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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
  
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended March 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from _______________ to _______________

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

IN
  
35-0225010
(State or other jurisdiction of
incorporation or organization)
  
(IRS Employer
Identification Number)
4925 Indiana Avenue
 
 
Lisle
IL
 
60532
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code:
(630)
577-8800
 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common stock, without par value
CTS
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  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
  
Accelerated filer 
  
Non-accelerated filer  o
  
Smaller reporting company 
Emerging growth company
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 21, 2020: 32,259,907.
 
 


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, except per share amounts) 
 
Three Months Ended
 
March 31,

March 31,

2020

2019
Net sales
$
103,075


$
117,625

Cost of goods sold
70,176


77,010

Gross Margin
32,899


40,615

Selling, general and administrative expenses
16,759


17,522

Research and development expenses
7,408


6,791

Restructuring charges
240


2,084

Operating earnings
8,492


14,218

Other (expense) income:





Interest expense
(851
)

(466
)
Interest income
331


432

Other (expense) income, net
(1,982
)

96

Total other (expense) income, net
(2,502
)

62

Earnings before income taxes
5,990


14,280

Income tax expense
2,182


2,861

Net earnings
$
3,808


$
11,419

Earnings per share:





Basic
$
0.12


$
0.35

Diluted
$
0.12


$
0.34







Basic weighted – average common shares outstanding:
32,466


32,807

Effect of dilutive securities
327


463

Diluted weighted – average common shares outstanding:
32,793


33,270





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 EARNINGS ‑ UNAUDITED
(In thousands of dollars) 
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Net earnings
$
3,808

 
$
11,419

Other comprehensive (loss) earnings:
 

 
 

Changes in fair market value of derivatives, net of tax
(4,414
)
 
78

Changes in unrealized pension cost, net of tax
1,285

 
1,022

Cumulative translation adjustment, net of tax
(139
)
 
91

Other comprehensive (loss) earnings
$
(3,268
)
 
$
1,191

Comprehensive earnings
$
540

 
$
12,610

 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,

2020
 
2019
ASSETS
 

 
 

Current Assets
 

 
 

Cash and cash equivalents
$
150,955

 
$
100,241

Accounts receivable, net
71,250

 
78,008

Inventories, net
45,679

 
42,237

Other current assets
15,094

 
16,992

Total current assets
282,978

 
237,478

Property, plant and equipment, net
101,755

 
105,038

Operating lease assets, net
25,117

 
24,644

Other Assets
 

 
 

Prepaid pension asset
63,093

 
62,082

Goodwill
106,056

 
106,056

Other intangible assets, net
82,919

 
85,215

Deferred income taxes
20,296

 
19,795

Other
2,951

 
3,046

Total other assets
275,315

 
276,194

Total Assets
$
685,165

 
$
643,354

LIABILITIES AND SHAREHOLDERS’ EQUITY
 

 
 

Current Liabilities
 

 
 

Accounts payable
$
46,766

 
$
48,219

Operating lease obligations
3,178

 
2,787

Accrued payroll and benefits
8,818

 
9,564

Accrued expenses and other liabilities
34,476

 
36,378

Total current liabilities
93,238

 
96,948

Long-term debt
151,200

 
99,700

Long-term operating lease obligations
25,078

 
24,926

Long-term pension obligations
6,548

 
6,632

Deferred income taxes
5,576

 
5,637

Other long-term obligations
6,059

 
4,292

Total Liabilities
287,699

 
238,135

Commitments and Contingencies (Note 10)


 


Shareholders’ Equity
 

 
 

Common stock
310,098

 
307,932

Additional contributed capital
39,832

 
43,689

Retained earnings
512,276

 
509,766

Accumulated other comprehensive loss
(94,994
)
 
(91,726
)
Total shareholders’ equity before treasury stock
767,212

 
769,661

Treasury stock
(369,746
)
 
(364,442
)
Total shareholders’ equity
397,466

 
405,219

Total Liabilities and Shareholders’ Equity
$
685,165

 
$
643,354

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,
 
2020
 
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net earnings 
$
3,808

 
$
11,419

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

 
 

Depreciation and amortization
6,532

 
5,924

Pension and other post-retirement plan expense
673

 
251

Stock-based compensation
228

 
1,214

Restructuring impairment charges

 
854

Deferred income taxes
333

 
1,063

(Gain) on sales of fixed assets

 
(40
)
Impairment of fixed assets
1,016

 

(Gain) loss on foreign currency hedges, net of cash
(23
)
 
53

Changes in assets and liabilities, net of acquisition:
 

 
 

Accounts receivable
6,176

 
(2,682
)
Inventories
(4,005
)
 
1,053

Operating lease assets
(473
)
 
(2,372
)
Other assets
799

 
(1,687
)
Accounts payable
1,252

 
1,275

Accrued payroll and benefits
(237
)
 
(5,250
)
Accrued liabilities
(5,364
)
 
(4,014
)
Income taxes payable
730

 
(535
)
Operating lease liabilities
542

 
2,439

Accrued expenses and other liabilities
7

 
675

Pension and other post-retirement plans
(67
)
 
(47
)
Net cash provided by operating activities
11,927

 
9,593

CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Capital expenditures
(4,570
)
 
(5,325
)
Proceeds from sale of assets

 
51

Net cash used in investing activities
(4,570
)
 
(5,274
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Payments of long-term debt
(764,550
)
 
(159,100
)
Proceeds from borrowings of long-term debt
816,050

 
159,100

Purchase of treasury stock
(5,304
)
 
(849
)
Dividends paid
(1,299
)
 
(1,310
)
Taxes paid on behalf of equity award participants
(1,903
)
 
(2,637
)
Net cash provided by (used) in financing activities
42,994

 
(4,796
)
Effect of exchange rate changes on cash and cash equivalents
363

 
252

Net increase (decrease) in cash and cash equivalents
50,714

 
(225
)
Cash and cash equivalents at beginning of period
100,241

 
100,933

Cash and cash equivalents at end of period
$
150,955

 
$
100,708

Supplemental cash flow information:
 

 
 

Cash paid for interest
$
678

 
$
281

Cash paid for income taxes, net
$
1,183

 
$
2,122

Non-cash financing and investing activities:
 
 
 
Capital expenditures incurred but not paid
$
1,843

 
$
3,734

See notes to unaudited condensed consolidated financial statements.

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CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - UNAUDITED
(in thousands of dollars)

The following summarizes the changes in total equity for the three months ended March 31, 2020:
 
Common
Stock
Additional
Contributed
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Earnings/(Loss)
Treasury
Stock
Total
Balances at December 31, 2019
$
307,932

$
43,689

$
509,766

$
(91,726
)
$
(364,442
)
$
405,219

Net earnings


3,808



3,808

Changes in fair market value of derivatives, net of tax



(4,414
)

(4,414
)
Changes in unrealized pension cost, net of tax



1,285


1,285

Cumulative translation adjustment, net of tax



(139
)

(139
)
Cash dividends of $0.04 per share


(1,298
)


(1,298
)
Acquired 220,731 for treasury stock




(5,304
)
(5,304
)
Issued shares on vesting of restricted stock units
2,166

(4,069
)



(1,903
)
Stock compensation

212




212

Balances at March 31, 2020
$
310,098

$
39,832

$
512,276

$
(94,994
)
$
(369,746
)
$
397,466

See notes to unaudited condensed consolidated financial statements.





















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CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - UNAUDITED
(in thousands of dollars)


The following summarizes the changes in total equity for the three 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
)
Acquired 31,500 shares for treasury stock




(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, 2020
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, 2019.
 
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. 


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, 2020 contained a significant financing component. Differences between the amount of revenue recognized and the amount invoiced, collected from, or paid to our customers are recognized as contract assets or liabilities. Contract assets will be reviewed for impairment when events or circumstances indicate that they may not be recoverable.

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















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Disaggregated Revenue

The following table presents revenues disaggregated by the major markets we serve:
 
Three Months Ended
 
March 31, 2020
 
March 31, 2019
Transportation
$
61,534

 
$
78,842

Industrial
20,843

 
18,156

Medical
9,370

 
9,666

Aerospace & Defense
9,005

 
7,523

Telecom & IT
2,323

 
3,438

Total
$
103,075

 
$
117,625



NOTE 3 – Accounts Receivable 

The components of accounts receivable, net are as follows:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Accounts receivable, gross
$
71,932

 
$
78,269

Less: Allowance for credit losses
(682
)
 
(261
)
Accounts receivable, net
$
71,250

 
$
78,008



NOTE 4 – Inventories 
Inventories, net consist of the following:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Finished goods
$
9,595

 
$
9,447

Work-in-process
16,276

 
14,954

Raw materials
25,012

 
23,363

Less: Inventory reserves
(5,204
)
 
(5,527
)
Inventories, net
$
45,679

 
$
42,237


NOTE 5 – Property, Plant and Equipment
 
Property, plant and equipment is comprised of the following:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Land and land improvements
$
1,095

 
$
1,095

Buildings and improvements
68,175

 
68,350

Machinery and equipment
225,258

 
224,312

Less: Accumulated depreciation
(192,773
)
 
(188,719
)
Property, plant and equipment, net
$
101,755

 
$
105,038

 
 
 
 
Depreciation expense for the three months ended March 31, 2020
 
 
$
4,237

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

 


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Table of Contents

NOTE 6 – Retirement Plans
 
Pension Plans
 
Net pension expense for our domestic and foreign plans included in other income (expense) in the Condensed Consolidated Statement of Earnings is as follows:
 
Three Months Ended

March 31,

March 31,
 
2020
 
2019
Net pension expense
$
664

 
$
250


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,
 
2020
 
2019
 
2020
 
2019
Service cost
$

 
$

 
$
7

 
$
9

Interest cost
1,443

 
1,931

 
7

 
7

Expected return on plan assets(1)
(2,454
)
 
(3,047
)
 
(4
)
 
(4
)
Amortization of loss
1,622

 
1,312

 
43

 
42

Total expense, net
$
611

 
$
196

 
$
53

 
$
54

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


In February 2020, the CTS Board of Directors authorized management to explore termination of our U.S. based pension plans at management's discretion, subject to certain conditions. Management has not yet made a final decision on whether to pursue a plan termination and the potential timing thereof.
    
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,
 
2020
 
2019
Service cost
$

 
$

Interest cost
30

 
42

Amortization of gain
(21
)
 
(41
)
Total expense, net
$
9

 
$
1




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Table of Contents

NOTE 7 – Other Intangible Assets
 
Other intangible assets, net consist of the following components:
 
As of
 
March 31, 2020
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Amount
Customer lists/relationships
$
92,194

 
$
(40,012
)
 
$
52,182

Technology and other intangibles
47,925

 
(19,388
)
 
28,537

In process research and development
2,200

 

 
2,200

Other intangible assets, net
$
142,319

 
$
(59,400
)
 
$
82,919

Amortization expense for the three months ended March 31, 2020


 
$
2,295

 


 
 
As of
 
December 31, 2019
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Amount
Customer lists/relationships
$
92,194

 
$
(38,682
)
 
$
53,512

Technology and other intangibles
47,925

 
(18,422
)
 
29,503

In process research and development
2,200

 

 
2,200

Other intangible assets, net
$
142,319

 
$
(57,104
)
 
$
85,215

Amortization expense for the three months ended March 31, 2019
 

 
$
1,690

 
 


Remaining amortization expense for other intangible assets as of March 31, 2020 is as follows: 

Amortization
expense
2020
$
6,756

2021
8,893

2022
8,657

2023
6,651

2024
6,489

Thereafter
45,473

Total amortization expense
$
82,919

 


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NOTE 8 – Costs Associated with Exit and Restructuring Activities
 
Restructuring charges are reported as a separate line within operating earnings in the Condensed Consolidated Statement of Earnings. 
 
Total restructuring charges is as follows:
 
Three Months Ended
 
March 31, 2020
 
March 31, 2019
Restructuring charges
$
240

 
$
2,084

 

2016 Plan

In June 2016, we announced plans to restructure operations by phasing out production at our Elkhart, IN 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. In 2017, we revised this plan to include 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. Restructuring charges under this plan, which is substantially complete, were $(32) and $2,332 during the three months ended March 31, 2020 and March 31, 2019, respectively. The total restructuring liability related to the June 2016 Plan was $104 at March 31, 2020 and $233 at December 31, 2019. 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, 2020:

 
 
Actual costs
 
Planned
 
incurred through
June 2016 Plan
Costs
 
March 31, 2020
Workforce reduction
$
3,075

 
$
3,312

Building and equipment relocation
9,025

 
10,530

Other charges(1)
1,300

 
2,156

Total restructuring charges
$
13,400

 
$
15,998


(1) Other charges includes the effects of currency translation, non-cash asset write-downs and other charges.

2014 Plan

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. Restructuring charges associated with this plan were $(248) for the three months ended March 31, 2019. There were no restructuring charges incurred under this plan during the three months ended March 31, 2020. The total restructuring liability related to the April 2014 Plan was $648 at March 31, 2020, and $703 at December 31, 2019.

Other Restructuring Activities

From time to time we incur other restructuring activities that are not part of a formal plan. During the three months ended March 31, 2020, we incurred restructuring charges of $272 primarily relating to workforce reduction actions taken during the quarter. There were no such charges incurred during the three months ended March 31, 2019. The total remaining restructuring liability associated with these actions was $431 at March 31, 2020.








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Table of Contents

The following table displays the restructuring liability activity included in Accrued expenses and other liabilities for all plans for the three months ended March 31, 2020
Restructuring liability at January 1, 2020
$
1,993

Restructuring charges
240

Cost paid
(606
)
Other activity(1)
(444
)
Restructuring liability at March 31, 2020
$
1,183

(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 expenses and other liabilities are as follows: 
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Accrued product related costs
$
4,234

 
$
4,464

Accrued income taxes
8,573

 
7,903

Accrued property and other taxes
809

 
1,574

Accrued professional fees
979

 
1,599

Accrued customer related liabilities
2,520

 
2,877

Dividends payable
1,298

 
1,299

Remediation reserves
8,975

 
11,444

Derivative liabilities
3,256

 

Other accrued liabilities
3,832

 
5,218

Total accrued expenses and other liabilities
$
34,476

 
$
36,378




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Table of Contents

NOTE 10 – Commitments and Contingencies

Certain processes in the manufacture of our current and past products create by-products classified as hazardous waste. We have been notified by the U.S. Environmental Protection Agency, state environmental agencies, and in some cases, groups of potentially responsible parties, that we may be potentially liable for environmental contamination at several sites currently and formerly owned or operated by us. Two of those sites, Asheville, North Carolina and Mountain View, California, are designated National Priorities List sites under the U.S. Environmental Protection Agency’s Superfund program. We accrue a liability for probable remediation activities, claims and proceedings against us with respect to environmental matters if the amount can be reasonably estimated, and provide disclosures including the nature of a loss whenever it is probable or reasonably possible that a potentially material loss may have occurred but cannot be estimated. We record contingent loss accruals on an undiscounted basis.
A roll-forward of remediation reserves included in Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets is comprised of the following:
 
As of
 
March 31, 2020
 
December 31, 2019
Balance at beginning of period
$
11,444

 
$
11,274

Remediation expense
143

 
2,602

Net remediation payments
(2,605
)
 
(2,455
)
Other activity(1)
(7
)
 
23

Balance at end of the period
$
8,975

 
$
11,444

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

Unrelated to the environmental claims described above, certain other legal claims are pending against us with respect to matters arising out of the ordinary conduct of our business.

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

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

NOTE 11 - Debt
 
Long-term debt was comprised of the following:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Total credit facility
$
300,000

 
$
300,000

Balance outstanding
151,200

 
99,700

Standby letters of credit
1,800

 
1,800

Amount available
$
147,000

 
$
198,500

Weighted-average interest rate
2.78
%
 
3.25
%
Commitment fee percentage per annum
0.23
%
 
0.23
%

 
On February 12, 2019, we entered into an amended and restated five-year Credit Agreement with a group of banks (the "Credit Agreement") to extend the term of the facility. 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.
 

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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 the base rate defined in the Credit Agreement. 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 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, 2020. 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. Amortization expense for the three months ended March 31, 2020 and 2019 was approximately $42 and $36. These costs are included in interest expense in our Condensed Consolidated Statement of Earnings.

We use interest rate swaps to convert the revolving credit facility's variable rate of interest into a fixed rate on a portion of the debt as described more fully in Note 12 "Derivative Financial Instruments". These swaps are treated as cash flow hedges and consequently, the changes in fair value were recorded in other comprehensive earnings.

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).

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, 2020.

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, 2020, we had a net unrealized loss of $2,076 in accumulated other comprehensive (loss) income, of which $1,483 is expected to be reclassified to income within the next 12 months. At March 31, 2019 we had a net unrealized gain of $746 in accumulated other comprehensive (loss) income. The notional amount of foreign currency forward contracts outstanding was $30,745 at March 31, 2020.






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Interest Rate Swaps
We use interest rate swaps to convert a portion of our revolving credit facility’s outstanding balance from a variable rate of interest to a fixed rate. As of March 31, 2020, we have agreements to fix interest rates on $50,000 of long-term debt through February 2024. 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 losses that are reported in accumulated other comprehensive (loss) income that are expected to be reclassified into earnings within the next twelve months is approximately $405

The location and fair values of derivative instruments designated as hedging instruments in the Condensed Consolidated Balance Sheets as of March 31, 2020, are shown in the following table:
 
As of

March 31,
 
December 31,
 
2020
 
2019
Interest rate swaps reported in Other current assets
$

 
$
82

Interest rate swaps reported in Accrued liabilities
$
(523
)
 
$

Interest rate swaps reported in Other long-term obligations
$
(1,840
)
 
$
(78
)
Foreign currency hedges reported in Other current assets
$

 
$
580

Foreign currency hedges reported in Accrued liabilities
$
(2,733
)
 
$



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 $235 and foreign currency derivative liabilities of $2,968 at March 31, 2020.

The effect of derivative instruments on the Condensed Consolidated Statements of Earnings is as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Foreign Exchange Contracts:
 
 
 
Amounts reclassified from AOCI to earnings:
 
 
 
Cost of goods sold
$
248

 
$
42

Selling, general and administrative expense
(5
)
 
17

Total gain reclassified from AOCI to earnings
243

 
59

Loss recognized in other expense for hedge ineffectiveness

 

Total derivative gain on foreign exchange contracts recognized in earnings
$
243

 
$
59

 
 
 
 
Interest Rate Swaps:
 
 
 
Benefit recorded in Interest expense
$
38

 
$
156

Total gains on derivatives
$
281

 
$
215




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Table of Contents

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 a portion of our revolving credit facility's outstanding balance from a variable rate of interest into a fixed rate and foreign currency forward contracts 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 (losses) gains for the three months ended March 31, 2020 and 2019 were $(1,271) and $474, respectively, which have been included in other income (expense) in the Condensed Consolidated Statement of Earnings.

The components of accumulated other comprehensive (loss) income for the three months ended March 31, 2020, are as follows:

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

2019
 
in OCI
 
to Income
 
2020
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
659

 
$
(5,422
)
 
$
(281
)
 
$
(5,044
)
Income tax (expense) benefit
(150
)
 
1,225

 
64

 
1,139

Net
509

 
(4,197
)
 
(217
)
 
(3,905
)


 

 

 

Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(124,140
)
 

 
1,660

 
(122,480
)
Income tax benefit (expense)
34,018

 

 
(375
)
 
33,643

Net
(90,122
)
 

 
1,285

 
(88,837
)



 

 


 


Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,211
)
 
(41
)
 

 
(2,252
)
Income tax benefit (expense)
98

 
(98
)
 

 

Net
(2,113
)
 
(139
)
 

 
(2,252
)
Total accumulated other comprehensive (loss) income
$
(91,726
)
 
$
(4,336
)
 
$
1,068

 
$
(94,994
)


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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
)


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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,
 
2020
 
2019
Preferred Stock
 
 
 
Par value per share
No par value

 
No par value

Shares authorized
25,000,000

 
25,000,000

Shares outstanding

 

Common Stock
 
 
 
Par value per share
No par value

 
No par value

Shares authorized
75,000,000

 
75,000,000

Shares issued
57,023,530

 
56,929,298

Shares outstanding
32,345,907

 
32,472,406

Treasury stock
 
 
 
Shares held
24,677,623

 
24,456,892


 
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, 2020 and 2019, 220,731 and 31,500 shares of common stock were repurchased for $5,304 and $849, respectively. Approximately $8,516 is available for future purchases.

A roll-forward of common shares outstanding is as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Balance at the beginning of the year
32,472,406

 
32,750,727

Repurchases
(220,731
)
 
(31,500
)
Restricted share issuances
94,232

 
136,281

Balance at the end of the period
32,345,907

 
32,855,508

 
Certain potentially dilutive restricted stock units are excluded from diluted earning per share because they are anti-dilutive. The number of outstanding awards that were anti-dilutive at March 31, 2020 and March 31, 2019 were 38,839 and 91,098, respectively.


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NOTE 15 - Stock-Based Compensation
 
At March 31, 2020, we had five active stock-based compensation plans: the Non-Employee Directors’ Stock Retirement Plan (“Directors’ Plan”), the 2004 Omnibus Long-Term Incentive Plan (“2004 Plan”), the 2009 Omnibus Equity and Performance Incentive Plan (“2009 Plan”), the 2014 Performance & Incentive Plan (“2014 Plan”), and the 2018 Equity and Incentive Compensation Plan ("2018 Plan"). Future grants can only be made under the 2018 Plan.

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

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

March 31,

March 31,
 
2020
 
2019
Service-based RSUs
$
580

 
$
606

Performance-based RSUs
(368
)
 
548

Cash-settled RSUs
16


60

Total
$
228

 
$
1,214

Income tax benefit
51

 
274

Net expense
$
177

 
$
940



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, 2020
 
Period
Service-based RSUs
$
3,020

 
1.56
Performance-based RSUs
3,919

 
2.24
Total
$
6,939

 
1.94

 
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, 2020:
 
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

 
225,000

 

 

 

Maximum potential RSU and cash settled awards outstanding
452,250

 
218,272

 
92,600

 
35,952

 
5,522

Maximum potential awards outstanding
452,250

 
443,272

 
92,600

 
35,952

 
5,522

RSUs and cash settled awards vested and released
27,037

 

 

 

 

Awards available for grant
2,020,713

 

 

 

 


 






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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 225,000 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 for the three-month periods ended March 31, 2020 and 2019, 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 for the three months ended March 31, 2020
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
364,396

 
$
19.87

Granted
64,796

 
30.13

Vested and released
(47,195
)
 
27.05

Forfeited
(3,624
)
 
28.45

Outstanding at March 31, 2020
378,373

 
$
20.65

Releasable at March 31, 2020
224,974

 
$
15.02

 
Performance and Market-Based Restricted Stock Units

The following table summarizes the performance and market-based RSU activity for the three months ended March 31, 2020:
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
217,229

 
$
27.73

Granted
72,521

 
32.56

Attained by performance
38,820

 
23.84

Released
(111,838
)
 
23.74

Forfeited
(11,884
)
 
25.69

Outstanding at March 31, 2020
204,848

 
$
30.85

Releasable at March 31, 2020

 
$



The following table summarizes each grant of performance awards outstanding at March 31, 2020.
Description
Grant Date
Vesting Year
Vesting Dependency
Target Units Outstanding
Maximum Number of Units to be Granted
2018 - 2020 Performance RSUs
February 8, 2018
2020
35% RTSR, 35% sales growth, 30% operating cash flow
31,398

62,796

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
60,414

120,828

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

13,890

2020 - 2022 QTI Performance RSUs
September 24, 2019
2022
50% EBITDA growth, 50% Sales growth
1,750

3,500

2020 - 2022 Performance RSUs
February 6, 2020
2022
25% RTSR, 40% sales growth, 35% operating cash flow
72,521

145,042

      Total



204,848

409,696



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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, 2020 and December 31, 2019 we had 16,547 and 17,271 cash-settled RSUs outstanding, respectively. At March 31, 2020 and December 31, 2019, liabilities of $135 and $353, respectively, were included in Accrued expenses and other liabilities on our Condensed Consolidated Balance Sheets.

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

The table below summarizes our financial assets (liabilities) that were measured at fair value on a recurring basis at March 31, 2020:
 
 
 
Quoted
 
 
 
 
 

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

2020
 
(Level 1)
 
(Level 2)
 
(Level 3)
Interest rate swaps
$
(2,363
)
 
$

 
$
(2,363
)
 
$

Foreign currency hedges
$
(2,733
)
 
$

 
$
(2,733
)
 
$

 
The table below summarizes the financial assets that were measured at fair value on a recurring basis as of December 31, 2019:
 
 
 
Quoted
 
 
 
 
 

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

2019
 
(Level 1)
 
(Level 2)
 
(Level 3)
Interest rate swaps
$
4

 
$

 
$
4

 
$

Foreign currency hedges
$
580

 
$

 
$
580

 
$

 
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.

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.


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NOTE 17 — Income Taxes
The effective tax rates for the three-month periods ended March 31, 2020 and 2019 are as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Effective tax rate
36.4
%
 
20.0
%

 
Our effective income tax rate was 36.4% and 20.0% in the first quarters of 2020 and 2019, respectively. This increase is primarily attributed to establishment of valuation allowances on certain U.S. tax credits and a one-time tax expense resulting from a change in company structure during 2020. The first quarter 2020 tax rate was higher than the U.S. statutory federal tax rate for the same reasons noted above. The first quarter 2019 tax rate was lower than the U.S. statutory federal tax rate primarily due to the tax benefits recorded upon vesting of restricted stock units.

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NOTE 18 — Leases

We lease certain land, buildings and equipment under non-cancellable 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.

Components of lease expense for the three months ended March 31, 2020 were as follows:

Three Months Ended

March 31,
 
March 31,
 
2020
 
2019
Operating lease cost
$
1,199

 
$
994

Short-term lease cost
167

 
73

Total lease cost
$
1,366

 
$
1,067



Supplemental cash flow information related to leases was as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities
$
1,130

 
$
927

Leased assets obtained in exchange for new operating lease liabilities
$
1,179

 
$
2,961



Supplemental balance sheet information related to leases was as follows:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Balance Sheet Classification:
 
 
 
Operating lease obligations
$
3,178

 
$
2,787

Long-term operating lease obligations
25,078

 
24,926

Total lease liabilities
$
28,256

 
$
27,713

 
 
 
 
Weighted-average remaining lease terms (years)
8.68

 
9.04



 
 
Weighted-average discount rate
6.46
%
 
6.54
%

Remaining maturity of our existing lease liabilities as of March 31, 2020 is as follows:
 
Operating Leases(1)
2020
$
3,514

2021
4,686

2022
4,547

2023
4,185

2024
4,075

Thereafter
16,950

Total
$
37,957

Less: interest
(9,701
)
Present value of lease liabilities
$
28,256

(1) Operating lease payments include $3,822 of payments related to options to extend lease terms that are reasonably expected to be exercised.

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Table of Contents

NOTE 19 – Business Acquisitions
 
On July 31, 2019, we acquired 100% of the outstanding shares of Quality Thermistor, Inc. (QTI) for $75 million plus a contingent earn out of up to $5 million based on sales performance objectives. The purchase price included adjustments for debt assumed and changes in working capital. QTI, doing business as QTI Sensing Solutions, is a leading designer and manufacturer of high-quality temperature sensors serving original equipment manufacturers with mission-critical applications in the industrial, aerospace, defense and medical markets. This acquisition provided us with a new core temperature sensing technology that expands our sensing product portfolio, while increasing our presence in the industrial and medical markets.

The final purchase price of $73,906 was allocated to the fair values of assets and liabilities acquired as of July 31, 2019.

The following table summarizes the consideration paid and the fair values of the assets acquired and the liabilities assumed as of the date of acquisition:

 
Consideration Paid
Cash paid, net of cash acquired of $567
$
72,850

Contingent consideration
1,056

Purchase price
$
73,906



 
 
Fair Values at July 31, 2019
Current assets
 
$
6,221

Property, plant and equipment
 
2,567

Other assets
 
29

Goodwill
 
34,999

Intangible assets
 
32,800

Fair value of assets acquired
 
76,616

Less fair value of liabilities acquired
 
(2,710
)
Purchase price
 
$
73,906



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

The contingent earn out was payable in cash upon the achievement of a revenue performance target for the year ending December 31, 2019. The Company recorded contingent consideration for the earn out of $1,056 based on the achievement performance target for the full year 2019 results. This amount is reflected as an addition to the purchase price.

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

Carrying Value
Weighted Average Amortization Period
Customer lists/relationships
$
31,000

15.0
Technology and other intangibles
1,800

5.0
Total
$
32,800




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NOTE 20 — Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted
ASU No. 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. We adopted this ASU on January 1, 2020 and it did not have a material impact on our financial statements.
ASU No. 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 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. We adopted this ASU on January 1, 2020 and it did not have a material impact on our financial statements.
ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments"
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions and reasonable and supportable forecasts. For trade receivables, loans, and other financial instruments, we will be required to use a forward-looking expected loss model that reflects losses that are probable rather than the incurred loss model for recognizing credit losses. The standard became effective for interim and annual periods beginning after December 15, 2019. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We adopted this ASU on January 1, 2020 and it did not have a material impact on our financial statements.

Recently Issued Accounting Pronouncements

ASU No. 2019-12 "Simplifying the Accounting for Income Taxes"

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Simplifying the Accounting for Income Taxes, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this ASU on our financial statements.

ASU No. 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 annual financial statement disclosures but will not impact our interim financial statements and does not have an impact on our consolidated financial position, results of operations, or cash flows.


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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, 2019.
Overview
CTS Corporation ("CTS", "we", "our" or "us") is a leading designer and manufacturer of products that Sense, Connect and Move. Our vision is to be a leading provider of sensing and motion devices as well as connectivity components, enabling an intelligent and seamless world. These devices are categorized by their ability to Sense, Connect or Move. Sense products provide vital inputs to electronic systems. Connect products allow systems to function in synchronization with other systems. Move products ensure required movements are effectively and accurately executed. We are committed to achieving our vision by continuing to invest in the development of products and technologies within these categories.

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

There is an increasing proliferation of sensing and motion applications within various markets we serve. In addition, the increasing connectivity of various devices to the internet results in greater demand for communication bandwidth and data storage, increasing the need for our connectivity products. Our success is dependent on the ability to execute our strategy to support these trends. We are subject to challenges including periodic market softness, competition from other suppliers, changes in technology, and the ability to add new customers, launch new products or penetrate new markets.

Impact of COVID-19

The recent outbreak of COVID-19 has resulted and will continue to result in significant disruption that adversely affects our business. We have experienced and expect to continue to experience reductions in customer demand in several of our end markets. We expect that social distancing measures, reductions in production due to mandated closures of or labor restrictions at our plants in China, Europe, and North America, as well as the reduced operational capacity of our suppliers will more meaningfully impact our operations in the second quarter, and general business uncertainty will continue to negatively impact demand in several of our end markets in the second quarter, and possibly beyond. The pandemic could lead to an extended disruption of economic activity and the impact on our consolidated results of operations, financial position and cash flows could be material.






















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Results of Operations: First Quarter 2020 versus First Quarter 2019
 
The following table highlights changes in significant components of the Unaudited Condensed Consolidated Statements of Earnings for the quarters ended March 31, 2020, and March 31, 2019:
 
 
Three Months Ended
 
 
 
Percent of
 
Percent of
 
March 31,
 
March 31,
 
Percent
 
Net Sales – 
 
Net Sales – 
 
2020
 
2019
 
Change
 
2020
 
2019
Net sales
$
103,075

 
$
117,625

 
(12.4
)%
 
100.0
 %
 
100.0
%
Cost of goods sold
70,176

 
77,010

 
(8.9
)
 
68.1

 
65.5

Gross margin
32,899

 
40,615

 
(19.0
)
 
31.9

 
34.5

Selling, general and administrative expenses
16,759

 
17,522

 
(4.4
)
 
16.3

 
14.9

Research and development expenses
7,408

 
6,791

 
9.1

 
7.2

 
5.8

Restructuring charges
240

 
2,084

 
(88.5
)
 
0.2

 
1.8

Total operating expenses
24,407

 
26,397

 
(7.5
)
 
23.7

 
22.4

Operating earnings
8,492

 
14,218

 
(40.3
)
 
8.2

 
12.1

Total other (expense) income, net
(2,502
)
 
62

 
(4,135.5
)
 
(2.4
)
 
0.1

Earnings before income taxes
5,990

 
14,280

 
(58.1
)
 
5.8

 
12.1

Income tax expense
2,182

 
2,861

 
(23.7
)
 
2.1

 
2.4

Net earnings
$
3,808

 
$
11,419

 
(66.7
)%
 
3.7
 %
 
9.7
%
Earnings per share:
 
 
 
 
 
 
 
 
 
Diluted net earnings per share
$
0.12

 
$
0.34

 
 
 
 
 
 
 
Sales were $103,075 in the first quarter of 2020, a decrease of $14,550 or 12.4% from the first quarter of 2019. Sales were negatively impacted as a result of the COVID-19 pandemic and government activities to control its spread.  In the first quarter, we were impacted by: (1) successively mandated closures of or labor restrictions at our plants in China, Europe and North America, (2) supply chain disruptions resulting from the closure of a number of our suppliers in China and in North America, and (3) weak demand from certain customers as a result of their mandated or elective plant closures.  These economic impacts are ongoing and continue to have an effect on our operations, which we are currently unable to quantify.
Sales to transportation markets decreased $17,308 or 22.0%.  Sales to other markets increased $2,758 or 7.1%. The QTI acquisition, which was completed in July 2019, added $5,575 in sales for the quarter. Changes in foreign exchange rates decreased sales by $574 year-over-year due to the U.S. Dollar appreciating compared to the Chinese Renminbi and Euro.
Gross margin as a percent of sales was 31.9% in the first quarter of 2020 compared to 34.5% in the first quarter of 2019. The decrease in gross margin was driven primarily by lower sales volumes.
Selling, general and administrative ("SG&A") expenses were $16,759 or 16.3% of sales in the first quarter of 2020 versus $17,522 or 14.9% of sales in the first quarter of 2019. The 2020 SG&A costs include amortization of intangibles and other operating costs associated with the QTI acquisition, which were offset by other expense reductions.
Research and development expenses were $7,408 or 7.2% of sales in the first quarter of 2020 compared to $6,791 or 5.8% of sales in the comparable quarter of 2019.
Restructuring charges were $240 or 0.2% of sales in the first quarter of 2020 and were mainly for severance charges. Restructuring charges were $2,084 or 1.8% of sales in the first quarter of 2019.
Operating earnings were $8,492 or 8.2% of sales in the first quarter of 2020 compared to operating earnings of $14,218 or 12.1% of sales in the first quarter of 2019.
Due to the ongoing impact of COVID-19, we have implemented temporary cost savings measures to reduce operating expenses to better align our cost structure to current and expected future market conditions. We will continue to evaluate market conditions to determine if further steps are necessary.

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Other income and expense items are summarized in the following table:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Interest expense
$
(851
)
 
$
(466
)
Interest income
331

 
432

Other (expense) income, net
(1,982
)
 
96

Total other (expense) income, net
$
(2,502
)
 
$
62

Interest expense increased mainly as a result of an increase in debt related to the QTI acquisition. Other expense in the first quarter of 2020 was principally driven by foreign currency translation losses, mainly due to the appreciation of the U.S. Dollar compared to the Chinese Renminbi and Euro during the quarter, as well as pension expense.
 
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Effective tax rate
36.4
%
 
20.0
%
 
Our effective income tax rate was 36.4% and 20.0% in the first quarters of 2020 and 2019, respectively. The increase in the effective tax rate for the three months ended March 31, 2020, compared with the same period in 2019, was primarily attributed to the establishment of valuation allowances on certain U.S. tax credits and a one-time tax expense resulting from a change in company structure during 2020.

Liquidity and Capital Resources

Cash and cash equivalents were $150,955 at March 31, 2020, and $100,241 at December 31, 2019, of which $99,064 and $98,309, respectively, were held outside the United States. The increase in cash and cash equivalents of $50,714 was primarily driven by net proceeds from an increase in borrowings of long-term debt of $51,500 and cash generated from operating activities of $11,927, which were partially offset by capital expenditures of $4,570, treasury stock purchases of $5,304, dividends paid of $1,299, and taxes paid on behalf of equity award participants of $1,903. Total long-term debt was $151,200 as of March 31, 2020 and $99,700 as of December 31, 2019. Total debt as a percentage of total capitalization, defined as long-term debt as a percentage of total debt and shareholders' equity, was 27.6% at March 31, 2020, compared to 19.7% at December 31, 2019.

We increased our cash position during the quarter to improve liquidity given the current economic environment. Our net debt, defined as cash and cash equivalents less long-term debt, was zero at March 31, 2020. We currently have $147,000 available for additional borrowings under our credit facility.

Working capital increased by $49,210 during the three months ended March 31, 2020, primarily due to the increase in cash and cash equivalents from borrowings under our credit facility.
Cash Flows from Operating Activities
Net cash provided by operating activities was $11,927 during the first three months of 2020. Components of net cash provided by operating activities included net earnings of $3,808, depreciation and amortization expense of $6,532, other net non-cash items of $2,227, and a net cash outflow from changes in assets and liabilities of $640.
Cash Flows from Investing Activities
Net cash used in investing activities for the first three months of 2020 was $4,570, driven entirely by capital expenditures.
Cash Flows from Financing Activities
Net cash provided by financing activities for the first three months of 2020 was $42,994. The net cash inflow was the result of net proceeds from an increase in borrowings of long-term debt of $51,500, which was partially offset by treasury stock purchases of $5,304, dividends paid of $1,299, and taxes paid on behalf of equity award participants in the amount of $1,903.


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Capital Resources
Long‑term debt is comprised of the following: 
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Total credit facility
$
300,000

 
$
300,000

Balance outstanding
151,200

 
99,700

Standby letters of credit
1,800

 
1,800

Amount available
$
147,000

 
$
198,500

Weighted-average interest rate
2.78
%
 
3.25
%
Commitment fee percentage per annum
0.23
%
 
0.23
%
 
Our 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.

We have entered into interest rate swap agreements to fix interest rates on $50,000 of long-term debt through February 2024. The difference to be paid or received under the terms of the swap agreements is 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 condensed consolidated financial statements 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.
Revenue Recognition
Product revenue is recognized when the transfer of promised goods to a customer occurs in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods. We follow the five step model to determine when this transfer has occurred: 1) identify the contract(s) with the customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations in the contract; 5) recognize revenue when (or as) the entity satisfies a performance obligation.
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 2.0% to 2.9% 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.








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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, specific customer collection issues, current conditions and reasonable and supportable forecasts that affect the collectability of the remaining cash flows over the contractual terms of our receivables and other financial assets. Over the last three years, accounts receivable reserves have been approximately 0.1% to 0.9% 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 of the reserves established, we cannot guarantee that our credit loss experience will continue to be consistent with historical experience or our current forecasts.
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 10.2% to 16.8% 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 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.
In February 2020, the CTS Board of Directors authorized management to explore termination of our U.S. based pension plans at management's discretion, subject to certain conditions. Management has not yet made a final decision on whether to pursue a plan termination and the potential timing thereof.
Impairment 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 regulatory factors or in the business climate,
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.


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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, 2019, 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. At this time, we have not deemed the impact that the current economic environment has or is expected to have on our business to be a triggering event for impairment purposes.
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 under performance 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. We recorded a charge of $1,016 during the current quarter due to the impairment of a specific asset group. No other indicators of impairment were identified during the quarter ended March 31, 2020.
Environmental and Legal Contingencies
U.S. GAAP requires a liability to be recorded for contingencies when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required to determine the existence and amounts of our environmental, legal and other contingent liabilities. We regularly consult with attorneys and consultants to determine the relevant facts and circumstances before we record a liability. Changes in laws, regulatory orders, cost estimates, participation of other parties, timing of payments, input of attorneys and consultants, or other circumstances may have a material impact on the recorded liability.
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

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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.

Following the enactment of the 2017 Tax Cut and Jobs Act and the associated one-time transition tax, in general, repatriation of foreign earnings to the U.S. can be completed with no incremental U.S. Tax. However, there are limited other taxes that continue to apply such as foreign withholding and certain state taxes. The company records a deferred tax liability for the estimated foreign earnings and state tax cost associated with the undistributed foreign earnings that are not permanently reinvested.

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,
 
2020
 
2019
Cummins Inc.
16.5
%
 
18.7
%
Toyota Motor Corporation
11.9
%
 
10.4
%
Honda Motor Co.
6.6
%
 
10.3
%

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, 2019. 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
For a discussion of current market conditions resulting from the COVID-19 pandemic, refer to Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations” and to Part II, Item 1A, "Risk Factors”.

There have been no other material changes in our market risk since December 31, 2019.
 
Item 4.   Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q were effective in providing reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

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

Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting for the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings
From time to time we are involved in litigation with respect to matters arising from the ordinary conduct of our business, and currently certain claims are pending against us. In the opinion of management, we believe we have established adequate accruals pursuant to U.S. generally accepted accounting principles for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based on presently available information. However, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition, or cash flows.

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

Item 1A.  Risk Factors
The COVID-19 pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, supply chains and distribution systems, and results of operations. We have experienced, and expect to continue to experience, disruptions in production and supply due to mandated facility closures and unpredictable fluctuations in demand for our products. The pandemic could lead to a continued disruption of economic activity and the impact on our consolidated results of operations, financial position and cash flows could be material.



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Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
On February 7, 2019 the Board of Directors authorized a 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 it has no expiration date.
 
 
 
 
 
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
January 1, 2020 through January 31, 2020
22,821

 
$
29.92

 
22,821

 
$
13,137

February 1, 2020 through February 29, 2020
38,106

 
$
29.47

 
38,106

 
$
12,014

March 1, 2020 through March 31, 2020
159,804

 
$
21.89

 
159,804

 
$
8,516

Total
220,731

 
$
24.03

 
220,731

 
 

Item 6.  Exhibits 
(31)(a)
 
 
(31)(b)
 
 
(32)(a)
 
 
(32)(b)
 
 
101.1
The following information from CTS Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 formatted in Inline XBRL: (i) Condensed Consolidated Statements of Earnings for the three months ended March 31, 2020 and 2019; (ii) Condensed Consolidated Statements of Comprehensive Earnings for the three months ended March 31, 2020 and 2019; (iii) Condensed Consolidated Balance Sheets at March 31, 2020 and December 31, 2019; (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019; (v) Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2020 and 2019; (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
 
 
104
The cover page from this Current Report on Form 10-Q formatted as inline XBRL

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CTS Corporation
 
CTS Corporation
 
 
 
/s/ 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 24, 2020
 
Dated: April 24, 2020

36
 
Exhibit


EXHIBIT (31)(a)
 
CERTIFICATION
 
I, Kieran O’Sullivan, certify that:
 
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; and
(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for external purposes in accordance with generally accepted accounting principles; and
(c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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: April 24, 2020
 
/s/ Kieran O’Sullivan
 
 
Kieran O’Sullivan
 
 
Chairman, President and Chief Executive Officer
 




Exhibit


EXHIBIT (31)(b)
 
CERTIFICATION
 
I, Ashish Agrawal, certify that: 
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; and
(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for external purposes in accordance with generally accepted accounting principles; and
(c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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: April 24, 2020
 
/s/Ashish Agrawal
 
 
Ashish Agrawal
 
 
Vice President and Chief Financial Officer
 


Exhibit


EXHIBIT (32)(a)
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
 
In connection with the quarterly report of CTS Corporation (the Company) on Form 10-Q for the quarter ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 
 
 
Date: April 24, 2020
 
/s/ Kieran O’Sullivan
 
 
Kieran O’Sullivan
 
 
Chairman, President and Chief Executive Officer


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

 




Exhibit


EXHIBIT (32)(b)
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of CTS Corporation (the Company) on Form 10-Q for the quarter ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 

Date: April 24, 2020
 
/s/Ashish Agrawal
 
 
Ashish Agrawal
 
 
Vice President and Chief Financial Officer


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



v3.20.1
Accrued Liabilities
3 Months Ended
Mar. 31, 2020
Other Liabilities Disclosure [Abstract]  
Accrued Liabilities
NOTE 9 – Accrued Liabilities
 
The components of Accrued expenses and other liabilities are as follows: 
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Accrued product related costs
$
4,234

 
$
4,464

Accrued income taxes
8,573

 
7,903

Accrued property and other taxes
809

 
1,574

Accrued professional fees
979

 
1,599

Accrued customer related liabilities
2,520

 
2,877

Dividends payable
1,298

 
1,299

Remediation reserves
8,975

 
11,444

Derivative liabilities
3,256

 

Other accrued liabilities
3,832

 
5,218

Total accrued expenses and other liabilities
$
34,476

 
$
36,378


v3.20.1
Property, Plant and Equipment
3 Months Ended
Mar. 31, 2020
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment
NOTE 5 – Property, Plant and Equipment
 
Property, plant and equipment is comprised of the following:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Land and land improvements
$
1,095

 
$
1,095

Buildings and improvements
68,175

 
68,350

Machinery and equipment
225,258

 
224,312

Less: Accumulated depreciation
(192,773
)
 
(188,719
)
Property, plant and equipment, net
$
101,755

 
$
105,038

 
 
 
 
Depreciation expense for the three months ended March 31, 2020
 
 
$
4,237

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

v3.20.1
Inventories (Tables)
3 Months Ended
Mar. 31, 2020
Inventory Disclosure [Abstract]  
Summary of Inventories
Inventories, net consist of the following:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Finished goods
$
9,595

 
$
9,447

Work-in-process
16,276

 
14,954

Raw materials
25,012

 
23,363

Less: Inventory reserves
(5,204
)
 
(5,527
)
Inventories, net
$
45,679

 
$
42,237


v3.20.1
Costs Associated with Exit and Restructuring Activities (Tables)
3 Months Ended
Mar. 31, 2020
Restructuring and Related Activities Disclosure [Text Block]
NOTE 8 – Costs Associated with Exit and Restructuring Activities
 
Restructuring charges are reported as a separate line within operating earnings in the Condensed Consolidated Statement of Earnings. 
 
Total restructuring charges is as follows:
 
Three Months Ended
 
March 31, 2020
 
March 31, 2019
Restructuring charges
$
240

 
$
2,084

 

2016 Plan

In June 2016, we announced plans to restructure operations by phasing out production at our Elkhart, IN 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. In 2017, we revised this plan to include 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. Restructuring charges under this plan, which is substantially complete, were $(32) and $2,332 during the three months ended March 31, 2020 and March 31, 2019, respectively. The total restructuring liability related to the June 2016 Plan was $104 at March 31, 2020 and $233 at December 31, 2019. 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, 2020:

 
 
Actual costs
 
Planned
 
incurred through
June 2016 Plan
Costs
 
March 31, 2020
Workforce reduction
$
3,075

 
$
3,312

Building and equipment relocation
9,025

 
10,530

Other charges(1)
1,300

 
2,156

Total restructuring charges
$
13,400

 
$
15,998


(1) Other charges includes the effects of currency translation, non-cash asset write-downs and other charges.

2014 Plan

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. Restructuring charges associated with this plan were $(248) for the three months ended March 31, 2019. There were no restructuring charges incurred under this plan during the three months ended March 31, 2020. The total restructuring liability related to the April 2014 Plan was $648 at March 31, 2020, and $703 at December 31, 2019.

Other Restructuring Activities

From time to time we incur other restructuring activities that are not part of a formal plan. During the three months ended March 31, 2020, we incurred restructuring charges of $272 primarily relating to workforce reduction actions taken during the quarter. There were no such charges incurred during the three months ended March 31, 2019. The total remaining restructuring liability associated with these actions was $431 at March 31, 2020.







The following table displays the restructuring liability activity included in Accrued expenses and other liabilities for all plans for the three months ended March 31, 2020
Restructuring liability at January 1, 2020
$
1,993

Restructuring charges
240

Cost paid
(606
)
Other activity(1)
(444
)
Restructuring liability at March 31, 2020
$
1,183

(1) Other activity includes the effects of currency translation, non-cash asset write-downs and other charges that do not flow through restructuring expense.
Restructuring Reserve Activity
The following table displays the restructuring liability activity included in Accrued expenses and other liabilities for all plans for the three months ended March 31, 2020
Restructuring liability at January 1, 2020
$
1,993

Restructuring charges
240

Cost paid
(606
)
Other activity(1)
(444
)
Restructuring liability at March 31, 2020
$
1,183

(1) Other activity includes the effects of currency translation, non-cash asset write-downs and other charges that do not flow through restructuring expense.
Other Restructuring [Member]  
Restructuring and Related Activities Disclosure [Text Block]
Other Restructuring Activities

From time to time we incur other restructuring activities that are not part of a formal plan. During the three months ended March 31, 2020, we incurred restructuring charges of $272 primarily relating to workforce reduction actions taken during the quarter. There were no such charges incurred during the three months ended March 31, 2019. The total remaining restructuring liability associated with these actions was $431 at March 31, 2020.







Restructuring Charges [Member]  
Restructuring and Related Activities Disclosure [Text Block] Consolidated Statement of Earnings. 
 
Total restructuring charges is as follows:
 
Three Months Ended
 
March 31, 2020
 
March 31, 2019
Restructuring charges
$
240

 
$
2,084

 

June 2016 Plan  
Restructuring, Impairment, and Other Activities Disclosure [Text Block]
2016 Plan

In June 2016, we announced plans to restructure operations by phasing out production at our Elkhart, IN 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. In 2017, we revised this plan to include 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. Restructuring charges under this plan, which is substantially complete, were $(32) and $2,332 during the three months ended March 31, 2020 and March 31, 2019, respectively. The total restructuring liability related to the June 2016 Plan was $104 at March 31, 2020 and $233 at December 31, 2019. 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, 2020:

 
 
Actual costs
 
Planned
 
incurred through
June 2016 Plan
Costs
 
March 31, 2020
Workforce reduction
$
3,075

 
$
3,312

Building and equipment relocation
9,025

 
10,530

Other charges(1)
1,300

 
2,156

Total restructuring charges
$
13,400

 
$
15,998


(1) Other charges includes the effects of currency translation, non-cash asset write-downs and other charges.

April 2014 Plan  
Restructuring and Related Activities Disclosure [Text Block]
2014 Plan

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. Restructuring charges associated with this plan were $(248) for the three months ended March 31, 2019. There were no restructuring charges incurred under this plan during the three months ended March 31, 2020. The total restructuring liability related to the April 2014 Plan was $648 at March 31, 2020, and $703 at December 31, 2019
v3.20.1
Accumulated Other Comprehensive (Loss) Income (Tables)
3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Schedule of Accumulated Other Comprehensive (Loss) Income
The components of accumulated other comprehensive (loss) income for the three months ended March 31, 2020, are as follows:

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

2019
 
in OCI
 
to Income
 
2020
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
659

 
$
(5,422
)
 
$
(281
)
 
$
(5,044
)
Income tax (expense) benefit
(150
)
 
1,225

 
64

 
1,139

Net
509

 
(4,197
)
 
(217
)
 
(3,905
)


 

 

 

Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(124,140
)
 

 
1,660

 
(122,480
)
Income tax benefit (expense)
34,018

 

 
(375
)
 
33,643

Net
(90,122
)
 

 
1,285

 
(88,837
)



 

 


 


Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,211
)
 
(41
)
 

 
(2,252
)
Income tax benefit (expense)
98

 
(98
)
 

 

Net
(2,113
)
 
(139
)
 

 
(2,252
)
Total accumulated other comprehensive (loss) income
$
(91,726
)
 
$
(4,336
)
 
$
1,068

 
$
(94,994
)

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
)

v3.20.1
Condensed Consolidated Statement of Shareholders' Equity - USD ($)
$ in Thousands
Total
Common Stock
Additional Contributed Capital
Retained Earnings
Accumulated Other Comprehensive Earnings/(Loss)
Treasury Stock
Beginning Balance at Dec. 31, 2018 $ 377,929 $ 306,697 $ 42,820 $ 478,847 $ (97,739) $ (352,696)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
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 (1,315)     (1,315)    
Acquired shares for treasury stock (849)         (849)
Issued shares on vesting of restricted stock units (2,636) 967 (3,603)      
Stock compensation 1,154   1,154      
Ending Balance at Mar. 31, 2019 386,893 307,664 40,371 488,951 (96,548) (353,545)
Beginning Balance at Dec. 31, 2019 405,219 307,932 43,689 509,766 (91,726) (364,442)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net earnings 3,808     3,808    
Changes in fair market value of derivatives, net of tax (4,414)       (4,414)  
Changes in unrealized pension cost, net of tax 1,285       1,285  
Cumulative translation adjustment, net of tax (139)       (139)  
Cash dividends (1,298)     (1,298)    
Acquired shares for treasury stock (5,304)         (5,304)
Issued shares on vesting of restricted stock units (1,903) 2,166 (4,069)      
Stock compensation 212   212      
Ending Balance at Mar. 31, 2020 $ 397,466 $ 310,098 $ 39,832 $ 512,276 $ (94,994) $ (369,746)
v3.20.1
Costs Associated with Exit and Restructuring Activities - Restructuring Reserve Activity (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Restructuring reserve activity    
Restructuring charges $ 240 $ 2,084
April 2014 Plan and June 2016 Plan [Member]    
Restructuring reserve activity    
Restructuring liability at beginning 1,993  
Restructuring charges 240  
Cost paid (606)  
Restructuring liability at ending 1,183  
Restructuring Reserve, Translation and Other Adjustment $ (444)  
v3.20.1
Consolidated Statements of Earnings - Unaudited - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Income Statement [Abstract]    
Net sales $ 103,075 $ 117,625
Cost of goods sold 70,176 77,010
Gross margin 32,899 40,615
Selling, general and administrative expenses 16,759 17,522
Research and development expenses 7,408 6,791
Restructuring charges 240 2,084
Operating earnings 8,492 14,218
Other (expense) income:    
Interest expense (851) (466)
Interest income 331 432
Other (expense) income, net (1,982) 96
Total other (expense) income. net (2,502) 62
Earnings before income taxes 5,990 14,280
Income tax expense 2,182 2,861
Net earnings $ 3,808 $ 11,419
Earnings per share:    
Basic (in dollars per share) $ 0.12 $ 0.35
Diluted (in dollars per share) $ 0.12 $ 0.34
Basic weighted - average common shares outstanding (in shares): 32,466 32,807
Effect of dilutive securities (in shares) 327 463
Diluted weighted - average common shares outstanding (in shares) 32,793 33,270
Cash dividends declared per share (in dollars per share) $ 0.04 $ 0.04
v3.20.1
Other Intangible Assets - Summary of Amortization Expense (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule    
2020 $ 6,756  
2021 8,893  
2022 8,657  
2023 6,651  
2024 6,489  
Thereafter 45,473  
Total amortization expense $ 82,919 $ 85,215
v3.20.1
Retirement Plans - Net Pension Income (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Pension Plans    
Defined Benefit Plan Disclosure    
Net pension expense $ 664 $ 250
v3.20.1
Equity-Based Compensation - Summary of Status of Equity-Based Compensation Plans (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Summary of Status of Equity-Based Compensation Plans    
Other accrued liabilities $ 3,832 $ 5,218
2018 Plan    
Summary of Status of Equity-Based Compensation Plans    
Awards originally available 2,500,000  
Shares outstanding 452,250  
Stock options outstanding 452,250  
Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Released Number 27,037  
Awards available for grant 2,020,713  
2014 Plan    
Summary of Status of Equity-Based Compensation Plans    
Awards originally available 1,500,000  
Stock options outstanding 35,952  
2009 Plan    
Summary of Status of Equity-Based Compensation Plans    
Awards originally available 3,400,000  
Stock options outstanding 443,272  
2004 Plan    
Summary of Status of Equity-Based Compensation Plans    
Awards originally available 6,500,000  
Stock options outstanding 5,522  
Directors' Plan    
Summary of Status of Equity-Based Compensation Plans    
Stock options outstanding 92,600  
RSUs | 2014 Plan    
Summary of Status of Equity-Based Compensation Plans    
Shares outstanding 218,272  
RSUs | 2009 Plan    
Summary of Status of Equity-Based Compensation Plans    
Shares outstanding 92,600  
RSUs | 2004 Plan    
Summary of Status of Equity-Based Compensation Plans    
Shares outstanding 35,952  
RSUs | Directors' Plan    
Summary of Status of Equity-Based Compensation Plans    
Shares outstanding 5,522  
Performance-Based Stock Options | 2014 Plan    
Summary of Status of Equity-Based Compensation Plans    
Awards originally available 350,000  
Shares outstanding 225,000  
Stock options outstanding 225,000  
Cash Settled Awards    
Summary of Status of Equity-Based Compensation Plans    
Other accrued liabilities $ 135 $ 353
Officers, key employees, and non-employee directors | Service-Based RSUs    
Share-based Compensation    
Releasable - weighted average fair value $ 15.02  
v3.20.1
Leases Operating Lease Disclosure (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Leases [Abstract]      
Operating Lease, Weighted Average Remaining Lease Term 8 years 8 months 4 days 9 years 14 days  
Operating lease obligations $ 3,178 $ 2,787 $ 2,787
Long-term operating lease obligations 25,078 24,926 $ 24,926
Operating Lease, Liability $ 28,256 $ 27,713  
Operating Lease, Weighted Average Discount Rate, Percent 6.46% 6.54%  
Operating Lease, Payments, Use $ 1,130 $ 927  
v3.20.1
Business Acquisitions Schedule of intangible assets acquired (Details) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Acquired Finite-Lived Intangible Assets [Line Items]    
Business Combination, Consideration Transferred $ 72,850,000  
Business Acquisitions, Consideration Transferred, Liabilities Incurred 1,056,000  
Payments to Acquire Businesses, Net of Cash Acquired $ 73,906,000 $ 73,906,000
v3.20.1
Equity-Based Compensation Equity-Based Compensation - Performance and Market Based RSUs (Details) - $ / shares
3 Months Ended
Mar. 31, 2020
Feb. 06, 2020
Sep. 04, 2019
Feb. 07, 2019
Performance Goal [Member]        
Units        
Target Units Outstanding 204,848 72,521 1,750 6,945
Shared Based Compensation Maximum Potential Awards 409,696 145,042 3,500 13,890
Performance and Market-based Restricted Stock Units        
Units        
Outstanding at beginning of year - shares 217,229      
Granted - shares 72,521      
Attained by performance - shares 38,820      
Vested and released - shares (111,838)      
Forfeited - shares (11,884)      
Outstanding at end of year - shares 204,848      
Maximum potential units outstanding at June 30, 2016 - shares 0      
Weighted Average Grant Date Fair Value        
Beginning of year - weighted average fair value $ 27.73      
Granted - weighted average fair value 32.56      
Attained by performance - weighted average fair value 23.84      
Vested and released - weighted average fair value 23.74      
Forfeited - weighted average fair value 25.69      
End of year - weighted average fair value 30.85      
Maximum potential units outstanding at June 30, 2016 - weighted average fair value $ 0      
v3.20.1
Equity-Based Compensation (Tables)
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Summary of Equity-Based Compensation Expense
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,
 
2020
 
2019
Service-based RSUs
$
580

 
$
606

Performance-based RSUs
(368
)
 
548

Cash-settled RSUs
16


60

Total
$
228

 
$
1,214

Income tax benefit
51

 
274

Net expense
$
177

 
$
940


Schedule of Unrecognized Equity-Based Compensation Expense
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, 2020
 
Period
Service-based RSUs
$
3,020

 
1.56
Performance-based RSUs
3,919

 
2.24
Total
$
6,939

 
1.94

Summary of Status of Equity-Based Compensation Plans
The following table summarizes the status of these plans as of March 31, 2020:
 
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

 
225,000

 

 

 

Maximum potential RSU and cash settled awards outstanding
452,250

 
218,272

 
92,600

 
35,952

 
5,522

Maximum potential awards outstanding
452,250

 
443,272

 
92,600

 
35,952

 
5,522

RSUs and cash settled awards vested and released
27,037

 

 

 

 

Awards available for grant
2,020,713

 

 

 

 


Summary of Service-Based Restricted Stock Units
The following table summarizes the service-based RSU activity for the three months ended March 31, 2020
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
364,396

 
$
19.87

Granted
64,796

 
30.13

Vested and released
(47,195
)
 
27.05

Forfeited
(3,624
)
 
28.45

Outstanding at March 31, 2020
378,373

 
$
20.65

Releasable at March 31, 2020
224,974

 
$
15.02

 
Schedule of Components of Performance-Based RSU's
The following table summarizes the performance and market-based RSU activity for the three months ended March 31, 2020:
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
217,229

 
$
27.73

Granted
72,521

 
32.56

Attained by performance
38,820

 
23.84

Released
(111,838
)
 
23.74

Forfeited
(11,884
)
 
25.69

Outstanding at March 31, 2020
204,848

 
$
30.85

Releasable at March 31, 2020

 
$



The following table summarizes each grant of performance awards outstanding at March 31, 2020.
Description
Grant Date
Vesting Year
Vesting Dependency
Target Units Outstanding
Maximum Number of Units to be Granted
2018 - 2020 Performance RSUs
February 8, 2018
2020
35% RTSR, 35% sales growth, 30% operating cash flow
31,398

62,796

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
60,414

120,828

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

13,890

2020 - 2022 QTI Performance RSUs
September 24, 2019
2022
50% EBITDA growth, 50% Sales growth
1,750

3,500

2020 - 2022 Performance RSUs
February 6, 2020
2022
25% RTSR, 40% sales growth, 35% operating cash flow
72,521

145,042

      Total



204,848

409,696


v3.20.1
Business Acquisitions (Tables)
3 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Schedule of Acquired Finite-Lived Intangible Assets by Major Class [Table Text Block]

Carrying Value
Weighted Average Amortization Period
Customer lists/relationships
$
31,000

15.0
Technology and other intangibles
1,800

5.0
Total
$
32,800



Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]
 
 
Fair Values at July 31, 2019
Current assets
 
$
6,221

Property, plant and equipment
 
2,567

Other assets
 
29

Goodwill
 
34,999

Intangible assets
 
32,800

Fair value of assets acquired
 
76,616

Less fair value of liabilities acquired
 
(2,710
)
Purchase price
 
$
73,906


v3.20.1
Property, Plant and Equipment - Summary of Property, Plant and Equipment (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Property, plant and equipment      
Less: Accumulated depreciation $ (192,773)   $ (188,719)
Property, plant and equipment, net 101,755   105,038
Depreciation 4,237 $ 4,234  
Land and land improvements      
Property, plant and equipment      
Property, plant and equipment gross 1,095   1,095
Buildings and improvements      
Property, plant and equipment      
Property, plant and equipment gross 68,175   68,350
Machinery and equipment      
Property, plant and equipment      
Property, plant and equipment gross $ 225,258   $ 224,312
v3.20.1
Derivative Financial Instruments - Income Statement (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Derivative, Gain (Loss) on Derivative, Net    
Derivative, Gain (Loss) on Derivative, Net $ 281 $ 215
Foreign exchange derivative | Designated As Hedging    
Derivative Instruments, Gain (Loss) [Line Items]    
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net 243 59
Derivative, Gain (Loss) on Derivative, Net    
Derivative, Gain (Loss) on Derivative, Net 243 59
Foreign exchange derivative | Cost of goods sold | Designated As Hedging    
Derivative Instruments, Gain (Loss) [Line Items]    
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net 248 42
Foreign exchange derivative | Selling, general and administrative expenses | Designated As Hedging    
Derivative Instruments, Gain (Loss) [Line Items]    
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net (5) 17
Foreign exchange derivative | Other income and expenses | Designated As Hedging    
Derivative, Gain (Loss) on Derivative, Net    
Derivative, Net Hedge Ineffectiveness Gain (Loss) 0 0
Interest rate swap | Interest expense | Designated As Hedging    
Derivative, Gain (Loss) on Derivative, Net    
Derivative, Gain (Loss) on Derivative, Net $ 38 $ 156
v3.20.1
Debt - Long-Term Debt (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Feb. 12, 2019
May 23, 2016
Long-term debt          
Total credit facility $ 300,000        
Amount available 147,000   $ 198,500    
Long-term Line of Credit, Noncurrent 151,200   99,700    
Letters of Credit Outstanding, Amount 1,800   1,800    
Amortization of Debt Issuance Costs 42 $ 36      
Line of Credit | Revolving Credit Facility Due 2024          
Long-term debt          
Total credit facility     $ 300,000 $ 300,000 $ 300,000
Line of Credit Facility Contingent Increase to Maximum Borrowing Capacity       $ 150,000  
Long-term Line of Credit, Noncurrent $ 151,200        
Weighted-average interest rate 2.78%   3.25%    
Commitment fee percentage per annum 0.23%   0.23%    
Line of Credit | Revolving Credit Facility [Member]          
Long-term debt          
Long-term Line of Credit, Noncurrent     $ 99,700    
v3.20.1
Basis of Presentation (Policies)
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Basis of Presentation
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, 2019.
 
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.
Recent Accounting Pronouncements
NOTE 20 — Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted
ASU No. 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. We adopted this ASU on January 1, 2020 and it did not have a material impact on our financial statements.
ASU No. 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 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. We adopted this ASU on January 1, 2020 and it did not have a material impact on our financial statements.
ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments"
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions and reasonable and supportable forecasts. For trade receivables, loans, and other financial instruments, we will be required to use a forward-looking expected loss model that reflects losses that are probable rather than the incurred loss model for recognizing credit losses. The standard became effective for interim and annual periods beginning after December 15, 2019. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We adopted this ASU on January 1, 2020 and it did not have a material impact on our financial statements.

Recently Issued Accounting Pronouncements

ASU No. 2019-12 "Simplifying the Accounting for Income Taxes"

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Simplifying the Accounting for Income Taxes, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this ASU on our financial statements.

ASU No. 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 annual financial statement disclosures but will not impact our interim financial statements and does not have an impact on our consolidated financial position, results of operations, or cash flows.
v3.20.1
Income Taxes
3 Months Ended
Mar. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 17 — Income Taxes
The effective tax rates for the three-month periods ended March 31, 2020 and 2019 are as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Effective tax rate
36.4
%
 
20.0
%

 
Our effective income tax rate was 36.4% and 20.0% in the first quarters of 2020 and 2019, respectively. This increase is primarily attributed to establishment of valuation allowances on certain U.S. tax credits and a one-time tax expense resulting from a change in company structure during 2020. The first quarter 2020 tax rate was higher than the U.S. statutory federal tax rate for the same reasons noted above. The first quarter 2019 tax rate was lower than the U.S. statutory federal tax rate primarily due to the tax benefits recorded upon vesting of restricted stock units.
v3.20.1
Accumulated Other Comprehensive (Loss) Income
3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Accumulated Other Comprehensive (Loss) Income
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 a portion of our revolving credit facility's outstanding balance from a variable rate of interest into a fixed rate and foreign currency forward contracts 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 (losses) gains for the three months ended March 31, 2020 and 2019 were $(1,271) and $474, respectively, which have been included in other income (expense) in the Condensed Consolidated Statement of Earnings.

The components of accumulated other comprehensive (loss) income for the three months ended March 31, 2020, are as follows:

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

2019
 
in OCI
 
to Income
 
2020
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
659

 
$
(5,422
)
 
$
(281
)
 
$
(5,044
)
Income tax (expense) benefit
(150
)
 
1,225

 
64

 
1,139

Net
509

 
(4,197
)
 
(217
)
 
(3,905
)


 

 

 

Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(124,140
)
 

 
1,660

 
(122,480
)
Income tax benefit (expense)
34,018

 

 
(375
)
 
33,643

Net
(90,122
)
 

 
1,285

 
(88,837
)



 

 


 


Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,211
)
 
(41
)
 

 
(2,252
)
Income tax benefit (expense)
98

 
(98
)
 

 

Net
(2,113
)
 
(139
)
 

 
(2,252
)
Total accumulated other comprehensive (loss) income
$
(91,726
)
 
$
(4,336
)
 
$
1,068

 
$
(94,994
)

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
)

v3.20.1
Inventories - Summary of Inventories (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Inventories    
Finished goods $ 9,595 $ 9,447
Work-in-process 16,276 14,954
Raw materials 25,012 23,363
Less: Inventory reserves (5,204) (5,527)
Inventories, net $ 45,679 $ 42,237
v3.20.1
Shareholders' Equity (Tables)
3 Months Ended
Mar. 31, 2020
Stockholders' Equity Note [Abstract]  
Summary of Share Count and Par Value Data Related to Shareholders' Equity
Share count and par value data related to shareholders’ equity are as follows:
 
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Preferred Stock
 
 
 
Par value per share
No par value

 
No par value

Shares authorized
25,000,000

 
25,000,000

Shares outstanding

 

Common Stock
 
 
 
Par value per share
No par value

 
No par value

Shares authorized
75,000,000

 
75,000,000

Shares issued
57,023,530

 
56,929,298

Shares outstanding
32,345,907

 
32,472,406

Treasury stock
 
 
 
Shares held
24,677,623

 
24,456,892


Treasury Stock [Text Block]
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, 2020 and 2019, 220,731 and 31,500 shares of common stock were repurchased for $5,304 and $849, respectively. Approximately $8,516 is available for future purchases.
Summary of Common Shares Outstanding
A roll-forward of common shares outstanding is as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Balance at the beginning of the year
32,472,406

 
32,750,727

Repurchases
(220,731
)
 
(31,500
)
Restricted share issuances
94,232

 
136,281

Balance at the end of the period
32,345,907

 
32,855,508

 
Certain potentially dilutive restricted stock units are excluded from diluted earning per share because they are anti-dilutive. The number of outstanding awards that were anti-dilutive at March 31, 2020 and March 31, 2019 were 38,839 and 91,098, respectively.
v3.20.1
Leases Future Lease Schedule (Tables)
3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]
Remaining maturity of our existing lease liabilities as of March 31, 2020 is as follows:
 
Operating Leases(1)
2020
$
3,514

2021
4,686

2022
4,547

2023
4,185

2024
4,075

Thereafter
16,950

Total
$
37,957

Less: interest
(9,701
)
Present value of lease liabilities
$
28,256

(1) Operating lease payments include $3,822 of payments related to options to extend lease terms that are reasonably expected to be exercised.
v3.20.1
Accumulated Other Comprehensive (Loss) Income - Summary of Components of Other Comprehensive Loss (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Dec. 31, 2018
Foreign currency transaction loss        
Foreign currency transaction gain (loss) $ (1,271) $ 474    
AOCI Attributable to Parent, Net of Tax        
Total accumulated other comprehensive (loss) income, end of period (94,994)   $ (91,726)  
Accumulated Other Comprehensive Earnings/(Loss)        
AOCI Attributable to Parent, Net of Tax        
Gain (Loss) recognized in OCI, Net (4,336) 335    
Gain (Loss) reclassified from AOCI to income, Net 1,068 856    
Total accumulated other comprehensive (loss) income, end of period (94,994) (96,548) (91,726) $ (97,739)
Changes in fair market value of hedges        
Changes in AOCI, Gross        
Gross, beginning of the period 659 1,316    
Other Comprehensive Income (Loss), before Reclassifications, before Tax (5,422) 315    
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax (281) (215)    
Gross, ending balance (5,044) 1,416    
Changes in AOCI, Income tax (benefit)        
Income tax (benefit), beginning of period (150) (298)    
Income tax (benefit), Gain (Loss) recognized in OCI 1,225 (71)    
Income tax (benefit), Gain (Loss) reclassified from AOCI to income 64 49    
Income tax (benefit), ending of period 1,139 (320)    
AOCI Attributable to Parent, Net of Tax        
Gain (Loss) recognized in OCI, Net (4,197) 244    
Gain (Loss) reclassified from AOCI to income, Net (217) (166)    
Total accumulated other comprehensive (loss) income, end of period (3,905) 1,096 509 1,018
Changes in unrealized pension cost        
Changes in AOCI, Gross        
Gross, beginning of the period (124,140) (132,454)    
Other Comprehensive Income (Loss), before Reclassifications, before Tax 0 0    
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax 1,660 1,319    
Gross, ending balance (122,480) (131,135)    
Changes in AOCI, Income tax (benefit)        
Income tax (benefit), beginning of period 34,018 35,893    
Income tax (benefit), Gain (Loss) recognized in OCI 0 0    
Income tax (benefit), Gain (Loss) reclassified from AOCI to income (375) (297)    
Income tax (benefit), ending of period 33,643 35,596    
AOCI Attributable to Parent, Net of Tax        
Gain (Loss) recognized in OCI, Net 0 0    
Gain (Loss) reclassified from AOCI to income, Net 1,285 1,022    
Total accumulated other comprehensive (loss) income, end of period (88,837) (95,539) (90,122) (96,561)
Cumulative translation adjustment        
Changes in AOCI, Gross        
Gross, beginning of the period (2,211) (2,291)    
Other Comprehensive Income (Loss), before Reclassifications, before Tax (41) 88    
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax 0 0    
Gross, ending balance (2,252) (2,203)    
Changes in AOCI, Income tax (benefit)        
Income tax (benefit), beginning of period 98 95    
Income tax (benefit), Gain (Loss) recognized in OCI (98) 3    
Income tax (benefit), Gain (Loss) reclassified from AOCI to income 0 0    
Income tax (benefit), ending of period 0 98    
AOCI Attributable to Parent, Net of Tax        
Gain (Loss) recognized in OCI, Net (139) 91    
Gain (Loss) reclassified from AOCI to income, Net 0 0    
Total accumulated other comprehensive (loss) income, end of period $ (2,252) $ (2,105) $ (2,113) $ (2,196)
v3.20.1
Debt - Narratives (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Feb. 12, 2019
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
May 23, 2016
Line of Credit Facility          
Line of credit maximum borrowing amount   $ 300,000      
Debt amortization expense   42 $ 36    
Long-term Line of Credit, Noncurrent   $ 151,200   $ 99,700  
Line of Credit | Revolving Credit Facility Due 2024          
Line of Credit Facility          
Debt instrument, term 5 years        
Line of credit maximum borrowing amount $ 300,000     $ 300,000 $ 300,000
Line of credit facility contingent increase to maximum borrowing capacity 150,000        
Commitment fee percentage per annum   0.23%   0.23%  
Long-term Line of Credit, Noncurrent   $ 151,200      
Line of Credit | Revolving Credit Facility Due 2024 Swingline Sublimit          
Line of Credit Facility          
Line of credit maximum borrowing amount 15,000        
Line of Credit | Revolving Credit Facility Due 2024 Letter Of Credit Sublimit          
Line of Credit Facility          
Line of credit maximum borrowing amount $ 10,000        
Minimum | Line of Credit | Revolving Credit Facility Due 2024          
Line of Credit Facility          
Commitment fee percentage per annum 0.20%        
Maximum | Line of Credit | Revolving Credit Facility Due 2024          
Line of Credit Facility          
Commitment fee percentage per annum 0.30%        
v3.20.1
Leases
3 Months Ended
Mar. 31, 2020
Disclosure Text Block [Abstract]  
Lessee, Operating Leases [Text Block]
NOTE 18 — Leases

We lease certain land, buildings and equipment under non-cancellable 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.

Components of lease expense for the three months ended March 31, 2020 were as follows:

Three Months Ended

March 31,
 
March 31,
 
2020
 
2019
Operating lease cost
$
1,199

 
$
994

Short-term lease cost
167

 
73

Total lease cost
$
1,366

 
$
1,067



Supplemental cash flow information related to leases was as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities
$
1,130

 
$
927

Leased assets obtained in exchange for new operating lease liabilities
$
1,179

 
$
2,961



Supplemental balance sheet information related to leases was as follows:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Balance Sheet Classification:
 
 
 
Operating lease obligations
$
3,178

 
$
2,787

Long-term operating lease obligations
25,078

 
24,926

Total lease liabilities
$
28,256

 
$
27,713

 
 
 
 
Weighted-average remaining lease terms (years)
8.68

 
9.04



 
 
Weighted-average discount rate
6.46
%
 
6.54
%

Remaining maturity of our existing lease liabilities as of March 31, 2020 is as follows:
 
Operating Leases(1)
2020
$
3,514

2021
4,686

2022
4,547

2023
4,185

2024
4,075

Thereafter
16,950

Total
$
37,957

Less: interest
(9,701
)
Present value of lease liabilities
$
28,256

(1) Operating lease payments include $3,822 of payments related to options to extend lease terms that are reasonably expected to be exercised.
v3.20.1
Shareholders' Equity
3 Months Ended
Mar. 31, 2020
Stockholders' Equity Note [Abstract]  
Shareholders' Equity
NOTE 14 – Shareholders’ Equity

Share count and par value data related to shareholders’ equity are as follows:
 
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Preferred Stock
 
 
 
Par value per share
No par value

 
No par value

Shares authorized
25,000,000

 
25,000,000

Shares outstanding

 

Common Stock
 
 
 
Par value per share
No par value

 
No par value

Shares authorized
75,000,000

 
75,000,000

Shares issued
57,023,530

 
56,929,298

Shares outstanding
32,345,907

 
32,472,406

Treasury stock
 
 
 
Shares held
24,677,623

 
24,456,892


 
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, 2020 and 2019, 220,731 and 31,500 shares of common stock were repurchased for $5,304 and $849, respectively. Approximately $8,516 is available for future purchases.

A roll-forward of common shares outstanding is as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Balance at the beginning of the year
32,472,406

 
32,750,727

Repurchases
(220,731
)
 
(31,500
)
Restricted share issuances
94,232

 
136,281

Balance at the end of the period
32,345,907

 
32,855,508

 
Certain potentially dilutive restricted stock units are excluded from diluted earning per share because they are anti-dilutive. The number of outstanding awards that were anti-dilutive at March 31, 2020 and March 31, 2019 were 38,839 and 91,098, respectively.
v3.20.1
Revenue Recognition Disaggregated Revenue (Tables)
3 Months Ended
Mar. 31, 2020
Disaggregation of Revenue [Abstract]  
Disaggregation of Revenue [Table Text Block]
The following table presents revenues disaggregated by the major markets we serve:
 
Three Months Ended
 
March 31, 2020
 
March 31, 2019
Transportation
$
61,534

 
$
78,842

Industrial
20,843

 
18,156

Medical
9,370

 
9,666

Aerospace & Defense
9,005

 
7,523

Telecom & IT
2,323

 
3,438

Total
$
103,075

 
$
117,625


v3.20.1
Contingencies
3 Months Ended
Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Contingencies
NOTE 10 – Commitments and Contingencies

Certain processes in the manufacture of our current and past products create by-products classified as hazardous waste. We have been notified by the U.S. Environmental Protection Agency, state environmental agencies, and in some cases, groups of potentially responsible parties, that we may be potentially liable for environmental contamination at several sites currently and formerly owned or operated by us. Two of those sites, Asheville, North Carolina and Mountain View, California, are designated National Priorities List sites under the U.S. Environmental Protection Agency’s Superfund program. We accrue a liability for probable remediation activities, claims and proceedings against us with respect to environmental matters if the amount can be reasonably estimated, and provide disclosures including the nature of a loss whenever it is probable or reasonably possible that a potentially material loss may have occurred but cannot be estimated. We record contingent loss accruals on an undiscounted basis.
A roll-forward of remediation reserves included in Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets is comprised of the following:
 
As of
 
March 31, 2020
 
December 31, 2019
Balance at beginning of period
$
11,444

 
$
11,274

Remediation expense
143

 
2,602

Net remediation payments
(2,605
)
 
(2,455
)
Other activity(1)
(7
)
 
23

Balance at end of the period
$
8,975

 
$
11,444

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

Unrelated to the environmental claims described above, certain other legal claims are pending against us with respect to matters arising out of the ordinary conduct of our business.

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

We cannot provide assurance that the ultimate disposition of environmental, legal, and product warranty claims will not materially exceed the amount of our accrued losses and adversely impact our consolidated financial position, results of operations, or cash flows. Our accrued liabilities and disclosures will be adjusted accordingly if additional information becomes available in the future.
v3.20.1
Retirement Plans
3 Months Ended
Mar. 31, 2020
Retirement Benefits [Abstract]  
Retirement Plans
NOTE 6 – Retirement Plans
 
Pension Plans
 
Net pension expense for our domestic and foreign plans included in other income (expense) in the Condensed Consolidated Statement of Earnings is as follows:
 
Three Months Ended

March 31,

March 31,
 
2020
 
2019
Net pension expense
$
664

 
$
250


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,
 
2020
 
2019
 
2020
 
2019
Service cost
$

 
$

 
$
7

 
$
9

Interest cost
1,443

 
1,931

 
7

 
7

Expected return on plan assets(1)
(2,454
)
 
(3,047
)
 
(4
)
 
(4
)
Amortization of loss
1,622

 
1,312

 
43

 
42

Total expense, net
$
611

 
$
196

 
$
53

 
$
54

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


In February 2020, the CTS Board of Directors authorized management to explore termination of our U.S. based pension plans at management's discretion, subject to certain conditions. Management has not yet made a final decision on whether to pursue a plan termination and the potential timing thereof.
    
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,
 
2020
 
2019
Service cost
$

 
$

Interest cost
30

 
42

Amortization of gain
(21
)
 
(41
)
Total expense, net
$
9

 
$
1


v3.20.1
Derivative Financial Instruments (Tables)
3 Months Ended
Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value
The location and fair values of derivative instruments designated as hedging instruments in the Condensed Consolidated Balance Sheets as of March 31, 2020, are shown in the following table:
 
As of

March 31,
 
December 31,
 
2020
 
2019
Interest rate swaps reported in Other current assets
$

 
$
82

Interest rate swaps reported in Accrued liabilities
$
(523
)
 
$

Interest rate swaps reported in Other long-term obligations
$
(1,840
)
 
$
(78
)
Foreign currency hedges reported in Other current assets
$

 
$
580

Foreign currency hedges reported in Accrued liabilities
$
(2,733
)
 
$


Derivative Instruments, Gain (Loss)
The effect of derivative instruments on the Condensed Consolidated Statements of Earnings is as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Foreign Exchange Contracts:
 
 
 
Amounts reclassified from AOCI to earnings:
 
 
 
Cost of goods sold
$
248

 
$
42

Selling, general and administrative expense
(5
)
 
17

Total gain reclassified from AOCI to earnings
243

 
59

Loss recognized in other expense for hedge ineffectiveness

 

Total derivative gain on foreign exchange contracts recognized in earnings
$
243

 
$
59

 
 
 
 
Interest Rate Swaps:
 
 
 
Benefit recorded in Interest expense
$
38

 
$
156

Total gains on derivatives
$
281

 
$
215


v3.20.1
Accounts Receivable (Tables)
3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Components of Accounts Receivable
The components of accounts receivable, net are as follows:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Accounts receivable, gross
$
71,932

 
$
78,269

Less: Allowance for credit losses
(682
)
 
(261
)
Accounts receivable, net
$
71,250

 
$
78,008


v3.20.1
Other Intangible Assets (Tables)
3 Months Ended
Mar. 31, 2020
Goodwill [Line Items]  
Summary of other intangible assets
 
Other intangible assets, net consist of the following components:
 
As of
 
March 31, 2020
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Amount
Customer lists/relationships
$
92,194

 
$
(40,012
)
 
$
52,182

Technology and other intangibles
47,925

 
(19,388
)
 
28,537

In process research and development
2,200

 

 
2,200

Other intangible assets, net
$
142,319

 
$
(59,400
)
 
$
82,919

Amortization expense for the three months ended March 31, 2020


 
$
2,295

 


 
Summary of amortization expense remaining for other intangible assets
Remaining amortization expense for other intangible assets as of March 31, 2020 is as follows: 

Amortization
expense
2020
$
6,756

2021
8,893

2022
8,657

2023
6,651

2024
6,489

Thereafter
45,473

Total amortization expense
$
82,919

v3.20.1
Costs Associated with Exit and Restructuring Activities - Summary (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Restructuring Cost and Reserve [Line Items]    
Document Period End Date Mar. 31, 2020  
Total restructuring, impairment and restructuring related charges    
Restructuring charges $ 240 $ 2,084
April 2014 Plan and June 2016 Plan [Member]    
Total restructuring, impairment and restructuring related charges    
Restructuring charges 240  
Operating Earnings | April 2014 Plan and June 2016 Plan [Member]    
Total restructuring, impairment and restructuring related charges    
Restructuring charges $ 240 $ 2,084
v3.20.1
Retirement Plans - Net Pension Income Domestic and Foreign (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Pension Plans    
Net pension expense (income)    
Total expense, net $ 664 $ 250
UNITED STATES    
Net pension expense (income)    
Service cost 0 0
Interest cost 1,443 1,931
Defined Benefit Plan, Expected Return (Loss) on Plan Assets 2,454 3,047
Amortization of loss 1,622 1,312
Total expense, net 611 196
Foreign Plan [Member]    
Net pension expense (income)    
Service cost 7 9
Interest cost 7 7
Defined Benefit Plan, Expected Return (Loss) on Plan Assets 4 4
Amortization of loss 43 42
Total expense, net $ 53 $ 54
v3.20.1
Condensed Consolidated Statement of Shareholders Equity (parenthetical) - $ / shares
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement of Stockholders' Equity [Abstract]    
Cash dividends declared per share (in dollars per share) $ 0.04 $ 0.04
Treasury Stock, Shares, Acquired 220,731 31,500
v3.20.1
Costs Associated with Exit and Restructuring Activities Other Restructuring Activities (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges $ (240) $ (2,084)
Other Restructuring Activities [Member]    
Restructuring Cost and Reserve [Line Items]    
Restructuring Charges (272)  
Restructuring Reserve $ 431  
v3.20.1
Condensed Consolidated Statements of Comprehensive Earnings - Unaudited - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement of Comprehensive Income [Abstract]    
Net earnings $ 3,808 $ 11,419
Other comprehensive (loss) earnings:    
Changes in fair market value of derivatives, net of tax (4,414) 78
Changes in unrealized pension cost, net of tax 1,285 1,022
Cumulative translation adjustment, net of tax (139) 91
Other comprehensive (loss) earnings (3,268) 1,191
Comprehensive earnings $ 540 $ 12,610
v3.20.1
Equity-Based Compensation - Summary of Equity-Based Compensation Expense related to Non-Vested RSUs (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
Service-Based RSUs  
Share-based Compensation  
Unrecognized compensation cost $ 3,020
Weighted average period 1 year 6 months 21 days
Performance-Based RSUs  
Share-based Compensation  
Unrecognized compensation cost $ 3,919
Weighted average period 2 years 2 months 26 days
RSUs  
Share-based Compensation  
Unrecognized compensation cost $ 6,939
Weighted average period 1 year 11 months 8 days
v3.20.1
Leases Schedule of Future Minimum Rental Payments for Operating Leases (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Mar. 31, 2019
Leases [Abstract]    
2020 $ 3,514  
2021 4,686  
2022 4,547  
2023 4,185  
2024 4,075  
Thereafter 16,950  
Total 37,957  
Less: Interest (9,701)  
Present value of lease liabilities $ 28,256 $ 27,713
v3.20.1
Business Acquisitions Schedule of Finite Lived Intangibles Acquired (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
Customer lists/relationships  
Acquired Finite-Lived Intangible Assets [Line Items]  
Finite-lived Intangible Assets Acquired $ 31,000
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life 15 years
Technology and other intangibles  
Acquired Finite-Lived Intangible Assets [Line Items]  
Finite-lived Intangible Assets Acquired $ 1,800
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life 5 years
Finite-Lived Intangible Assets [Member]  
Acquired Finite-Lived Intangible Assets [Line Items]  
Finite-lived Intangible Assets Acquired $ 32,800
v3.20.1
Equity-Based Compensation - Schedule of Performance-Based RSUs (Details) - shares
Mar. 31, 2020
Feb. 06, 2020
Sep. 04, 2019
Feb. 07, 2019
Feb. 16, 2018
Feb. 08, 2018
Performance and Market-based Restricted Stock Units            
Share-based Compensation            
Maximum potential units outstanding at June 30, 2016 - shares 0          
Performance-Based RSUs            
Share-based Compensation            
Target Units Outstanding       60,414 31,820 31,398
Shared Based Compensation Maximum Potential Awards       120,828 63,640 62,796
Performance Goal [Member]            
Share-based Compensation            
Target Units Outstanding 204,848 72,521 1,750 6,945    
Shared Based Compensation Maximum Potential Awards 409,696 145,042 3,500 13,890    
v3.20.1
Shareholders' Equity - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Feb. 07, 2019
Stockholders' Equity Note [Abstract]      
Treasury Shares Authorized to be Purchased     $ 25,000
Common stock repurchased, shares 220,731 31,500  
Common stock repurchased, value $ 5,304 $ 849  
Shares are available for future issuances $ 8,516    
Antidilutive securities excluded from computation of earnings per share (shares) 38,839 91,098  
v3.20.1
Derivative Financial Instruments - Fair Value of Derivative Instruments (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Derivative Liability    
Derivative Liability $ 3,256 $ 0
Interest rate swap | Other Current Assets [Member] | Cash Flow Hedging [Member]    
Derivative Liability    
Derivative Asset 0 82
Interest rate swap | Other Noncurrent Liabilities [Member] | Cash Flow Hedging [Member]    
Derivative Liability    
Derivative Liability (1,840) (78)
Cash Flow Hedging [Member] | Other Current Liabilities [Member] | Interest rate swap    
Derivative Liability    
Derivative Liability (523) 0
Foreign currency hedges | Other Current Liabilities [Member] | Cash Flow Hedging [Member]    
Derivative Liability    
Derivative Liability (2,733) 0
Foreign currency hedges | Other Current Assets [Member] | Cash Flow Hedging [Member]    
Derivative Liability    
Derivative Asset 0 $ 580
Designated as Hedging Instrument [Member] | Foreign currency hedges | Cash Flow Hedging [Member]    
Derivatives, Fair Value [Line Items]    
Foreign Currency Cash Flow Hedge Gain (Loss) to be Reclassified During Next 12 Months $ 1,483  
v3.20.1
Contingencies Remediation Liability (Details) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Loss Contingencies [Line Items]      
Accrued Environmental Loss Contingencies, Current $ 8,975 $ 11,444 $ 11,274
Accrual for Environmental Loss Contingencies, Charges to Expense for New Losses 143 2,602  
Accrual for Environmental Loss Contingencies Payments, Net of Reimbursements (2,605) (2,455)  
Accrual for Environmental Loss Contingencies, Foreign Currency Translation Gain (Loss) $ (7) $ 23  
v3.20.1
Fair Value Measurement (Tables)
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Summary of Financial Liability Measured at Fair Value on a Recurring Basis
The table below summarizes our financial assets (liabilities) that were measured at fair value on a recurring basis at March 31, 2020:
 
 
 
Quoted
 
 
 
 
 

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

2020
 
(Level 1)
 
(Level 2)
 
(Level 3)
Interest rate swaps
$
(2,363
)
 
$

 
$
(2,363
)
 
$

Foreign currency hedges
$
(2,733
)
 
$

 
$
(2,733
)
 
$

 
The table below summarizes the financial assets that were measured at fair value on a recurring basis as of December 31, 2019:
 
 
 
Quoted
 
 
 
 
 

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

2019
 
(Level 1)
 
(Level 2)
 
(Level 3)
Interest rate swaps
$
4

 
$

 
$
4

 
$

Foreign currency hedges
$
580

 
$

 
$
580

 
$

Reconciliation of Recurring Financial Liability Related to Interest Rate Swaps
The effect of derivative instruments on the Condensed Consolidated Statements of Earnings is as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Foreign Exchange Contracts:
 
 
 
Amounts reclassified from AOCI to earnings:
 
 
 
Cost of goods sold
$
248

 
$
42

Selling, general and administrative expense
(5
)
 
17

Total gain reclassified from AOCI to earnings
243

 
59

Loss recognized in other expense for hedge ineffectiveness

 

Total derivative gain on foreign exchange contracts recognized in earnings
$
243

 
$
59

 
 
 
 
Interest Rate Swaps:
 
 
 
Benefit recorded in Interest expense
$
38

 
$
156

Total gains on derivatives
$
281

 
$
215


v3.20.1
Revenue Recognition Disaggregated Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Disaggregation of Revenue [Line Items]    
Revenues $ 103,075 $ 117,625
Aerospace and Defense [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 61,534 78,842
Industrial [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 20,843 18,156
Medical [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 9,370 9,666
Telecommunications & IT [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 9,005 7,523
Transportation [Member]    
Disaggregation of Revenue [Line Items]    
Revenues $ 2,323 $ 3,438
v3.20.1
Recent Accounting Pronouncements
3 Months Ended
Mar. 31, 2020
Recent Accounting Pronouncements [Abstract]  
Description of New Accounting Pronouncements Not yet Adopted [Text Block]
NOTE 20 — Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted
ASU No. 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. We adopted this ASU on January 1, 2020 and it did not have a material impact on our financial statements.
ASU No. 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 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. We adopted this ASU on January 1, 2020 and it did not have a material impact on our financial statements.
ASU 2016-13 "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments"
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions and reasonable and supportable forecasts. For trade receivables, loans, and other financial instruments, we will be required to use a forward-looking expected loss model that reflects losses that are probable rather than the incurred loss model for recognizing credit losses. The standard became effective for interim and annual periods beginning after December 15, 2019. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. We adopted this ASU on January 1, 2020 and it did not have a material impact on our financial statements.

Recently Issued Accounting Pronouncements

ASU No. 2019-12 "Simplifying the Accounting for Income Taxes"

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Simplifying the Accounting for Income Taxes, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this ASU on our financial statements.

ASU No. 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 annual financial statement disclosures but will not impact our interim financial statements and does not have an impact on our consolidated financial position, results of operations, or cash flows.
v3.20.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements
NOTE 16 — Fair Value Measurements
 
We use interest rate swaps to convert a portion of our Revolving Credit Facility’s outstanding balance from a variable rate of interest into a fixed rate and foreign currency forward contracts to hedge the effect of foreign currency changes on certain revenues and costs denominated in foreign currencies. These derivative financial instruments are measured at fair value on a recurring basis. 

The table below summarizes our financial assets (liabilities) that were measured at fair value on a recurring basis at March 31, 2020:
 
 
 
Quoted
 
 
 
 
 

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

2020
 
(Level 1)
 
(Level 2)
 
(Level 3)
Interest rate swaps
$
(2,363
)
 
$

 
$
(2,363
)
 
$

Foreign currency hedges
$
(2,733
)
 
$

 
$
(2,733
)
 
$

 
The table below summarizes the financial assets that were measured at fair value on a recurring basis as of December 31, 2019:
 
 
 
Quoted
 
 
 
 
 

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

2019
 
(Level 1)
 
(Level 2)
 
(Level 3)
Interest rate swaps
$
4

 
$

 
$
4

 
$

Foreign currency hedges
$
580

 
$

 
$
580

 
$

 
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.

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.
v3.20.1
Property, Plant and Equipment (Tables)
3 Months Ended
Mar. 31, 2020
Property, Plant and Equipment [Abstract]  
Summary of Property, Plant and Equipment Property, plant and equipment is comprised of the following:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Land and land improvements
$
1,095

 
$
1,095

Buildings and improvements
68,175

 
68,350

Machinery and equipment
225,258

 
224,312

Less: Accumulated depreciation
(192,773
)
 
(188,719
)
Property, plant and equipment, net
$
101,755

 
$
105,038

 
 
 
 
Depreciation expense for the three months ended March 31, 2020
 
 
$
4,237

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

v3.20.1
Accrued expenses and other liabilities (Tables)
3 Months Ended
Mar. 31, 2020
Other Liabilities Disclosure [Abstract]  
Components of Accrued Liabilities
The components of Accrued expenses and other liabilities are as follows: 
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Accrued product related costs
$
4,234

 
$
4,464

Accrued income taxes
8,573

 
7,903

Accrued property and other taxes
809

 
1,574

Accrued professional fees
979

 
1,599

Accrued customer related liabilities
2,520

 
2,877

Dividends payable
1,298

 
1,299

Remediation reserves
8,975

 
11,444

Derivative liabilities
3,256

 

Other accrued liabilities
3,832

 
5,218

Total accrued expenses and other liabilities
$
34,476

 
$
36,378


v3.20.1
Derivative Financial Instruments
3 Months Ended
Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments
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).

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, 2020.

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, 2020, we had a net unrealized loss of $2,076 in accumulated other comprehensive (loss) income, of which $1,483 is expected to be reclassified to income within the next 12 months. At March 31, 2019 we had a net unrealized gain of $746 in accumulated other comprehensive (loss) income. The notional amount of foreign currency forward contracts outstanding was $30,745 at March 31, 2020.





Interest Rate Swaps
We use interest rate swaps to convert a portion of our revolving credit facility’s outstanding balance from a variable rate of interest to a fixed rate. As of March 31, 2020, we have agreements to fix interest rates on $50,000 of long-term debt through February 2024. 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 losses that are reported in accumulated other comprehensive (loss) income that are expected to be reclassified into earnings within the next twelve months is approximately $405

The location and fair values of derivative instruments designated as hedging instruments in the Condensed Consolidated Balance Sheets as of March 31, 2020, are shown in the following table:
 
As of

March 31,
 
December 31,
 
2020
 
2019
Interest rate swaps reported in Other current assets
$

 
$
82

Interest rate swaps reported in Accrued liabilities
$
(523
)
 
$

Interest rate swaps reported in Other long-term obligations
$
(1,840
)
 
$
(78
)
Foreign currency hedges reported in Other current assets
$

 
$
580

Foreign currency hedges reported in Accrued liabilities
$
(2,733
)
 
$



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 $235 and foreign currency derivative liabilities of $2,968 at March 31, 2020.

The effect of derivative instruments on the Condensed Consolidated Statements of Earnings is as follows:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Foreign Exchange Contracts:
 
 
 
Amounts reclassified from AOCI to earnings:
 
 
 
Cost of goods sold
$
248

 
$
42

Selling, general and administrative expense
(5
)
 
17

Total gain reclassified from AOCI to earnings
243

 
59

Loss recognized in other expense for hedge ineffectiveness

 

Total derivative gain on foreign exchange contracts recognized in earnings
$
243

 
$
59

 
 
 
 
Interest Rate Swaps:
 
 
 
Benefit recorded in Interest expense
$
38

 
$
156

Total gains on derivatives
$
281

 
$
215


v3.20.1
Costs Associated with Exit and Restructuring Activities
3 Months Ended
Mar. 31, 2020
Restructuring Cost and Reserve [Line Items]  
Costs Associated with Exit and Restructuring Activities
NOTE 8 – Costs Associated with Exit and Restructuring Activities
 
Restructuring charges are reported as a separate line within operating earnings in the Condensed Consolidated Statement of Earnings. 
 
Total restructuring charges is as follows:
 
Three Months Ended
 
March 31, 2020
 
March 31, 2019
Restructuring charges
$
240

 
$
2,084

 

2016 Plan

In June 2016, we announced plans to restructure operations by phasing out production at our Elkhart, IN 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. In 2017, we revised this plan to include 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. Restructuring charges under this plan, which is substantially complete, were $(32) and $2,332 during the three months ended March 31, 2020 and March 31, 2019, respectively. The total restructuring liability related to the June 2016 Plan was $104 at March 31, 2020 and $233 at December 31, 2019. 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, 2020:

 
 
Actual costs
 
Planned
 
incurred through
June 2016 Plan
Costs
 
March 31, 2020
Workforce reduction
$
3,075

 
$
3,312

Building and equipment relocation
9,025

 
10,530

Other charges(1)
1,300

 
2,156

Total restructuring charges
$
13,400

 
$
15,998


(1) Other charges includes the effects of currency translation, non-cash asset write-downs and other charges.

2014 Plan

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. Restructuring charges associated with this plan were $(248) for the three months ended March 31, 2019. There were no restructuring charges incurred under this plan during the three months ended March 31, 2020. The total restructuring liability related to the April 2014 Plan was $648 at March 31, 2020, and $703 at December 31, 2019.

Other Restructuring Activities

From time to time we incur other restructuring activities that are not part of a formal plan. During the three months ended March 31, 2020, we incurred restructuring charges of $272 primarily relating to workforce reduction actions taken during the quarter. There were no such charges incurred during the three months ended March 31, 2019. The total remaining restructuring liability associated with these actions was $431 at March 31, 2020.







The following table displays the restructuring liability activity included in Accrued expenses and other liabilities for all plans for the three months ended March 31, 2020
Restructuring liability at January 1, 2020
$
1,993

Restructuring charges
240

Cost paid
(606
)
Other activity(1)
(444
)
Restructuring liability at March 31, 2020
$
1,183

(1) Other activity includes the effects of currency translation, non-cash asset write-downs and other charges that do not flow through restructuring expense.
v3.20.1
Inventories
3 Months Ended
Mar. 31, 2020
Inventory Disclosure [Abstract]  
Inventories
NOTE 4 – Inventories 
Inventories, net consist of the following:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Finished goods
$
9,595

 
$
9,447

Work-in-process
16,276

 
14,954

Raw materials
25,012

 
23,363

Less: Inventory reserves
(5,204
)
 
(5,527
)
Inventories, net
$
45,679

 
$
42,237


v3.20.1
Shareholders' Equity - Summary of Common Shares Outstanding (Details) - shares
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Roll forward of common shares outstanding    
Balance at the beginning of the year 32,472,406 32,750,727
Restricted share issuances 94,232 136,281
Balance at the end of the period 32,345,907 32,855,508
v3.20.1
Income Taxes - Schedule of Effective Income Tax Rate (Details)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Income Tax Disclosure [Abstract]    
Effective income tax rate 36.40% 20.00%
v3.20.1
Leases Supplemental Cashflow Information (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Supplemental Cash Flow Information [Abstract]    
Operating Lease, Payments, Use $ 1,130 $ 927
Lessee, Operating Lease Payment on Extension Option $ 1,179 $ 2,961
v3.20.1
Equity-Based Compensation - Performance-Based Stock Options (Details) - USD ($)
3 Months Ended
May 26, 2015
Mar. 31, 2020
Performance and Market-based Restricted Stock Units    
Share-based Compensation    
Attained by performance - weighted average fair value   $ 23.84
2014 Plan    
Share-based Compensation    
Awards granted (in shares)   1,500,000
2014 Plan | Performance-Based Stock Options    
Share-based Compensation    
Awards granted (in shares)   350,000
Grant date fair value (in dollars per share) $ 18.37  
Option term (in years) 5 years  
Revenue threshold for award $ 600,000  
v3.20.1
Fair Value Measurements - Summary of Financial Liability Measured at Fair Value on a Recurring Basis (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Recurring financial liability that was measured at carrying value    
Derivative liability $ (3,256) $ 0
Recurring | Significant Other Observable Inputs (Level 2) | Interest rate swap | Designated As Hedging | Cash Flow Hedge    
Recurring financial liability that was measured at carrying value    
Derivative liability 2,363 (4)
Recurring | Significant Other Observable Inputs (Level 2) | Foreign currency hedges | Designated As Hedging | Cash Flow Hedge    
Recurring financial liability that was measured at carrying value    
Derivative liability   (580)
Derivative Asset (2,733)  
Recurring | Carrying Value | Interest rate swap | Designated As Hedging | Cash Flow Hedge    
Recurring financial liability that was measured at carrying value    
Derivative liability 2,363 (4)
Recurring | Carrying Value | Foreign currency hedges | Designated As Hedging | Cash Flow Hedge    
Recurring financial liability that was measured at carrying value    
Derivative liability   $ (580)
Derivative Asset $ (2,733)  
v3.20.1
Revenue Recognition
3 Months Ended
Mar. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer [Text Block]
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, 2020 contained a significant financing component. Differences between the amount of revenue recognized and the amount invoiced, collected from, or paid to our customers are recognized as contract assets or liabilities. Contract assets will be reviewed for impairment when events or circumstances indicate that they may not be recoverable.

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














Disaggregated Revenue

The following table presents revenues disaggregated by the major markets we serve:
 
Three Months Ended
 
March 31, 2020
 
March 31, 2019
Transportation
$
61,534

 
$
78,842

Industrial
20,843

 
18,156

Medical
9,370

 
9,666

Aerospace & Defense
9,005

 
7,523

Telecom & IT
2,323

 
3,438

Total
$
103,075

 
$
117,625


v3.20.1
Costs Associated with Exit and Restructuring Activities - April 2014 Plan (Details) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Restructuring Cost and Reserve [Line Items]      
Restructuring and Related Activities Disclosure [Text Block]
NOTE 8 – Costs Associated with Exit and Restructuring Activities
 
Restructuring charges are reported as a separate line within operating earnings in the Condensed Consolidated Statement of Earnings. 
 
Total restructuring charges is as follows:
 
Three Months Ended
 
March 31, 2020
 
March 31, 2019
Restructuring charges
$
240

 
$
2,084

 

2016 Plan

In June 2016, we announced plans to restructure operations by phasing out production at our Elkhart, IN 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. In 2017, we revised this plan to include 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. Restructuring charges under this plan, which is substantially complete, were $(32) and $2,332 during the three months ended March 31, 2020 and March 31, 2019, respectively. The total restructuring liability related to the June 2016 Plan was $104 at March 31, 2020 and $233 at December 31, 2019. 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, 2020:

 
 
Actual costs
 
Planned
 
incurred through
June 2016 Plan
Costs
 
March 31, 2020
Workforce reduction
$
3,075

 
$
3,312

Building and equipment relocation
9,025

 
10,530

Other charges(1)
1,300

 
2,156

Total restructuring charges
$
13,400

 
$
15,998


(1) Other charges includes the effects of currency translation, non-cash asset write-downs and other charges.

2014 Plan

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. Restructuring charges associated with this plan were $(248) for the three months ended March 31, 2019. There were no restructuring charges incurred under this plan during the three months ended March 31, 2020. The total restructuring liability related to the April 2014 Plan was $648 at March 31, 2020, and $703 at December 31, 2019.

Other Restructuring Activities

From time to time we incur other restructuring activities that are not part of a formal plan. During the three months ended March 31, 2020, we incurred restructuring charges of $272 primarily relating to workforce reduction actions taken during the quarter. There were no such charges incurred during the three months ended March 31, 2019. The total remaining restructuring liability associated with these actions was $431 at March 31, 2020.







The following table displays the restructuring liability activity included in Accrued expenses and other liabilities for all plans for the three months ended March 31, 2020
Restructuring liability at January 1, 2020
$
1,993

Restructuring charges
240

Cost paid
(606
)
Other activity(1)
(444
)
Restructuring liability at March 31, 2020
$
1,183

(1) Other activity includes the effects of currency translation, non-cash asset write-downs and other charges that do not flow through restructuring expense.
   
Total restructuring, impairment and restructuring related charges      
Restructuring charges $ 240,000 $ 2,084,000  
April 2014 Plan      
Restructuring Cost and Reserve [Line Items]      
Restructuring and Related Activities Disclosure [Text Block]
2014 Plan

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. Restructuring charges associated with this plan were $(248) for the three months ended March 31, 2019. There were no restructuring charges incurred under this plan during the three months ended March 31, 2020. The total restructuring liability related to the April 2014 Plan was $648 at March 31, 2020, and $703 at December 31, 2019
   
Restructuring Reserve $ 648,000   $ 703,000
Total restructuring, impairment and restructuring related charges      
Restructuring charges   $ (248,000)  
v3.20.1
Other Intangible Assets - Summary of Intangible Assets (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Other Intangible Assets      
Gross Carrying Amount $ 142,319   $ 142,319
Accumulated Amortization (59,400)   (57,104)
Total amortization expense 82,919   85,215
Amortization expense 2,295 $ 1,690  
Customer lists/relationships      
Other Intangible Assets      
Gross Carrying Amount 92,194   92,194
Accumulated Amortization (40,012)   (38,682)
Total amortization expense 52,182   53,512
Technology and other intangibles      
Other Intangible Assets      
Gross Carrying Amount 47,925   47,925
Accumulated Amortization (19,388)   (18,422)
Total amortization expense 28,537   29,503
In process research and development      
Other Intangible Assets      
Gross Carrying Amount     2,200
Total amortization expense 2,200   $ 2,200
Indefinite-lived Intangible Assets (Excluding Goodwill) $ 2,200    
v3.20.1
Condensed Consolidated Statements of Cash Flows - Unaudited - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net earnings $ 3,808 $ 11,419
Adjustments to reconcile net earnings to net cash provided by operating activities:    
Depreciation and amortization 6,532 5,924
Pension and other post-retirement plan expense 673 251
Stock-based compensation 228 1,214
Restructuring Impairment charges 0 854
Deferred income taxes 333 1,063
(Gain) on sales of fixed assets 0 (40)
Impairment of fixed assets 1,016 0
(Gain) loss on foreign currency hedges, net of cash (23) 53
Changes in assets and liabilities, net of acquisition:    
Accounts receivable 6,176 (2,682)
Inventories (4,005) 1,053
Operating lease assets 473 2,372
Other assets 799 (1,687)
Accounts payable 1,252 1,275
Accrued payroll and benefits (237) (5,250)
Accrued liabilities (5,364) (4,014)
Income taxes payable 730 (535)
Operating lease liabilities 542 2,439
Accrued expenses and other liabilities 7 675
Pension and other post-retirement plans (67) (47)
Net cash provided by operating activities 11,927 9,593
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures (4,570) (5,325)
Proceeds from sale of assets 0 51
Net cash used in investing activities (4,570) (5,274)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Payments of long-term debt (764,550) (159,100)
Proceeds from borrowings of long-term debt 816,050 159,100
Purchase of treasury stock (5,304) (849)
Dividends paid (1,299) (1,310)
Taxes paid on behalf of equity award participants (1,903) (2,637)
Net cash provided by (used) in financing activities 42,994 (4,796)
Effect of exchange rate changes on cash and cash equivalents 363 252
Net increase (decrease) in cash and cash equivalents 50,714 (225)
Cash and cash equivalents at beginning of period 100,241 100,933
Cash and cash equivalents at end of period 150,955 100,708
Supplemental cash flow information:    
Cash paid for interest 678 281
Cash paid for income taxes, net 1,183 2,122
Capital expenditures incurred but not yet paid $ 1,843 $ 3,734
v3.20.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2020
Apr. 21, 2020
Document and Entity Information    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Mar. 31, 2020  
Document Transition Report false  
Entity File Number 1-4639  
Entity Registrant Name CTS CORPORATION  
Entity Incorporation, State or Country Code IN  
Entity Tax Identification Number 35-0225010  
Entity Address, Address Line One 4925 Indiana Avenue  
Entity Address, City or Town Lisle  
Entity Address, State or Province IL  
Entity Address, Postal Zip Code 60532  
City Area Code (630)  
Local Phone Number 577-8800  
Title of Each Class Common stock, without par value  
Trading Symbol CTS  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Central Index Key 0000026058  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   32,259,907
v3.20.1
Retirement Plans (Tables)
3 Months Ended
Mar. 31, 2020
Retirement Benefits [Abstract]  
Net Pension Income or Postretirement Expense
Net post-retirement expense for our other post-retirement plan includes the following components:
 
Three Months Ended
 
March 31,
 
March 31,
 
2020
 
2019
Service cost
$

 
$

Interest cost
30

 
42

Amortization of gain
(21
)
 
(41
)
Total expense, net
$
9

 
$
1


Net pension expense for our domestic and foreign plans included in other income (expense) in the Condensed Consolidated Statement of Earnings is as follows:
 
Three Months Ended

March 31,

March 31,
 
2020
 
2019
Net pension expense
$
664

 
$
250


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,
 
2020
 
2019
 
2020
 
2019
Service cost
$

 
$

 
$
7

 
$
9

Interest cost
1,443

 
1,931

 
7

 
7

Expected return on plan assets(1)
(2,454
)
 
(3,047
)
 
(4
)
 
(4
)
Amortization of loss
1,622

 
1,312

 
43

 
42

Total expense, net
$
611

 
$
196

 
$
53

 
$
54

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

v3.20.1
Debt (Tables)
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Summary of Long-Term Debt
Long-term debt was comprised of the following:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Total credit facility
$
300,000

 
$
300,000

Balance outstanding
151,200

 
99,700

Standby letters of credit
1,800

 
1,800

Amount available
$
147,000

 
$
198,500

Weighted-average interest rate
2.78
%
 
3.25
%
Commitment fee percentage per annum
0.23
%
 
0.23
%

v3.20.1
Other Intangible Assets
3 Months Ended
Mar. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets
NOTE 7 – Other Intangible Assets
 
Other intangible assets, net consist of the following components:
 
As of
 
March 31, 2020
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Amount
Customer lists/relationships
$
92,194

 
$
(40,012
)
 
$
52,182

Technology and other intangibles
47,925

 
(19,388
)
 
28,537

In process research and development
2,200

 

 
2,200

Other intangible assets, net
$
142,319

 
$
(59,400
)
 
$
82,919

Amortization expense for the three months ended March 31, 2020


 
$
2,295

 


 
 
As of
 
December 31, 2019
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Amount
Customer lists/relationships
$
92,194

 
$
(38,682
)
 
$
53,512

Technology and other intangibles
47,925

 
(18,422
)
 
29,503

In process research and development
2,200

 

 
2,200

Other intangible assets, net
$
142,319

 
$
(57,104
)
 
$
85,215

Amortization expense for the three months ended March 31, 2019
 

 
$
1,690

 
 


Remaining amortization expense for other intangible assets as of March 31, 2020 is as follows: 

Amortization
expense
2020
$
6,756

2021
8,893

2022
8,657

2023
6,651

2024
6,489

Thereafter
45,473

Total amortization expense
$
82,919

v3.20.1
Accounts Receivable
3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Accounts Receivable
NOTE 3 – Accounts Receivable 

The components of accounts receivable, net are as follows:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Accounts receivable, gross
$
71,932

 
$
78,269

Less: Allowance for credit losses
(682
)
 
(261
)
Accounts receivable, net
$
71,250

 
$
78,008


v3.20.1
Debt
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Debt
NOTE 11 - Debt
 
Long-term debt was comprised of the following:
 
As of
 
March 31,
 
December 31,
 
2020
 
2019
Total credit facility
$
300,000

 
$
300,000

Balance outstanding
151,200

 
99,700

Standby letters of credit
1,800

 
1,800

Amount available
$
147,000

 
$
198,500

Weighted-average interest rate
2.78
%
 
3.25
%
Commitment fee percentage per annum
0.23
%
 
0.23
%

 
On February 12, 2019, we entered into an amended and restated five-year Credit Agreement with a group of banks (the "Credit Agreement") to extend the term of the facility. 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 the base rate defined in the Credit Agreement. 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 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, 2020. 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. Amortization expense for the three months ended March 31, 2020 and 2019 was approximately $42 and $36. These costs are included in interest expense in our Condensed Consolidated Statement of Earnings.

We use interest rate swaps to convert the revolving credit facility's variable rate of interest into a fixed rate on a portion of the debt as described more fully in Note 12 "Derivative Financial Instruments". These swaps are treated as cash flow hedges and consequently, the changes in fair value were recorded in other comprehensive earnings.
v3.20.1
Fair Value Measurements - Reconciliation of Recurring Financial Liability Related to Interest Rate Swaps (Details)
$ in Thousands
Mar. 31, 2020
USD ($)
Reconciliation of the recurring financial derivatives  
Beginning balance, derivative liability $ 0
Total gains/(losses) for the period:  
Ending balance, derivative liability $ (3,256)
v3.20.1
Equity-Based Compensation - Summary of Equity-Based Compensation Expense (Details)
$ / shares in Units, $ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
plan
$ / shares
shares
Mar. 31, 2019
USD ($)
Dec. 31, 2019
$ / shares
shares
Share-based Compensation      
Number of Equity-Based Compensation Plans | plan 5    
Restricted stock units $ (228) $ (1,214)  
Share-based Payment Arrangement, Expense, after Tax 177 940  
Service-Based RSUs      
Share-based Compensation      
Restricted stock units (580) (606)  
Performance-Based RSUs      
Share-based Compensation      
Restricted stock units $ 368 (548)  
Cash Settled Awards      
Share-based Compensation      
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number | shares 16,547   17,271
Restricted stock units $ (16)    
Restricted Stock Expense (Benefit)   60  
RSUs      
Share-based Compensation      
Restricted stock units (228) (1,214)  
Income tax benefit $ 51 $ 274  
Officers, key employees, and non-employee directors | Service-Based RSUs      
Share-based Compensation      
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Forfeitures | shares 3,624    
Releasable - weighted average fair value | $ / shares $ 15.02    
Granted - shares | shares 64,796    
Forfeited - weighted average fair value | $ / shares $ 28.45    
Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Released Number | shares 47,195    
Granted - weighted average fair value | $ / shares $ 30.13    
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value | $ / shares 20.65   $ 19.87
Converted - weighted average fair value | $ / shares $ 27.05    
Releasable - shares | shares 224,974    
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number | shares 378,373   364,396
v3.20.1
Leases Lease Cost (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Leases [Abstract]    
Operating Lease, Expense $ 1,199 $ 994
Short-term Lease Payments 167 73
Operating Leases, Rent Expense, Net $ 1,366 $ 1,067
v3.20.1
Business Acquisition (Details) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Business Acquisition    
Business Combination, Consideration Transferred $ 72,850,000  
Business Acquisitions, Consideration Transferred, Liabilities Incurred 1,056,000  
Cash Acquired from Acquisition 567,000  
Current assets 6,221,000  
Property, plant and equipment 2,567,000  
Other assets 29,000  
Business Acquisition, Goodwill, Expected Tax Deductible Amount 34,999,000  
Business Acquisitions, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill 32,800,000  
Fair Value of Assets Acquired 76,616,000  
Business Acquisitions, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities (2,710,000)  
Net cash paid $ 73,906,000 $ 73,906,000
v3.20.1
Equity-Based Compensation - Summary of Service-Based Restricted Stock Units (Details) - Officers, key employees, and non-employee directors - Service-Based RSUs
3 Months Ended
Mar. 31, 2020
$ / shares
shares
Units  
Outstanding at beginning of year - shares | shares 364,396
Granted - shares | shares 64,796
Released - shares | shares (47,195)
Forfeited - shares | shares (3,624)
Outstanding at end of year - shares | shares 378,373
Releasable - shares | shares 224,974
Weighted Average Grant Date Fair Value  
Beginning of year - weighted average fair value | $ / shares $ 19.87
Granted - weighted average fair value | $ / shares 30.13
Converted - weighted average fair value | $ / shares 27.05
Forfeited - weighted average fair value | $ / shares 28.45
End of year - weighted average fair value | $ / shares 20.65
Releasable - weighted average fair value | $ / shares $ 15.02
v3.20.1
Condensed Consolidated Balance Sheets - Unaudited - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Current Assets    
Cash and cash equivalents $ 150,955 $ 100,241
Accounts receivable, net 71,250 78,008
Inventories, net 45,679 42,237
Other current assets 15,094 16,992
Total current assets 282,978 237,478
Property, plant and equipment, net 101,755 105,038
Operating lease assets 25,117 24,644
Other Assets    
Prepaid pension asset 63,093 62,082
Goodwill 106,056 106,056
Other intangible assets, net 82,919 85,215
Deferred income taxes 20,296 19,795
Other 2,951 3,046
Total other assets 275,315 276,194
Total Assets 685,165 643,354
Current Liabilities    
Accounts payable 46,766 48,219
Operating lease obligations 3,178 2,787
Accrued payroll and benefits 8,818 9,564
Accrued expenses and other liabilities 34,476 36,378
Total current liabilities 93,238 96,948
Long-term debt 151,200 99,700
Long-term operating lease obligations 25,078 24,926
Long-term pension obligations 6,548 6,632
Deferred income taxes 5,576 5,637
Other long-term obligations 6,059 4,292
Total Liabilities 287,699 238,135
Shareholders’ Equity    
Common stock 310,098 307,932
Additional contributed capital 39,832 43,689
Retained earnings 512,276 509,766
Accumulated other comprehensive loss (94,994) (91,726)
Total shareholders’ equity before treasury stock 767,212 769,661
Treasury stock (369,746) (364,442)
Total shareholders’ equity 397,466 405,219
Total Liabilities and Shareholders’ Equity $ 685,165 $ 643,354
v3.20.1
Basis of Presentation
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Basis of Presentation
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, 2019.
 
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.
v3.20.1
Costs Associated with Exit and Restructuring Activities Costs Associated with Exit and Restructuring Activities - June 2016 Plan (Details) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Jun. 03, 2016
Total restructuring, impairment and restructuring related charges        
Restructuring charges $ 240,000 $ 2,084,000    
Document Period End Date Mar. 31, 2020      
June 2016 Plan        
Restructuring Cost and Reserve [Line Items]        
Actual costs incurred $ 10,530,000      
Total restructuring, impairment and restructuring related charges        
Restructuring charges (32,000) $ 2,332,000    
Restructuring Reserve 104,000   $ 233,000  
June 2016 Plan | Operating Earnings        
Restructuring Cost and Reserve [Line Items]        
Planned Costs       $ 13,400,000
Actual costs incurred 15,998,000      
Equipment relocation | June 2016 Plan        
Restructuring Cost and Reserve [Line Items]        
Planned Costs       9,025,000
Other charges | June 2016 Plan        
Restructuring Cost and Reserve [Line Items]        
Planned Costs       1,300,000
Other charges | June 2016 Plan | Operating Earnings        
Restructuring Cost and Reserve [Line Items]        
Actual costs incurred 2,156,000      
Workforce reduction | June 2016 Plan        
Restructuring Cost and Reserve [Line Items]        
Planned Costs       $ 3,075,000
Workforce reduction | June 2016 Plan | Operating Earnings        
Restructuring Cost and Reserve [Line Items]        
Actual costs incurred $ 3,312,000      
v3.20.1
Retirement Plans - Other Postretirement Benefit Plan (Details) - Other Postretirement Benefits Plan [Member] - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Defined Benefit Plan Disclosure    
Service cost $ 0 $ 0
Interest cost 30 42
Amortization of gain (21) (41)
Total expense, net $ 9 $ 1
v3.20.1
Derivative Financial Instruments - Narratives (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Derivative      
Unrealized Gain (Loss) on Foreign Currency Derivatives, Net, before Tax $ 2,076 $ 746  
Derivative Liability 3,256   $ 0
Foreign exchange derivative      
Derivative      
Derivative Asset 235    
Derivative Liability 2,968    
Cash Flow Hedging [Member] | Designated As Hedging | Foreign currency forward contracts      
Derivative      
Foreign currency cash flow hedge gain to be reclassified during next 12 months 1,483    
Derivative, notional amount 30,745    
Cash Flow Hedging [Member] | Designated As Hedging | Interest rate swap      
Derivative      
Interest rate cash flow hedge gain (loss) to be reclassified during next 12 months $ 405    
v3.20.1
Accrued Liabilities - Components of Accrued Liabilities (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Accrued Liabilities      
Accrued product related costs $ 4,234 $ 4,464  
Accrued income taxes 8,573 7,903  
Accrued property and other taxes 809 1,574  
Accrued professional fees 979 1,599  
Contract with Customer, Liability 2,520 2,877  
Dividends payable 1,298 1,299  
Remediation reserves 8,975 11,444 $ 11,274
Derivative Liability 3,256 0  
Other accrued liabilities 3,832 5,218  
Total accrued expenses and other liabilities $ 34,476 $ 36,378  
v3.20.1
Shareholders' Equity - Summary of Share Count and Par Value Data Related to Shareholders' Equity (Details) - shares
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Dec. 31, 2018
Preferred Stock        
Preferred stock, shares authorized 25,000,000   25,000,000  
Preferred stock, shares outstanding 0   0  
Common Stock        
Common stock, shares authorized 75,000,000   75,000,000  
Common stock, shares issued 57,023,530   56,929,298  
Common stock, shares outstanding 32,345,907 32,855,508 32,472,406 32,750,727
Treasury stock        
Treasury stock, shares held 24,677,623   24,456,892  
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount 38,839 91,098    
v3.20.1
Leases Operating Cost (Tables)
3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Lease, Cost [Table Text Block] lease expense for the three months ended March 31, 2020 were as follows:

Three Months Ended

March 31,
 
March 31,
 
2020
 
2019
Operating lease cost
$
1,199

 
$
994

Short-term lease cost
167

 
73

Total lease cost
$
1,366

 
$
1,067


v3.20.1
Accounts Receivable - Components of Accounts Receivable (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Accounts Receivable    
Accounts receivable, gross $ 71,932 $ 78,269
Less: Allowance for credit losses (682) (261)
Accounts receivable, net $ 71,250 $ 78,008
v3.20.1
Business Acquisitions
3 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
NOTE 19 – Business Acquisitions
 
On July 31, 2019, we acquired 100% of the outstanding shares of Quality Thermistor, Inc. (QTI) for $75 million plus a contingent earn out of up to $5 million based on sales performance objectives. The purchase price included adjustments for debt assumed and changes in working capital. QTI, doing business as QTI Sensing Solutions, is a leading designer and manufacturer of high-quality temperature sensors serving original equipment manufacturers with mission-critical applications in the industrial, aerospace, defense and medical markets. This acquisition provided us with a new core temperature sensing technology that expands our sensing product portfolio, while increasing our presence in the industrial and medical markets.

The final purchase price of $73,906 was allocated to the fair values of assets and liabilities acquired as of July 31, 2019.

The following table summarizes the consideration paid and the fair values of the assets acquired and the liabilities assumed as of the date of acquisition:

 
Consideration Paid
Cash paid, net of cash acquired of $567
$
72,850

Contingent consideration
1,056

Purchase price
$
73,906



 
 
Fair Values at July 31, 2019
Current assets
 
$
6,221

Property, plant and equipment
 
2,567

Other assets
 
29

Goodwill
 
34,999

Intangible assets
 
32,800

Fair value of assets acquired
 
76,616

Less fair value of liabilities acquired
 
(2,710
)
Purchase price
 
$
73,906



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

The contingent earn out was payable in cash upon the achievement of a revenue performance target for the year ending December 31, 2019. The Company recorded contingent consideration for the earn out of $1,056 based on the achievement performance target for the full year 2019 results. This amount is reflected as an addition to the purchase price.

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

Carrying Value
Weighted Average Amortization Period
Customer lists/relationships
$
31,000

15.0
Technology and other intangibles
1,800

5.0
Total
$
32,800



v3.20.1
Equity-Based Compensation
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Equity-Based Compensation
NOTE 15 - Stock-Based Compensation
 
At March 31, 2020, we had five active stock-based compensation plans: the Non-Employee Directors’ Stock Retirement Plan (“Directors’ Plan”), the 2004 Omnibus Long-Term Incentive Plan (“2004 Plan”), the 2009 Omnibus Equity and Performance Incentive Plan (“2009 Plan”), the 2014 Performance & Incentive Plan (“2014 Plan”), and the 2018 Equity and Incentive Compensation Plan ("2018 Plan"). Future grants can only be made under the 2018 Plan.

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

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

March 31,

March 31,
 
2020
 
2019
Service-based RSUs
$
580

 
$
606

Performance-based RSUs
(368
)
 
548

Cash-settled RSUs
16


60

Total
$
228

 
$
1,214

Income tax benefit
51

 
274

Net expense
$
177

 
$
940



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, 2020
 
Period
Service-based RSUs
$
3,020

 
1.56
Performance-based RSUs
3,919

 
2.24
Total
$
6,939

 
1.94

 
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, 2020:
 
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

 
225,000

 

 

 

Maximum potential RSU and cash settled awards outstanding
452,250

 
218,272

 
92,600

 
35,952

 
5,522

Maximum potential awards outstanding
452,250

 
443,272

 
92,600

 
35,952

 
5,522

RSUs and cash settled awards vested and released
27,037

 

 

 

 

Awards available for grant
2,020,713

 

 

 

 


 





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 225,000 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 for the three-month periods ended March 31, 2020 and 2019, 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 for the three months ended March 31, 2020
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
364,396

 
$
19.87

Granted
64,796

 
30.13

Vested and released
(47,195
)
 
27.05

Forfeited
(3,624
)
 
28.45

Outstanding at March 31, 2020
378,373

 
$
20.65

Releasable at March 31, 2020
224,974

 
$
15.02

 
Performance and Market-Based Restricted Stock Units

The following table summarizes the performance and market-based RSU activity for the three months ended March 31, 2020:
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
217,229

 
$
27.73

Granted
72,521

 
32.56

Attained by performance
38,820

 
23.84

Released
(111,838
)
 
23.74

Forfeited
(11,884
)
 
25.69

Outstanding at March 31, 2020
204,848

 
$
30.85

Releasable at March 31, 2020

 
$



The following table summarizes each grant of performance awards outstanding at March 31, 2020.
Description
Grant Date
Vesting Year
Vesting Dependency
Target Units Outstanding
Maximum Number of Units to be Granted
2018 - 2020 Performance RSUs
February 8, 2018
2020
35% RTSR, 35% sales growth, 30% operating cash flow
31,398

62,796

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
60,414

120,828

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

13,890

2020 - 2022 QTI Performance RSUs
September 24, 2019
2022
50% EBITDA growth, 50% Sales growth
1,750

3,500

2020 - 2022 Performance RSUs
February 6, 2020
2022
25% RTSR, 40% sales growth, 35% operating cash flow
72,521

145,042

      Total



204,848

409,696



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, 2020 and December 31, 2019 we had 16,547 and 17,271 cash-settled RSUs outstanding, respectively. At March 31, 2020 and December 31, 2019, liabilities of $135 and $353, respectively, were included in Accrued expenses and other liabilities on our Condensed Consolidated Balance Sheets.