|
·
|
Further
enhance and document CTS’ annual vendor certification process at all CTS
locations.
|
·
|
Standardize
and strengthen the account reconciliation process at all CTS
locations.
|
(a)
Total
Number of
Shares
Purchased
|
(b)
Average
Price
Paid
per Share
|
(c)
Total
Number
of
Shares
Purchased
as Part of
Plans
or
Programs
(1)
|
(d)
Maximum
Number
of
Shares
That
May Yet Be
Purchased
Under the
Plans or Programs
|
|||||||||||||
2,340,000
|
||||||||||||||||
July
2, 2007 – July 5, 2007
|
45,000
|
$ |
12.90
|
45,000
|
2,000,000
|
|||||||||||
August
8, 2007 – August 24, 2007
|
116,000
|
12.95
|
116,000
|
1,884,000
|
||||||||||||
August
27, 2007 – September 28, 2007
|
191,700
|
13.02
|
191,700
|
1,692,300
|
||||||||||||
Total
|
352,700
|
$ |
12.98
|
352,700
|
|
_________________________________
|
(1)
|
In
November 2005, CTS’ Board of Directors authorized a program to repurchase
up to one million shares of its common stock in the open
market. The authorization expired June 29,
2007.
|
|
In
June 2007, CTS’ Board of Director authorized a program to repurchase up to
two million shares of its common stock in the open market. The
authorization expires June 30,
2009.
|
Performance
Share Agreement with Vinod M. Khilnani
|
||
Amendment
to Employment Agreement of Donald K. Schwanz
|
||
Amendment
to CTS Corporation Individual Excess Benefit Retirement Plan of Donald
K.
Schwanz
|
||
Form
of CTS Corporation Individual Excess Benefit Retirement
Plan
|
||
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
||
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
||
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
||
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
||
CTS
Corporation
|
|
CTS
Corporation
|
|
|
|
|
|
/s/
Richard G. Cutter III
|
|
/s/
Vinod M. Khilnani
|
|
Richard
G. Cutter III
Vice
President, Secretary and General Counsel
|
|
Vinod
M. Khilnani
President
and Chief Executive Officer
|
|
|
|
|
|
Dated:
October 24, 2007
|
|
Dated:
October 24, 2007
|
|
(a)
|
The
Total Stockholder Return of the Company and each Peer will be determined
and the Performance Measure evaluated separately for each Performance
Period, and the Award will be determined based on the matrix set
forth on
Exhibit B
(the “RTSR Matrix”);
and
|
(b)
|
In
no event shall the Grantee be entitled to receive more than 25,000
Shares
under this Agreement in the
aggregate.
|
(a)
|
credit
the number of Shares to be issued or transferred to the Grantee as
of that
Settlement Date to a book-entry account in the name of the Grantee
held by
the Company’s transfer agent; or
|
(b)
|
deliver
to the Grantee a certificate representing the number of Shares transferred
or issued to the Grantee as of that Settlement
Date.
|
(a)
|
the
Grantee becomes disabled;
|
(b)
|
the
Grantee dies; or
|
(c)
|
a
change in ownership or effective control of the Company, or a change
in
the ownership of a substantial portion of the assets of the
Company.
|
NAME
|
SYMBOL
|
STOCK
EXCHANGE
|
Aeroflex
Incorporated
|
ARXX
|
Nasdaq
Global Select Market
|
ArvinMeritor,
Inc.
|
ARM
|
New
York Stock Exchange
|
AVX
Corporation
|
AVX
|
New
York Stock Exchange
|
Benchmark
Electronics, Inc.
|
BHE
|
New
York Stock Exchange
|
BorgWarner
Inc.
|
BWA
|
New
York Stock Exchange
|
Celestica
Inc.
|
CLS
|
New
York Stock Exchange
|
EPCOS
AG
|
EPC
|
New
York Stock Exchange
|
Flextronics
International Ltd.
|
FLEX
|
Nasdaq
Global Select Market
|
Frequency
Electronics, Inc.
|
FEIM
|
Nasdaq
Global Market
|
Gentex
Corporation
|
GNTX
|
Nasdaq
Global Select Market
|
Jabil
Circuit, Inc.
|
JBL
|
New
York Stock Exchange
|
KEMET
Corporation
|
KEM
|
New
York Stock Exchange
|
Key
Tronic Corporation
|
KTCC
|
Nasdaq
Global Market
|
Kimball
International, Inc.
|
KBALB
|
Nasdaq
Global Select Market
|
LaBarge,
Inc.
|
LB
|
American
Stock Exchange
|
Lear
Corporation
|
LEA
|
New
York Stock Exchange
|
LittelFuse,
Inc.
|
LFUS
|
Nasdaq
Global Select Market
|
Methode
Electronics, Inc.
|
METH
|
Nasdaq
Global Select Market
|
Molex
Incorporated
|
MOLX
|
Nasdaq
Global Select Market
|
Plexus
Corp.
|
PLXS
|
Nasdaq
Global Select Market
|
RF
Micro Devices, Inc.
|
RFMD
|
Nasdaq
Global Select Market
|
Sanmina-Sci
Corporation
|
SANM
|
Nasdaq
Global Select Market
|
Sirenza
Microdevices, Inc.
|
SMDI
|
Nasdaq
Global Market
|
Solectron
Corporation
|
SLR
|
New
York Stock Exchange
|
Sparton
Corporation
|
SPA
|
New
York Stock Exchange
|
Spectrum
Control, Inc.
|
SPEC
|
Nasdaq
Global Market
|
Stoneridge,
Inc.
|
SRI
|
New
York Stock Exchange
|
Sypris
Solutions, Inc.
|
SYPR
|
Nasdaq
Global Market
|
Technitrol,
Inc.
|
TNL
|
New
York Stock Exchange
|
Triquint
Semiconductors, Inc.
|
TQNT
|
Nasdaq
Global Select Market
|
Vishay
Intertechnology, Inc.
|
VSH
|
New
York Stock Exchange
|
Williams
Controls, Inc.
|
WMCO
|
Nasdaq
Global Market
|
·
|
such
Peer will be removed from the Peer Group for purposes of such Performance
Period and any subsequent Performance Periods;
and
|
·
|
the
Relative Total Stockholder Return for such Performance Period and
any
subsequent Performance Periods will be calculated as if such Peer
had
never been a member of the Peer
Group.
|
·
|
Company
Return
. For each Performance Period, the Company’s Total
Stockholder Return will be a percentage amount determined based on
(1) the
average closing price of the Shares for the 20 business days immediately
preceding the respective Vesting Date (including aggregate dividends
for
the Performance Period) compared to (2) the average closing price
of the
Shares for the 20 business days immediately preceding July 2,
2007.
|
·
|
Peer
Return
.
|
|
For
each Performance Period, each Peer’s Total Stock Return will be a
percentage amount determined based on (1) the closing stock price
on the
last trading day of the Performance Period (adjusted for stock splits)
compared to (2) the closing stock price on the first trading day
of the
Performance Period (adjusted for stock
splits.)
|
·
|
Company
Ranking
. For each Performance Period, the Company’s and
each Peer’s Total Stockholder Return will be ranked in decreasing
order. Relative Total Stockholder Return equals the percentile
rank (expressed as a percentage) of the Company’s Total Stockholder Return
when compared to the rankings, from lowest to highest, of the Total
Stockholder Returns of the Peers comprising the Peer Group for the
Performance Period.
|
|
(d)
|
Expense
Reimbursement.
The Company shall reimburse Executive for
all reasonable business-related expenses incurred by Executive during
the
Employment Period and, to the extent provided under paragraph 6 and
paragraph 10(b), during the Consulting Period and during Executive’s
lifetime, respectively, in the course of performing Executive’s duties
under this Agreement that are consistent with the Company’s policies in
effect from time to time with respect to travel, entertainment and
other
business expenses, subject to the Company’s requirements applicable
generally with respect to reporting and documentation of such
expenses. Any such reimbursement shall be made not later than
December 31 of the calendar year following the calendar year in which
Executive incurs the expense. In no event may the amount of
expenses reimbursed by the Company in one calendar year affect the
amount
of expenses eligible for reimbursement in any other calendar
year.
|
|
(i)
|
Executive
or his estate or beneficiaries shall be entitled to a lump sum payment
in
an amount equal to the amount of Base Salary Executive would have
earned
from the Termination Date until December 31, 2007, payable within 90
days of the date of Executive’s death or determination of Disability, as
the case may be; and
|
|
(e)
|
Notwithstanding
the provisions of paragraph 7:
|
|
(i)
|
If
the Company determines in good faith that (A) any payment to Executive
or
his estate or beneficiaries under this paragraph 7 does not qualify
for
the “short-term deferral exception” or otherwise would constitute a
“deferral of compensation” under Section 409A of the Code, (B) Executive
is a “specified employee” (as such phrase is defined in Section 409A of
the Code) and (C) delay of such payment is required by Section 409A
of the
Code and is not already provided for in this paragraph 7, Executive
(or Executive’s estate or beneficiary) will receive payment of such
amounts upon the earlier of (X) the first day of the seventh month
following Executive’s “separation from service” with the Company (as such
phrase is defined in Section 409A of the Code) or (Y) Executive’s
death.
|
|
(ii)
|
It
is expressly understood that the Company’s payment obligations under
paragraph 7 shall terminate and Executive’s right to such payments shall
be forfeited in the event Executive breaches any of his agreements
in
paragraph 8 hereof.
|
|
(iii)
|
Notwithstanding
the foregoing, if the Release Agreement has not been executed and
all
periods for revocation expired within the applicable “short term deferral
period” prescribed by Section 409A of the Code, Executive will forfeit the
payments prescribed by paragraphs 7(c)(ii), 7(c)(iii) and 7(c)(v),
above.
|
|
23.
|
Section
409A of the Code
. To the extent applicable, it is intended
that the compensation arrangements under this Agreement be in full
compliance with Section 409A of the Code. This Agreement shall
be construed in a manner to give effect to such
intention. Reference to Section 409A of the Code includes any
proposed, temporary or final regulations, or any other guidance,
promulgated with respect to such Section by the U.S. Department of
the
Treasury or the Internal Revenue
Service.
|
CTS CORPORATION | |||
|
By:
|
/s/ James L. Cummins | |
James L. Cummins | |||
Senior Vice President Administration | |||
|
By:
|
/s/ Donald K. Schwanz | |
Donald K. Schwanz | |||
Executive | |||
1.
|
Section
2.02 of the Plan (“
Beneficiary
”) is amended by replacing the term
“termination of employment” contained therein with the term “separation
from service.”
|
2.
|
The
fourth sentence of Section 3.03 of the Plan (“
Payment of the Retirement
Benefit
”) is amended by replacing the phrase “the date the Member’s
employment with the Company terminated” contained therein with the phrase
“the date the Member separated from service with the
Company.”
|
4.
|
The
second sentence of Section 3.04 of the Plan (“
Payment of the
Pre-retirement Death Benefit
”) is amended in its entirety to read as
follows:
|
5.
|
The
second sentence of Section 3.05 of the Plan (“
Section 409A of the
Code
”) is amended in its entirety to read as
follows:
|
CTS CORPORATION | |||
|
By:
|
/s/ James L. Cummins | |
James L. Cummins | |||
Senior Vice President Administration | |||
|
By:
|
/s/ Donald K. Schwanz | |
Donald K. Schwanz | |||
(i)
|
the
percentage of “Compensation” (as defined in the Pension Plan) used in
determining the Member’s benefit under the applicable provision of
Section 6 of the Pension Plan was determined as follows, based on the
date of the Member’s separation from service with the
Company:
|
Date
of Separation from Service
|
Applicable
Percentage
|
||
Prior
to July 1, 2008
|
[ ]%
|
||
July 1,
2008 to June 30, 2009
|
[ ]%
|
||
July
1, 2009 to June 30, 2010
|
[ ]%
|
||
July
1, 2010 to June 30, 2011
|
[ ]%
|
||
After
June 30, 2011
|
[ ]%
|
(ii)
|
the
“Credited Service” (as defined in the Pension Plan) used in determining
the Member’s benefit under the applicable provision of Section 6 of
the Pension Plan is limited to a maximum of 30 years;
and
|
(iii)
|
such
benefit were computed without giving effect to the limitations then
currently imposed by Code Section 401(a)(17) and Code
Section 415(b) and regulations thereunder and without regard to the
benefit accrual determined under Section 6.13 of the Pension
Plan.
|
(i)
|
the
percentage of “Compensation” (as defined in the Pension Plan) used in
determining the Member’s benefit under the applicable provision of
Section 6 of the Pension Plan was determined as follows, based on the
date of the Member’s separation from service with the
Company:
|
Date
of Separation from Service
|
Applicable
Percentage
|
||
Prior
to July 1, 2008
|
[ ]%
|
||
July 1,
2008 to June 30, 2009
|
[ ]%
|
||
July
1, 2009 to June 30, 2010
|
[ ]%
|
||
July
1, 2010 to June 30, 2011
|
[ ]%
|
||
After
June 30, 2011
|
[ ]%
|
(ii)
|
the
“Credited Service” (as defined in the Pension Plan) used in determining
the Member’s benefit under the applicable provision of Section 6 of
the Pension Plan is limited to a maximum of 30 years;
and
|
(iii)
|
the
Member’s benefit were computed without giving effect to the limitations
then currently imposed by Code Section 401(a)(17) and Code
Section 415(b) and regulations thereunder and without regard to the
benefit accrual determined under Section 6.13 of the Pension
Plan.
|
|
By:
|
James
L. Cummins
|
|
Title:
|
Senior
Vice President Administration
|
|
Re:
|
Release
Agreement
|
1.
|
Termination
of Employment
|
2.
|
Payments
and Benefits
|
3.
|
Release
|
4.
|
Right
to Consider/Rescind
|
5.
|
Release
of Claims by the Company
|
6.
|
Miscellaneous
|
A.
|
This
Agreement may not be modified, altered or changed except upon written
consent of the parties.
|
B.
|
This
Agreement shall be governed by and construed in accordance with the
laws
of the State of Indiana.
|
C.
|
The
benefits afforded you under this Agreement (and the Severance Agreement
dated ______________________, to the extent applicable, and the benefits
to which you are entitled under your outstanding stock option agreements
and restricted stock unit agreements) are in lieu of any other
compensation, benefit, bonus pay, separation pay, severance pay,
or notice
pay to which you might otherwise have been
entitled.
|
D.
|
The
waiver by either party of a breach of any provision of this Agreement
shall not operate or be construed to be a waiver of any subsequent
breach
thereof.
|
E.
|
It
is agreed and understood that neither the offer nor any negotiations
or
proceedings connected herewith nor the execution of this Agreement
nor the
payment of money shall constitute or be construed as an admission
of any
liability to, or the validity of, any claims
whatsoever.
|
F.
|
The
parties intend this Agreement to serve as a final expression of this
contract and as a complete and exclusive statement of the terms
hereof. This Agreement supersedes any prior written or verbal
contracts, agreements, or letters of intent or understanding between
you
and CTS executed prior to the execution date hereof to the extent
any such
agreement is inconsistent with the terms
hereof.
|
G.
|
The
parties agree that in the event a court of competent jurisdiction
determines that the character, duration or scope of any provision
of this
Agreement is unreasonable or unenforceable in any respect, then such
provision shall be deemed limited to the extent the court deems reasonable
or enforceable and the provision shall remain in effect as limited
by the
court. In the event that such a court determines that any
provision is wholly unenforceable, the provision shall be deemed
severed
from this Agreement and the other provisions shall remain in full
force
and effect.
|
7.
|
Representations
and Warranties
|
A.
|
You
have been provided a reasonable time of at least twenty-one (21)
days to
consider whether or not to sign this
Agreement.
|
B.
|
You
are aware, by signing this Agreement, which includes a general release,
you are giving up rights to initiate a
lawsuit.
|
C.
|
You
understand and agree that by signing this Agreement, you are specifically
waiving your rights to file a lawsuit against CTS under Title VII
of the
Civil Rights Act of 1964 as amended, the Age Discrimination in Employment
Act, as amended, the Americans with Disabilities Act and similar
state and
local anti-discrimination laws.
|
D.
|
There
are no promises or representations except those contained in this
Agreement which have been made to you in connection with this
subject.
|
E.
|
You
have read and understand each and every provision of this
Agreement.
|
F.
|
You
acknowledge and agree that the release contained herein is an essential
and material term of this
Agreement.
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of CTS
Corporation:
|
2.
|
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;
|
3.
|
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;
|
4.
|
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;
|
(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;
|
(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
|
5.
|
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:
October
24, 2007
|
By:
|
/s/ Vinod M. Khilnani | |
Vinod M. Khilnani | |||
President and Chief Executive Officer | |||
1.
|
I
have reviewed this quarterly report on Form 10-Q of CTS
Corporation:
|
2.
|
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;
|
3.
|
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;
|
4.
|
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;
|
(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;
|
(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
|
5.
|
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:
October
24, 2007
|
By:
|
/s/ Matthew W. Long | |
Matthew W. Long | |||
Interim Chief Financial Officer and Treasurer | |||
(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:
October
24, 2007
|
By:
|
/s/ Vinod M. Khilnani | |
Vinod M. Khilnani | |||
President and Chief Executive Officer | |||
(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:
October
24, 2007
|
By:
|
/s/ Matthew W. Long | |
Matthew W. Long | |||
Interim Chief Financial Officer and Treasurer | |||