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)
|
Page
|
|||
PART
I
.
|
|||
Item
1.
|
3
|
||
3
|
|||
- For the Three and Nine Months Ended September 27, 2009 and September 28,
2008
|
|||
4
|
|||
- As of September 27, 2009 and December 31, 2008
|
|||
5
|
|||
- For the Nine Months Ended September 27, 2009 and September 28,
2008
|
|||
6
|
|||
- For the Three and Nine Months Ended September 27, 2009
and September 28, 2008
|
|||
7
|
|||
Item
2.
|
20
|
||
Item
3.
|
29
|
||
Item
4.
|
29
|
||
Item
1.
|
29
|
||
Item
1A.
|
29
|
||
Item
6.
|
30
|
||
31
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
27, 2009
|
September
28, 2008*
|
September
27, 2009
|
September
28, 2008*
|
|||||||||||||
Net
sales
|
$ | 126,565 | $ | 170,034 | $ | 365,094 | $ | 528,880 | ||||||||
Costs
and expenses:
|
||||||||||||||||
Cost
of goods sold
|
100,380 | 136,684 | 297,202 | 421,553 | ||||||||||||
Selling,
general and administrative expenses
|
16,494 | 20,754 | 48,357 | 63,236 | ||||||||||||
Research
and development expenses
|
3,408 | 4,509 | 10,227 | 13,576 | ||||||||||||
Restructuring
charge – Note I
|
— | 3,202 | 2,243 | 3,465 | ||||||||||||
Goodwill
impairment
|
— | — | 33,153 | — | ||||||||||||
Operating
earnings/(loss)
|
6,283 | 4,885 | (26,088 | ) | 27,050 | |||||||||||
Other
(expense)/income:
|
||||||||||||||||
Interest
expense
|
(256 | ) | (1,591 | ) | (1,615 | ) | (4,976 | ) | ||||||||
Interest
income
|
17 | 316 | 118 | 1,174 | ||||||||||||
Other
|
(390 | ) | (307 | ) | (736 | ) | 98 | |||||||||
Total
other expense
|
(629 | ) | (1,582 | ) | (2,233 | ) | (3,704 | ) | ||||||||
Earnings/(loss) before
income taxes
|
5,654 | 3,303 | (28,321 | ) | 23,346 | |||||||||||
Income
tax expense/(benefit)
|
1,173 | (3,912 | ) | 9,872 | 266 | |||||||||||
Net
earnings/(loss)
|
$ | 4,481 | $ | 7,215 | $ | (38,193 | ) | $ | 23,080 | |||||||
Net
earnings/(loss) per share - Note K
|
||||||||||||||||
Basic
|
$ | 0.13 | $ | 0.21 | $ | (1.13 | ) | $ | 0.68 | |||||||
Diluted
|
$ | 0.13 | $ | 0.21 | $ | (1.13 | ) | $ | 0.65 | |||||||
Cash
dividends declared per share
|
$ | 0.03 | $ | 0.03 | $ | 0.09 | $ | 0.09 | ||||||||
Average
common shares outstanding:
|
||||||||||||||||
Basic
|
33,873 | 33,708 | 33,799 | 33,735 | ||||||||||||
Diluted
|
34,513 | 38,199 | 33,799 | 38,206 |
September
27,
2009
|
December
31, 2008*
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
and cash equivalents
|
$
|
40,329
|
$
|
44,628
|
||||
Accounts
receivable, less allowances (2009 – $2,250; 2008- $2,165)
|
75,942
|
94,175
|
||||||
Inventories,
net - Note D
|
60,452
|
70,867
|
||||||
Other
current assets
|
14,969
|
16,172
|
||||||
Total
current assets
|
191,692
|
225,842
|
||||||
Property,
plant and equipment, less accumulated depreciation (2009 - $267,614;
2008 - $257,850)
|
83,395
|
90,756
|
||||||
Other
Assets
|
||||||||
Prepaid
pension asset
|
24,609
|
18,756
|
||||||
Goodwill
– Note J
|
—
|
33,150
|
||||||
Other
intangible assets – Note N
|
34,577
|
36,927
|
||||||
Deferred
income taxes
|
71,718
|
82,101
|
||||||
Other
|
689
|
910
|
||||||
Total
other assets
|
131,593
|
171,844
|
||||||
Total
Assets
|
$
|
406,680
|
$
|
488,442
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable
|
$
|
62,211
|
$
|
71,285
|
||||
Accrued
liabilities
|
36,254
|
41,956
|
||||||
Total
current liabilities
|
98,465
|
113,241
|
||||||
Long-term
debt - Note E
|
49,500
|
79,988
|
||||||
Other
long-term obligations
|
16,820
|
17,740
|
||||||
Shareholders’
Equity
|
||||||||
Preferred
stock - authorized 25,000,000 shares without par value; none
issued
|
—
|
—
|
||||||
Common
stock - authorized 75,000,000 shares without par value; 54,195,624 shares
issued
at
September 27, 2009 and
54,031,844 shares issued at December 31, 2008
|
282,231
|
280,266
|
||||||
Additional
contributed capital
|
36,665
|
37,148
|
||||||
Retained
earnings
|
314,456
|
355,694
|
||||||
Accumulated
other comprehensive loss
|
(94,448
|
)
|
(98,626
|
)
|
||||
538,904
|
574,482
|
|||||||
Cost
of common stock held in treasury (2009 and 2008 – 20,320,759
shares)
|
(297,009
|
)
|
(297,009
|
)
|
||||
Total
shareholders’ equity
|
241,895
|
277,473
|
||||||
Total
Liabilities and Shareholders’ Equity
|
$
|
406,680
|
$
|
488,442
|
Nine
Months Ended
|
||||||||
September
27,
2009
|
September
28,
2008*
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
(loss)/earnings
|
$
|
(38,193
|
)
|
$
|
23,080
|
|||
Adjustments
to reconcile net (loss)/earnings to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
14,919
|
18,457
|
||||||
Prepaid
pension asset – Note F
|
(5,853
|
)
|
(7,599
|
)
|
||||
Equity-based
compensation – Note B
|
2,711
|
|
2,614
|
|||||
Restructuring
and impairment charges – Note I
|
2,243
|
3,465
|
||||||
Goodwill
impairment – Note J
|
33,153
|
—
|
||||||
Gain
on sales of assets
|
(1,153
|
)
|
(30
|
)
|
||||
Amortization
of retirement benefit adjustments – Note F
|
3,942
|
1,683
|
||||||
Changes
in assets and liabilities, net of acquisitions
|
||||||||
Accounts
receivable
|
20,045
|
1,041
|
||||||
Inventories
|
11,031
|
(5,529
|
)
|
|||||
Other
current assets
|
1,600
|
1,054
|
||||||
Accounts
payable and accrued liabilities
|
(18,936
|
)
|
(13,804
|
)
|
||||
Other
|
8,542
|
(4,312
|
)
|
|||||
Total
adjustments
|
72,244
|
(2,960
|
)
|
|||||
Net
cash provided by operating activities
|
34,051
|
20,120
|
||||||
Cash
flows from investing activities:
|
||||||||
Payments
for acquisitions, net of cash received – Note C
|
—
|
(20,828
|
)
|
|||||
Capital
expenditures
|
(4,681
|
)
|
(13,756
|
)
|
||||
Proceeds
from sales of assets
|
1,309
|
34
|
||||||
Net
cash used in investing activities
|
(3,372
|
)
|
(34,550
|
)
|
||||
Cash
flows from financing activities:
|
||||||||
Payment
of 2.125% Debentures – Note E
|
(32,500
|
)
|
—
|
|||||
Payments
of long-term debt – Note E
|
(2,141,050
|
)
|
(892,150
|
)
|
||||
Proceeds
from borrowings of long-term debt – Note E
|
2,142,550
|
920,250
|
||||||
Payments
of short-term notes payable
|
(7,755
|
)
|
(7,426
|
)
|
||||
Proceeds
from borrowings of short-term notes payable
|
7,755
|
6,426
|
||||||
Dividends
paid
|
(3,040
|
)
|
(3,051
|
)
|
||||
Purchase
of treasury stock – Note L
|
—
|
(7,037
|
)
|
|||||
Other
|
(929
|
)
|
56
|
|||||
Net
cash (used in)/provided by financing activities
|
(34,969
|
)
|
17,068
|
|||||
Effect
of exchange rate on cash and cash equivalents
|
(9
|
)
|
(1,795
|
)
|
||||
Net
(decrease)/increase in cash and cash equivalents
|
(4,299
|
)
|
843
|
|||||
Cash
and cash equivalents at beginning of year
|
44,628
|
52,868
|
||||||
Cash
and cash equivalents at end of period
|
$
|
40,329
|
$
|
53,711
|
||||
Supplemental
cash flow information
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$
|
728
|
$
|
2,206
|
||||
Income
taxes—net
|
$
|
5,915
|
$
|
3,035
|
||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
27, 2009
|
September
28, 2008*
|
September
27, 2009
|
September
28, 2008*
|
|||||||||||||
Net
earnings/(loss)
|
$
|
4,481
|
$
|
7,215
|
$
|
(38,193
|
)
|
$
|
23,080
|
|||||||
Other
comprehensive earnings/(loss):
|
||||||||||||||||
Cumulative
translation adjustment
|
(352
|
)
|
(2,459
|
)
|
1,925
|
(2,562
|
)
|
|||||||||
Deferred
loss on foreign currency forward contracts
|
—
|
(31
|
)
|
—
|
(31
|
)
|
||||||||||
Amortization
of retirement benefit adjustments (net of tax)
|
779
|
435
|
2,253
|
1,021
|
||||||||||||
Comprehensive
earnings/(loss)
|
$
|
4,908
|
$
|
5,160
|
$
|
(34,015
|
)
|
$
|
21,508
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
($ in
thousands)
|
September
27, 2009
|
September
28, 2008
|
September
27, 2009
|
September
28, 2008
|
||||||||||||
Stock
options
|
$ | 2 | $ | 18 | $ | 34 | $ | 109 | ||||||||
Restricted
stock units
|
907 | 867 | 2,677 | 2,473 | ||||||||||||
Restricted
stock
|
— | — | — | 32 | ||||||||||||
Total
|
$ | 909 | $ | 885 | $ | 2,711 | $ | 2,614 |
2009
Plan
|
2004
Plan
|
2001
Plan
|
1996
Plan
|
|||||||||||||
Awards
originally available
|
3,400,000
|
6,500,000
|
2,000,000
|
1,200,000
|
||||||||||||
Stock
options outstanding
|
—
|
276,850
|
730,888
|
176,850
|
||||||||||||
Restricted
stock units outstanding
|
381,950
|
469,087
|
—
|
—
|
||||||||||||
Awards
exercisable
|
—
|
256,100
|
730,888
|
176,850
|
||||||||||||
Awards
available for grant
|
3,018,050
|
472,000
|
—
|
—
|
September
27, 2009
|
September
28, 2008
|
|||||||||||||||
Options
|
Weighted-Average
Exercise
Price
|
Options
|
Weighted-Average
Exercise
Price
|
|||||||||||||
Outstanding
at beginning of year
|
1,294,263
|
$
|
14.53
|
1,426,638
|
$
|
16.06
|
||||||||||
Exercised
|
—
|
$
|
—
|
(7,100
|
)
|
$
|
8.40
|
|||||||||
Expired
|
(109,675
|
)
|
$
|
21.45
|
(113,375
|
)
|
$
|
32.91
|
||||||||
Forfeited
|
—
|
$
|
—
|
—
|
$
|
—
|
||||||||||
Outstanding
at end of period
|
1,184,588
|
$
|
13.89
|
1,306,163
|
$
|
14.63
|
||||||||||
Exercisable
at end of period
|
1,163,838
|
$
|
13.89
|
1,231,638
|
$
|
14.76
|
September
27, 2009
|
September
28, 2008
|
|||||||||||||||
Options
|
Weighted-average
Grant-Date
Fair
Value
|
Options
|
Weighted-average
Grant-Date
Fair
Value
|
|||||||||||||
Nonvested
at beginning of year
|
74,525
|
$
|
6.36
|
158,587
|
$
|
6.41
|
||||||||||
Vested
|
(53,775
|
)
|
$
|
6.41
|
(84,062
|
)
|
$
|
6.46
|
||||||||
Forfeited
|
—
|
$
|
—
|
—
|
$
|
—
|
||||||||||
Nonvested
at end of period
|
20,750
|
(1)
|
$
|
6.24
|
74,525
|
(1)
|
$
|
6.36
|
Options
Outstanding
|
Options
Exercisable
|
||||||||||||||||||||
Weighted
Average
|
|||||||||||||||||||||
Range
of
|
Number
|
Remaining
|
Weighted
Average
|
Number
|
Weighted
Average
|
||||||||||||||||
Exercise
|
Outstanding
|
Contractual
|
Exercise
|
Exercisable
|
Exercise
|
||||||||||||||||
Prices
|
at
9/27/09
|
Life
(Years)
|
Price
|
At
9/27/09
|
Price
|
||||||||||||||||
$
|
7.70
– 11.11
|
727,163
|
3.88
|
$
|
9.37
|
727,163
|
$
|
9.37
|
|||||||||||||
13.68
– 16.24
|
227,800
|
4.00
|
14.16
|
207,050
|
14.12
|
||||||||||||||||
23.00
– 25.10
|
188,625
|
1.56
|
23.22
|
188,625
|
23.22
|
||||||||||||||||
42.69
– 79.25
|
41,000
|
0.66
|
49.78
|
41,000
|
49.78
|
September
27, 2009
|
September
28, 2008
|
|||||||||||||||
RSUs
|
Weighted-average
Grant-Date
Fair
Value
|
RSUs
|
Weighted-average
Grant-Date
Fair
Value
|
|||||||||||||
Outstanding
at beginning of year
|
700,358 | $ | 10.76 | 595,148 | $ | 12.14 | ||||||||||
Granted
|
390,850 | $ | 6.09 | 240,950 | $ | 10.06 | ||||||||||
Converted
|
(217,991 | ) | $ | 10.70 | (143,720 | ) | $ | 11.86 | ||||||||
Forfeited
|
(22,180 | ) | $ | 11.32 | (22,410 | ) | $ | 12.20 | ||||||||
Outstanding
at end of period
|
851,037 | $ | 8.61 | 669,968 | $ | 11.45 | ||||||||||
Weighted-average
remaining contractual life
|
4.7
years
|
4.4
years
|
·
|
Tusonix,
Inc. (“Tusonix”), based in Tucson, Arizona, a leader in the design and
manufacture of ceramic electromagnetic interference and radio frequency
interference (“EMI/RFI”) filters;
and
|
·
|
Orion
Manufacturing, Inc. (“Orion”), based in San Jose, California, a contract
electronics manufacturer.
|
($
in thousands)
|
September
27,
2009
|
December
31,
2008
|
||||||
Finished
goods
|
$
|
8,395
|
$
|
7,813
|
||||
Work-in-process
|
17,151
|
16,246
|
||||||
Raw
materials
|
34,906
|
46,808
|
||||||
Total
inventories, net
|
$
|
60,452
|
$
|
70,867
|
($
in thousands)
|
September
27,
2009
|
December
31,
2008
|
||||||
Revolving
credit agreement, weighted-average interest rate of 1.2%, and 4.2% due in
2011
|
$ | 49,500 | $ | 48,000 | ||||
Convertible,
senior subordinated debentures at an effective interest rate of 7.0% and a
coupon
rate of 2.1%, due in 2024,
net of discount of $512
|
— | 31,988 | ||||||
Total
long-term debt
|
$ | 49,500 | $ | 79,988 |
Three
months ended
September
28, 2008
|
Nine
months ended
September
28, 2008
|
|||||||||||||||||||||||
($
in thousands)
|
As
originally reported
|
As
adjusted
|
Effect
of change in accounting principle
|
As
originally reported
|
As
adjusted
|
Effect
of change in accounting principle
|
||||||||||||||||||
Interest
expense
|
$
|
931
|
$
|
1,591
|
$
|
660
|
$
|
3,048
|
$
|
4,976
|
$
|
1,928
|
||||||||||||
Tax
(benefit)/expense
|
$
|
(3,648
|
)
|
$
|
(3,912
|
)
|
$
|
(264
|
)
|
$
|
1,040
|
$
|
266
|
$
|
(774
|
)
|
||||||||
Net
Earnings
|
$
|
7,611
|
$
|
7,215
|
$
|
(396
|
)
|
$
|
24,234
|
$
|
23,080
|
$
|
(1,154
|
)
|
||||||||||
Earnings
per share-basic
|
$
|
0.23
|
$
|
0.21
|
$
|
(0.02
|
)
|
$
|
0.72
|
$
|
0.68
|
$
|
(0.04
|
)
|
||||||||||
Earnings
per share-fully diluted
|
$
|
0.21
|
$
|
0.21
|
$
|
—
|
$
|
0.65
|
$
|
0.65
|
$
|
—
|
Three Months
Ended
|
Nine Months
Ended
|
|||||||||||||||
($ in
thousands)
|
September 27,
2009
|
September 28,
2008
|
September 27,
2009
|
September 28,
2008
|
||||||||||||
PENSION
PLANS
|
||||||||||||||||
Service
cost
|
$ | 788 | $ | 887 | $ | 2,346 | $ | 2,661 | ||||||||
Interest
cost
|
3,396 | 3,230 | 10,268 | 9,825 | ||||||||||||
Expected
return on plan assets
(1)
|
(6,108 | ) | (6,592 | ) | (18,305 | ) | (19,785 | ) | ||||||||
Amortization
of prior service cost
|
126 | 135 | 378 | 404 | ||||||||||||
Amortization
of loss
|
1,198 | 420 | 3,640 | 1,279 | ||||||||||||
Net
pension income
|
$ | (600 | ) | $ | (1,920 | ) | $ | (1,673 | ) | $ | (5,616 | ) |
Three Months
Ended
|
Nine Months
Ended
|
|||||||||||||||
($ in
thousands)
|
September 27,
2009
|
September 28,
2008
|
September 27,
2009
|
September 28,
2008
|
||||||||||||
OTHER
POSTRETIREMENT BENEFIT PLAN
|
||||||||||||||||
Service
cost
|
$ | 3 | $ | 5 | $ | 8 | $ | 15 | ||||||||
Interest
cost
|
78 | 92 | 235 | 276 | ||||||||||||
Amortization
of gain
|
(25 | ) | — | (76 | ) | — | ||||||||||
Net
postretirement expense
|
$ | 56 | $ | 97 | $ | 167 | $ | 291 |
($
in thousands)
|
EMS
|
Components
and Sensors
|
Total
|
|||||||||
Third
Quarter of 2009
|
||||||||||||
Net
sales to external customers
|
$
|
70,737
|
$
|
55,828
|
$
|
126,565
|
||||||
Segment
operating earnings
|
$
|
2,214
|
$
|
4,069
|
$
|
6,283
|
||||||
Total
assets
|
$
|
122,937
|
$
|
283,743
|
$
|
406,680
|
||||||
Third
Quarter of 2008
|
||||||||||||
Net
sales to external customers
|
$
|
97,510
|
$
|
72,524
|
$
|
170,034
|
||||||
Segment
operating earnings
|
$
|
2,657
|
$
|
5,709
|
$
|
8,366
|
||||||
Total
assets
|
$
|
195,143
|
$
|
386,132
|
$
|
581,275
|
||||||
First
Nine Months of 2009
|
||||||||||||
Net
sales to external customers
|
$
|
217,366
|
$
|
147,728
|
$
|
365,094
|
||||||
Segment
operating earnings
|
$
|
6,559
|
$
|
2,749
|
$
|
9,308
|
||||||
Total
assets
|
$
|
122,937
|
$
|
283,743
|
$
|
406,680
|
||||||
First
Nine Months of 2008
|
||||||||||||
Net
sales to external customers
|
$
|
294,474
|
$
|
234,406
|
$
|
528,880
|
||||||
Segment
operating earnings
|
$
|
8,371
|
$
|
22,696
|
$
|
31,067
|
||||||
Total
assets
|
$
|
195,143
|
$
|
386,132
|
$
|
581,275
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
($
in thousands)
|
September
27 2009
|
September
28, 2008
|
September
27 2009
|
September
28, 2008
|
||||||||||||
Total
segment operating earnings
|
$ | 6,283 | $ | 8,366 | $ | 9,308 | $ | 31,067 | ||||||||
Restructuring
and related charges
|
— | (3,481 | ) | (2,243 | ) | (4,017 | ) | |||||||||
Goodwill
impairment
|
— | — | (33,153 | ) | — | |||||||||||
Interest
expense
|
(256 | ) | (1,591 | ) | (1,615 | ) | (4,976 | ) | ||||||||
Interest
income
|
17 | 316 | 118 | 1,174 | ||||||||||||
Other
(expense)/income
|
(390 | ) | (307 | ) | (736 | ) | 98 | |||||||||
Earnings/(loss)
before income taxes
|
$ | 5,654 | $ | 3,303 | $ | (28,321 | ) | $ | 23,346 |
($ in
millions)
September
2008 Plan
|
||||
Restructuring
liability at January 1, 2009
|
$
|
1.7
|
||
Restructuring
and restructuring-related charges, excluding asset impairments and
write-offs
|
—
|
|||
Cost
paid
|
(1.7
|
)
|
||
Restructuring
liability at September 27, 2009
|
$
|
—
|
($ in
millions)
March 2009 Plan
|
Planned
Costs
|
Actual
incurred through
June
28, 2009
|
||||||
Workforce
reduction
|
$ | 1.9 | $ | 2.1 | ||||
Asset
impairments
|
— | 0.1 | ||||||
Total
restructuring and impairment charge
|
$ | 1.9 | $ | 2.2 |
($ in
millions)
March
2009 Plan
|
||||
Restructuring
liability at January 1, 2009
|
$
|
—
|
||
Restructuring
and restructuring-related charges, excluding asset impairments and
write-offs
|
2.1
|
|||
Cost
paid
|
(2.1
|
)
|
||
Restructuring
liability at September 27, 2009
|
$
|
0.0
|
EMS
|
Components
& Sensors
|
Total
CTS
|
||||||||||
Balance
at January 1, 2008
|
$
|
24,144
|
$
|
513
|
$
|
24,657
|
||||||
Tusonix
acquisition
|
—
|
1,857
|
1,857
|
|||||||||
Orion
acquisition
|
6,636
|
—
|
6,636
|
|||||||||
Balance
at December 31, 2008
|
30,780
|
2,370
|
33,150
|
|||||||||
Purchase
accounting adjustment
|
—
|
3
|
3
|
|||||||||
Impairment
loss – first quarter 2009
|
(30,780
|
)
|
(2,373
|
)
|
(33,153
|
)
|
||||||
Balance
at September 27, 2009
|
$
|
—
|
$
|
—
|
$
|
—
|
(in
thousands $)
|
Total
Loss
|
|||||||||||||||||||||||
Description
|
Balance
at September 27, 2009
|
Quoted
prices in active markets for identical (Level 1)
|
Significant
Other Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
Three
Months ended
September
27, 2009
|
Nine
months ended
September
27, 2009
|
||||||||||||||||||
Goodwill
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
33,153
|
||||||||||||
Intangible
assets, other than
goodwill
|
34,577
|
—
|
—
|
34,577
|
—
|
—
|
||||||||||||||||||
Long-lived
assets
|
83,395
|
—
|
—
|
83,395
|
155
|
297
|
||||||||||||||||||
$
|
155
|
$
|
33,450
|
($
in thousands, except per share amounts)
|
Net
Earnings
(Numerator)
|
Shares
(in
thousands) (Denominator)
|
Per
Share Amount
|
|||||||||
Third
Quarter 2009
|
||||||||||||
Basic
EPS
|
$
|
4,481
|
33,873
|
$
|
0.13
|
|||||||
Effect
of dilutive securities:
|
||||||||||||
Convertible
debt
|
—
|
—
|
||||||||||
Equity-based
compensation plans
|
—
|
640
|
||||||||||
Diluted
EPS
|
$
|
4,481
|
34,513
|
$
|
0.13
|
|||||||
Third
Quarter 2008
|
||||||||||||
Basic
EPS
|
$
|
7,215
|
33,708
|
$
|
0.21
|
|||||||
Effect
of dilutive securities:
|
||||||||||||
Convertible
debt
|
665
|
4,000
|
||||||||||
Equity-based
compensation plans
|
—
|
491
|
||||||||||
Diluted
EPS
|
$
|
7,880
|
38,199
|
$
|
0.21
|
|||||||
First
Nine Months of 2009
|
||||||||||||
Basic
EPS
|
$
|
(38,193
|
)
|
33,799
|
$
|
(1.13
|
)
|
|||||
Effect
of dilutive securities:
|
||||||||||||
Convertible
debt
|
—
|
—
|
||||||||||
Equity-based
compensation plans
|
—
|
—
|
||||||||||
Diluted
EPS
|
$
|
(38,193
|
)
|
33,799
|
$
|
(1.13
|
)
|
|||||
First
Nine Months of 2008
|
||||||||||||
Basic
EPS
|
$
|
23,080
|
33,735
|
$
|
0.68
|
|||||||
Effect
of dilutive securities:
|
||||||||||||
Convertible
debt
|
1,876
|
4,000
|
||||||||||
Equity-based
compensation plans
|
—
|
471
|
||||||||||
Diluted
EPS
|
$
|
24,956
|
38,206
|
$
|
0.65
|
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
(Number
of Shares in Thousands)
|
September
27,
2009
|
September
28,
2008
|
September
27, 2009
|
September
28, 2008
|
|||||||||
Stock
options where the assumed proceeds exceeds the
average
market price
|
919
|
523
|
1,134
|
648
|
|||||||||
Restricted
stock units
|
—
|
—
|
582
|
—
|
|||||||||
Securities
related to the subordinated convertible debt
|
—
|
—
|
984
|
—
|
September
27, 2009
|
December
31, 2008
|
|||||||||||||||
($
in thousands)
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
||||||||||||
Amortized
intangible assets:
|
||||||||||||||||
Customer
lists/relationships
|
$
|
51,084
|
$
|
(16,916
|
)
|
$
|
51,084
|
$
|
(15,038
|
)
|
||||||
Patents
|
10,319
|
(10,319
|
)
|
10,319
|
(9,886
|
)
|
||||||||||
Other
intangibles
|
500
|
(91
|
)
|
500
|
(52
|
)
|
||||||||||
Total
|
61,903
|
(27,326
|
)
|
61,903
|
(24,976
|
)
|
||||||||||
Goodwill
|
—
|
—
|
33,150
|
—
|
||||||||||||
Total
other intangible assets and goodwill
|
$
|
61,903
|
$
|
(27,326
|
)
|
$
|
95,053
|
$
|
(24,976
|
)
|
·
|
Total
sales in the third quarter 2009 of $126.6 million were reported through
two segments, EMS and Components and Sensors. Sales decreased
by $43.5 million, or 25.6%, in the third quarter of 2009 from the third
quarter of 2008. Sales in the Components and Sensors segment
decreased by 23.0% versus the third quarter of 2008, while sales in the
EMS segment decreased by 27.5% compared to the third quarter of
2008. Sequentially, third quarter 2009 sales increased by $6.1
million, or 5.1% compared to the second quarter
2009.
|
·
|
Gross
margins, as a percent of sales, were 20.7% and 19.6% in the third quarters
of 2009 and 2008, respectively. Sales in the Components and
Sensors segment, which inherently generates a higher gross margin,
increased to 44.1% of total company sales in the third quarter of 2009
compared to 42.7% of total sales in the same period of
2008.
|
·
|
Selling,
general and administrative (“SG&A”) and research and development
(“R&D”) expenses were $19.9 million in the third quarter of 2009
compared to $25.3 million in the third quarter of 2008. This
significant reduction reflects our proactive management of costs,
including the benefits of previously announced restructuring actions and
aggressive cost-cutting measures
companywide.
|
·
|
Interest
and other expense in 2009 was $0.6 million versus $1.6 million in the same
quarter 2008.
|
·
|
The
income tax expense and rate for the third quarter of 2009 were $1.2
million and 20.8%, respectively.
|
·
|
Net
income was $4.5 million, or $0.13 per diluted share, in the third quarter
of 2009. This compares with net income of $7.2 million, or
$0.21 per diluted share, in the third quarter of 2008, which included a
net benefit of $0.05 per share from a tax credit offset by restructuring
and related charges.
|
·
|
Total
debt as a percentage of total capitalization, which is the sum of total
debt and shareholders’ equity, improved to 17.0% at the end of the third
quarter of 2009, compared with 22.4% at the end of
2008.
|
·
|
Working
capital decreased $19.4 million in the third quarter of 2009 versus
year-end 2008.
|
·
|
Net
cash provided by operating activities was $34.1 million during the first
nine months of 2009, compared to $20.1 million during the first nine
months of 2008.
|
·
|
Inventory
valuation, the allowance for doubtful accounts, and other accrued
liabilities
|
·
|
Long-lived
and intangible assets valuation, and depreciation/amortization
periods
|
·
|
Income
taxes
|
·
|
Retirement
plans
|
·
|
Equity-based
compensation
|
($
in thousands)
|
Components
& Sensors
|
EMS
|
Consolidated
Total
|
|||||||||
Third
quarter 2009
|
||||||||||||
Sales
|
$
|
55,828
|
$
|
70,737
|
$
|
126,565
|
||||||
Segment
operating earnings
|
$
|
4,069
|
$
|
2,214
|
$
|
6,283
|
||||||
%
of sales
|
7.3
|
%
|
3.1
|
%
|
5.0
|
%
|
||||||
Third
quarter 2008
|
||||||||||||
Sales
|
$
|
72,524
|
$
|
97,510
|
$
|
170,034
|
||||||
Segment
operating earnings
|
$
|
5,709
|
$
|
2,657
|
$
|
8,366
|
||||||
%
of sales
|
7.9
|
%
|
2.7
|
%
|
4.9
|
%
|
Three
months ended
|
||||||||||||
($
in thousands, except net earnings per share)
|
September
27, 2009
|
September
28, 2008
|
Increase
(Decrease)
|
|||||||||
Net
sales
|
$
|
126,565
|
$
|
170,034
|
$
|
(43,469
|
)
|
|||||
Gross
margin
|
$
|
26,185
|
$
|
33,350
|
$
|
(7,165
|
)
|
|||||
%
of net sales
|
20.7
|
%
|
19.6
|
%
|
1.1
|
%
|
||||||
Selling,
general and administrative expenses
|
$
|
16,494
|
$
|
20,754
|
$
|
(4,260
|
)
|
|||||
%
of net sales
|
13.0
|
%
|
12.2
|
%
|
0.8
|
%
|
||||||
Research
and development expenses
|
$
|
3,408
|
$
|
4,509
|
$
|
(1,101
|
)
|
|||||
%
of net sales
|
2.7
|
%
|
2.7
|
%
|
—
|
%
|
||||||
Restructuring
charge
|
$
|
—
|
$
|
3,202
|
$
|
(3,202
|
)
|
|||||
%
of net sales
|
—
|
%
|
1.9
|
%
|
(1.9
|
)%
|
||||||
Operating
earnings
|
$
|
6,283
|
$
|
4,885
|
$
|
1,398
|
||||||
%
of net sales
|
5.0
|
%
|
2.9
|
%
|
2.1
|
%
|
||||||
Income
tax expense / (benefit)
|
$
|
1,173
|
$
|
(3,912)
|
$
|
5,085
|
||||||
Net
earnings
|
$
|
4,481
|
$
|
7,215
|
$
|
(2,734
|
)
|
|||||
%
of net sales
|
3.5
|
%
|
4.2
|
%
|
(0.7
|
)%
|
||||||
Net
earnings per diluted share
|
$
|
0.13
|
$
|
0.21
|
$
|
(0.08
|
)
|
|||||
($
in thousands)
|
Components
& Sensors
|
EMS
|
Consolidated
Total
|
|||||||||
First
Nine Months 2009
|
||||||||||||
Sales
|
$
|
147,728
|
$
|
217,366
|
$
|
365,094
|
||||||
Segment
operating earnings
|
$
|
2,749
|
$
|
6,559
|
$
|
9,308
|
||||||
%
of sales
|
1.9
|
%
|
3.0
|
%
|
2.5
|
%
|
||||||
First
Nine Months 2008
|
||||||||||||
Sales
|
$
|
234,406
|
$
|
294,474
|
$
|
528,880
|
||||||
Segment
operating earnings
|
$
|
22,696
|
$
|
8,371
|
$
|
31,067
|
||||||
%
of sales
|
9.7
|
%
|
2.8
|
%
|
5.9
|
%
|
Nine
months ended
|
||||||||||||
($
in thousands, except net earnings per share)
|
September
27, 2009
|
September
28, 2008
|
Increase
(Decrease)
|
|||||||||
Net
sales
|
$
|
365,094
|
$
|
528,880
|
$
|
(163,786
|
)
|
|||||
Gross
margin
|
$
|
67,892
|
$
|
107,327
|
$
|
(39,435
|
)
|
|||||
%
of net sales
|
18.6
|
%
|
20.3
|
%
|
(1.7
|
)%
|
||||||
Selling,
general and administrative expenses
|
$
|
48,357
|
$
|
63,236
|
$
|
(14,879
|
)
|
|||||
%
of net sales
|
13.2
|
%
|
12.0
|
%
|
1.2
|
%
|
||||||
Research
and development expenses
|
$
|
10,227
|
$
|
13,576
|
$
|
(3,349
|
)
|
|||||
%
of net sales
|
2.8
|
%
|
2.6
|
%
|
0.2
|
%
|
||||||
Restructuring
charge
|
$
|
2,243
|
$
|
3,465
|
$
|
(1,222
|
)
|
|||||
%
of net sales
|
0.6
|
%
|
0.7
|
%
|
(0.1
|
)%
|
||||||
Goodwill
impairment
|
$
|
33,153
|
$
|
—
|
$
|
33,153
|
||||||
%
of net sales
|
9.1
|
%
|
—
|
%
|
9.1
|
%
|
||||||
Operating
(loss)/earnings
|
$
|
(26,088
|
)
|
$
|
27,050
|
$
|
(53,138
|
)
|
||||
%
of net sales
|
(7.1
|
)%
|
5.1
|
%
|
(12.2
|
)%
|
||||||
Income
tax expense
|
$
|
9,872
|
$
|
266
|
$
|
9,606
|
||||||
Net
(loss)/earnings
|
$
|
(38,193
|
)
|
$
|
23,080
|
$
|
(61,273
|
)
|
||||
%
of net sales
|
(10.5
|
)%
|
4.4
|
%
|
(14.9
|
)%
|
||||||
Net
(loss)/earnings per diluted share
|
$
|
(1.13
|
)
|
$
|
0.65
|
$
|
(1.78
|
)
|
||||
Year
Ended December 31, 2009
|
||||
Projected
full year GAAP (loss) per share
|
$
|
(1.02)
– (0.98)
|
||
Tax
affected adjustments to projected GAAP loss per share:
|
||||
Tax
expense associated with our cash repatriation
|
0.27
|
|||
Restructuring
charge
|
0.05
|
|||
Goodwill
impairment
|
0.97
|
|||
Adjusted
full year projected earnings per share
|
$
|
0.27
– 0.31
|
·
|
provide
a truer measure of CTS' operating
performance,
|
·
|
reflect
the results used by management in making decisions about the business,
and
|
·
|
help
review and project CTS' performance over
time.
|
Executive
Severance Policy.
|
||
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/
Donna L. Belusar
|
||
Richard
G. Cutter III
Vice
President, Secretary and General Counsel
|
Donna
L. Belusar
Senior
Vice President and Chief Financial Officer
|
||
Dated:
October 28, 2009
|
Dated:
October 28, 2009
|
A.
|
Eligibility.
CTS’
President and Chief Executive Officer is eligible for Severance Benefits
under the terms of this policy. In addition, he may recommend,
and CTS’ Board of Directors will designate from time-to-time through Board
action, those other officers and executives who are eligible for severance
under this policy at the Tier 1 and the Tier 2 severance
levels. (The President and CEO, and designated officers and
executives are collectively referred to herein as
“Executive(s).”) An eligible Executive will be paid Severance
Benefits unless his or her termination was due to one of the events listed
in paragraph A(1) below, provided also that the eligible Executive
executes and delivers the release required by this
policy.
|
|
1.
|
Ineligibility.
Terminations
not eligible for Severance Benefits
are:
|
·
|
Terminations
for Cause or resulting from Gross or Willful
Misconduct;
|
·
|
Resignations
(other than a resignation that qualifies as an “involuntary separation
from service” within the meaning of Section 409A of the Internal Revenue
Code of 1986 (the “Code”);
|
·
|
Layoffs/
furloughs, unless the layoff or furlough is subsequently converted to a
termination;
|
·
|
Deaths
or transfers to a disability
status;
|
·
|
Retirements,
except as provided in paragraph D(6)
below;
|
·
|
Inability
to return from a medical leave even though unable to meet Disability
status requirements unless the cause for the medical leave was covered by
Worker’s Compensation;
|
·
|
The
sale of a CTS facility, division, or operation when the Executive has been
offered employment in a comparable position by the successor organization
as a part of the sale. Executives who do not elect to accept
employment by the new employer and who desire to seek employment elsewhere
within CTS shall not be eligible for Severance Benefits if such employment
cannot be provided.
|
·
|
In
the event of a change in control, as defined by the agreement, if the
Executive is the beneficiary of a change-in-control Severance Agreement
and eligible for payment under that
agreement.
|
|
2.
|
Separation
from Service.
For purposes of this policy, Executive
will not be considered to have a termination of employment unless the
termination qualifies as a separation from service within the meaning of
Section 409A of the Internal Revenue Code of 1986, as amended from
time-to-time (“Separation from
Service”).
|
B.
|
Tier
2 Severance Benefits.
Tier 2 Executives shall be
eligible for the following Severance
Benefits:
|
|
1.
|
Severance
Pay.
Severance pay
equal to 9 months of his or her base salary in effect immediately prior to
termination. Such payment will be paid in a single lump sum
cash payment on the 60
th
day after the date of the Executive’s Separation from
Service.
|
|
2.
|
Health
and Dental Insurance.
For a period of 9
months following the date of the Executive’s termination, CTS will make
available to the Executive the medical and dental benefits (but not
long-term or short-term disability benefits) that the Executive had
elected and was eligible to receive as of the date of the Executive’s
termination. The cost of such coverage will be shared by CTS
and the Executive on the same basis as in effect prior to the Executive’s
termination, with the Executive required to make monthly premium
payments. If the coverage described in this paragraph is not or
cannot be paid or provided under any policy, plan, program or arrangement
by CTS or any subsidiary, then CTS will itself pay or provide for such
equivalent coverage to the Executive, and his or her dependents and
beneficiaries. All payments of benefits under the CTS’ medical
and dental programs or other reimbursements shall be made no later than
December 31 of the year following the year in which the Executive
incurs the related expenses. In no event will the benefits and
reimbursements provided by CTS in one taxable year affect the amount of
expenses or reimbursements that CTS is obligated to pay, or in-kind
benefits to be provided in any other taxable
year.
|
|
3.
|
Outplacement
Assistance.
Reimbursement of
an amount up to $15,000
for outplacement
services that are obtained following Executive’s termination, by a firm
selected by the Executive; provided, however, that in no event shall
expenses incurred after December 31 of the second year following the
year in which the Executive’s Separation from Service occurs be eligible
for reimbursement hereunder, and all reimbursements hereunder shall be
paid to Executive no later than December 31 of the third year
following the year in which the Executive’s Separation from Service
occurs.
|
C.
|
Tier
1 Severance Benefits.
Tier 1 Executives
shall be eligible for the following Severance
Benefits:
|
|
1.
|
Severance
Pay.
Severance Pay
equal to 12 months of his or her base salary in effect immediately prior
to termination, payable in accord with the provisions of paragraph B(1)
above.
|
|
2.
|
Health
and Dental Insurance.
The continuing
availability of medical and dental benefits for a period of 12 months
following the date of the Executive’s termination, otherwise on the same
terms of paragraph B(2) above.
|
|
3.
|
Outplacement
Assistance.
Reimbursement of
an amount up to $30,000
for outplacement
services that are obtained following Executive’s termination, otherwise on
the same terms of paragraph B(3)
above.
|
D.
|
President
and Chief Executive Officer Severance Benefits.
The President and
Chief Executive Officer shall be eligible for the following Severance
Benefits:
|
|
1.
|
Severance
Pay.
Two times the sum
of (a) Executive’s base salary in effect at the time of termination
of employment and (b) an amount equal to Executive’s target annual
incentive compensation for the calendar year ending prior to the date of
termination of employment under this subparagraph. Such
payment will be paid in a single lump sum cash payment on the 60
th
day after the date of the Executive’s Separation from
Service.
|
|
2.
|
Health
and Dental Insurance.
The continuing
availability of medical and dental benefits for a period of twenty four
(24) months following the date of the Executive’s termination, otherwise
on the same terms of paragraph B(2)
above.
|
|
3.
|
Outstanding
Time-Based Equity Awards.
To the extent
permitted by CTS’ equity plans, the vesting of any outstanding unvested
time-based restricted stock units or other equity awards granted to
Executive under CTS’ equity plans will be accelerated and such equity
awards will be fully vested as of the date of the Executive’s termination
of employment and payable in accordance with their existing
terms.
|
|
4.
|
Outstanding
Performance-Based Equity Awards.
For any outstanding
unvested performance-based restricted stock units, outstanding unvested
performance shares, or any other outstanding unvested equity incentive
available under any then-current performance-based equity program, to the
extent permitted by CTS’ equity plans, such awards will become
non-forfeitable as of the date of the Executive’s termination of
employment. At the end of the applicable performance period,
CTS shall calculate the degree to which the awards were earned based on
actual performance, and then settle any earned awards on a pro-rata basis,
in accordance with the portion of the actual performance period that
elapsed prior to the Executive’s termination, in accordance with the
existing terms of such awards.
|
|
5.
|
Outplacement
Assistance.
Reimbursement of
an amount up to $30,000
for outplacement
services that are obtained following Executive’s termination, otherwise on
the same terms of paragraph B(3)
above.
|
|
6.
|
Notice
of Retirement.
In the event the President and Chief
Executive Officer gives the Board of Directors at least twelve (12) months
formal notice of his intent to terminate his employment voluntarily due to
his retirement and maintains continuous employment through such twelve
month period, upon retirement, the Executive will be entitled to the
Severance Benefits described in paragraphs (2), (3), and (4) of this
Section.
|
E.
|
No
Duplication of Benefits
.
In general,
it is the intent of the parties that Severance Benefits under this policy
shall not duplicate substantially similar payments under any other
agreement, policy, plan or arrangement. Executive shall not be
eligible for benefits under CTS' Severance Pay-Exempt Salaried Employees
Policy or any successor policy.
|
F.
|
Section
409A.
|
|
1.
|
The
provisions of this paragraph F shall apply notwithstanding any provision
to the contrary in this policy. In the event of any
inconsistency between a provision in this paragraph F and another
provision in this policy, the provision in this paragraph F shall be the
controlling provision.
|
|
2.
|
The
intent of the parties is that payments and benefits under this policy
comply with or be exempt from Section 409A and, accordingly, to the
maximum extent permitted, this policy shall be interpreted to be in
compliance therewith. To the extent that there is a material
risk that any payments under this policy may result in the imposition of
an additional tax to the Executive under Section 409A, CTS will reasonably
cooperate with the Executive to amend this policy such that payments
hereunder comply with Section 409A without materially changing the
economic value of this policy to either party. Notwithstanding
the foregoing, CTS does not guarantee to the Executive any specific tax
consequences relating to entitlement to or receipt of payments or benefits
pursuant to the policy. The Executive shall be solely
responsible for payment of any taxes or penalties in connection with this
policy.
|
|
3.
|
Each
payment and benefit to be made or provided to the Executive pursuant to
this policy will be considered to be a separate payment and not one of a
series of payments for purposes of Section 409A. Coverages
provided during one taxable year will not affect the degree to which
coverages will be provided in any other taxable
year.
|
|
4.
|
If
the Executive is a “specified employee” (within the meaning of Section
409A and determined pursuant to the identification methodology selected by
CTS from time to time) on the Executive’s Separation from Service and if
any portion of the payments or benefits to be received by the Executive
upon Separation from Service would be considered deferred compensation
(within the meaning of Section 409A) the payment or provision of which is
required to be delayed pursuant to the six-month delay rule set forth in
Section 409A in order to avoid taxes or penalties under Section 409A, then
CTS will not pay or provide the amount or benefit on the otherwise
scheduled date, but such payments or benefits will instead be accumulated
and paid or made available on the earlier of (a) the first day of the
seventh month following the Executive’s Separation from Service and (b)
the Executive’s death. Any remaining payments and benefits due
under this policy shall be paid or provided in accordance with the normal
payment dates specified for them
herein.
|
|
5.
|
Any
reimbursement provided under this policy will be made no later than
December 31 of the calendar year following the calendar year in which the
related expense was incurred; provided, however, that in no event will the
reimbursements in one taxable year affect the amount of reimbursements in
any other taxable year, nor shall the right to reimbursement be subject to
liquidation or exchange for another benefit.
|
G.
|
Release.
In
order to receive the Severance Benefits contemplated by this policy, the
Executive must execute and return to CTS a valid and binding
release. The release shall contain such terms and conditions as
are satisfactory to CTS, including, but not limited to, the release of any
and all claims that the Executive may then have, as of the signing of such
release, against the corporation, its employees, officers, and
directors. The Executive generally shall have up to twenty one
(21) days following the date the release is given to the Executive to sign
and return the release to CTS. Further, the Executive shall
have seven (7) calendar days after delivery of the release to CTS to
revoke the release by sending written notice to that effect to the
corporation’s Secretary, Vice President, and General
Counsel.
|
H.
|
Competitive
Activity and Non-solicitation.
During a period ending
one year following the Executive’s Separation from Service, if the
Executive has received severance benefits under this policy, the Executive
will not, without the prior written consent of CTS, which consent will not
be unreasonably withheld, engage in the management of any business
enterprise if such enterprise engages in substantial and direct
competition with CTS. In addition, for such one year period,
the Executive shall not, either alone or in association with others (i)
solicit, or facilitate any organization with which the Executive is
associated in soliciting, any CTS employee or any of its subsidiaries to
leave the employ of the company or any of its subsidiaries; (ii) solicit
for employment, hire or engage as an independent contractor, or facilitate
any organization with which the Executive is associated in soliciting for
employment, hire or engagement as an independent contractor, any person
who was employed by CTS or any of its subsidiaries at any time during the
term of the Executive's employment with the Company or any of its
subsidiaries;
provided
,
however
that
this clause shall not apply to any individual whose employment with CTS or
any of its subsidiaries has been terminated for a minimum of one year
preceding any such solicitation.
|
I.
|
Amendment
and Termination.
CTS’ Board of Directors has the right
in its sole and absolute discretion to amend this policy or terminate it
prospectively, provided that this policy may not be amended by the Board
in any manner which is materially adverse to any named executive officers
without the Executive’s written consent. Notwithstanding the
foregoing, CTS’ Board may amend this policy at any time to reflect changes
required by the Internal Revenue Code, or other federal or state
laws. Notwithstanding any provision of this policy
to the contrary, this policy will remain in effect until, and will not be
revoked or earlier terminated prior to three (3) years from its effective
date.
|
J.
|
Excess
Parachute Payments
- All payments and benefits under this policy are
subject to the Excess Parachute Payment limitation described in Addendum A
of this policy.
|
/s/
James L. Cummins
|
|
|||
James
L. Cummins
|
|
|||
Senior
Vice President Administration
|
|
/s/
Vinod M. Khilnani
|
/s/
Patricia K.
Collawn
|
|||
Vinod
M. Khilnani
|
Patricia
K. Collawn
|
|||
Chairman,
President and Chief Executive Officer
|
Chairperson
CTS Corporation
Compensation Committee
|
|
“Cause”
means that the Executive:
|
|
(i) has
been convicted of a criminal violation involving fraud, embezzlement or
theft in connection with his duties or in the course of his employment
with CTS or any Subsidiary;
|
|
(ii) has
intentionally and wrongfully damaged property of CTS or any
Subsidiary;
|
|
(iii) has
intentionally and wrongfully disclosed secret processes, trade secrets or
confidential information of CTS or any Subsidiary;
or
|
|
(iv) has
intentionally and wrongfully engaged in any Competitive
Activity.
|
|
“Change
in Control” has the meaning ascribed to such term in CTS’ prototype
Severance Agreement.
|
|
“Code”
means the Internal Revenue Code of 1986, as
amended.
|
|
“Disability”
means that the Executive has become permanently disabled within the
meaning of, and has begun to actually receive disability benefits pursuant
to, CTS’ long-term disability plan in effect for, or applicable to, the
Executive. A conclusive determination of the Executive's
permanent disability shall occur when the Executive is placed on Permanent
Inactive Disability Status under the CTS Corporation Pension Plan or a
similar plan in which Executive is then a
participant.
|
|
“Gross
or Willful Misconduct” means willful neglect by the Executive of the
duties of the Executive or the Executive's gross dishonesty which
materially prejudices the interests of
CTS.
|
|
“Section
409A” means Section 409A of the Code. References in this policy
to Section 409A are intended to include any proposed, temporary, or final
regulations, or any other guidance, promulgated with respect to Section
409A by the U.S. Department of the Treasury or the Internal Revenue
Service.
|
|
“Subsidiary”
means an entity in which CTS directly or indirectly beneficially owns 50%
or more of the outstanding securities entitled to vote generally in the
election of directors.
|
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 28, 2009
|
By:
|
/s/ Vinod M. Khilnani | |
Vinod M. Khilnani | |||
Chairman, 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 28, 2009
|
By:
|
/s/ Donna L. Belusar | |
Donna L. Belusar | |||
Senior Vice President and Chief Financial 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 28, 2009
|
By:
|
/s/ Vinod M. Khilnani | |
Vinod M. Khilnani | |||
Chairman, 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 28, 2009
|
By:
|
/s/ Donna L. Belusar | |
Donna L. Belusar | |||
Senior Vice President and Chief Financial Officer | |||