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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended March 31, 2019
 
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from _______________ to _______________

Commission File Number: 1-4639
 
CTS CORPORATION
(Exact name of registrant as specified in its charter)



 
Indiana
  
35-0225010
(State or other jurisdiction of
incorporation or organization)
  
(IRS Employer
Identification Number)
 
 
 
4925 Indiana Avenue, Lisle, IL
  
60532
(Address of principal executive offices)
  
(Zip Code)
 Registrant’s telephone number, including area code: 630-577-8800
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x No    ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer x
  
Accelerated filer  o
  
Non-accelerated filer  o
  
Smaller reporting company  o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.     ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨ No   x 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of April 22, 2019: 32,855,508.
 
 


Table of Contents

CTS CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2
 

Table of Contents

PART I - FINANCIAL INFORMATION
Item 1.   Financial Statements
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands of dollars, except per share amounts) 
 
Three Months Ended
 
March 31,

March 31,

2019

2018
Net sales
$
117,625


$
113,530

Cost of goods sold
77,010


75,097

Gross Margin
40,615


38,433

Selling, general and administrative expenses
17,522


17,372

Research and development expenses
6,791


6,507

Restructuring charges
2,084


1,195

Operating earnings
14,218


13,359

Other income (expense):





Interest expense
(466
)

(541
)
Interest income
432


482

Other income, net
96


2,004

Total other income (expense), net
62


1,945

Earnings before income taxes
14,280


15,304

Income tax expense
2,861


3,756

Net earnings
$
11,419


$
11,548

Earnings per share:





Basic
$
0.35


$
0.35

Diluted
$
0.34


$
0.34







Basic weighted – average common shares outstanding:
32,807


32,975

Effect of dilutive securities
463


540

Diluted weighted – average common shares outstanding
33,270


33,515





Cash dividends declared per share
$
0.04


$
0.04

See notes to unaudited condensed consolidated financial statements.

3
 

Table of Contents

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ‑ UNAUDITED
(In thousands of dollars) 
 
Three Months Ended
 
March 31,

March 31,
 
2019
 
2018
Net earnings
$
11,419

 
$
11,548

Other comprehensive income:
 

 
 

Changes in fair market value of derivatives, net of tax
78

 
807

Changes in unrealized pension cost, net of tax
1,022

 
1,107

Cumulative translation adjustment, net of tax
91

 
243

Other comprehensive income
$
1,191

 
$
2,157

Comprehensive income
$
12,610

 
$
13,705

 See notes to unaudited condensed consolidated financial statements.

4
 

Table of Contents

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
 
(Unaudited)


 
March 31,

December 31,

2019

2018
ASSETS
 


 

Current Assets
 


 

Cash and cash equivalents
$
100,708


$
100,933

Accounts receivable, net
82,326


79,518

Inventories, net
42,521


43,486

Other current assets
16,670


15,422

Total current assets
242,225


239,359

Property, plant and equipment, net
99,052


99,401

Operating lease assets, net
24,438



Other Assets
 


 

Prepaid pension asset
55,216


54,100

Goodwill
71,057


71,057

Other intangible assets, net
58,494


60,180

Deferred income taxes
20,901


22,201

Other
2,625


2,043

Total other assets
208,293


209,581

Total Assets
$
574,008


$
548,341

LIABILITIES AND SHAREHOLDERS’ EQUITY
 


 

Current Liabilities
 


 

Accounts payable
$
52,884


$
51,975

Operating lease obligations
2,076



Accrued payroll and benefits
9,301


14,671

Accrued liabilities
33,243


37,347

Total current liabilities
97,504


103,993

Long-term debt
50,000


50,000

Long-term operating lease obligations
25,155



Long-term pension and other post-retirement obligations
6,437


6,510

Deferred income taxes
4,050


3,990

Other long-term obligations
3,969


5,919

Total Liabilities
187,115


170,412

Commitments and Contingencies (Note 10)





Shareholders’ Equity
 


 

Common stock
307,664


306,697

Additional contributed capital
40,371


42,820

Retained earnings
488,951


478,847

Accumulated other comprehensive loss
(96,548
)

(97,739
)
Total shareholders’ equity before treasury stock
740,438


730,625

Treasury stock
(353,545
)

(352,696
)
Total shareholders’ equity
386,893


377,929

Total Liabilities and Shareholders’ Equity
$
574,008


$
548,341

See notes to unaudited condensed consolidated financial statements.

5
 

Table of Contents

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ‑ UNAUDITED
(In thousands of dollars)
 
 
Three Months Ended
 
March 31,

March 31,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net earnings 
$
11,419

 
$
11,548

Adjustments to reconcile net earnings to net cash provided by operating activities:
 

 
 

Depreciation and amortization
5,924


5,483

Pension and other post-retirement plan expense
251

 
107

Stock-based compensation
1,214

 
923

Restructuring impairment charges
854



Deferred income taxes
1,063

 
1,289

(Gain) loss on sales of fixed assets
(40
)
 
1

Loss (gain) on foreign currency hedges, net of cash
53

 
(56
)
Changes in assets and liabilities:
 

 
 

Accounts receivable
(2,682
)
 
1,435

Inventories
1,053

 
(788
)
Other assets
(1,687
)
 
147

Accounts payable
1,275

 
2,855

Accrued payroll and benefits
(5,250
)
 
(3,596
)
Accrued expenses
(4,014
)
 
(69
)
Income taxes payable
(535
)
 
1,179

Other liabilities
742

 
(224
)
Pension and other post-retirement plans
(47
)
 
(80
)
Net cash provided by operating activities
9,593

 
20,154

CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Capital expenditures
(5,325
)
 
(6,912
)
Proceeds from sale of assets
51

 

Net cash used in investing activities
(5,274
)
 
(6,912
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Payments of long-term debt
(159,100
)
 
(334,100
)
Proceeds from borrowings of long-term debt
159,100

 
331,800

Purchase of treasury stock
(849
)
 

Dividends paid
(1,310
)
 
(1,318
)
Taxes paid on behalf of equity award participants
(2,637
)

(1,423
)
Net cash used in financing activities
(4,796
)
 
(5,041
)
Effect of exchange rate changes on cash and cash equivalents
252

 
(390
)
Net (decrease) increase in cash and cash equivalents
(225
)
 
7,811

Cash and cash equivalents at beginning of period
100,933

 
113,572

Cash and cash equivalents at end of period
$
100,708

 
$
121,383

Supplemental cash flow information:
 

 
 

Cash paid for interest
$
281

 
$
486

Cash paid for income taxes, net
$
2,122

 
$
809

Non-cash financing and investing activities:
 
 
 
Capital expenditures incurred but not paid
$
3,734


$
5,173

See notes to unaudited condensed consolidated financial statements.

6
 

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CTS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders' Equity - Unaudited
(in thousands)


The following summarizes the changes in total equity for the three months ended March 31, 2018:
 
Common
Stock
Additional
Contributed
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Earnings/(Loss)
Treasury
Stock
Total
Balances at December 31, 2017
$
304,777

$
41,084

$
420,160

$
(78,960
)
$
(343,256
)
$
343,805

Net earnings


11,548



11,548

Changes in fair market value of hedges, net of tax



807


807

Changes in unrealized pension cost, net of tax



1,107


1,107

Cumulative translation adjustment, net of tax



243


243

Cash dividends of $0.04 per share


(1,320
)


(1,320
)
Issued shares on vesting of restricted stock units
945

(2,368
)



(1,423
)
Stock compensation

965




965

Balances at March 31, 2018
$
305,722

$
39,681

$
430,388

$
(76,803
)
$
(343,256
)
$
355,732


The following summarizes the changes in total equity for the three months ended March 31, 2019:
 
Common
Stock
Additional
Contributed
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Earnings/(Loss)
Treasury
Stock
Total
Balances at December 31, 2018
$
306,697

$
42,820

$
478,847

$
(97,739
)
$
(352,696
)
$
377,929

Net earnings


11,419



11,419

Changes in fair market value of derivatives, net of tax



78


78

Changes in unrealized pension cost, net of tax



1,022


1,022

Cumulative translation adjustment, net of tax



91


91

Cash dividends of $0.04 per share


(1,315
)


(1,315
)
Stock repurchases of 31,500 shares




(849
)
(849
)
Issued shares on vesting of restricted stock units
967

(3,603
)



(2,636
)
Stock compensation

1,154




1,154

Balances at March 31, 2019
$
307,664

$
40,371

$
488,951

$
(96,548
)
$
(353,545
)
$
386,893

See notes to unaudited condensed consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(in thousands except for share and per share data)
March 31, 2019
NOTE 1—Basis of Presentation
 
The accompanying condensed consolidated financial statements have been prepared by CTS Corporation (“CTS” "we", "our", "us" or the "Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The unaudited condensed consolidated financial statements should be read in conjunction with the financial statements, notes thereto, and other information included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2018.
 
The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring items) necessary for a fair statement, in all material respects, of the financial position and results of operations for the periods presented.  The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period.  Actual results could differ materially from those estimates.  The results of operations for the interim periods are not necessarily indicative of the results for the entire year.

Changes in Accounting Principles

Beginning in January 2019, CTS adopted the provisions of Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)" under the optional transition method, which requires a cumulative effect adjustment to the opening balance of retained earnings. The lease liability is based on the present value of minimum lease payments discounted using our secured incremental borrowing rate at the date of adoption. Existing deferred rent liabilities, resulting from our historical practice of using the straight line method for recognizing lease expense, were reclassified upon adoption to reduce the measurement of the lease assets. We elected the package of practical expedients permitted under the transition guidance, which among other things, allows us to carry forward the historical accounting relating to lease identification and classification for existing leases at adoption. Our leases are classified as operating leases and expense is recorded in a manner similar to historical accounting guidance. We have also elected the practical expedient to not separate lease and non-lease components for the majority of our leases and the election to keep leases with an initial term of 12 months or less off of the balance sheet. Upon adoption we recorded a lease liability of $24,792 and a right of use asset of $22,066. No adjustment to the opening balance of retained earnings was required.

Subsequent Events

We have evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through the date the consolidated financial statements are issued.
 
NOTE 2 – Revenue Recognition

The core principle of Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step process to achieve that core principle:

Identify the contract(s) with a customer
Identify the performance obligations
Determine the transaction price
Allocate the transaction price
Recognize revenue when the performance obligations are met

We recognize revenue when the performance obligations specified in our contracts have been satisfied, after considering the impact of variable consideration and other factors that may affect the transaction price. Our contracts normally contain a single performance obligation that is fulfilled on the date of delivery based on shipping terms stipulated in the contract. We usually expect payment within 30 to 90 days from the shipping date, depending on our terms with the customer. None of our contracts as of March 31, 2019, contained a significant financing component. Differences between the amount of revenue recognized and the amount invoiced, collected from, or paid to our customers are recognized as contract assets or liabilities. Contract assets will be reviewed for impairment when events or circumstances indicate that they may not be recoverable.


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

Contract Assets and Liabilities

Contract assets and liabilities included in our Condensed Consolidated Balance Sheets are as follows:
 
As of
 
March 31,
 
December 31,
 
2019
 
2018
Contract Assets
 
 
 
Prepaid rebates included in Other current assets
$
65

 
$
65

Prepaid rebates included in Other assets
1,167

 
999

Total Contract Assets
$
1,232

 
$
1,064

 
 
 
 
Contract Liabilities
 
 
 
Customer discounts and price concessions included in Accrued liabilities
$
(785
)
 
$
(1,656
)
Customer rights of return included in Accrued liabilities
(348
)
 
(325
)
Total Contract Liabilities
$
(1,133
)
 
$
(1,981
)

 
During the three months ended March 31, 2019, we recognized a decrease of revenues of $69 for amounts that were included in contract liabilities at the beginning of the period.

The decrease in contract liabilities as of March 31, 2019 is primarily due to the settlement of customer discounts and price concessions recognized at the beginning of the period.

Disaggregated Revenue

The following table presents revenues disaggregated by the major markets we serve:
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
Aero & Defense
$
7,523

 
$
5,103

Industrial
18,156

 
20,356

Medical
9,666

 
9,241

Telecom & IT
3,438

 
4,525

Transportation
78,842

 
74,305

Total
$
117,625

 
$
113,530



NOTE 3 – Accounts Receivable 

The components of accounts receivable are as follows:
 
As of
 
March 31,
 
December 31,
 
2019
 
2018
Accounts receivable, gross
$
82,687

 
$
79,902

Less: Allowance for doubtful accounts
(361
)
 
(384
)
Accounts receivable, net
$
82,326

 
$
79,518




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NOTE 4 – Inventories 
Inventories consist of the following:
 
As of
 
March 31,

December 31,
 
2019
 
2018
Finished goods
$
7,955

 
$
10,995

Work-in-process
15,075

 
12,129

Raw materials
24,760

 
25,746

Less: Inventory reserves
(5,269
)
 
(5,384
)
Inventories, net
$
42,521

 
$
43,486



NOTE 5 – Property, Plant and Equipment
 
Property, plant and equipment is comprised of the following:
 
As of
 
March 31,
 
December 31,
 
2019
 
2018
Land
$
1,136

 
$
1,136

Buildings and improvements
69,317

 
70,522

Machinery and equipment
234,373

 
231,619

Less: Accumulated depreciation
(205,774
)
 
(203,876
)
Property, plant and equipment, net
$
99,052

 
$
99,401

 
 
 
 
Depreciation expense for the three months ended March 31, 2019
 
 
$
4,234

Depreciation expense for the three months ended March 31, 2018


$
3,763

 

NOTE 6 – Retirement Plans
 
Pension Plans
 
Net pension expense for our domestic and foreign plans is as follows:
 
Three Months Ended

March 31,

March 31,
 
2019
 
2018
Net pension expense
$
250

 
$
79


















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

Three Months Ended
 
Three Months Ended
 
March 31,

March 31,

March 31,

March 31,
 
2019
 
2018
 
2019
 
2018
Service cost
$

 
$

 
$
9

 
$
11

Interest cost
1,931

 
1,781

 
7

 
11

Expected return on plan assets (1)
(3,047
)
 
(3,225
)
 
(4
)
 
(7
)
Amortization of loss
1,312

 
1,466

 
42

 
42

Total expense, net
$
196

 
$
22

 
$
54

 
$
57

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


Other Post-retirement Benefit Plan
 
Net post-retirement expense for our other post-retirement plan includes the following components:
 
Three Months Ended
 
March 31,

March 31,
 
2019
 
2018
Service cost
$

 
$
1

Interest cost
42

 
39

Amortization of gain
(41
)
 
(12
)
Total expense, net
$
1

 
$
28



NOTE 7 – Other Intangible Assets
 
Intangible assets consist of the following components:
 
As of
 
March 31, 2019
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Amount
Customer lists/relationships
$
64,323

 
$
(37,936
)
 
$
26,387

Technology and other intangibles
44,460

 
(14,553
)
 
29,907

In process research and development
2,200

 

 
2,200

Other intangible assets, net
$
110,983

 
$
(52,489
)
 
$
58,494

Amortization expense for the three months ended March 31, 2019


 
$
1,690

 


 
 
As of
 
December 31, 2018
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Amount
Customer lists/relationships
$
64,323

 
$
(37,088
)
 
$
27,235

Technology and other intangibles
44,460

 
(13,715
)
 
30,745

In process research and development
2,200




2,200

Other intangible assets, net
$
110,983

 
$
(50,803
)
 
$
60,180

Amortization expense for the three months ended March 31, 2018
 

 
$
1,720

 
 





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Remaining amortization expense for other intangible assets as of March 31, 2019 is as follows: 

Amortization
expense
2019
$
5,066

2020
6,624

2021
6,467

2022
6,230

2023
4,224

Thereafter
29,883

Total amortization expense
$
58,494

 

NOTE 8 – Costs Associated with Exit and Restructuring Activities
 
Costs associated with exit and restructuring activities are recorded in the Condensed Consolidated Statement of Earnings as a separate component of Operating earnings. 
 
Total restructuring charges is as follows:
 
Three Months Ended
 
March 31, 2019
 
March 31, 2018
Restructuring charges
$
2,084

 
$
1,195

 
 
 
 
 
 
In June 2016, we announced plans to restructure operations by phasing out production at our Elkhart facility and transitioning it into a research and development center supporting our global operations ("June 2016 Plan"). Additional organizational changes were also implemented in various other locations. During the third quarter of 2017, we revised the June 2016 Plan. The amendment added an additional $1,100 in planned costs related to the relocation of our corporate headquarters in Lisle, IL and our plant in Bolingbrook, IL, both of which have now been consolidated into a single facility. The total restructuring liability related to severance and other one-time benefit arrangements under the June 2016 Plan was $537 at March 31, 2019, and $668 at December 31, 2018. Additional costs related to production line movements, equipment charges, and other costs will be expensed as incurred.

The following table displays the planned restructuring charges associated with the June 2016 Plan as well as a summary of the actual costs incurred through March 31, 2019:

 

Actual costs
 
Planned

incurred through
June 2016 Plan
Costs

March 31, 2019
Workforce reduction
$
3,075


$
3,087

Building and equipment relocation
9,025


9,165

Other charges
1,300


1,826

Total restructuring charges
$
13,400


$
14,078



In April 2014, we announced plans to restructure our operations and consolidate our Canadian operations into other existing facilities as part of our overall plan to simplify our business model and rationalize our global footprint (“April 2014 Plan”).  These restructuring actions were completed in 2015. The remaining restructuring liability related to the April 2014 Plan was $683 at March 31, 2019, and $918 at December 31, 2018.









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Table of Contents

The following table displays the restructuring liability activity for all plans for the three months ended March 31, 2019
Restructuring liability at January 1, 2019
$
1,586

Restructuring charges
2,084

Cost paid
(1,306
)
Other activity (1)
(1,144
)
Restructuring liability at March 31, 2019
$
1,220

(1) Other activity includes the effects of currency translation, non-cash asset write-downs and other charges that do not flow through restructuring expense.

NOTE 9 – Accrued Liabilities
 
The components of accrued liabilities are as follows: 
 
As of
 
March 31,
 
December 31,
 
2019
 
2018
Accrued product related costs
$
3,535

 
$
4,377

Accrued income taxes
6,407

 
6,914

Accrued property and other taxes
1,843

 
1,976

Accrued professional fees
3,207

 
3,350

Contract liabilities
1,133

 
1,981

Dividends payable
1,315

 
1,310

Remediation reserves
10,912

 
11,274

Other accrued liabilities
4,891

 
6,165

Total accrued liabilities
$
33,243

 
$
37,347



NOTE 10 – Contingencies

Certain processes in the manufacture of our current and past products create by-products classified as hazardous waste. We have been notified by the U.S. Environmental Protection Agency, state environmental agencies, and in some cases, groups of potentially responsible parties, that we may be potentially liable for environmental contamination at several sites currently and formerly owned or operated by us. Some sites, such as Asheville, North Carolina and Mountain View, California, are designated National Priorities List sites under the U.S. Environmental Protection Agency’s Superfund program. We reserve for probable remediation activities and for claims and proceedings against us with respect to other environmental matters. We record reserves on an undiscounted basis. In the opinion of management, based upon presently available information relating to such matters, adequate provision for probable and estimable costs have been recorded. We do not have any known environmental obligations where a loss is probable or reasonably possible of occurring for which we do not have a reserve, nor do we have any amounts for which we have not reserved because the amount of the loss cannot be reasonably estimated. Due to the inherent nature of environmental obligations, we cannot provide assurance that our ultimate environmental liability will not materially exceed the amount of its current reserve. Our reserve and disclosures will be adjusted accordingly if additional information becomes available in the future.
A roll forward of remediation reserves included in accrued liabilities on the balance sheet is comprised of the following:
 
As of

March 31, 2019

December 31, 2018
Balance at beginning of period
$
11,274


$
17,067

Remediation expense
234


1,182

Net remediation payments
(594
)

(6,967
)
Other Activity (1)
$
(2
)

$
(8
)
Balance at end of the period
$
10,912


$
11,274

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

Unrelated to the environmental claims described above, certain other claims are pending against us with respect to matters arising in the ordinary conduct of our business. Although the ultimate outcome of any potential litigation resulting from these claims cannot be predicted with certainty, and some may be disposed of unfavorably to us, we believe that adequate provision for anticipated costs have been established based upon all presently available information. Except as noted herein, we do not believe we have

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any pending loss contingencies that are probable or reasonably possible of having a material impact on our consolidated financial position, results of operations, or cash flows.

NOTE 11 - Debt
 
Long-term debt is comprised of the following:
 
As of
 
March 31,

December 31,
 
2019
 
2018
Total credit facility
$
300,000

 
$
300,000

Balance outstanding
$
50,000

 
$
50,000

Standby letters of credit
$
1,940

 
$
1,940

Amount available
$
248,060

 
$
248,060

Weighted-average interest rate
3.60
%
 
3.10
%
Commitment fee percentage per annum
0.20
%
 
0.20
%

 
On February 12, 2019, we entered into an amended and restated five-year Credit Agreement with a group of banks (the "Credit Agreement"). The Credit Agreement provides for a revolving credit facility of $300,000, which may be increased by $150,000 at the request of the Company, subject to the administrative agent's approval. This new unsecured credit facility replaces the prior $300,000 unsecured credit facility, which would have expired August 10, 2020. Borrowings of $50,000 under the prior credit agreement were refinanced into the Credit Agreement. The prior agreement was terminated as of February 12, 2019.
 
The Revolving Credit Facility includes a swing line sublimit of $15,000 and a letter of credit sublimit of $10,000.  Borrowings under the Revolving Credit Facility bear interest, at our option, at the base rate plus the applicable margin for base rate loans or London Interbank Offered Rate ("LIBOR") plus the applicable margin for LIBOR loans.  We also pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility.  The commitment fee ranges from 0.20% to 0.30% based on the our total leverage ratio. 
 
The Revolving Credit Facility requires, among other things, that we comply with a maximum total leverage ratio and a minimum fixed charge coverage ratio.  Failure to comply with these covenants could reduce the borrowing availability under the Revolving Credit Facility.  We were in compliance with all debt covenants at March 31, 2019.  The Revolving Credit Facility requires that we deliver quarterly financial statements, annual financial statements, auditor certifications, and compliance certificates within a specified number of days after the end of a quarter and year. Additionally, the Revolving Credit Facility contains restrictions limiting our ability to: dispose of assets; incur certain additional debt; repay other debt or amend subordinated debt instruments; create liens on assets; make investments, loans or advances; make acquisitions or engage in mergers or consolidations; engage in certain transactions with our subsidiaries and affiliates; and make stock repurchases and dividend payments.  Interest rates on the Revolving Credit Facility fluctuate based upon the LIBOR and the Company’s quarterly total leverage ratio.  
 
We have debt issuance costs related to our long-term debt that are being amortized using the straight-line method over the life of the debt. These costs are included in interest expense in our Condensed Consolidated Statement of Earnings. Amortization expense was approximately $36 and $46 for the three months ended March 31, 2019 and 2018, respectively. 

Note 12 - Derivative Financial Instruments

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

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

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


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We assess hedge effectiveness qualitatively by verifying that the critical terms of the hedging instrument and the forecasted transaction continue to match, and that there have been no adverse developments that have increased the risk that the counterparty will default. No recognition of ineffectiveness was recorded in our Condensed Consolidated Statement of Earnings for the three months ended March 31, 2019.

Foreign Currency Hedges

We use forward contracts to mitigate currency risk related to a portion of our forecasted foreign currency revenues and costs. The currency forward contracts are designed as cash flow hedges and are recorded in the Condensed Consolidated Balance Sheets at fair value.
We continue to monitor the Company’s overall currency exposure and may elect to add cash flow hedges in the future. At March 31, 2019, we had a net unrealized gain of $746 in accumulated other comprehensive (loss) income, of which $737 is expected to be reclassified to income within the next 12 months. At March 31, 2018 we had a net unrealized gain of $37 in accumulated other comprehensive (loss) income. The notional amount of foreign currency forward contracts outstanding was $12,357 at March 31, 2019.

Interest Rate Swaps
We use interest rate swaps to convert our revolving credit facility’s variable rate of interest into a fixed rate. As of March 31, 2019, we have agreements to fix interest rates on $50,000 of long-term debt through August 2020. The difference to be paid or received under the terms of the swap agreements will be recognized as an adjustment to interest expense when settled.
These swaps are treated as cash flow hedges and consequently, the changes in fair value are recorded in other comprehensive (loss) income. The estimated net amount of the existing gains that are reported in accumulated other comprehensive (loss) income that are expected to be reclassified into earnings within the next twelve months is approximately $494

The location and fair values of derivative instruments designated as hedging instruments in the Condensed Consolidated Balance Sheets as of March 31, 2019, are shown in the following table:
 
As of

March 31,
 
December 31,
 
2019
 
2018
Interest rate swaps reported in Other current assets
$
494

 
$
576

Interest rate swaps reported in Other assets
$
176

 
$
369

Foreign currency hedges reported in Other current assets
$
715

 
$
393



The Company has elected to net its foreign currency derivative assets and liabilities in the balance sheet in accordance with ASC 210-20 (Balance Sheet, Offsetting). On a gross basis, there were foreign currency derivative assets of $715 and foreign currency derivative liabilities of $0.


15
 

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The effect of derivative instruments on the Condensed Consolidated Statements of Earnings is as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2019

2018
Foreign Exchange Contracts:
 
 
 
Amounts reclassified from AOCI to earnings:
 
 
 
Net Sales
$

 
$
(58
)
Cost of goods sold
42

 
108

Selling, general and administrative expense
17

 
(1
)
Total amounts reclassified from AOCI to earnings
59

 
49

Loss recognized in other expense for hedge ineffectiveness

 
(1
)
Total derivative gain on foreign exchange contracts recognized in earnings
$
59

 
$
48

 
 
 
 
Interest Rate Swaps:
 
 
 
Benefit recorded in Interest expense
$
156

 
$
65

  Total gain
$
215

 
$
113



NOTE 13 – Accumulated Other Comprehensive (Loss) Income

Shareholders’ equity includes certain items classified as accumulated other comprehensive (loss) income (“AOCI”) in the Condensed Consolidated Balance Sheets, including:
 
Unrealized gains (losses) on hedges relate to interest rate swaps to convert our revolving credit facility's variable rate of interest into a fixed rate and foreign currency forward contracts used to hedge our exposure to changes in exchange rates affecting certain revenues and costs denominated in foreign currencies. These hedges are designated as cash flow hedges, and we have deferred income statement recognition of gains and losses until the hedged transactions occur, at which time amounts are reclassified into earnings.  Further information related to our derivative financial instruments is included in Note 12 - Derivative Financial Instruments and Note 16 – Fair Value Measurements.
 
Unrealized gains (losses) on pension obligations are deferred from income statement recognition until the gains or losses are realized.  Amounts reclassified to income from AOCI are included in net periodic pension income / (expense).  Further information related to our pension obligations is included in Note 6 – Retirement Plans.
 
Cumulative translation adjustments relate to our non-U.S. subsidiary companies that have designated a functional currency other than the U.S. dollar. We are required to translate the subsidiary functional currency financial statements to dollars using a combination of historical, period-end, and average foreign exchange rates. This combination of rates creates the foreign currency translation adjustment component of other comprehensive income.  

Changes in exchange rates between the functional currency and the currency in which a transaction is denominated are foreign exchange transaction gains or losses. Transaction gains for the three months ended March 31, 2019 and 2018 were $474 and $1,996, respectively, which have been included in other income (expense) in the Condensed Consolidated Statement of Earnings.














16
 

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The components of accumulated other comprehensive (loss) income for the three months ended March 31, 2019, are as follows:

 
 
 
 
 
Gain (Loss)
 
 
 
As of
 
Gain (Loss)
 
Reclassified
 
As of
 
December 31,
 
Recognized
 
from AOCI
 
March 31,

2018
 
in OCI
 
to Income
 
2019
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
1,316

 
$
315

 
$
(215
)
 
$
1,416

Income tax (expense) benefit
(298
)
 
(71
)
 
49

 
(320
)
Net
1,018

 
244

 
(166
)
 
1,096



 

 

 

Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(132,454
)
 

 
1,319

 
(131,135
)
Income tax benefit (expense)
35,893

 

 
(297
)
 
35,596

Net
(96,561
)
 

 
1,022

 
(95,539
)



 

 


 


Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,291
)
 
88

 

 
(2,203
)
Income tax benefit
95

 
3

 

 
98

Net
(2,196
)
 
91

 

 
(2,105
)
Total accumulated other comprehensive (loss) income
$
(97,739
)
 
$
335

 
$
856

 
$
(96,548
)

The components of accumulated other comprehensive (loss) income for the three months ended March 31, 2018, are as follows:
 
 
 
 
 
Gain (Loss)
 
 
 
As of
 
Gain (Loss)
 
Reclassified
 
As of
 
December 31,
 
Recognized
 
from AOCI
 
March 31,

2017
 
in OCI
 
to Income
 
2018
Changes in fair market value of hedges:

 

 
 
 
 
Gross
$
289

 
$
1,157

 
$
(114
)
 
$
1,332

Income tax (expense) benefit
(105
)
 
(261
)
 
25

 
(341
)
Net
184

 
896

 
(89
)
 
991



 

 

 

Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(130,096
)
 

 
1,424

 
(128,672
)
Income tax benefit (expense)
52,837

 

 
(317
)
 
52,520

Net
(77,259
)
 

 
1,107

 
(76,152
)
 
 
 
 
 
 
 
 
Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(1,985
)
 
238

 

 
(1,747
)
Income tax benefit
100

 
5

 

 
105

Net
(1,885
)
 
243

 

 
(1,642
)
Total accumulated other comprehensive (loss) income
$
(78,960
)
 
$
1,139

 
$
1,018

 
$
(76,803
)
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 



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NOTE 14 – Shareholders’ Equity

Share count and par value data related to shareholders’ equity are as follows:
 
 
As of
 
March 31,

December 31,
 
2019
 
2018
Preferred Stock
 
 
 
Par value per share
No par value

 
No par value

Shares authorized
25,000,000

 
25,000,000

Shares outstanding

 

Common Stock
 
 
 
Par value per share
No par value

 
No par value

Shares authorized
75,000,000

 
75,000,000

Shares issued
56,923,130

 
56,786,849

Shares outstanding
32,855,508

 
32,750,727

Treasury stock
 
 
 
Shares held
24,067,622

 
24,036,122


 
On February 7, 2019, the Board of Directors authorized a new stock repurchase program with a maximum dollar limit of $25,000 in stock repurchases, which replaced the previous program. During the three months ended March 31, 2019, 31,500 shares of common stock were repurchased for approximately $849, of which $567 was repurchased under the previous program and $282 was repurchased under the most recent board-authorized share repurchase plan. Approximately $24,718 is available for future purchases.

A roll-forward of common shares outstanding is as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2019
 
2018
Balance at the beginning of the year
32,750,727

 
32,938,466

Repurchases
(31,500
)
 

Restricted share issuances
136,281

 
79,304

Balance at the end of the period
32,855,508

 
33,017,770

 
Certain potentially dilutive restricted stock units are excluded from diluted earning per share because they are anti-dilutive. The number of awards that were anti-dilutive at March 31, 2019 and March 31, 2018 were 91,098 and 78,317, respectively.

NOTE 15 - Stock-Based Compensation
 
At March 31, 2019, we had five active stock-based compensation plans: the Nonemployee Directors’ Stock Retirement Plan (“Directors’ Plan”), the 2004 Omnibus Long-Term Incentive Plan (“2004 Plan”), the 2009 Omnibus Equity and Performance Incentive Plan (“2009 Plan”), the 2014 Performance & Incentive Plan (“2014 Plan”), and the 2018 Equity and Incentive Compensation Plan ("2018 Plan").  Future grants can only be made under the 2018 Plan.










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

March 31,

March 31,
 
2019
 
2018
Service-Based RSUs
$
606

 
$
455

Performance-Based RSUs
548

 
510

Cash-settled RSUs
60


(42
)
Total
$
1,214

 
$
923

Income tax benefit
274

 
209

Net
$
940

 
$
714



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

 
 
Compensation

Weighted-
 
Expense at

Average

March 31, 2019

Period
Service-Based RSUs
$
3,058


1.59
Performance-Based RSUs
4,496


2.11
Total
$
7,554


1.90

 
We recognize expense on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.
 
The following table summarizes the status of these plans as of March 31, 2019:
 
2018 Plan
 
2014 Plan
 
2009 Plan
 
2004 Plan
 
Directors' Plan
Awards originally available
2,500,000


1,500,000


3,400,000


6,500,000


N/A

Performance-based options outstanding


275,000







Maximum potential RSU and cash settled awards outstanding
270,818


439,353


92,600


35,952


5,522

Maximum potential awards outstanding
270,818

 
714,353

 
92,600

 
35,952

 
5,522

RSUs and cash settled awards vested and released









Awards available for grant
2,229,182

 

 

 

 


Stock Options

We have no stock options exercisable or outstanding as of March 31, 2019, other than the performance-based stock options described below.
 
Performance-Based Stock Options

During 2015 and 2016, the Compensation Committee of the Board of Directors of the Company (the “Committee”) granted a total of 350,000 performance-based stock option awards (“Performance-Based Option Awards”) for certain employees under the 2014 Plan, of which 275,000 remain outstanding after considering forfeitures.  The Performance-Based Option Awards have an exercise price of $18.37, a term of five years, and generally will become exercisable (provided the optionee remains employed by the Company or an affiliate) upon our attainment of at least $600,000 in revenues during any of our trailing four quarterly periods (as determined by the Committee) during the term.  We have not recognized any expense on these Performance-Based Option Awards

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for the three-month periods ended March 31, 2019 and 2018, since the revenue target was not deemed likely to be attained based on our current forecast.
Service-Based Restricted Stock Units
 
The following table summarizes the service-based RSU activity as of and for the three months ended March 31, 2019
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at January 1, 2019
355,590

 
$
17.91

Granted
72,591

 
28.79

Vested and released
(65,623
)
 
19.92

Forfeited
(1,061
)
 
22.13

Outstanding at March 31, 2019
361,497

 
$
19.71

Releasable at March 31, 2019
204,640

 
$
13.60

 
Performance and Market-Based Restricted Stock Units

The following table summarizes the performance and market-based RSU activity as of and for the three months ended March 31, 2019:
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at January 1, 2019
267,792

 
$
21.44

Granted
82,103

 
30.98

Attained by performance
60,779

 
13.54

Released
(160,889
)
 
14.34

Forfeited
(10,287
)
 
14.20

Outstanding at March 31, 2019
239,498

 
$
27.86

Releasable at March 31, 2019

 
$



The following table summarizes each grant of performance awards outstanding at March 31, 2019.
Description
Grant Date
Vesting Year
Vesting Dependency
Target Units Outstanding
Maximum Number of Units to be Granted
2017 - 2019 Performance RSUs
February 9, 2017
2019
35% RTSR, 35% sales growth, 30% operating cash flow
71,796

143,592

2017 - 2019 Performance RSUs
February 9, 2017
2018 - 2020
Operating Income
13,556

13,556

2018 - 2020 Performance RSUs
February 8, 2018
2020
35% RTSR, 35% sales growth, 30% operating cash flow
40,223

80,446

2018 - 2020 Performance RSUs
February 16, 2018
2020
35% RTSR, 35% sales growth, 30% operating cash flow
31,820

63,640

2019 - 2021 Performance RSUs
February 7, 2019
2021
35% RTSR, 35% sales growth, 30% operating cash flow
75,158

150,316

2019 Supplemental Performance RSUs
February 7, 2019
2021
Succession Planning Targets
6,945

13,890











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Cash-Settled Restricted Stock Units

Cash-Settled RSUs entitle the holder to receive the cash equivalent of one share of common stock for each unit when the unit vests. These RSUs are issued to key employees residing in foreign locations as direct compensation. Generally, these RSUs vest over a three-year period. Cash-Settled RSUs are classified as liabilities and are remeasured at each reporting date until settled. At March 31, 2019 and December 31, 2018 we had 17,308 and 17,248 cash-settled RSUs outstanding, respectively. At March 31, 2019 and December 31, 2018, liabilities of $158 and $300, respectively were included in Accrued liabilities on our Condensed Consolidated Balance Sheets.


NOTE 16 — Fair Value Measurements
 
We use interest rate swaps to convert our Revolving Credit Facility’s variable rate of interest into a fixed rate and foreign currency forward contracts to hedge the effect of foreign currency changes on certain revenues and costs denominated in foreign currencies. These derivative financial instruments are measured at fair value on a recurring basis. 

The table below summarizes our financial assets that are measured at fair value on a recurring basis at March 31, 2019:
 
 
 
Quoted
 
 
 
 
 
 

 
Prices
 
 
 
 
 
 
Asset
 
in Active
 
Significant
 
 
 
 
Carrying
 
Markets for
 
Other
 
Significant
 
 
Value at
 
Identical
 
Observable
 
Unobservable
 
 
March 31,
 
Instruments
 
Inputs
 
Inputs
 

2019
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
Interest rate swaps
$
670

 
$

 
$
670

 
$

 
Foreign currency hedges
$
715

 
$

 
$
715

 
$

 
 
The table below summarizes the financial assets (liabilities) that are measured at fair value on a recurring basis as of December 31, 2018:
 
 
 
Quoted
 
 
 
 
 

 
Prices
 
 
 
 
 
Asset
 
in Active
 
Significant
 
 
 
Carrying
 
Markets for
 
Other
 
Significant
 
Value at
 
Identical
 
Observable
 
Unobservable
 
December 31,
 
Instruments
 
Inputs
 
Inputs

2018
 
(Level 1)
 
(Level 2)
 
(Level 3)
Interest rate swaps
$
945

 
$

 
$
945

 
$

Foreign currency hedges
$
393


$


$
393


$

 
The fair value of our interest rate swaps and foreign currency hedges were measured using standard valuation models using market-based observable inputs over the contractual terms, including forward yield curves, among others. There is a readily determinable market for these derivative instruments, but that market is not active and therefore they are classified within Level 2 of the fair value hierarchy.







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The table below provides a reconciliation of the recurring financial assets (liabilities) for our derivative instruments:
 
 
 
Foreign
 
Interest
 
Currency
 
Rate Swaps
 
Hedges
Balance at January 1, 2018
$
971

 
$
(742
)
Cash settlements paid (received)
421


(402
)
Total gains (losses) for the period:
 
 
 
Included in earnings
(421
)
 
484

Included in other comprehensive income
(26
)
 
1,053

Balance at December 31, 2018
$
945

 
$
393

Cash settlements paid (received)
(156
)

(112
)
Total gains (losses) for the period:
 
 
 
Included in earnings
156

 
59

Included in other comprehensive income
(275
)
 
375

Balance at March 31, 2019
$
670

 
$
715

 

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

NOTE 17 — Income Taxes
The effective tax rates for the three-month periods ended March 31, 2019 and 2018 are as follows:
 
Three Months Ended
 
March 31,

March 31,
 
2019

2018
Effective tax rate
20.0
%
 
24.5
%

 
Our effective income tax rate was 20.0% and 24.5% in the first quarters of 2019 and 2018, respectively. The decrease in the effective tax rate for the three months ended March 31, 2019, compared with the same period in 2018, was primarily attributed to tax benefits recorded upon vesting of restricted stock units. The first quarter 2019 tax rate was lower than the U.S. statutory federal tax rate primarily due to the aforementioned tax benefits recorded upon vesting of restricted stock units. The tax rate in the first quarter of 2018 was higher than the U.S. statutory federal tax rate primarily due to higher foreign tax rates applicable on foreign earnings.

We have elected to recognize the tax on the global intangible low-taxed income (GILTI) as a period expense in the period the tax is incurred, and we have included a provisional estimate for GILTI in our estimated annual effective tax rate.

Our continuing practice is to recognize interest and/or penalties related to income tax matters as income tax expense. For the three months ended March 31, 2019, and 2018, we recorded interest and penalties of $0 and $14, respectively.

NOTE 18 — Leases

We lease certain land, buildings and equipment under non-cancelable operating leases used in our operations. Operating lease assets represent our right to use an underlying asset for the lease term. Operating lease liabilities represent the present value of lease payments over the lease term, discounted using an estimate of our secured incremental borrowing rate because none of our leases contain a rate implicit in the lease arrangement.

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The operating lease assets and liabilities are adjusted to include the impact of any lease incentives and non-lease components. We have elected not to separate lease and non-lease components, which include taxes and common area maintenance in some of our leases. Variable lease payments that depend on an index or a rate are included in lease payments using the prevailing index or rate in effect at lease commencement.

Options to extend or terminate a lease are included in the lease term when it is reasonably likely that we will exercise that option. We have elected not to record leases with an initial term of 12 months or less on the balance sheet and instead recognize those lease payments on a straight-line basis over the lease term.

We determine if an arrangement is a lease or contains a lease at its inception, which normally does not require significant estimates or judgments. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants and we currently have no material sublease agreements.

Total lease expense for the three months ended March 31, 2019 is as follows:

Three Months Ended

March 31, 2019
Operating lease cost
$
994

Short-term lease cost
73

Total lease cost
$
1,067



Remaining maturity of our existing lease liabilities as of March 31, 2019 is as follows:
 
Operating Leases (1)
2019
$
2,949

2020
4,106

2021
4,021

2022
3,819

2023
3,573

Thereafter
20,084

Total
$
38,552

Less: interest
(11,321
)
Present value of lease liabilities
$
27,231

(1) Operating lease payments include $4,615 of payments related to options to extend lease terms that are reasonably expected to be exercised.

Balance Sheet Classification:
 
Operating lease obligations
$
2,076

Long-term operating lease obligations
25,155

Total Lease Liabilities
$
27,231

 
 
Weighted-average remaining lease terms (years)
10.0


Weighted-average discount rate
6.91
%


Supplemental cash flow information related to leases:

Cash paid for amounts included in the measurement of lease liabilities
$
927

Leased assets obtained in exchange for new operating lease liabilities
$
2,961




23
 

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24
 

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NOTE 19 — Recent Accounting Pronouncements

ASU 2018-14 "Compensation - Retirement Benefits - Defined Benefit Plans - General"

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General." This ASU modifies the disclosure requirements for defined benefit and other postretirement plans. This ASU eliminates certain disclosures associated with accumulated other comprehensive income, plan assets, related parties, and the effects of interest rate basis point changes on assumed health care costs; while other disclosures have been added to address significant gains and losses related to changes in benefit obligations. This ASU also clarifies disclosure requirements for projected benefit and accumulated benefit obligations. The amendments in this ASU are effective for fiscal years ending after December 15, 2020 and for interim periods therein with early adoption permitted. Adoption on a retrospective basis for all periods presented is required. This ASU will impact our financial statement disclosures but will not have an impact on our consolidated financial position, results of operations, or cash flows.
ASU 2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement"
In August 2018, the FASB issued ASU No. 2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement". This ASU modified the disclosures related to recurring and nonrecurring fair value measurements. Disclosures related to the transfer of assets between Level 1 and Level 2 hierarchies have been eliminated and various additional disclosures related to Level 3 fair value measurements have been added, modified or removed. This ASU is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted upon issuance of the standard for disclosures modified or removed with a delay of adoption of the additional disclosures until their effective date. This ASU is not expected to have an impact on our financial statements.
ASU 2016-16 "Income Taxes (Topic 740) Intra-Entity Transfers of Assets Other Than Inventory"
In October 2016, the FASB issued ASU No. 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory". This ASU is meant to improve the accounting for the income tax effect of intra-entity transfers of assets other than inventory. Currently, U.S. GAAP prohibits the recognition of current and deferred income taxes for intra-entity asset transfers until the asset is sold to a third party. This ASU will now require companies to recognize the income tax effect of an intra-entity asset transfer (other than inventory) when the transaction occurs. This ASU is effective for public companies, for fiscal years beginning after December 15, 2019 and interim periods within those annual reporting periods. Early adoption is permitted and is to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. This guidance is not expected to have a material impact on our consolidated financial statements.





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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
(in thousands, except percentages and per share amounts)
 
The following discussion should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and notes included under Item 1, as well as our Consolidated Financial Statements and notes and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2018.
Overview
CTS Corporation (“CTS”, “we”, “our” or “us”) is a leading designer and manufacturer of products that Sense, Connect and Move. We manufacture sensors, actuators, and electronic components in North America, Europe, and Asia, and provide engineered products to customers in the aerospace/defense, industrial, medical, telecommunications/IT, and transportation markets.
Results of Operations: First Quarter 2019 versus First Quarter 2018
 
The following table highlights changes in significant components of the Unaudited Condensed Consolidated Statements of Earnings for the quarters ended March 31, 2019, and March 31, 2018:
 
 
Three Months Ended
 
 
 
Percent of
 
Percent of
 
March 31,
 
March 31,
 
Percent
 
Net Sales – 
 
Net Sales – 
 
2019
 
2018
 
Change
 
2019
 
2018
Net sales
$
117,625

 
$
113,530

 
3.6

 
100.0
 
100.0
Cost of goods sold
77,010

 
75,097

 
2.5

 
65.5
 
66.1
Gross margin
40,615

 
38,433

 
5.7

 
34.5
 
33.9
Selling, general and administrative expenses
17,522

 
17,372

 
0.9

 
14.9

15.3
Research and development expenses
6,791

 
6,507

 
4.4

 
5.8

5.7
Restructuring charges
2,084

 
1,195

 
74.4

 
1.8

1.1
Total operating expenses
26,397

 
25,074

 
5.3

 
22.4
 
22.1
Operating earnings
14,218

 
13,359

 
6.4

 
12.1

11.8
Total other income (expense), net
62

 
1,945

 
(96.8
)
 
0.1

1.7
Earnings before income taxes
14,280

 
15,304

 
(6.7
)
 
12.1
 
13.5
Income tax expense
2,861

 
3,756

 
(23.8
)
 
2.4

3.3
Net earnings
$
11,419

 
$
11,548

 
(1.1
)
 
9.7
 
10.2
Earnings per share:
 
 
 
 
 
 
 
 
 
Diluted net earnings per share
$
0.34

 
$
0.34

 
 
 
 
 
 
 
Sales were $117,625 in the first quarter of 2019, an increase of $4,095 or 3.6% from the first quarter of 2018. Sales to transportation markets increased $4,537 or 6.1%.  Sales to other markets declined $442 or 1.1%. Changes in foreign exchange rates decreased sales by $1,771 year-over-year due to the U.S. Dollar appreciating compared to the Chinese Renminbi and Euro and relating mostly to sales of products to the transportation end market.
Gross margin as a percent of sales was 34.5% in the first quarter of 2019 compared to 33.9% in the first quarter of 2018. The improvement was driven mainly by savings related to cost improvements and the manufacturing transition from Elkhart, Indiana, which were partially offset by material cost and wage increases.
Selling, general and administrative ("SG&A") expenses were $17,522 or 14.9% of sales in the first quarter of 2019 versus $17,372 or 15.3% of sales in the first quarter of 2018.
Research and development expenses were $6,791 or 5.8% of sales in the first quarter of 2019 compared to $6,507 or 5.7% of sales in the comparable quarter of 2018. Research and development expenses are focused on expanded applications of existing products and new product development, as well as current product and process enhancements.

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Restructuring charges were $2,084 or 1.8% of sales in the first quarter of 2019. The charges were mainly for building and equipment relocation, severance, and travel costs related to the restructuring of certain operations as part of the 2016 Restructuring Plan. Restructuring charges were $1,195 or 1.1% of sales in the first quarter of 2018.
Operating earnings were $14,218 or 12.1% of sales in the first quarter of 2019 compared to operating earnings of $13,359 or 11.8% of sales in the first quarter of 2018.
Other income and expense items are summarized in the following table:
 
Three Months Ended
 
March 31,

March 31,
 
2019
 
2018
Interest expense
$
(466
)
 
$
(541
)
Interest income
432

 
482

Other income, net
96

 
2,004

Total other income (expense), net
$
62

 
$
1,945

Interest expense decreased mainly as a result of the reduction in debt year-over-year. Interest income decreased due to lower cash balances. Other income in the first quarter of 2019 was principally driven by foreign currency translation gains, mainly due to the depreciation of the U.S. Dollar compared to the Chinese Renminbi during the quarter, which was partially offset by pension expense.
 
 
Three Months Ended
 
March 31,
 
March 31,
 
2019
 
2018
Effective tax rate
20.0
%
 
24.5
%
 
Our effective income tax rate was 20.0% and 24.5% in the first quarters of 2019 and 2018, respectively. The decrease in the effective tax rate for the three months ended March 31, 2019, compared with the same period in 2018, was primarily attributed to tax benefits recorded upon vesting of restricted stock units.

Liquidity and Capital Resources

Cash and cash equivalents were $100,708 at March 31, 2019, and $100,933 at December 31, 2018, of which $97,924 and $96,762, respectively, were held outside the United States. The decrease in cash and cash equivalents of $225 was primarily driven by capital expenditures of $5,325, taxes paid on behalf of equity award participants of $2,637, dividends paid of $1,310 and treasury stock purchases of $849, which were partially offset by cash generated from operating activities of $9,593. Total long-term debt was $50,000 as of March 31, 2019 and $50,000 as of December 31, 2018. Total debt as a percentage of total capitalization, defined as long-term debt as a percentage of total debt and shareholders' equity, was 11.4% at March 31, 2019, compared to 11.7% at December 31, 2018.

Working capital increased by $9,355 during the three months ended March 31, 2019, primarily due to the decrease of accrued payroll and benefits and accrued liabilities.
Cash Flows from Operating Activities
Net cash provided by operating activities was $9,593 during the first three months of 2019. Components of net cash provided by operating activities included net earnings of $11,419, depreciation and amortization expense of $5,924, other net non-cash items of $3,395, and a net cash outflow from changes in assets and liabilities of $11,145.
Cash Flows from Investing Activities
Net cash used in investing activities for the first three months of 2019 was $5,274, driven almost entirely by capital expenditures.



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Cash Flows from Financing Activities
Net cash used in financing activities for the first three months of 2019 was $4,796. These cash outflows were the result of taxes paid on behalf of equity award participants in the amount of $2,637, dividend payments of $1,310, and treasury stock purchases of $849.
Capital Resources
Long‑term debt is comprised of the following: 
 
As of
 
March 31,
 
December 31,
 
2019
 
2018
Total credit facility
$
300,000

 
$
300,000

Balance outstanding
$
50,000

 
$
50,000

Standby letters of credit
$
1,940

 
$
1,940

Amount available
$
248,060

 
$
248,060

Weighted-average interest rate
3.60
%
 
3.10
%
Commitment fee percentage per annum
0.20
%
 
0.20
%
 
On February 12, 2019, we entered into an amended and restated five-year Credit Agreement with a group of banks (the "Credit Agreement"). The Credit Agreement provides for a revolving credit facility of $300,000, which may be increased by $150,000 at the request of the Company, subject to the administrative agent's approval. This new unsecured credit facility replaces the prior $300,000 unsecured credit facility, which would have expired August 10, 2020. Borrowings of $50,000 under the prior credit agreement were refinanced into the Credit Agreement. The prior agreement was terminated as of February 12, 2019.

The Revolving Credit Facility requires, among other things, that CTS comply with a maximum total leverage ratio and a minimum fixed charge coverage ratio.  Failure to comply with these covenants could reduce the borrowing availability under the Revolving Credit Facility.  We were in compliance with all debt covenants at March 31, 2019

In the third quarter of 2016, we entered into three forward-starting interest rate swap agreements to fix interest rates on $50,000 of long-term debt for the periods August 2017 to August 2020. The difference to be paid or received under the terms of the swap agreements will be recognized as an adjustment to interest expense when settled.

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

Critical Accounting Policies and Estimates
Management prepared the consolidated financial statements of CTS under accounting principles generally accepted in the United States of America. These principles require the use of estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions we used are reasonable, based upon the information available.
Our estimates and assumptions affect the reported amounts in our financial statements. The following accounting policies comprise those that we believe are the most critical in understanding and evaluating our reported financial results.







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Revenue Recognition
We recognize revenue upon the transfer of promised goods to our customers in an amount that reflects the consideration to which we expect to be entitled by applying the following five-step process specified in Accounting Standard Codification ("ASC") Topic 606:

Identify the contract(s) with a customer
Identify the performance obligations
Determine the transaction price
Allocate the transaction price
Recognize revenue when the performance obligations are met

Our contracts normally contain a single performance obligation that is fulfilled on the date of delivery based on shipping terms stipulated in the contract. We recognize revenue when (or as) the performance obligation has been satisfied after considering the impact of variable consideration and other factors that may affect the transaction price. Differences between the amount of revenue recognized and the amount invoiced, collected from, or paid to our customers are recognized as contract assets or liabilities. Contract assets will be reviewed for impairment when events or circumstances indicate that they may not be recoverable.
Product Warranties
Provisions for estimated warranty expenses primarily related to our automotive products are made at the time products are sold. These estimates are established using a quoted industry rate. We adjust our warranty reserve for any known or anticipated warranty claims as new information becomes available. We evaluate our warranty obligations at least quarterly and adjust our accruals if it is probable that future costs will be different than our current reserve. Over the last three years, product warranty reserves have ranged from 0.5% to 2.4% of total sales. We believe our reserve level is appropriate considering all facts and circumstances surrounding any outstanding quality claims and our historical experience selling our products to our customers.
Accounts Receivable
We have standardized credit granting and review policies and procedures for all customer accounts, including:
Credit reviews of all new customer accounts,
Ongoing credit evaluations of current customers,
Credit limits and payment terms based on available credit information,
Adjustments to credit limits based upon payment history and the customer's current credit worthiness,
An active collection effort by regional credit functions, reporting directly to the corporate financial officers, and;
Limited credit insurance on the majority of our international receivables.
We reserve for estimated credit losses based on historical experience and specific customer collection issues. Over the last three years, accounts receivable reserves have been approximately 0.3% to 0.7% of total accounts receivable. We believe our reserve level is appropriate considering the quality of the portfolio. While credit losses have historically been within expectations and the reserves established, we cannot guarantee that our credit loss experience will continue to be consistent with historical experience.
Inventories
We value our inventories at the lower of the actual cost to purchase or manufacture using the first-in, first-out ("FIFO") method, or net realizable value. We review inventory quantities on hand and record a provision for excess and obsolete inventory based on forecasts of product demand and production requirements.
Over the last three years, our reserves for excess and obsolete inventories have ranged from 11.0% to 19.5% of gross inventory. We believe our reserve level is appropriate considering the quantities and quality of the inventories.
Retirement Plans
Actuarial assumptions are used in determining pension income and expense and our pension benefit obligation. We utilize actuaries from consulting companies in each applicable country to develop our discount rates that match high-quality bonds currently available and expected to be available during the period to maturity of the pension benefit in order to provide the necessary future cash flows to pay the accumulated benefits when due. After considering the recommendations of our actuaries, we have assumed a discount rate, expected rate of return on plan assets and a rate of compensation increase in determining our annual pension income and expense and the projected benefit obligation. During the fourth quarter of each year, we review our actuarial assumptions

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in light of current economic factors to determine if the assumptions need to be adjusted. Changes in the actuarial assumptions could have a material effect on our results of operations.
Valuation of Goodwill
Goodwill of a reporting unit is tested for impairment annually, or more frequently if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Examples of such events or circumstances include, but are not limited to, the following:
Significant decline in market capitalization relative to net book value,
Significant adverse change in legal factors or in the business climate,
Adverse action or assessment by a regulator,
Unanticipated competition,
More-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed of,
Testing for recoverability of a significant asset group within a reporting unit, and
Allocation of a portion of goodwill to a business to be disposed.
If we believe that one or more of the above indicators of impairment have occurred, we perform an impairment test. We have the option to perform a qualitative assessment (commonly referred to as "step zero" test) to determine whether further quantitative analysis for impairment of goodwill and indefinite-lived intangible assets is necessary. The qualitative assessment includes a review of macroeconomic conditions, industry and market considerations, internal cost factors, and our own overall financial and share price performance, among other factors. If, after assessing the totality of events or circumstances we determine that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, we do not need to perform a quantitative analysis.
If a quantitative assessment is required, we estimate the fair value of each reporting unit using a combination of discounted cash flow analysis and market-based valuation methodologies. Determining fair value using a quantitative approach requires significant judgment, including judgments about projected revenues, operating expenses, working capital investment, capital expenditures, and cash flows over a multi-year period. The discount rate applied to our forecasts of future cash flows is based on our estimated weighted average cost of capital. In assessing the reasonableness of our determined fair values, we evaluate our results against our market capitalization. Changes in these estimates and assumptions could materially affect the determination of fair value and impact the goodwill impairment assessment.
Our latest assessment was performed using a qualitative approach as of October 1, 2018, and we determined that it was likely that the fair values of our reporting units were more than their carrying amounts, and therefore no impairment charges were recorded. We will monitor future results and will perform a test if indicators trigger an impairment review.
Impairment of Other Intangible and Long-Lived Assets
We evaluate the impairment of identifiable intangibles and other long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered that may trigger an impairment review consist of, but are not limited to, the following:
Significant decline in market capitalization relative to net book value,
Significant underperformance relative to expected historical or projected future operating results,
Significant changes in the manner of use of the acquired assets or the strategy for the overall business,
Significant negative industry or economic trends.
If we believe that one or more indicators of impairment have occurred, we perform a recoverability test by comparing the carrying amount of an asset or asset group to the sum of the undiscounted cash flows expected to result from the use and the eventual disposition of the asset or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value. During the first quarter we recognized impairment charges of $854 related to the June 2016 Restructuring Plan. No other indicators of impairment were identified during the quarter ended March 31, 2019.


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Income Taxes
Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of consolidated income tax expense.
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage our underlying businesses.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. Accounting Standards Codification (ASC) No. 740 states that a tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, on the basis of its technical merits.  We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.
Our practice is to recognize interest and penalties related to income tax matters as part of income tax expense.
Generally, outside of Canada and the United Kingdom, it has been our historical practice to permanently reinvest the earnings of our non-U.S. subsidiaries in those operations. However, the 2017 Tax Cut and Jobs Act made significant changes to the taxation of undistributed foreign earnings, requiring that all previously untaxed earnings and profits of our controlled foreign corporation be subjected to a one-time mandatory deemed repatriation tax. This transition tax substantially eliminated the basis difference that existed prior to the Tax Act. However, there are limited other taxes that continue to apply such as foreign withholding and certain state taxes. We completed an evaluation of our indefinite reinvestment assertion as a result of the Tax Cut and Jobs Act during the fourth quarter of 2018 and decided not to reinvest the current year earnings of our primary operations, except for in the Czech Republic, Denmark, India, Mexico and Taiwan. We intend to continue to indefinitely reinvest the earnings in these non-U.S. subsidiaries.
Significant Customers
Our net sales to customers representing at least 10% of total net sales is as follows:
 
Three Months Ended
 
March 31,

March 31,
 
2019
 
2018
Cummins Inc.
18.7
%

14.2
%
Toyota Motor Corporation
10.4
%
 
11.2
%
Honda Motor Co.
10.3
%
 
10.8
%











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Forward‑Looking Statements
This document contains statements that are, or may be deemed to be, forward‑looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward‑looking statements include, but are not limited to, any financial or other guidance, statements that reflect our current expectations concerning future results and events, and any other statements that are not based solely on historical fact. Forward‑looking statements are based on management’s expectations, certain assumptions and currently available information. Readers are cautioned not to place undue reliance on these forward‑looking statements, which speak only as of the date hereof and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. These forward‑looking statements are made subject to certain risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from those presented in the forward‑looking statements. Examples of factors that may affect future operating results and financial condition include, but are not limited to: changes in the economy generally and in respect to the business in which CTS operates; unanticipated issues in integrating acquisitions; the results of actions to reposition our business; rapid technological change; general market conditions in the automotive, communications, and computer industries, as well as conditions in the industrial, defense and aerospace, and medical markets; reliance on key customers; unanticipated natural disasters or other events; the ability to protect our intellectual property; pricing pressures and demand for our products; unanticipated developments that could occur with respect to contingencies such as litigation and environmental matters as well as any product liability claims; and risks associated with our international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks. Many of these and other risks and uncertainties are discussed in further detail in Item 1A. of CTS' Annual Report on Form 10‑K for the fiscal year ended December 31, 2018. We undertake no obligation to publicly update our forward‑looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.

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Item 3.   Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our market risk since December 31, 2018.
 
Item 4.   Controls and Procedures
Pursuant to Rule 13a-15(e) of the Securities and Exchange Act of 1934, management, under the direction of our Chief Executive Officer and Chief Financial Officer, evaluated our disclosure controls and procedures.  Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2019.
Changes in Internal Control Over Financial Reporting
Beginning January 1, 2019, we adopted ASC 842 "Leases". It is expected to have an immaterial impact on our ongoing net income; however, we implemented changes to our processes related to lease recognition and related internal controls. These changes included the development of new procedures related to the determination of lease classification, ongoing contract review requirements, and gathering of information to comply with disclosure requirements.  

PART II - OTHER INFORMATION

Not applicable

Item 1.  Legal Proceedings
From time to time we are involved in litigation with respect to matters arising from the ordinary conduct of our business, and currently certain claims are pending against us. In the opinion of management, based upon presently available information, either adequate provision for anticipated costs have been accrued or the ultimate anticipated costs will not materially affect our consolidated financial position, results of operations, or cash flows.

Item 1A.  Risk Factors
There have been no significant changes to our risk factors since December 31, 2018.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
On February 7, 2019 the Board of Directors authorized a new stock repurchase program with a maximum dollar limit of $25 million. This program authorizes us to make repurchases of our common stock from time to time on the open market, but does not obligate us to make repurchases, and has no expiration date. This program replaces the previous plan authorized on April 27, 2015.
 
 
 
 
 
Total Number
 
Maximum Dollar
 
 
 
 
 
of Shares
 
Value of Shares
 

 
 
 
Purchased as
 
That May Yet By
 
Total Number of
 

 
Part of Publicly
 
Purchased Under
 
Shares
 
Average Price
 
Announced
 
Publicly Announced
 
Purchased
 
Paid per Share
 
Programs
 
Plans or Programs
Balance at December 31, 2018

 

 

 
$
8,114

January 1, 2019 - February 6, 2019
22,000

 
25.76

 
22,000

 
$

 
 
 
 
 
 
 
 
New program effective February 7, 2019









$
25,000

February 7, 2019 - March 31, 2019
9,500

 
29.68

 
9,500

 
$
24,718




 


 


 

Total
31,500

 
26.94

 
31,500

 
$
24,718


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Item 6.  Exhibits 
(31)(a)
 
 
(31)(b)
 
 
(32)(a)
 
 
(32)(b)
 
 
101.INS
XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
 
 
101.SCH
XBRL Taxonomy Extension Schema Document
 
 
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
 
 
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
 
 
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CTS Corporation
 
CTS Corporation
 
 
 
/s/ William M. Cahill
 
/s/ Ashish Agrawal
William M. Cahill
Chief Accounting Officer
 
Ashish Agrawal
Vice President and Chief Financial Officer
(Principal Accounting Officer)
 
(Principal Financial Officer)
 
 
 
Dated: April 25, 2019
 
Dated: April 25, 2019

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