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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
  
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended June 30, 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 July 28, 2020: 32,267,524.
 
 


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

Six Months Ended
 
June 30,

June 30,

June 30,

June 30,

2020

2019

2020

2019
Net sales
$
84,197


$
120,684


$
187,272


$
238,308

Cost of goods sold
57,630


79,480


127,806


156,490

Gross Margin
26,567


41,204


59,466


81,818

Selling, general and administrative expenses
14,668


17,036


31,427


34,597

Research and development expenses
5,522


6,257


12,930


13,048

Restructuring charges
135


911


375


2,995

Gain on sale of assets


(83
)



(122
)
Operating earnings
6,242


17,083


14,734


31,300

Other (expense) income:











Interest expense
(909
)

(467
)

(1,760
)

(933
)
Interest income
304


440


635


872

Other income (expense), net
256


(1,107
)

(1,726
)

(1,010
)
Total other (expense), net
(349
)

(1,134
)

(2,851
)

(1,071
)
Earnings before income taxes
5,893


15,949


11,883


30,229

Income tax expense
1,036


4,006


3,218


6,867

Net earnings
$
4,857


$
11,943


$
8,665


$
23,362

Earnings per share:











Basic
$
0.15


$
0.36


$
0.27


$
0.71

Diluted
$
0.15


$
0.36


$
0.27


$
0.70













Basic weighted – average common shares outstanding:
32,262


32,799


32,364


32,803

Effect of dilutive securities
242


406


284


422

Diluted weighted – average common shares outstanding:
32,504


33,205


32,648


33,225









Cash dividends declared per share
$
0.04


$
0.04


$
0.08


$
0.08

See notes to unaudited condensed consolidated financial statements.

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Table of Contents

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS ‑ UNAUDITED
(In thousands of dollars) 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Net earnings
$
4,857

 
$
11,943

 
$
8,665

 
$
23,362

Other comprehensive earnings (loss):
 

 
 

 
 
 
 
Changes in fair market value of derivatives, net of tax
644

 
(294
)
 
(3,770
)
 
(216
)
Changes in unrealized pension cost, net of tax
1,209

 
1,026

 
2,494

 
2,048

Cumulative translation adjustment, net of tax
(14
)
 
(87
)
 
(153
)
 
4

Other comprehensive earnings (loss)
$
1,839

 
$
645

 
$
(1,429
)
 
$
1,836

Comprehensive earnings
$
6,696

 
$
12,588

 
$
7,236

 
$
25,198

 See notes to unaudited condensed consolidated financial statements.

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Table of Contents

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


 
June 30,

December 31,

2020

2019
ASSETS
 


 

Current Assets
 


 

Cash and cash equivalents
$
145,981


$
100,241

Accounts receivable, net
59,798


78,008

Inventories, net
44,266


42,237

Other current assets
14,750


16,992

Total current assets
264,795


237,478

Property, plant and equipment, net
99,349


105,038

Operating lease assets, net
24,369


24,644

Other Assets
 


 

Prepaid pension asset
64,104


62,082

Goodwill
106,056


106,056

Other intangible assets, net
80,622


85,215

Deferred income taxes
21,278


19,795

Other
2,816


3,046

Total other assets
274,876


276,194

Total Assets
$
663,389


$
643,354

LIABILITIES AND SHAREHOLDERS’ EQUITY
 


 

Current Liabilities
 


 

Accounts payable
$
32,820


$
48,219

Operating lease obligations
3,051


2,787

Accrued payroll and benefits
8,725


9,564

Accrued expenses and other liabilities
33,175


36,378

Total current liabilities
77,771


96,948

Long-term debt
141,300


99,700

Long-term operating lease obligations
24,473


24,926

Long-term pension obligations
6,504


6,632

Deferred income taxes
6,303


5,637

Other long-term obligations
6,146


4,292

Total Liabilities
262,497


238,135

Commitments and Contingencies (Note 10)





Shareholders’ Equity
 


 

Common stock
310,953


307,932

Additional contributed capital
39,775


43,689

Retained earnings
515,841


509,766

Accumulated other comprehensive loss
(93,155
)

(91,726
)
Total shareholders’ equity before treasury stock
773,414


769,661

Treasury stock
(372,522
)

(364,442
)
Total shareholders’ equity
400,892


405,219

Total Liabilities and Shareholders’ Equity
$
663,389


$
643,354

See notes to unaudited condensed consolidated financial statements.

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Table of Contents

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ‑ UNAUDITED
(In thousands of dollars)
 
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net earnings 
$
8,665

 
$
23,362

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

 
 

Depreciation and amortization
13,143

 
11,919

Pension and other post-retirement plan expense
1,348

 
502

Stock-based compensation
1,045

 
2,793

Asset impairment charges
1,016

 
892

Deferred income taxes
(466
)
 
1,937

Gain on sales of fixed assets

 
(122
)
(Gain) loss on foreign currency hedges, net of cash
(133
)
 
88

Changes in assets and liabilities, net of acquisition:
 

 
 

Accounts receivable
17,850

 
(5,394
)
Inventories
(2,328
)
 
360

Operating lease assets
275

 
(1,780
)
Other assets
1,460

 
(2,370
)
Accounts payable
(12,294
)
 
(1,582
)
Accrued payroll and benefits
(512
)
 
(4,713
)
Accrued liabilities
(4,026
)
 
(3,622
)
Income taxes payable
(974
)
 
(588
)
Operating lease liabilities
(189
)
 
1,986

Accrued expenses and other liabilities
(26
)
 
660

Pension and other post-retirement plans
(130
)
 
(144
)
Net cash provided by operating activities
23,724

 
24,184

CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Capital expenditures
(7,245
)
 
(9,430
)
Proceeds from sale of assets

 
122

Net cash used in investing activities
(7,245
)
 
(9,308
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 

 
 

Payments of long-term debt
(2,207,450
)
 
(309,100
)
Proceeds from borrowings of long-term debt
2,249,050

 
309,100

Purchase of treasury stock
(8,080
)
 
(5,002
)
Dividends paid
(2,598
)
 
(2,625
)
Taxes paid on behalf of equity award participants
(1,903
)
 
(2,637
)
Net cash provided by (used) in financing activities
29,019

 
(10,264
)
Effect of exchange rate changes on cash and cash equivalents
242

 
33

Net increase in cash and cash equivalents
45,740

 
4,645

Cash and cash equivalents at beginning of period
100,241

 
100,933

Cash and cash equivalents at end of period
$
145,981

 
$
105,578

Supplemental cash flow information:
 

 
 

Cash paid for interest
$
1,442

 
$
574

Cash paid for income taxes, net
$
4,114

 
$
5,448

Non-cash financing and investing activities:
 
 
 
Capital expenditures incurred but not paid
$
1,158

 
$
4,807

See notes to unaudited condensed consolidated financial statements.

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Table of Contents

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

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

Net earnings


4,857



4,857

Changes in fair market value of derivatives, net of tax



644


644

Changes in unrealized pension cost, net of tax



1,209


1,209

Cumulative translation adjustment, net of tax



(14
)

(14
)
Cash dividends of $0.04 per share


(1,292
)


(1,292
)
Acquired 122,000 shares of treasury stock




(2,776
)
(2,776
)
Issued shares on vesting of restricted stock units
855

(855
)




Stock compensation

798




798

Balances at June 30, 2020
$
310,953

$
39,775

$
515,841

$
(93,155
)
$
(372,522
)
$
400,892

See notes to unaudited condensed consolidated financial statements.










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Table of Contents

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


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

Net earnings


11,943



11,943

Changes in fair market value of derivatives, net of tax



(294
)

(294
)
Changes in unrealized pension cost, net of tax



1,026


1,026

Cumulative translation adjustment, net of tax



(87
)

(87
)
Cash dividends of $0.04 per share


(1,309
)


(1,309
)
Acquired 148,466 shares of treasury stock




(4,153
)
(4,153
)
Issued shares on vesting of restricted stock units
111

(111
)




Stock compensation

1,526




1,526

Balances at June 30, 2019
$
307,775

$
41,786

$
499,585

$
(95,903
)
$
(357,698
)
$
395,545

See notes to unaudited condensed consolidated financial statements.

8
 

Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(in thousands except for share and per share data)
June 30, 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. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. The reclassifications had no impact on previously reported net earnings.


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 June 30, 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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Table of Contents

Disaggregated Revenue

The following table presents revenues disaggregated by the major markets we serve:
 
Three Months Ended
 
Six Months Ended
 
June 30, 2020
 
June 30, 2019
 
June 30, 2020
 
June 30, 2019
Transportation
$
38,129

 
$
80,343

 
$
99,663

 
$
159,184

Industrial
20,213

 
19,500

 
41,056

 
37,656

Medical
13,038

 
8,973

 
22,408

 
18,639

Aerospace & Defense
9,373

 
6,988

 
18,378

 
14,511

Telecom & IT
3,444

 
4,880

 
5,767

 
8,318

Total
$
84,197

 
$
120,684

 
$
187,272

 
$
238,308



NOTE 3 – Accounts Receivable 

The components of accounts receivable, net are as follows:
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Accounts receivable, gross
$
60,425

 
$
78,269

Less: Allowance for credit losses
(627
)
 
(261
)
Accounts receivable, net
$
59,798

 
$
78,008



NOTE 4 – Inventories 
Inventories, net consist of the following:
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Finished goods
$
8,937

 
$
9,447

Work-in-process
15,754

 
14,954

Raw materials
24,943

 
23,363

Less: Inventory reserves
(5,368
)
 
(5,527
)
Inventories, net
$
44,266

 
$
42,237


NOTE 5 – Property, Plant and Equipment
 
Property, plant and equipment is comprised of the following:
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Land and land improvements
$
1,095

 
$
1,095

Buildings and improvements
68,424

 
68,350

Machinery and equipment
226,465

 
224,312

Less: Accumulated depreciation
(196,635
)
 
(188,719
)
Property, plant and equipment, net
$
99,349

 
$
105,038

 
 
 
 
Depreciation expense for the six months ended June 30, 2020
 
 
$
8,580

Depreciation expense for the six months ended June 30, 2019
 
 
$
8,537

 

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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
 
Six Months Ended

June 30,

June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Net pension expense
$
666

 
$
249

 
$
1,330

 
$
499


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

Three Months Ended
 
Three Months Ended
 
June 30,

June 30,

June 30,

June 30,
 
2020
 
2019
 
2020
 
2019
Service cost
$

 
$

 
$
8

 
$
9

Interest cost
1,443

 
1,931

 
6

 
7

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

 
1,311

 
44

 
42

Total expense, net
$
611

 
$
195

 
$
55

 
$
54

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

 
Domestic Pension Plans
 
Foreign Pension Plans
 
Six Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Service cost
$

 
$

 
$
15

 
$
18

Interest cost
2,886

 
3,862

 
13

 
15

Expected return on plan assets(1)
(4,908
)
 
(6,094
)
 
(7
)
 
(9
)
Amortization of loss
3,244

 
2,623

 
87

 
84

Total expense, net
$
1,222

 
$
391

 
$
108

 
$
108

(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 plan ("Plan") at management's discretion, subject to certain conditions. On June 1, 2020, we entered into the Fifth Amendment to the Plan whereby we set an effective termination date of July 31, 2020. The Plan termination process is expected to take twelve to eighteen months and requires certain approvals from both the Internal Revenue Service and Pension Benefit Guaranty Corporation. Once we receive such approvals, an insurance company will be selected to purchase annuities and fulfill the obligations of the Plan including administering payments to participants. Upon settlement of the pension liabilities, we will reclassify the related pension losses currently recorded in accumulated other comprehensive loss into earnings.  We do not expect any cash contributions from the Company to the Plan as a result of this termination because plan assets exceed estimated liabilities.
    










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Other Post-retirement Benefit Plan
 
Net post-retirement expense for our other post-retirement plan includes the following components:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Service cost
$

 
$
1

 
$

 
$
1

Interest cost
30

 
43

 
60

 
85

Amortization of gain
(21
)
 
(42
)
 
(42
)
 
(83
)
Total expense, net
$
9

 
$
2

 
$
18

 
$
3




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NOTE 7 – Other Intangible Assets
 
Other intangible assets, net consist of the following components:
 
As of
 
June 30, 2020
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Amount
Customer lists/relationships
$
92,194

 
$
(41,370
)
 
$
50,824

Technology and other intangibles
47,925

 
(20,327
)
 
27,598

In process research and development
2,200

 

 
2,200

Other intangible assets, net
$
142,319

 
$
(61,697
)
 
$
80,622

Amortization expense for the three months ended June 30, 2020


 
$
2,268

 


Amortization expense for the six months ended June 30, 2020
 
 
$
4,563

 
 
 
 
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 June 30, 2019
 

 
$
1,692

 
 

Amortization expense for the six months ended June 30, 2019
 

 
$
3,382

 
 


Remaining amortization expense for other intangible assets as of June 30, 2020 is as follows: 

Amortization
expense
2020
$
4,459

2021
8,893

2022
8,657

2023
6,651

2024
6,489

Thereafter
45,473

Total amortization expense
$
80,622

 


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Table of Contents

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 are as follows:
 
Three Months Ended
 
June 30, 2020
 
June 30, 2019
Restructuring charges
$
135

 
$
911

 

 
Six Months Ended
 
June 30, 2020
 
June 30, 2019
Restructuring charges
$
375

 
$
2,995

 

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 $0 and $911 during the three months ended June 30, 2020 and June 30, 2019, respectively. Restructuring charges under this plan were $(32) and $2,995 during the six months ended June 30, 2020 and June 30, 2019, respectively. The total restructuring liability related to the June 2016 Plan was $48 at June 30, 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 June 30, 2020:

 
 
Actual costs
 
Planned
 
incurred through
June 2016 Plan
Costs
 
June 30, 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 and six months ended June 30, 2019. There were no restructuring charges incurred under this plan during the three or six months ended June 30, 2020. The total restructuring liability related to the April 2014 Plan was $672 at June 30, 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 and six months ended June 30, 2020, we incurred restructuring charges of $135 and $407, respectively, primarily relating to workforce reduction actions taken during the quarter. There were no such charges incurred during the three and six months ended June 30, 2019. The total remaining restructuring liability associated with these actions was $183 at June 30, 2020 and $1,057 at December 31, 2019.

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The following table displays the restructuring liability activity included in Accrued expenses and other liabilities for all plans for the six months ended June 30, 2020
Restructuring liability at January 1, 2020
$
1,993

Restructuring charges
375

Cost paid
(1,039
)
Other activity(1)
(426
)
Restructuring liability at June 30, 2020
$
903

(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
 
June 30,
 
December 31,
 
2020
 
2019
Accrued product related costs
$
3,090

 
$
2,950

Accrued income taxes
6,921

 
7,903

Accrued property and other taxes
1,948

 
1,574

Accrued professional fees
903

 
1,599

Accrued customer related liabilities
3,673

 
4,391

Dividends payable
1,291

 
1,299

Remediation reserves
9,300

 
11,444

Derivative liabilities
2,220

 

Other accrued liabilities
3,829

 
5,218

Total accrued expenses and other liabilities
$
33,175

 
$
36,378




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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
 
June 30, 2020
 
December 31, 2019
Balance at beginning of period
$
11,444

 
$
11,274

Remediation expense
791

 
2,602

Net remediation payments
(2,956
)
 
(2,455
)
Other activity(1)
21

 
23

Balance at end of the period
$
9,300

 
$
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
 
June 30,
 
December 31,
 
2020
 
2019
Total credit facility
$
300,000

 
$
300,000

Balance outstanding
141,300

 
99,700

Standby letters of credit
1,740

 
1,800

Amount available, subject to covenant restrictions
$
157,000

 
$
198,500

Weighted-average interest rate
2.17
%
 
3.25
%
Commitment fee percentage per annum
0.25
%
 
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 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.
 

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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 Credit Agreement 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 credit facility. We were in compliance with all debt covenants at June 30, 2020. The Credit Agreement 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, it 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 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 and six months ended June 30, 2020 and 2019 was approximately $42 and $41 and $84 and $77, respectively. 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. In accordance with FASB Staff Q&A - Topic 815: Cash Flow Hedge Accounting Affected by the COVID-19 Pandemic (“FASB Staff Q&A Hedge”) issued in April 2020, companies may elect to assess the ineffectiveness of our cashflow hedges utilizing the two-month grace period for assessing whether forecasted transactions will occur. We have made this election in assessing the effectiveness of our cash flow hedges during the three months ended June 30, 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 June 30, 2020, we had a net unrealized loss of $1,247 in accumulated other comprehensive (loss) income, of which $1,037 is expected to be reclassified to earnings within the next 12 months. At June 30, 2019 we had a net unrealized gain of $784 in accumulated other comprehensive (loss) income. The notional amount of foreign currency forward contracts outstanding was $24,434 at June 30, 2020.




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Table of Contents

Interest Rate Swaps
We use interest rate swaps to convert a portion of our revolving credit facility’s outstanding balance from a variable rate of interest to a fixed rate. As of June 30, 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 $505

The location and fair values of derivative instruments designated as hedging instruments in the Condensed Consolidated Balance Sheets as of June 30, 2020, are shown in the following table:
 
As of

June 30,
 
December 31,
 
2020
 
2019
Interest rate swaps reported in Other current assets
$

 
$
82

Interest rate swaps reported in Accrued liabilities
$
(656
)
 
$

Interest rate swaps reported in Other long-term obligations
$
(1,959
)
 
$
(78
)
Foreign currency hedges reported in Other current assets
$

 
$
580

Foreign currency hedges reported in Accrued liabilities
$
(1,564
)
 
$



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 $57 and foreign currency derivative liabilities of $1,621 at June 30, 2020.

The effect of derivative instruments on the Condensed Consolidated Statements of Earnings is as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Foreign Exchange Contracts:
 
 
 
 
 
 
 
Amounts reclassified from AOCI to earnings:
 
 
 
 
 
 
 
Net sales
$
73

 
$

 
$
73

 
$

Cost of goods sold
(519
)
 
233

 
(271
)
 
276

Selling, general and administrative expense

 
23

 
(5
)
 
39

Total (loss) gain reclassified from AOCI to earnings
(446
)
 
256

 
(203
)
 
315

Gain recognized in other expense for hedge ineffectiveness
3

 

 
3

 

Total derivative (loss) gain on foreign exchange contracts recognized in earnings
$
(443
)
 
$
256

 
$
(200
)
 
$
315

 
 
 
 
 
 
 
 
Interest Rate Swaps:
 
 
 
 
 
 
 
(Expense) benefit recorded in Interest expense
$
(109
)
 
$
156

 
$
(71
)
 
$
313

Total (losses) gains on derivatives
$
(552
)
 
$
412

 
$
(271
)
 
$
628




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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 gains (losses) for the three and six months ended June 30, 2020 were $892 and $(379), respectively and transaction losses for the three and six months ended June 30, 2019 were $829 and $355, 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 June 30, 2020, are as follows:

 
 
 
 
 
Loss
 
 
 
As of
 
Gain (Loss)
 
Reclassified
 
As of
 
March 31,
 
Recognized
 
from AOCI
 
June 30,

2020
 
in OCI
 
to Income
 
2020
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
(5,044
)
 
$
250

 
$
555

 
$
(4,239
)
Income tax benefit (expense)
1,139

 
(44
)
 
(117
)
 
978

Net
(3,905
)
 
206

 
438

 
(3,261
)


 

 

 

Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(122,480
)
 

 
1,574

 
(120,906
)
Income tax benefit (expense)
33,643

 

 
(365
)
 
33,278

Net
(88,837
)
 

 
1,209

 
(87,628
)



 

 


 


Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,252
)
 
(14
)
 

 
(2,266
)
Income tax benefit

 

 

 

Net
(2,252
)
 
(14
)
 

 
(2,266
)
Total accumulated other comprehensive (loss) income
$
(94,994
)
 
$
192

 
$
1,647

 
$
(93,155
)


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Table of Contents

The components of accumulated other comprehensive (loss) income for the three months ended June 30, 2019, are as follows:
 
 
 
 
 
(Gain) Loss
 
 
 
As of
 
Gain (Loss)
 
Reclassified
 
As of
 
March 31,
 
Recognized
 
from AOCI
 
June 30,

2019
 
in OCI
 
to Income
 
2019
Changes in fair market value of hedges:

 

 
 
 
 
Gross
$
1,416

 
$
32

 
$
(412
)
 
$
1,036

Income tax (expense) benefit
(320
)
 
(7
)
 
93

 
(234
)
Net
1,096

 
25

 
(319
)
 
802



 

 

 

Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(131,135
)
 

 
1,325

 
(129,810
)
Income tax benefit (expense)
35,596

 

 
(299
)
 
35,297

Net
(95,539
)
 

 
1,026

 
(94,513
)
 
 
 
 
 
 
 
 
Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,203
)
 
(84
)
 

 
(2,287
)
Income tax benefit (expense)
98

 
(3
)
 

 
95

Net
(2,105
)
 
(87
)
 

 
(2,192
)
Total accumulated other comprehensive (loss) income
$
(96,548
)
 
$
(62
)
 
$
707

 
$
(95,903
)


The components of accumulated other comprehensive (loss) income for the six months ended June 30, 2020, are as follows:

 
 
 
 
 
Loss
 
 
 
As of
 
Loss
 
Reclassified
 
As of
 
December 31,
 
Recognized
 
from AOCI
 
June 30,
 
2019
 
in OCI
 
to Income
 
2020
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
659

 
$
(5,172
)
 
274

 
$
(4,239
)
Income tax (expense) benefit
(150
)
 
1,181

 
(53
)
 
978

Net
509

 
(3,991
)
 
221

 
(3,261
)
 
 
 
 
 
 
 
 
Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(124,140
)
 

 
3,234

 
(120,906
)
Income tax benefit (expense)
34,018

 

 
(740
)
 
33,278

Net
(90,122
)
 

 
2,494

 
(87,628
)
 
 
 
 
 
 
 
 
Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,211
)

(55
)
 

 
(2,266
)
Income tax benefit (expense)
98


(98
)
 

 

Net
(2,113
)

(153
)
 

 
(2,266
)
Total accumulated other comprehensive (loss) income
$
(91,726
)

$
(4,144
)
 
$
2,715

 
$
(93,155
)










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Table of Contents


The components of accumulated other comprehensive (loss) income for the six months ended June 30, 2019, are as follows:
 
 
 
 
 
Loss
 
 
 
As of
 
Gain
 
Reclassified
 
As of
 
December 31,
 
Recognized
 
from AOCI
 
June 30,
 
2018
 
in OCI
 
to Income
 
2019
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
1,316

 
$
348

 
$
(628
)
 
$
1,036

Income tax (expense) benefit
(298
)
 
(78
)
 
142

 
(234
)
Net
1,018

 
270

 
486

 
802

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

 
2,644

 
(129,810
)
Income tax benefit (expense)
35,893

 

 
(596
)
 
35,297

Net
(96,561
)
 

 
2,048

 
(94,513
)
 
 
 
 
 
 
 
 
Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,291
)
 
4

 

 
(2,287
)
Income tax benefit
95

 

 

 
95

Net
(2,196
)
 
4

 

 
(2,192
)
Total accumulated other comprehensive (loss) income
$
(97,739
)
 
$
274

 
$
1,562

 
$
(95,903
)




21
 

Table of Contents

 
NOTE 14 – Shareholders’ Equity

Share count and par value data related to shareholders’ equity are as follows:
 
 
As of
 
June 30,
 
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
57,066,930

 
56,929,298

Shares outstanding
32,267,307

 
32,472,406

Treasury stock
 
 
 
Shares held
24,799,623

 
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 six months ended June 30, 2020 and 2019, 342,731 and 179,966 shares of common stock were repurchased for $8,080 and $5,002, respectively. Approximately $5,740 is available for future purchases.

A roll-forward of common shares outstanding is as follows:
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
Balance at the beginning of the year
32,472,406

 
32,750,727

Repurchases
(342,731
)
 
(179,966
)
Restricted share issuances
137,632

 
136,520

Balance at the end of the period
32,267,307

 
32,707,281

 
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 for the three months ended June 30, 2020 was 84,720. There were no anti-dilutive awards outstanding for the three months ended June 30, 2019. The number of outstanding awards that were anti-dilutive for the six months ended June 30, 2020 and June 30, 2019 were 61,780 and 108,894, respectively.


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NOTE 15 - Stock-Based Compensation
 
At June 30, 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
 
Six Months Ended

June 30,

June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Service-based RSUs
$
779

 
$
488

 
$
1,359

 
$
1,094

Performance-based RSUs
19

 
1,038

 
(349
)
 
1,586

Cash-settled RSUs
19


53

 
35

 
113

Total
$
817

 
$
1,579

 
$
1,045

 
$
2,793

Income tax benefit
189

 
357

 
240

 
631

Net expense
$
628

 
$
1,222

 
$
805

 
$
2,162



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

June 30, 2020
 
Period
Service-based RSUs
$
2,860

 
1.53
Performance-based RSUs
2,968

 
2.12
Total
$
5,828

 
1.83

 
We recognize expense on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.
 
The following table summarizes the status of these plans as of June 30, 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

 

 

 

 

Maximum potential RSU and cash settled awards outstanding
536,819

 
200,804

 
75,200

 
35,952

 
5,522

Maximum potential awards outstanding
536,819

 
200,804

 
75,200

 
35,952

 
5,522

RSUs and cash settled awards vested and released
35,637

 

 

 

 

Awards available for grant
1,927,544

 

 

 

 


 






23
 

Table of Contents

Performance-Based Stock Options

During 2015, the Compensation Committee of the Board of Directors granted a total of 350,000 performance-based stock option awards for certain employees under the 2014 Plan. We did not recognized any expense on these awards because the attainment of the performance target was not deemed to be likely to occur. These performance options expired unexercised in May 2020.

Service-Based Restricted Stock Units
 
The following table summarizes the service-based RSU activity for the six months ended June 30, 2020
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
364,396

 
$
19.87

Granted
92,996

 
27.73

Vested and released
(90,595
)
 
22.71

Forfeited
(3,893
)
 
28.43

Outstanding at June 30, 2020
362,904

 
$
21.08

Releasable at June 30, 2020
185,974

 
$
14.63

 
Performance and Market-Based Restricted Stock Units

The following table summarizes the performance and market-based RSU activity for the six months ended June 30, 2020:
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
217,229

 
$
27.73

Granted
120,521

 
28.65

Attained by performance
38,820

 
23.84

Released
(111,838
)
 
23.74

Forfeited
(11,884
)
 
25.69

Outstanding at June 30, 2020
252,848

 
$
29.31

Releasable at June 30, 2020

 
$



The following table summarizes each grant of performance awards outstanding at June 30, 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

Focus 2025 Performance RSUs
April 23, 2020
2024
Cumulative revenues of $750 million over a trailing four-quarter period
48,000

48,000

      Total



252,848

457,696





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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 June 30, 2020 and December 31, 2019 we had 33,697 and 17,271 cash-settled RSUs outstanding, respectively. At June 30, 2020 and December 31, 2019, liabilities of $154 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.  Due to changes in interest rates and foreign exchange rates, these fair values fluctuated significantly during the second quarter and may continue to fluctuate based on market conditions and other factors.

The table below summarizes our financial liabilities that were measured at fair value on a recurring basis at June 30, 2020:
 
 
 
Quoted
 
 
 
 
 

 
Prices
 
 
 
 
 
Liability
 
in Active
 
Significant
 
 
 
Carrying
 
Markets for
 
Other
 
Significant
 
Value at
 
Identical
 
Observable
 
Unobservable
 
June 30,
 
Instruments
 
Inputs
 
Inputs

2020
 
(Level 1)
 
(Level 2)
 
(Level 3)
Interest rate swaps
$
(2,615
)
 
$

 
$
(2,615
)
 
$

Foreign currency hedges
$
(1,564
)
 
$

 
$
(1,564
)
 
$

 
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 and six-month periods ended June 30, 2020 and 2019 are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Effective tax rate
17.6
%
 
25.1
%
 
27.1
%
 
22.7
%

 
Our effective income tax rate was 17.6% and 25.1% in the second quarters of 2020 and 2019, respectively. This decrease is primarily attributed to the change in the mix of earnings by jurisdiction, a reduction in reserves related to uncertain tax positions, and other favorable permanent items, partially offset by a provision recorded due to the company's decision to no longer permanently reinvest the earnings from our Taiwan subsidiary. The second quarter 2020 tax rate was lower than the U.S. statutory federal tax rate for the same reasons as noted above. The second quarter 2019 tax rate was higher than the U.S. statutory federal tax rate primarily due to state taxes and foreign earnings that are taxed at higher rates.

Our effective income tax rate was 27.1% and 22.7% in the first half of 2020 and 2019, respectively. This increase is primarily attributed to establishment of valuation allowances on certain U.S. tax credits and the company's decision to no longer reinvest the earnings of its Taiwan subsidiary, offset by a reduction in reserves related to uncertain tax positions. The tax rate in the first half of 2020 was higher than the U.S. statutory federal tax rate for the same reasons noted above. The tax rate in the first half of 2019 was higher than the U.S. statutory federal tax rate primarily due to higher foreign tax rates applicable on foreign earnings offset by 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.

In accordance with FASB Staff Q&A - Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic ("FASB Staff Q&A") issued in April 2020, we have elected to account for any lease concessions resulting directly from COVID-19 as if the enforceable rights and obligations for the concessions existed in the respective contracts at lease inception and as such we will not account for any concession as a lease modification. Guidance from the FASB Staff Q&A provided methods to account for rent deferrals which include the option to treat the lease as if no changes to the lease contract were made or to treat deferred payments as variable lease payments. The FASB Staff Q&A allows entities to select the most practical approach and does not require the same approach be applied consistently to all leases. As a result, we have accounted for lease deferrals as if no changes to the lease contract were made and will continue to recognize lease expense, on a straight-line basis, during the deferral periods. During the three and six months ended June 30, 2020, these rent concessions related to COVID-19 were not material.

Components of lease expense for the three and six months ended June 30, 2020 were as follows:


Three Months Ended
 
Six Months Ended

June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Operating lease cost
$
1,190

 
$
1,075

 
$
2,389

 
$
2,069

Short-term lease cost
170

 
176

 
337

 
249

Total lease cost
$
1,360

 
$
1,251

 
$
2,726

 
$
2,318


Supplemental cash flow information related to leases was as follows:
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities
$
2,299

 
$
1,862

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
 
June 30,
 
December 31,
 
2020
 
2019
Balance Sheet Classification:
 
 
 
Operating lease obligations
$
3,051

 
$
2,787

Long-term operating lease obligations
24,473

 
24,926

Total lease liabilities
$
27,524

 
$
27,713

 
 
 
 
Weighted-average remaining lease terms (years)
8.43

 
9.04



 
 
Weighted-average discount rate
6.46
%
 
6.54
%






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Remaining maturity of our existing lease liabilities as of June 30, 2020 is as follows:
 
Operating Leases(1)
2020
$
2,344

2021
4,686

2022
4,547

2023
4,185

2024
4,075

Thereafter
16,950

Total
$
36,787

Less: interest
(9,263
)
Present value of lease liabilities
$
27,524

(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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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 Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("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. 2020-04 "Reference Rate Reform"

In March 2020, the FASB issued ASU 2020-04, “ Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides temporary optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as it relates to our LIBOR indexed instruments. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022, and an entity may elect to apply ASU 2020-04 for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.

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

In December 2019, the 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.


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ASU No. 2018-14 "Compensation - Retirement Benefits - Defined Benefit Plans - General"

In August 2018, the FASB issued 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 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 COVID-19 pandemic has resulted in a significant disruption to the global economy that has and will continue to adversely affect our business. We have experienced reductions in customer demand in several of our end markets. We expect that social distancing measures, high employee absenteeism, and reductions in production due to mandated labor capacity restrictions at some of our plants in Europe and North America, as well as the reduced operational capacity of our customers and suppliers, will continue to impact our business in the second half of 2020. 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: Second Quarter 2020 versus Second Quarter 2019
 
The following table highlights changes in significant components of the Unaudited Condensed Consolidated Statements of Earnings for the quarters ended June 30, 2020, and June 30, 2019:
 
 
Three Months Ended
 
 
 
Percent of
 
Percent of
 
June 30,
 
June 30,
 
Percent
 
Net Sales – 
 
Net Sales – 
 
2020
 
2019
 
Change
 
2020
 
2019
Net sales
$
84,197

 
$
120,684

 
(30.2
)%
 
100.0
 %
 
100.0
 %
Cost of goods sold
57,630

 
79,480

 
(27.5
)
 
68.4

 
65.9

Gross margin
26,567

 
41,204

 
(35.5
)
 
31.6

 
34.1

Selling, general and administrative expenses
14,668

 
17,036

 
(13.9
)
 
17.4

 
14.1

Research and development expenses
5,522

 
6,257

 
(11.7
)
 
6.6

 
5.2

Restructuring charges
135

 
911

 
(85.2
)
 
0.2

 
0.8

Gain on sale of assets

 
(83
)
 
(100.0
)
 

 
(0.1
)
Total operating expenses
20,325

 
24,121

 
(15.7
)
 
24.1

 
20.0

Operating earnings
6,242

 
17,083

 
(63.5
)
 
7.4

 
14.2

Total other (expense), net
(349
)
 
(1,134
)
 
(69.2
)
 
(0.4
)
 
(0.9
)
Earnings before income taxes
5,893

 
15,949

 
(63.1
)
 
7.0

 
13.2

Income tax expense
1,036

 
4,006

 
(74.1
)
 
1.2

 
3.3

Net earnings
$
4,857

 
$
11,943

 
(59.3
)%
 
5.8
 %
 
9.9
 %
Earnings per share:
 
 
 
 
 
 
 
 
 
Diluted net earnings per share
$
0.15

 
$
0.36

 
 
 
 
 
 
 
Sales were $84,197 in the second quarter of 2020, a decrease of $36,487 or 30.2% from the second quarter of 2019. Sales were negatively impacted as a result of the COVID-19 pandemic and government activities to control its spread.  In the second 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 $42,214 or 52.5%.  Sales to other markets increased $5,727 or 14.2%. The QTI acquisition, which was completed in July 2019, added $5,420 in sales for the quarter. Changes in foreign exchange rates decreased sales by $754 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 31.6% in the second quarter of 2020 compared to 34.1% in the second quarter of 2019. The decrease in gross margin was driven primarily by lower sales volumes, which was partially offset by various cost reduction measures.
Selling, general and administrative ("SG&A") expenses were $14,668 or 17.4% of sales in the second quarter of 2020 versus $17,036 or 14.1% of sales in the second quarter of 2019. The 2020 SG&A costs include savings from cost reduction measures we implemented during the second quarter, partially offset by amortization of intangibles and other operating costs associated with the QTI acquisition.
Research and development expenses were $5,522 or 6.6% of sales in the second quarter of 2020 compared to $6,257 or 5.2% of sales in the comparable quarter of 2019.
Restructuring charges were $135 or 0.2% of sales in the second quarter of 2020 and were mainly for severance charges. Restructuring charges were $911 or 0.8% of sales in the second quarter of 2019.
Operating earnings were $6,242 or 7.4% of sales in the second quarter of 2020 compared to operating earnings of $17,083 or 14.2% of sales in the second quarter of 2019.
Due to the impact of COVID-19, we implemented cost savings measures, some of which are temporary in nature. We will continue to evaluate market conditions to determine the extent and duration of the temporary measures. Given the continued demand

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volatility and expected multi-year recovery in the transportation end-market, the Company is implementing a restructuring plan starting in July 2020 to adapt our cost structure to lower market demand. The restructuring plan is focused on optimizing our manufacturing footprint and improving operational efficiency by better utilizing our systems capabilities. More information will be provided on the details of this restructuring plan in the Company’s subsequent filings.
Other income and expense items are summarized in the following table:
 
Three Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
Interest expense
$
(909
)
 
$
(467
)
Interest income
304

 
440

Other income (expense), net
256

 
(1,107
)
Total other (expense), net
$
(349
)
 
$
(1,134
)
Interest expense increased mainly as a result of an increase in debt related to the QTI acquisition and additional borrowings to ensure adequate liquidity for the next several quarters given the current global pandemic. Other income in the second quarter of 2020 was principally driven by foreign currency translation gains, mainly due to the depreciation of the U.S. Dollar compared to the Chinese Renminbi and Euro during the quarter, which were partially offset by pension expense.
 
 
Three Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
Effective tax rate
17.6
%
 
25.1
%
 
Our effective income tax rate was 17.6% and 25.1% in the second quarters of 2020 and 2019, respectively. This decrease is primarily attributed to the change in the mix of earnings by jurisdiction, a reduction in reserves related to uncertain tax positions, and other favorable permanent items, partially offset by a provision recorded due to the company's decision to no longer permanently reinvest the earnings from our Taiwan subsidiary.

Results of Operations: Six Months ended June 30, 2020 versus Six Months Ended June 30, 2019
 
The following table highlights changes in significant components of the Unaudited Condensed Consolidated Statements of Earnings for the six months ended June 30, 2020, and June 30, 2019:
 
 
Six months ended
 
 
 
Percent of
 
Percent of
 
June 30,
 
June 30,
 
Percent
 
Net Sales – 
 
Net Sales – 
 
2020
 
2019
 
Change
 
2020
 
2019
Net sales
$
187,272

 
$
238,308

 
(21.4
)%
 
100.0
 %
 
100.0
 %
Cost of goods sold
127,806

 
156,490

 
(18.3
)
 
68.2

 
65.7

Gross margin
59,466

 
81,818

 
(27.3
)
 
31.8

 
34.3

Selling, general and administrative expenses
31,427

 
34,597

 
(9.2
)
 
16.8

 
14.5

Research and development expenses
12,930

 
13,048

 
(0.9
)
 
6.9

 
5.5

Restructuring charges
375

 
2,995

 
(87.5
)
 
0.2
 %
 
1.3

Gain sale of assets

 
(122
)
 
(100.0
)
 

 
(0.1
)
Total operating expenses
44,732

 
50,518

 
(11.5
)
 
23.9

 
21.2

Operating earnings
14,734

 
31,300

 
(52.9
)
 
7.9

 
13.1

Total other (expense), net
(2,851
)
 
(1,071
)
 
166.2

 
(1.5
)
 
(0.4
)
Earnings before income taxes
11,883

 
30,229

 
(60.7
)
 
6.3

 
12.7

Income tax expense
3,218

 
6,867

 
(53.1
)
 
1.7

 
2.9

Net earnings
$
8,665

 
$
23,362

 
(62.9
)%
 
4.6
 %
 
9.8
 %
Earnings per share:
 
 
 
 
 
 
 
 
 
Diluted net earnings per share
$
0.27

 
$
0.71

 
 
 
 
 
 
 

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Sales were $187,272 in the six months ended June 30, 2020, a decrease of $51,036 or 21.4% from the six months ended June 30, 2019. Sales were negatively impacted as a result of the COVID-19 pandemic and government activities to control its spread.  In the first half of the year, 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 $59,521 or 37.4%.  Sales to other markets increased $8,485 or 10.7%. The QTI acquisition, which was completed in July 2019, added $10,995 in sales for the first six months of 2020. Changes in foreign exchange rates decreased sales by $1,317 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 31.8% for the six months ended June 30, 2020 compared to 34.3% for the six months ended June 30, 2019. The decrease in gross margin was driven primarily by lower sales volumes, which was partially offset by various cost reduction measures.
Selling, general and administrative ("SG&A") expenses were $31,427 or 16.8% of sales for the six months ended June 30, 2020 versus $34,597 or 14.5% of sales for the six months ended June 30, 2019. The 2020 SG&A costs include savings from cost reduction measures we implemented during the second quarter, partially offset by amortization of intangibles and other operating costs associated with the QTI acquisition.
Research and development expenses were $12,930 or 6.9% of sales for the six months ended June 30, 2020 compared to $13,048 or 5.5% of sales for the six months ended June 30, 2019.
Restructuring charges were $375 or 0.2% of sales for the six months ended June 30, 2020 and were mainly for severance charges. Restructuring charges were $2,995 or 1.3% of sales for the six months ended June 30, 2019.
Operating earnings were $14,734 or 7.9% of sales for the six months ended June 30, 2020 compared to operating earnings of $31,300 or 13.1% of sales for the six months ended June 30, 2019.
Due to the impact of COVID-19, we implemented cost savings measures, some of which are temporary in nature. We will continue to evaluate market conditions to determine the extent and duration of the temporary measures. Given the continued demand volatility and expected multi-year recovery in the transportation end-market, the Company is implementing a restructuring plan starting in July 2020 to adapt our cost structure to lower market demand. The restructuring plan is focused on optimizing our manufacturing footprint and improving operational efficiency by better utilizing our systems capabilities. More information will be provided on the details of this restructuring plan in the Company’s subsequent filings.
Other income and expense items are summarized in the following table:
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
Interest expense
$
(1,760
)
 
$
(933
)
Interest income
635

 
872

Other (expense) income, net
(1,726
)
 
(1,010
)
Total other (expense), net
$
(2,851
)
 
$
(1,071
)
Interest expense increased mainly as a result of an increase in debt related to the QTI acquisition and additional borrowings at the end of the first quarter to ensure adequate liquidity for the next several quarters. The increase in Other (expense) income, net for the six months ended June 30, 2020 was principally driven by pension expense as well as foreign currency translation losses, mainly due to the appreciation of the U.S. Dollar compared to the Chinese Renminbi and Euro during the first half of the year.
 
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
Effective tax rate
27.1
%
 
22.7
%
 

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Our effective income tax rate was 27.1% and 22.7% in the six months ended June 30, 2020 and 2019, respectively. This increase is primarily attributed to establishment of valuation allowances on certain U.S. tax credits and the company's decision to no longer reinvest the earnings of its Taiwan subsidiary, offset by a reduction in reserves related to uncertain tax positions.

Liquidity and Capital Resources

Cash and cash equivalents were $145,981 at June 30, 2020, and $100,241 at December 31, 2019, of which $93,958 and $98,309, respectively, were held outside the United States. The increase in cash and cash equivalents of $45,740 was primarily driven by net proceeds from an increase in borrowings of long-term debt of $41,600 and cash generated from operating activities of $23,724, which were partially offset by treasury stock purchases of $8,080, capital expenditures of $7,245, dividends paid of $2,598, and taxes paid on behalf of equity award participants of $1,903. Total long-term debt was $141,300 as of June 30, 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 26.1% at June 30, 2020, compared to 19.7% at December 31, 2019.

We increased our cash position during the first quarter to improve liquidity given the current economic environment. Our net debt, defined as long-term debt less cash and cash equivalents, was $(4,681) at June 30, 2020. We currently have $157,000 available for additional borrowings under our credit facility.

Working capital increased by $46,494 during the six months ended June 30, 2020, primarily due to the increase in cash and cash equivalents from borrowings under our credit facility and a decrease in accounts payable, which were partially offset by a decrease in accounts receivable.
Cash Flows from Operating Activities
Net cash provided by operating activities was $23,724 during the first six months of 2020. Components of net cash provided by operating activities included net earnings of $8,665, depreciation and amortization expense of $13,143, other net non-cash items of $2,810, and a net cash outflow from changes in assets and liabilities of $894.
Cash Flows from Investing Activities
Net cash used in investing activities for the first six months of 2020 was $7,245, driven entirely by capital expenditures.
Cash Flows from Financing Activities
Net cash provided by financing activities for the first six months of 2020 was $29,019. The net cash inflow was the result of net proceeds from an increase in borrowings of long-term debt of $41,600, which was partially offset by treasury stock purchases of $8,080, dividends paid of $2,598, and taxes paid on behalf of equity award participants in the amount of $1,903.
Capital Resources
Long‑term debt is comprised of the following: 
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Total credit facility
$
300,000

 
$
300,000

Balance outstanding
141,300

 
99,700

Standby letters of credit
1,740

 
1,800

Amount available, subject to covenant restrictions
$
157,000

 
$
198,500

Weighted-average interest rate
2.17
%
 
3.25
%
Commitment fee percentage per annum
0.25
%
 
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.

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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 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 3.2% of total sales. We believe our reserve level is appropriate considering all facts and circumstances surrounding any outstanding quality claims and our historical experience selling our products to our customers.
Accounts Receivable
We have standardized credit granting and review policies and procedures for all customer accounts, including:
Credit reviews of all new customer accounts,
Ongoing credit evaluations of current customers,
Credit limits and payment terms based on available credit information,
Adjustments to credit limits based upon payment history and the customer's current credit worthiness,
An active collection effort by regional credit functions, reporting directly to the corporate financial officers, and;
Limited credit insurance on the majority of our international receivables.
We reserve for estimated credit losses based on historical experience, 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 1.0% 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.


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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 plan ("Plan") at management's discretion, subject to certain conditions. On June 1, 2020, we entered into the Fifth Amendment to the Plan whereby we set an effective termination date of July 31, 2020. The Plan termination process is expected to take twelve to eighteen months and requires certain approvals from both the Internal Revenue Service and Pension Benefit Guaranty Corporation. Once we receive such approvals, an insurance company will be selected to purchase annuities and fulfill the obligations of the Plan including administering payments to participants. Upon settlement of the pension liabilities, we will reclassify the related pension losses currently recorded in accumulated other comprehensive loss into earnings.  We do not expect any cash contributions from the Company to the Plan as a result of this termination because plan assets exceed estimated liabilities.

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.
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.


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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 first quarter due to the impairment of a specific asset group. No indicators of impairment were identified during the quarter ended June 30, 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 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.


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In the second quarter of 2020, the company made the decision to no longer permanently reinvest the earnings of its Taiwan subsidiary. As a result, a provision for the expected taxes on repatriation of those earnings has been recorded.
Significant Customers
Our net sales to customers representing at least 10% of total net sales is as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Cummins Inc.
9.7
%
 
18.0
%
 
13.4
%
 
18.3
%
Toyota Motor Corporation
11.6
%
 
11.8
%
 
11.7
%
 
11.1
%
Honda Motor Co.
9.9
%
 
9.9
%
 
8.1
%
 
10.1
%

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 June 30, 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, labor capacity restrictions, 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
April 1, 2020 through April 30, 2020
114,000

 
$
22.66

 
114,000

 
$
5,933

May 1, 2020 through May 31, 2020
8,000

 
$
24.11

 
8,000

 
$
5,740

June 1, 2020 through June 30, 2020

 
$

 

 
$
5,740

Total
122,000

 
$
22.76

 
122,000

 
 

Item 6.  Exhibits 
10.1
 
 
10.2
 
 
(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 June 30, 2020 formatted in Inline XBRL: (i) Condensed Consolidated Statements of Earnings for the three and six months ended June 30, 2020 and 2019; (ii) Condensed Consolidated Statements of Comprehensive Earnings for the three and six months ended June 30, 2020 and 2019; (iii) Condensed Consolidated Balance Sheets at June 30, 2020 and December 31, 2019; (iv) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019; (v) Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 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


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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: July 31, 2020
 
Dated: July 31, 2020

43
 
Exhibit

Fourth Amendment
to the
CTS Corporation Pension Plan
(Amended and Restated Effective as of July 1, 2015)
Whereas, CTS Corporation (the “Company”) maintains the CTS Corporation Pension Plan (the “Plan”) for the benefit of its eligible employees; and
Whereas, the Plan consists of a main Plan document and several Appendices which form a part of the Plan and which together constitute a “single plan” as such term is defined in Internal Revenue Code Section 1.414(1)–1(b)(1); and
Whereas, under section 9.1 of the Plan, the Company reserves the right to amend, modify, suspend, or terminate the Plan (including the Appendices made a part thereof) at any time by resolution of the Board of Directors; and
Whereas, the Company desires to amend the Plan in order to:
1.expand the joint and survivor annuity options to certain participants who were previously married;
2.    clarify that the small amount cashout provisions apply to the qualified preretirement survivor annuity;
3.    reference new IRS mortality tables for purposes of determining the amount of lump sum distributions; and
4.    eliminate special Plan provisions relating to claims and appeals of disability determinations.
Now, Therefore, the Plan is amended as follows, effective as of the dates described below:
1.
Section 6.5 of the Plan is revised by adding subsection (f) as follows, effective as of April 1, 2018:
“(f)
Availability of Joint and Survivor Annuity to certain former Spouses. In addition to being the normal form of payment for a married Participant, the Qualified Joint and Survivor Annuity shall also be made available by the Administrator to certain Participants with a former Spouse who do not choose to obtain a qualified domestic relations order, as described in section 7.7. The Administrator shall make this option and the Optional Joint and (75%) Survivor Annuity available on a nondiscriminatory and uniform basis to such similarly situated Participants, but without application of the Spousal consent requirement described in subsection (d) above.”
2.
Section 6.6(a) of the Plan is revised and clarified to read as follows, effective as of July 1, 2017:
“(a)
Eligibility. In the case of a Participant who has a nonforfeitable right to all or a portion of his accrued benefit, who has a surviving Spouse, and who dies prior to his Annuity Starting Date (whether or not such Participant is employed by the Employer at the time of his death), there shall be payable to his surviving Spouse a Preretirement Survivor Annuity, subject to the provisions of section 6.7(a) and (b).”
3.
Section 6.11(b) of the Plan is revised by amending the second paragraph to read as follows, effective as of July 1, 2018:
Post-2007 Plan Year Annuity Starting Dates. For distributions with an Annuity Starting date after June 30, 2008, and prior to July 1, 2018, the IRS Mortality Table and IRS Interest Rate shall be determined as follows:”
4.
Section 6.11 of the Plan is revised by adding subsection (c) as follows, effective as of July 1, 2018:
“(c)
Annuity Starting Dates on or after July 1, 2018. For distributions with an Annuity Starting Date on or after July 1, 2018, the IRS Interest Rate and IRS Mortality Table shall be determined in accordance with paragraphs (1) and (2) below:
(1)
IRS Mortality Table. The term “IRS Mortality Table” means the mortality table prescribed by the IRS pursuant to Code section 417(e)(3), which table is based on the mortality table specified for a Plan Year under subparagraph (A) of Code section 430(h)(3) (without regard to subparagraph (C) or (D) of that section), and which the IRS shall publish from time to time.

For stability periods beginning in 2018 (i.e., the 2018 Plan Year), such mortality table will be the table published in Appendix B of IRS Notice 2017-60. For stability periods beginning after 2018, such mortality table will be the table published in comparable IRS guidance issued in future years.
(2)
IRS Interest Rate. The term “IRS Interest Rate” means the interest rate prescribed by the IRS pursuant to Code section 417(e), which means the adjusted first, second, and third segment rates, based on the monthly corporate bond yield curve “spot” rates, applied under rules similar to the rules of Code section 430(h)(2)(C) (determined by not taking into account any adjustment under clause (iv) thereof, and by substituting average yields for the month described in the following paragraph for the average yields for the 24-month period described in Code section 430(h)(2)(D)).

The IRS Interest Rate for the Plan Year in which the Annuity Starting Date occurs shall be the rate determined for May of the preceding Plan Year. (For purposes of determining the appropriate IRS Interest Rate, the “stability period” under IRS guidance is the Plan Year.)
The IRS Interest Rate and the IRS Mortality Table described above shall be determined in accordance with Code sections 417(e) and 430(h), as well as any written guidance issued by the IRS or Treasury regarding such interest rate or mortality table.”
5.
Section 11.3 of the Plan is revised by adding the following new subsection (e), and by relabeling current subsection (e) as new subsection (f):
“(e)
Inapplicability of Supplemental Claims Procedures for Disability Pension Benefits. The provisions described in subsections (b) and (d) above shall cease to apply, effective June 30, 2018. Pursuant to section 5.3, no new Total and Permanent Disability shall be recognized, and any claims relating to a prior disability pension benefit shall be subject to the remaining provisions of section 11.3.”
* * * * * * * * * * * * * * * * * *
In Witness Whereof, CTS Corporation has caused this Fourth Amendment to be signed on its behalf and attested by its duly authorized officers this ____ day of ______________, 2018, but effective as of the dates described above.

CTS Corporation

By:         

        
Attest:    
    
By:        

        


1    00366 PP-A4-v1 R 7-1-15.DOC Ln
Exhibit

Fifth Amendment
to the
CTS Corporation Pension Plan
(Amended and Restated Effective as of July 1, 2015)
Whereas, CTS Corporation (the “Company”) maintains the CTS Corporation Pension Plan (the “Plan”) for the benefit of its eligible employees; and
Whereas, the Plan consists of a main Plan document and several Appendices which form a part of the Plan and which together constitute a “single plan” as such term is defined in Internal Revenue Code Section 1.414(1)–1(b)(1); and
Whereas, under section 9.1 of the Plan, the Company reserves the right to amend, modify, suspend, or terminate the Plan (including the Appendices made a part thereof) at any time by resolution of the Board of Directors; and
Whereas, the Company has decided to terminate the Plan, effective as of July 31, 2020, and as part of the termination process, wishes to amend the Plan, in order to make certain changes that will apply either before or after such termination; and
Whereas, more specifically, the Amendment includes the following provisions:
1.
Provides for a time-limited lump sum distribution option, expected to be available for a limited period of time during 2021, to certain terminated vested and active participants whose retirement benefit has not yet commenced;
2.
Provides for an immediate annuity option for those same participants;
3.
Specifies a July 31, 2020 termination date;
4.
Provides for voluntary in-service benefit commencement upon attaining normal retirement age;
5.
Changes the method of determining beneficiaries in the event that a participant does not designate a specific individual, or if the participant’s designation cannot take effect for some reason;
6.
Eliminates certain service requirements previously necessary in order to attain “normal” or “early” retirement age under the Plan;
7.
Implements certain provisions of the SECURE Act of 2019 relating to changes to minimum required distributions;
8.
Removes a limited lump sum preretirement death benefit from the Plan;
9.
Removes certain references within the Plan document to certain preretirement death benefits that are no longer payable under the Plan; and
10.
Provides for various other changes and authorizations related to the Plan termination.
Now, Therefore, the Plan is amended as follows, effective as of the dates described below:
1.Section 1.1(h) is added to the Plan as follows, effective as of July 31, 2020:
“(h)
Termination of Plan. Effective as of July 31, 2020, (the Plan Termination Date), the Plan is terminated pursuant to the provisions of section 9.4 and other provisions of the Fifth Amendment to the Plan.”
2.    Section 2.1(s) of the Plan is revised to read as follows, effective as of July 31, 2020:
“(s)
Early Retirement Date” generally means, effective as of July 31, 2020, the first day of the month coincident with or next following the date an Employee retires before his Normal Retirement Age. Such age is generally 55, as further described in section 6.2, and except as otherwise provided in an Appendix to the Plan.”
3.    Section 2.1(jj) of the Plan is revised to read as follows, effective as of July 31, 2020:
“(jj)
“Normal Retirement Age” generally means, effective as of July 31, 2020, the Employee’s 65th birthday, as described further in section 5.1, except as otherwise provided in an Appendix to the Plan. Upon attaining Normal Retirement Age, the Employee shall have a fully vested and nonforfeitable interest in his accrued benefit.”
4.    Section 2.1(kk) of the Plan is revised to read as follows, effective as of July 31, 2020:
“(kk)
“Normal Retirement Date” generally means, effective as of July 31, 2020, Normal Retirement Age, except that a Participant may elect to delay his Normal Retirement Date beyond Normal Retirement Age, up until the date that he retires from employment with the Company and all Affiliated Employers. Furthermore, for purposes of Appendix G, Normal Retirement Date is as defined in the first paragraph of section 5.1 of that Appendix G.”
5.    Section 5.1 of the Plan is revised to read as follows, effective July 31, 2020:
5.1 Normal Retirement
An Employee who has attained Normal Retirement Age will be entitled to nonforfeitable monthly normal retirement benefits, as further described in section 6.1.”
6.    Section 5.2 of the Plan is revised to read as follows, effective July 31, 2020:
5.2 Early Retirement
An Employee who, effective as of July 31, 2020—
(a)has attained age 55 years but not Normal Retirement Age, and
(b)    retires from employment with the Company and all Affiliated Employers before his Normal Retirement Age,
will be entitled to monthly early pension benefits, as further described in section 6.2.”
7.    Section 6.7(c) of the Plan is revised by adding a new paragraph to read as follows, effective as of July 31, 2020:
“Notwithstanding the preceding paragraph, effective as of July 31, 2020, in the absence of an affirmative election by the Participant or other person to receive cash or authorize a direct rollover, such person shall be treated as a “missing participant” under ERISA section 4050. Automatic rollovers to a “default” individual retirement plan (as described above) shall not be performed if the Participant is being treated as a missing participant.”
8.    Section 6.9 of the Plan is revised to read as follows, effective as of July 31, 2020;
“6.9 Lump Sum Distribution Option relating to Survivor Annuity to Spouse.
In the event that a surviving Spouse is eligible to receive the survivor portion of either a Qualified Joint and Survivor Annuity or an Optional Joint and Survivor Annuity under section 6.5(d), such surviving Spouse shall be eligible to elect to receive the lump sum Actuarial Equivalent of the survivor annuity as an alternative payment form, subject to the following terms and conditions:
(a)Actuarial Factors. Such lump sum will be calculated by using the lump sum Actuarial Equivalent factors described in section 6.11(b).
(b)Required Notification and Election Periods. In order to be eligible to receive this lump sum distribution option, the surviving Spouse must notify the Administrator of the Participant’s death within 30 days of the date on which such death occurs. Following such timely notification, the Spouse will receive an election form permitting the lump sum distribution as an alternative payment form. The Spouse must then complete and submit such an election form within 30 days after such form is made available to the Spouse. If either of these deadlines is not satisfied, the lump sum distribution option will not be available to the surviving Spouse.
Following a timely lump sum election, such lump sum shall be paid out within 60 days from the receipt of the election form by the Administrator.”
9.    Section 7.1 of the Plan is revised by adding the following section (d) to the Plan, effective as of July 31, 2020:
“(d)
Benefit Commencement following Plan Termination. Notwithstanding anything to the contrary in subsections (a)-(c) above, in the case of a Participant who attains age 65 on or after July 31, 2020, such Participant may elect to have benefit payments commence immediately, rather than be delayed until such Participant’s employment with the Company and Affiliated Employers terminates. Furthermore, in the case of a Participant who had attained age 65 prior to July 31, 2020, but whose benefit payments had not commenced due to continued employment with the Company or an Affiliated Employer, such Participant may elect to have such payments commence as of July 31, 2020. In determining the amount and form of payment of such normal retirement benefits, the remaining provisions of this Article 7 (and of the Plan and Appendices in general) shall apply as if that Participant’s employment with the Company and Affiliated Employers had terminated. The provisions of this subsection (d) shall also apply to Participants entitled to a benefit under any Appendix to the Plan, regardless of any language within such Appendix to the contrary.”
10.    Section 7.2(c)(1) of the Plan is revised by adding the following wording to section 7.2(c)(1) (i.e., immediately preceding section 7.2(c)(2)), effective as of January 1, 2020:
“Notwithstanding subparagraphs (A) and (B) above, in the case of an Employee who has not attained age 70-1/2 as of December 31, 2019, the references in subparagraphs (A) and (B) above to “the calendar year in which such Employee attains age 70-1/2” shall be replaced by “the calendar year in which such Employee attains age 72.”
11.    Section 7.5 of the Plan is revised by adding a new subsection (c), effective as of July 31, 2020:
“(c)
Limited Suspension of Benefits on and after Plan Termination Date. Notwithstanding subsections (a) and (b) above, in the case of Participants who remain in employment with the Company and Affiliated Employers after having attained age 65, and after July 31, 2020, benefit payments may commence in accordance with section 7.1(d), regardless of the number of Hours of Service earned in each month.”
12.    Section 9.4 is added to the Plan as follows, effective as of July 31, 2020
“9.4 Plan Termination
(a)Plan Termination. Notwithstanding any provision of the Plan to the contrary, the Plan shall be terminated effective July 31, 2020 (the “Termination Date”). All accrued benefits under the Plan shall be distributed thereafter in accordance with the provisions of the Plan and this section 9.4. The Administrator shall take all actions as are necessary or desirable to provide for the termination of the Plan and the distribution of Participants’ accrued benefits.
(b)Vesting and Continued Participation. Effective as of the Termination Date, each affected Participant’s accrued benefit shall be fully vested in accordance with section 9.2(a) of the Plan. All Participants in the Plan on the Termination Date shall continue as Participants in the Plan with respect to their accrued benefits until such accrued benefits are distributed to them or their Beneficiaries, in accordance with the terms of this section 9.4 and the remaining provisions of the Plan.
(c)
Distribution of Benefits. After the termination of the Plan, the benefits of each Participant, surviving Spouse alternate payee, or other Beneficiary under the Plan will be distributed in accordance with the terms of this section 9.4. Many such Participants and other persons are eligible to receive lump sum distributions pursuant to the terms of section 6.18, or a comparable provision of an Appendix to the Plan. Such immediate lump sum shall be paid after the Termination Date but prior to the purchase of an irrevocable annuity contract from a licensed insurance company. Alternatively, each such Participant or other person may elect to receive benefits in any available distribution option upon the Plan termination in accordance with the terms of the Plan; provided, however, certain annuity payments may commence under the terms of the Plan and continue under the terms of the irrevocable annuity contract from the insurance company referenced in subsection (f) below.

Upon completion of the distributions to Participants and other persons described in the preceding
paragraphs, any remaining funds in the Trust Fund may revert to the Employer, pursuant to section 8.4(a) of the Plan. Furthermore, the Company shall have the discretion to transfer some portion of such excess assets to the CTS Corporation Retirement Savings Plan, or some other eligible “qualified replacement plan,” as that term is defined in Code section 4980(d)(2). Any such transfer shall be in accordance with the provisions of Code section 4980 and this section 9.4.
(d)Trust Fund. All accrued benefits shall continue to be held by the Trustee under the Trust until distributed in accordance with subsection (c) above.
(e)Government Notices and Approvals. The Administrator shall furnish notices to and request approvals from the Internal Revenue Service and any other government agency with regard to the termination of the Plan, as deemed necessary or desirable.
(f)Authority of Company and Administrator. The Administrator may adopt such further amendments to the Plan, including amendments to the Plan after the Plan has been terminated, as may be necessary to comply with applicable IRS or other governmental requirements, or as may be desirable to provide for the distribution of the accrued benefits, or for any other reason. Until all accrued benefits have been distributed (either by lump sum payment or through the purchase of an irrevocable annuity contract from a licensed insurance company), the Company and Administrator shall retain all rights, duties, and discretion imposed on or reserved to the Company and Administrator under the Plan, as applicable.
(g)Plan Provisions. Except as inconsistent with the provisions of this section 9.4, all provisions of the Plan shall continue in effect until all accrued benefits have been distributed and all other actions necessary to terminate the Plan have been completed. Upon complete distribution of the accrued benefits, the Trust shall terminate. The terms of this section 9.4 shall supersede the provisions of the Plan to the extent necessary to eliminate inconsistencies between the Plan and this section.”
13.    Section B.1(a)(1)(A) is added to Appendix B of the Plan, immediately following subsection (a)(1), to read as follows, effective as of August 1, 2020:
“(1)(A) “Beneficiary” means, where applicable, an individual or (to the extent permitted) an entity designated by the Participant on a form for such purpose, and filed with the Administrator. In the event that a Participant shall not designate a Beneficiary in the manner heretofore stated, or if for any reason such designation shall be legally ineffective, or if such Beneficiary shall predecease the Participant or die simultaneously with him, or if such Beneficiary shall die prior to receiving all of the benefit payments that would have been payable to such Beneficiary if such Beneficiary’s death had not occurred, then distribution shall be made to the surviving member or members of the following classes of persons, with preference for classes in the order listed, in equal shares among members of a class if there should be more than one member of a class then living. The Participant’s—
(1)    spouse;
(2)    children (including children by adoption);
(3)    parents (including parents by adoption);
(4)    brothers and sisters;
(5)    such other person(s) as may be determined by the Administrator.
14.    Section 2.1(b) of Appendix E of the Plan is revised and clarified as follows, effective as of July 31, 2020:
“(b)
“Early Retirement Date” means the first day of the month coincident with or next following the date an Employee retires (as further described in section 5.2) before his Normal Retirement Age.”
15.    Section 2.1(d) of Appendix G of the Plan is revised to read as follows, effective as of July 31, 2020:
“(d)
Beneficiary” means, where applicable, an individual or (to the extent permitted) an entity designated by the Participant on a form for such purpose, and filed with the Administrator. In the event that a Participant shall not designate a Beneficiary in the manner heretofore stated, or if for any reason such designation shall be legally ineffective, or if such Beneficiary shall predecease the Participant or die simultaneously with him, or if such Beneficiary shall die prior to receiving all of the benefit payments that would have been payable to such Beneficiary if such Beneficiary’s death had not occurred, then distribution shall be made to the surviving member or members of the following classes of persons, with preference for classes in the order listed, in equal shares among members of a class if there should be more than one member of a class then living. The Participant’s—
(6)    spouse;
(7)    children (including children by adoption);
(8)    parents (including parents by adoption);
(9)    brothers and sisters;
(10)    such other person(s) as may be determined by the Administrator.
16.    Addendum C to Appendix G of the Plan shall be deleted, insofar as there are no active Participants still employed by CTS who are covered under Appendix G, and therefore no lump sum death benefits under that Addendum C are still payable to Beneficiaries.
17.    
Changes to Core Document
18.    Article 6 of the Core Document is amended to include a new section 6.18 to read as follows, effective as of August 1, 2020:
“6.18 Lump Sum Option Available to Terminated Vested and Active Participants for Limited Period of Time During 2020–2021.
(a)Definitions. For purposes of this section 6.18, the following definitions will apply:
(1)    “Eligible Window Participant” means a Participant who is eligible to make an election described in this section 6.18, as more fully described in subsection (c) below.
(2)    “Lump Sum Determination Date” means April 1, 2021, the date as of which lump sum distributions shall be calculated and payable, and the date as of which immediate annuity payments may commence; provided, however, the actual date on which a lump sum distribution is made or the initial annuity payment is made may be a short period of time following this Lump Sum Determination Date.
(3)    “Offer Closing Date” means the latest permissible date on which an Eligible Window Participant may elect to receive a lump sum distribution or other payment under the provisions of this section 6.18. Such date is expected to be March 5, 2021; provided, however, that the Administrator may choose in its sole and absolute discretion to permit extensions beyond such Offer Closing Date, provided that any such extensions are applied on a uniform and nondiscriminatory basis to all similarly situated persons.
(b)General. In addition to lump sum distributions for amounts not exceeding $5,000 described in section 6.7, a lump sum distribution for amounts larger than $5,000 shall be made available to Eligible Window Participants, as further described in subsection (c) below.

These additional lump sum distributions shall only be made available for a limited period of time, as described further below.
(c)Eligible Window Participants. The single lump sum payment option (as well as the immediate annuity option described in subsection (e) below), shall be available to Active Window Participants, Terminated Vested Window Participants, and Other Window Participants, as described in paragraphs (1)-(3) below, but excluding any persons described in paragraph (4) below. These groups of eligible Participants shall collectively be known as Eligible Window Participants.
(1)    Active Window Participants. The term Active Window Participants shall include all Participants who—
(A)    are actively employed by the Company or an Affiliated Employer as of the date just before formal notice is provided, as described in subsection (d)(1) below,
(B)    are covered under the terms and provisions of this Core Document, and specifically including a Participant who is covered under the terms of Appendix B and therefore eligible to receive a “past service benefit” (commonly referred to as a “Wireless Participant”),
(C)    who are alive as of the Lump Sum  Determination Date, and
(D)    are not excluded under paragraph (4) below.
(2)    Terminated Vested Window Participants. Unless excluded under paragraph (4), an Eligible Window Participant means a Participant—
(A)    who is covered under the terms and provisions of this Core Document, and specifically including a Participant who is covered under the terms of Appendix B and therefore eligible to receive a “past service benefit” (commonly referred to as a “Wireless Participant”).
(B)    who has terminated employment with the Company and all Affiliated Employers on a date before the date on which formal notice is provided, as described in subsection (d)(1) below,
(C)    who is alive as of the Lump Sum Determination Date,
(D)    who is entitled to a retirement benefit under Article 6 of this Core Document, and such benefit has not commenced to be paid (in the form of an annuity) and has not been paid out completely (in the form of a lump sum) as of the Lump Sum Determination Date, except as otherwise provided in paragraph (5) below, and
(E)    for whom the lump sum actuarial equivalent value of the Participant’s benefit, determined on the basis of the Actuarial Assumptions described in section 6.11, and based on the methodology described in subsection (f) below, exceeds $5,000,
shall be classified as a Terminated Vested Participants for purposes of this section 6.18.
(3)    Other Window Participants. In addition to Active Window Participants and Terminated Vested Window Participants described above, any—
(A)    surviving spouse or nonspouse beneficiary or alternate payee whose benefits are derived from any of the previously described groups of Window Participants,
(B)    whose benefits under the Plan have not yet commenced, and
(C)    who is alive as of the Lump Sum Determination Date,  
shall be considered as Other Window Participants, and shall thereby be designated as Eligible Window Participants; provided, however, that if a Participant otherwise described in paragraph (1) or (2) above, or an alternate payee is subject to the terms of a qualified domestic relations order which requires payment (to that specific person) in a form other than a lump sum, such Participant or alternate payee shall be treated as excluded under paragraph (4) below.
(4)    Excluded Persons. Notwithstanding paragraphs (1)-(3) above, Participants and other persons described in paragraphs (1), (2), and (3) above who are in payment status shall not be Eligible Window Participants, except as otherwise provided in paragraph (5) below. Similarly, Terminated Vested Window Participants described in paragraphs (2) above who have attained age 65 prior to the Lump Sum Determination Date shall not be Eligible Window Participants, except as otherwise provided in paragraph (5) below.
(5)    Limited Exception for Certain Participants in Payment Status. Notwithstanding the provisions of paragraphs (2)(D) and (3)(B) above, a Participant, if any—
(A)    who satisfies the conditions of paragraph (2) above, other than those described in subparagraph (D), or who satisfies the conditions of paragraph (3) above, other than those described in subparagraph (B),
(B)    whose benefits have commenced on or after March 1, 2020 and prior to June 1, 2020, and
(C)    who is determined by the Administrator not to have been fully informed of the right to receive a lump sum distribution prior to the date on which his benefits commenced,
shall be classified as an Eligible Window Participant, and eligible to make the election described in this section 6.18, modified as described in the following paragraph. Such determination shall be made in the sole and absolute discretion of the Administrator, which shall be applied on a consistent, uniform, and nondiscriminatory basis.
Notwithstanding anything to the contrary in subsection (d) or (e) below, any such Participant described above may elect between (i) receiving a lump sum distribution, calculated as described in subsection (f)(1), but actuarially reduced to reflect the value of annuity payments received, or (ii) continuing the annuity payments in the same payment form as previously elected (and currently in payment status).
(d)Notice and Election Period. The following provisions relating to notices and elections shall be applicable to Eligible Window Participants.
(1)
Notification Dates and Timing Requirements. Eligible Window Participants were initially notified of the availability of the option to receive a lump sum distribution in May or June 2020. The formal notice describing all election rights (comparable to the notice described in section 4.7(a)(5) of the Plan) will be distributed to Eligible Window Participants in January, 2021.

The lump sum distribution option described in subsection (b) above (and the immediate annuity option described in subsection (e) below) may only be elected during the election period beginning after the formal notice has been provided, and ending on the Offer Closing Date (as defined in subsection (a) above) (the “Election Period”). Immediate annuity payments for Eligible Window Participants who timely elect to receive such payments will be determined as of the Lump Sum Determination Date. Similarly, lump sum distributions will be determined as of the Lump Sum Determination Date.


The dates mentioned in the preceding two paragraphs, including the Offer Closing Date and the Lump Sum Determination Date, are anticipated to be accurate, but may need to be changed, and are permitted to be changed, in order to accommodate unanticipated administrative or other delays or, alternatively, in accordance with subsection (h) below. Regardless of the actual dates of notice and the dates of the Election Period described above, Eligible Window Participants shall be permitted a minimum of 30 days in order to consider the program described in this section 6.18, and to make any and all elections relating to form of payment and related matters.
(2)    Election, Waiver, Consent, and Revocation Requirements. In the case of Eligible Window Participants who are married, the provisions of section 6.5 relating to notice requirements, Qualified Joint and Survivor Annuity automatic payment form, waiver of the automatic payment form, spousal consent, and related requirements affecting the timing of the distribution, shall apply, except as otherwise provided in this section 6.18 or section 6.7 (relating to certain benefit amounts that do not exceed $5,000). In the case of Eligible Window Participants (regardless of whether single or married), such persons shall be notified of the lump sum distribution option, and also notified of all applicable payment forms for which they are eligible, as described in subsection (e).

In all cases, an Eligible Window Participant who elects to receive a lump sum distribution or immediate annuity pursuant to this section 6.18 may subsequently choose to revoke that election at any time prior to the Lump Sum Determination Date (including the period of time after the Offer Closing Date, but prior to the Lump Sum Determination Date).


In addition to the election, waiver, and consent requirements described in the preceding paragraph, Eligible Window Participants must comply with any reasonable requests of the Administrator related to payment of a benefit payable under this section 6.18, which requests shall be uniformly applied to similarly situated persons. Such requests may relate to, for example, required notarizations or proof of birthdate.
(3)    Failure to Submit an Election. For purposes of this section 6.18, an Eligible Window Participant must make a “valid” election in order to receive a lump sum distribution or an immediate annuity. This determination of whether an Eligible Window Participant has made a “valid” election shall be made in the sole and absolute discretion of the Administrator. An Eligible Window Participant may make a valid election by signing and returning the election confirmation form provided by the Administrator for this purpose.
Any Eligible Window Participant who does not submit a valid election hereunder by the Offer Closing Date, in accordance with procedures established and determined by the Administrator, shall not be eligible to receive the lump sum distribution or immediate annuity described in this section 6.18.
(e)Immediate Annuity Option Payment Forms. In the case of any Eligible Window Participant who is eligible to elect a lump sum distribution as described in this section 6.18, such person shall alternatively be permitted to elect an “immediately payable” annuity. Such immediately payable annuity shall be available in the following payment forms, as further described in Article 6 of this Core Document, depending on the status of the Eligible Window Participant, and shall be payable as of the Lump Sum Determination Date, as described above. Such immediate annuity will commence under the terms of the Plan, and continue (as applicable) under the terms of the irrevocable annuity contract from the insurance company referenced in section 9.4(f).

An Eligible Window Participant described in subsection (c)(1) or (c)(2) above who is single may elect a single life annuity. If married, such person may elect a single life annuity, a Qualified Joint and Survivor Annuity, or an Optional Joint and Survivor Annuity. A Window Participant described in subsection (c)(3) above may elect a life annuity (if a surviving spouse or nonspouse beneficiary), or, if an alternate payee, may elect whatever payment forms are permissible, taking into account the terms of the qualified domestic relations order and the age of the applicable Participant as of the date of the alternate payee’s benefit commencement.

Notwithstanding the preceding paragraph, either—
(1)    a Terminated Vested Window Participant described in subsection (c)(2) above who has attained age 55, or
(2)    an Active Window Participant described in subsection (c)(1) above who has attained Normal Retirement Age,
shall be eligible to elect all other optional payment forms described in this Core Document (if any).
(f)Determination of Amount of Lump Sum Distributions and Immediate Annuity Payments. In the case of an Eligible Window Participant who elects under subsection (d) to receive a lump sum distribution or immediate annuity described in subsection (b) or (e) above, such benefit shall be calculated as of the Lump Sum Determination Date, pursuant to the methodology described below, although such amounts may not actually be distributed until a later date in December.
(1)    Lump Sum Distributions. The amount of a Participant’s lump sum distribution under this section 6.18 shall be determined on the basis of the lump sum Actuarial Assumptions described in section 6.11. For purposes of subparagraphs (A) and (B) below, Active Window Participants described in subsection (c)(1) above shall be assumed to have terminated employment with the Company and all Affiliated Employers immediately prior to the Lump Sum Determination Date.
(A)    Eligible Window Participants Who have not attained Age 55 as of Lump Sum Determination Date. For Eligible Window Participants who have not yet attained age 55 as of the Lump Sum Determination Date (or, in the case of a person described in subsection (c)(3)(A) above, such a person whose Plan benefit is derived from such an Eligible Window Participant who has not yet attained age 55), the amount of the lump sum benefit shall be determined on the basis of the benefit that such Participant or other person would have been entitled to receive at age 55, as described in section 5.2 or 5.4 of this Core Document, but in no event less than the lump sum value determined as of his Normal Retirement Age.
(B)    Eligible Window Participants Who have attained Age 55 as of Lump Sum Determination Date. Notwithstanding the above, in the case of an Eligible Window Participant who is entitled to a benefit under section 5.2 or 5.4 of this Core Document as of the Lump Sum Determination Date (or, in the case of a person described in subsection (c)(3)(A) above, such a person whose Plan benefit is derived from such an Eligible Window Participant entitled to such a benefit), the lump sum value shall be determined on the basis of the annuity benefit that such Participant would have been entitled to receive beginning on that Lump Sum Determination Date. In no event, however, shall such lump sum value be less than the lump sum determined as of the Participant’s Normal Retirement Age.
(2)    Immediate Annuity Payments to Certain Eligible Window Participants.
(A)    Benefit Commencement Prior to Age 55 for Terminated Vested Window Participants or Prior to Normal Retirement Age for Active Window Participants. For purposes of determining the amount of an immediately payable annuity under this section 6.18 that commences—
(i)    prior to age 55, in the case of a Terminated Vested Window Participant described in subsection (c)(2), or
(ii)    prior to a Participant’s Normal Retirement Age, in the case of an Active Window Participant described in subsection (c)(1),
the value of the lump sum distribution potentially payable to such Participant under paragraph (1) above shall be converted to a single life annuity, by applying the same Actuarial Factors that were used to convert the Early Retirement Age or age 65 annuity into the lump sum distribution (i.e., the IRS Mortality Table and IRS Interest Rate described in section 6.11(b) of this Core Document).The values of annuity payments in other forms shall be determined by the applicable provisions of Article 6 of this Core Document.
(B)    Benefit Commencement between Age 55 and Normal Retirement Age for Terminated Vested Window Participants or On or After Normal Retirement Age for Active Window Participants. For purposes of determining the amount of an immediately payable annuity to either—
(i)    a Terminated Vested Window Participant that commences on or after Age 55 and on or before Normal Retirement Age, or
(ii)    an Active Window Participant that commences on or after Normal Retirement Age,
the values of annuity payments shall be determined by the applicable provisions of Article 6 of this Core Document.
(g)Death After Election and Prior to Benefit Commencement. Notwithstanding anything to the contrary in Article 6 of this Core Document, in the case of an Eligible Window Participant who makes and files with the Administrator a valid election under subsection (c) above, on or before the Offer Closing Date, to receive a lump sum distribution or annuity payment, but who subsequently dies prior to receiving that distribution (otherwise payable in April, 2021), such election shall be deemed rescinded. A qualified preretirement survivor annuity (as described in section 6.6(c) may be payable to a surviving spouse of the Eligible Window Participant pursuant to section 6.6.
(h)Alternative Dates. Notwithstanding the various dates described above within this section 6.18, the Administrator shall have discretion to offer the temporary lump sum program during an alternative period of time, beginning as early as November 2020; provided, however, that the incremental time periods shall be comparable to those described above, and that Eligible Window Participants shall be permitted a minimum of 30 days in order to consider the program and make any and all elections associated with form of payment and related matters.”
(i)
Changes to Appendix B
19.    Section B.5 is added to Appendix B as follows, effective as of August 1, 2020:
“B.5 Lump Sum Option Available to Terminated Vested Participants for Limited Period of Time During 2020–2021
The limited lump sum option described in section 6.18 of the Core Document shall be applicable to certain Transferred Participants covered under this Appendix B, as further described in section 6.18 of the Core Document.”

Changes to Appendix C
20.    Article 6 of the Appendix C is amended to include a new section 6.19 to read as follows, effective as of August 1, 2020:
“6.19 Lump Sum Option Available to Terminated Vested and Active Participants for Limited Period of Time During 2020–2021.
(a)Definitions. For purposes of this section 6.19, the following definitions will apply:
(1)    “Eligible Window Participant” means a Participant who is eligible to make an election described in this section 6.19, as more fully described in subsection (c) below.
(2)    “Lump Sum Determination Date” means April 1, 2021, the date as of which lump sum distributions shall be calculated and payable, and the date as of which immediate annuity payments may commence; provided, however, the actual date on which a lump sum distribution is made or the initial annuity payment is made may be a short period of time following this Lump Sum Determination Date.
(3)    “Offer Closing Date” means the latest permissible date on which an Eligible Window Participant may elect to receive a lump sum distribution or other payment under the provisions of this section 6.19. Such date is expected to be March 5, 2021; provided, however, that the Administrator may choose in its sole and absolute discretion to permit extensions beyond such Offer Closing Date, provided that any such extensions are applied on a uniform and nondiscriminatory basis to all similarly situated persons.
(b)General. In addition to lump sum distributions for amounts not exceeding $5,000 described in section 6.7 of the Core Document, a lump sum distribution for amounts larger than $5,000 shall be made available to Eligible Window Participants, as further described in subsection (c) below.

These additional lump sum distributions shall only be made available for a limited period of time, as described further below.
(c)Eligible Window Participants. The single lump sum payment option (as well as the immediate annuity option described in subsection (e) below), shall be available to Active Window Participants, Terminated Vested Window Participants, and Other Window Participants, as described in paragraphs (1)-(3) below, but excluding any persons described in paragraph (4) below. These groups of eligible Participants shall collectively be known as Eligible Window Participants.
(1)    Active Window Participants. The term Active Window Participants shall include all Participants who—
(A)    are actively employed by the Company or an Affiliated Employer as of the date just before formal notice is provided, as described in subsection (d)(1) below,
(B)    are covered under the terms and provisions of this Appendix C,
(C)    who are alive as of the Lump Sum Determination Date, and
(D)    are not excluded under paragraph (4) below.
(2)    Terminated Vested Window Participants. Unless excluded under paragraph (4), an Eligible Window Participant means a Participant—
(A)    who is covered under the terms and provisions of this Appendix C, and specifically including a Participant who is covered under the terms of Appendix C and therefore eligible to receive a “past service benefit” (commonly referred to as a “Wireless Participant”).
(B)    who has terminated employment with the Company and all Affiliated Employers on a date before the date on which formal notice is provided, as described in subsection (d)(1) below,
(C)    who is alive as of the Lump Sum Determination Date,
(D)
who is entitled to a retirement benefit under Article 6 of this Appendix C, and such benefit has not commenced to be paid (in the form of an annuity) and has not been paid out completely (in the form of a lump sum) as of the Lump Sum Determination Date, except as otherwise provided in paragraph (5) below, and
(E)    for whom the lump sum actuarial equivalent value of the Participant’s benefit, determined on the basis of the Actuarial Assumptions described in section 6.11 of the Core Document, and based on the methodology described in subsection (f) below, exceeds $5,000,
shall be classified as a Terminated Vested Participants for purposes of this section 6.19.
(3)    Other Window Participants. In addition to Active Window Participants and Terminated Vested Window Participants described above, any—
(A)    surviving spouse or nonspouse beneficiary or alternate payee whose benefits are derived from any of the previously described groups of Window Participants,
(B)    whose benefits under the Plan have not yet commenced, and
(C)    who is alive as of the Lump Sum Determination Date,
shall be considered as Other Window Participants, and shall thereby be designated as Eligible Window Participants; provided, however, that if a Participant otherwise described in paragraph (1) or (2) above, or an alternate payee is subject to the terms of a qualified domestic relations order which requires payment (to that specific person) in a form other than a lump sum, such Participant or alternate payee shall be treated as excluded under paragraph (4) below.
(4)    Excluded Persons. Notwithstanding paragraphs (1)-(3) above, Participants and other persons described in paragraphs (1), (2), and (3) above who are in payment status shall not be Eligible Window Participants, except as otherwise provided in paragraph (5) below. Similarly, Terminated Vested Window Participants described in paragraphs (2) above who have attained age 65 prior to the Lump Sum Determination Date shall not be Eligible Window Participants, except as otherwise provided in paragraph (5) below.
(5)    Limited Exception for Certain Participants in Payment Status. Notwithstanding the provisions of paragraphs (2)(D) and (3)(B) above, a Participant, if any—
(A)
who satisfies the conditions of paragraph (2) above, other than those described in subparagraph (D), or who satisfies the conditions of paragraph (3) above, other than those described in subparagraph (B),
(B)    whose benefits have commenced on or after March 1, 2020 and prior to June 1, 2020, and
(C)    who is determined by the Administrator not to have been fully informed of the right to receive a lump sum distribution prior to the date on which his benefits commenced,
shall be classified as an Eligible Window Participant, and eligible to make the election described in this section 6.19, modified as described in the following paragraph. Such determination shall be made in the sole and absolute discretion of the Administrator, which shall be applied on a consistent, uniform, and nondiscriminatory basis.
Notwithstanding anything to the contrary in subsection (d) or (e) below, any such Participant described above may elect between (i) receiving a lump sum distribution, calculated as described in subsection (f)(1), but actuarially reduced to reflect the value of annuity payments received, or (ii) continuing the annuity payments in the same payment form as previously elected (and currently in payment status).
(d)Notice and Election Period. The following provisions relating to notices and elections shall be applicable to Eligible Window Participants.
(1)
Notification Dates and Timing Requirements. Eligible Window Participants were initially notified of the availability of the option to receive a lump sum distribution in May or June 2020. The formal notice describing all election rights (comparable to the notice described in section 4.7(a)(5) of the Core Document) will be distributed to Eligible Window Participants in January, 2021.

The lump sum distribution option described in subsection (b) above (and the immediate annuity option described in subsection (e) below) may only be elected during the election period beginning after the formal notice has been provided, and ending on the Offer Closing Date (as defined in subsection (a) above) (the “Election Period”). Immediate annuity payments for Eligible Window Participants who timely elect to receive such payments will be determined as of the Lump Sum Determination Date. Similarly, lump sum distributions will be determined as of the Lump Sum Determination Date.
The dates mentioned in the preceding two paragraphs, including the Offer Closing Date and the Lump Sum Determination Date, are anticipated to be accurate, but may need to be changed, and are permitted to be changed, in order to accommodate unanticipated administrative or other delays or, alternatively, in accordance with subsection (h) below. Regardless of the actual dates of notice and the dates of the Election Period described above, Eligible Window Participants shall be permitted a minimum of 30 days in order to consider the program described in this section 6.19, and to make any and all elections relating to form of payment and related matters.
(2)    Election, Waiver, Consent, and Revocation Requirements. In the case of Eligible Window Participants who are married, the provisions of section 6.5 relating to notice requirements, Qualified Joint and Survivor Annuity automatic payment form, waiver of the automatic payment form, spousal consent, and related requirements affecting the timing of the distribution, shall apply, except as otherwise provided in this section 6.19 or section 6.7 of the Core Document (relating to certain benefit amounts that do not exceed $5,000). In the case of Eligible Window Participants (regardless of whether single or married), such persons shall be notified of the lump sum distribution option, and also notified of all applicable payment forms for which they are eligible, as described in subsection (e).

In all cases, an Eligible Window Participant who elects to receive a lump sum distribution or immediate annuity pursuant to this section 6.19 may subsequently choose to revoke that election at any time prior to the Lump Sum Determination Date (including the period of time after the Offer Closing Date, but prior to the Lump Sum Determination Date).


In addition to the election, waiver, and consent requirements described in the preceding paragraph, Eligible Window Participants must comply with any reasonable requests of the Administrator related to payment of a benefit payable under this section 6.19, which requests shall be uniformly applied to similarly situated persons. Such requests may relate to, for example, required notarizations or proof of birthdate.
(3)    Failure to Submit an Election. For purposes of this section 6.19, an Eligible Window Participant must make a “valid” election in order to receive a lump sum distribution or an immediate annuity. This determination of whether an Eligible Window Participant has made a “valid” election shall be made in the sole and absolute discretion of the Administrator. An Eligible Window Participant may make a valid election by signing and returning the election confirmation form provided by the Administrator for this purpose.
Any Eligible Window Participant who does not submit a valid election hereunder by the Offer Closing Date, in accordance with procedures established and determined by the Administrator, shall not be eligible to receive the lump sum distribution or immediate annuity described in this section 6.19.
(e)Immediate Annuity Option Payment Forms. In the case of any Eligible Window Participant who is eligible to elect a lump sum distribution as described in this section 6.19, such person shall alternatively be permitted to elect an “immediately payable” annuity. Such immediately payable annuity shall be available in the following payment forms, as further described in Article 6 of this Appendix C, depending on the status of the Eligible Window Participant, and shall be payable as of the Lump Sum Determination Date, as described above. Such immediate annuity will commence under the terms of the Plan, and continue (as applicable) under the terms of the irrevocable annuity contract from the insurance company referenced in section 9.4(f).

An Eligible Window Participant described in subsection (c)(1) or (c)(2) above who is single may elect a single life annuity. If married, such person may elect a single life annuity, a Qualified Joint and Survivor Annuity, or an Optional Joint and Survivor Annuity. A Window Participant described in subsection (c)(3) above may elect a life annuity (if a surviving spouse or nonspouse beneficiary), or, if an alternate payee, may elect whatever payment forms are permissible, taking into account the terms of the qualified domestic relations order and the age of the applicable Participant as of the date of the alternate payee’s benefit commencement.


Notwithstanding the preceding paragraph, either—
(1)    a Terminated Vested Window Participant described in subsection (c)(2) above who has attained age 55, or
(2)    an Active Window Participant described in subsection (c)(1) above who has attained Normal Retirement Age,
shall be eligible to elect all other optional payment forms described in this Appendix C (if any).
(f)Determination of Amount of Lump Sum Distributions and Immediate Annuity Payments. In the case of an Eligible Window Participant who elects under subsection (d) to receive a lump sum distribution or immediate annuity described in subsection (b) or (e) above, such benefit shall be calculated as of the Lump Sum Determination Date, pursuant to the methodology described below, although such amounts may not actually be distributed until a later date in December.
(1)    Lump Sum Distributions. The amount of a Participant’s lump sum distribution under this section 6.19 shall be determined on the basis of the lump sum Actuarial Assumptions described in section 6.11 of the Core Document. For purposes of subparagraphs (A) and (B) below, Active Window Participants described in subsection (c)(1) above shall be assumed to have terminated employment with the Company and all Affiliated Employers immediately prior to the Lump Sum Determination Date.
(A)    Eligible Window Participants Who have not attained Age 55 as of Lump Sum Determination Date. For Eligible Window Participants who have not yet attained age 55 as of the Lump Sum Determination Date (or, in the case of a person described in subsection (c)(3)(A) above, such a person whose Plan benefit is derived from such an Eligible Window Participant who has not yet attained age 55), the amount of the lump sum benefit shall be determined on the basis of the benefit that such Participant or other person would have been entitled to receive at age 55, as described in section 5.2 or 5.4 of the Core Document, but in no event less than the lump sum value determined as of his Normal Retirement Age.
(B)    Eligible Window Participants Who have attained Age 55 as of Lump Sum Determination Date. Notwithstanding the above, in the case of an Eligible Window Participant who is entitled to a benefit under section 5.2 or 5.4 of this Appendix C as of the Lump Sum Determination Date (or, in the case of a person described in subsection (c)(3)(A) above, such a person whose Plan benefit is derived from such an Eligible Window Participant entitled to such a benefit), the lump sum value shall be determined on the basis of the annuity benefit that such Participant would have been entitled to receive beginning on that Lump Sum Determination Date. In no event, however, shall such lump sum value be less than the lump sum determined as of the Participant’s Normal Retirement Age.
(2)    Immediate Annuity Payments to Certain Eligible Window Participants.
(A)    Benefit Commencement Prior to Age 55 for Terminated Vested Window Participants or Prior to Normal Retirement Age for Active Window Participants. For purposes of determining the amount of an immediately payable annuity under this section 6.19 that commences—
(i)    prior to age 55, in the case of a Terminated Vested Window Participant described in subsection (c)(2), or
(ii)    prior to a Participant’s Normal Retirement Age, in the case of an Active Window Participant described in subsection (c)(1),
the value of the lump sum distribution potentially payable to such Participant under paragraph (1) above shall be converted to a single life annuity, by applying the same Actuarial Factors that were used to convert the Early Retirement Age or age 65 annuity into the lump sum distribution (i.e., the IRS Mortality Table and IRS Interest Rate described in section 6.11(b) of the Core Document).The values of annuity payments in other forms shall be determined by the applicable provisions of Article 6 of the Core Document.
(B)    Benefit Commencement between Age 55 and Normal Retirement Age for Terminated Vested Window Participants or On or After Normal Retirement Age for Active Window Participants. For purposes of determining the amount of an immediately payable annuity to either—
(i)    a Terminated Vested Window Participant that commences on or after Age 55 and on or before Normal Retirement Age, or
(ii)    an Active Window Participant that commences on or after Normal Retirement Age,
the values of annuity payments shall be determined by the applicable provisions of Article 6 of the Core Document.
(g)Death After Election and Prior to Benefit Commencement. Notwithstanding anything to the contrary in Article 6 of the Appendix C, in the case of an Eligible Window Participant who makes and files with the Administrator a valid election under subsection (c) above, on or before the Offer Closing Date, to receive a lump sum distribution or annuity payment, but who subsequently dies prior to receiving that distribution (otherwise payable in April, 2021), such election shall be deemed rescinded. A qualified preretirement survivor annuity (as described in section 6.6(c) of the Core Document may be payable to a surviving spouse of the Eligible Window Participant pursuant to section 6.6 of the Core Document.
(h)Alternative Dates. Notwithstanding the various dates described above within this section 6.19, the Administrator shall have discretion to offer the temporary lump sum program during an alternative period of time, beginning as early as November 2020; provided, however, that the incremental time periods shall be comparable to those described above, and that Eligible Window Participants shall be permitted a minimum of 30 days in order to consider elections associated with form of payment and related matters.”

Changes to Appendix D
21.    Article 6 of Appendix D is amended to include a new section 6.19 to read as follows, effective as of August 1, 2020:
“6.19 Lump Sum Option Available to Terminated Vested and Active Participants for Limited Period of Time During 2020–2021.
(a)Definitions. For purposes of this section 6.19, the following definitions will apply:
(1)    “Eligible Window Participant” means a Participant who is eligible to make an election described in this section 6.19, as more fully described in subsection (c) below.
(2)    “Lump Sum Determination Date” means April 1, 2021, the date as of which lump sum distributions shall be calculated and payable, and the date as of which immediate annuity payments may commence; provided, however, the actual date on which a lump sum distribution is made or the initial annuity payment is made may be a short period of time following this Lump Sum Determination Date.
(3)    “Offer Closing Date” means the latest permissible date on which an Eligible Window Participant may elect to receive a lump sum distribution or other payment under the provisions of this section 6.19. Such date is expected to be March 5, 2021; provided, however, that the Administrator may choose in its sole and absolute discretion to permit extensions beyond such Offer Closing Date, provided that any such extensions are applied on a uniform and nondiscriminatory basis to all similarly situated persons.
(b)General. In addition to lump sum distributions for amounts not exceeding $5,000 described in section 6.7 of the Core Document, a lump sum distribution for amounts larger than $5,000 shall be made available to Eligible Window Participants, as further described in subsection (c) below.

These additional lump sum distributions shall only be made available for a limited period of time, as described further below.
(c)Eligible Window Participants. The single lump sum payment option (as well as the immediate annuity option described in subsection (e) below), shall be available to Active Window Participants, Terminated Vested Window Participants, and Other Window Participants, as described in paragraphs (1)-(3) below, but excluding any persons described in paragraph (4) below. These groups of eligible Participants shall collectively be known as Eligible Window Participants.
(1)    Active Window Participants. The term Active Window Participants shall include all Participants who—
(A)    are actively employed by the Company or an Affiliated Employer as of the date just before formal notice is provided, as described in subsection (d)(1) below,
(B)    are covered under the terms and provisions of this Appendix D,
(C)    who are alive as of the Lump Sum  Determination Date, and
(D)    are not excluded under paragraph (4) below.
(2)    Terminated Vested Window Participants. Unless excluded under paragraph (4), an Eligible Window Participant means a Participant—
(A)    who is covered under the terms and provisions of this Appendix D, and specifically including a Participant who is covered under the terms of Appendix D and therefore eligible to receive a “past service benefit” (commonly referred to as a “Wireless Participant”).
(B)    who has terminated employment with the Company and all Affiliated Employers on a date before the date on which formal notice is provided, as described in subsection (d)(1) below,
(C)    who is alive as of the Lump Sum Determination Date,
(D)    who is entitled to a retirement benefit under Article 6 of this Appendix D, and such benefit has not commenced to be paid (in the form of an annuity) and has not been paid out completely (in the form of a lump sum) as of the Lump Sum Determination Date, and
(E)    for whom the lump sum actuarial equivalent value of the Participant’s benefit, determined on the basis of the Actuarial Assumptions described in section 6.11 of the Core Document, and based on the methodology described in subsection (f) below, exceeds $5,000,
shall be classified as a Terminated Vested Participants for purposes of this section 6.19.
(3)    Other Window Participants. In addition to Active Window Participants and Terminated Vested Window Participants described above, any—
(A)    surviving spouse or nonspouse beneficiary or alternate payee whose benefits are derived from any of the previously described groups of Window Participants,
(B)    whose benefits under the Plan have not yet commenced, and
(C)    who is alive as of the Lump Sum Determination Date,  
shall be considered as Other Window Participants, and shall thereby be designated as Eligible Window Participants; provided, however, that if a Participant otherwise described in paragraph (1) or (2) above, or an alternate payee is subject to the terms of a qualified domestic relations order which requires payment (to that specific person) in a form other than a lump sum, such Participant or alternate payee shall be treated as excluded under paragraph (4) below.
(4)    Excluded Persons. Notwithstanding paragraphs (1)-(3) above, Participants and other persons described in paragraphs (1), (2), and (3) above who are in payment status shall not be Eligible Window Participants. Similarly, Terminated Vested Window Participants described in paragraphs (2) above who have attained age 65 prior to the Lump Sum Determination Date shall not be Eligible Window Participants.
(d)Notice and Election Period. The following provisions relating to notices and elections shall be applicable to Eligible Window Participants.
(1)
Notification Dates and Timing Requirements. Eligible Window Participants were initially notified of the availability of the option to receive a lump sum distribution in May or June 2020. The formal notice describing all election rights (comparable to the notice described in section 4.7(a)(5) of the Core Document) will be distributed to Eligible Window Participants in January, 2021.

The lump sum distribution option described in subsection (b) above (and the immediate annuity option described in subsection (e) below) may only be elected during the election period beginning after the formal notice has been provided, and ending on the Offer Closing Date (as defined in subsection (a) above) (the “Election Period”). Immediate annuity payments for Eligible Window Participants who timely elect to receive such payments will be determined as of the Lump Sum Determination Date. Similarly, lump sum distributions will be determined as of the Lump Sum Determination Date.


The dates mentioned in the preceding two paragraphs, including the Offer Closing Date and the Lump Sum Determination Date, are anticipated to be accurate, but may need to be changed, and are permitted to be changed, in order to accommodate unanticipated administrative or other delays or, alternatively, in accordance with subsection (h) below. Regardless of the actual dates of notice and the dates of the Election Period described above, Eligible Window Participants shall be permitted a minimum of 30 days in order to consider the program described in this section 6.19, and to make any and all elections relating to form of payment and related matters.
(2)    Election, Waiver, Consent, and Revocation Requirements. In the case of Eligible Window Participants who are married, the provisions of section 6.5 relating to notice requirements, Qualified Joint and Survivor Annuity automatic payment form, waiver of the automatic payment form, spousal consent, and related requirements affecting the timing of the distribution, shall apply, except as otherwise provided in this section 6.19 or section 6.7 of the Core Document (relating to certain benefit amounts that do not exceed $5,000). In the case of Eligible Window Participants (regardless of whether single or married), such persons shall be notified of the lump sum distribution option, and also notified of all applicable payment forms for which they are eligible, as described in subsection (e).

In all cases, an Eligible Window Participant who elects to receive a lump sum distribution or immediate annuity pursuant to this section 6.19 may subsequently choose to revoke that election at any time prior to the Lump Sum Determination Date (including the period of time after the Offer Closing Date, but prior to the Lump Sum Determination Date).


In addition to the election, waiver, and consent requirements described in the preceding paragraph, Eligible Window Participants must comply with any reasonable requests of the Administrator related to payment of a benefit payable under this section 6.19, which requests shall be uniformly applied to similarly situated persons. Such requests may relate to, for example, required notarizations or proof of birthdate.
(3)    Failure to Submit an Election. For purposes of this section 6.19, an Eligible Window Participant must make a “valid” election in order to receive a lump sum distribution or an immediate annuity. This determination of whether an Eligible Window Participant has made a “valid” election shall be made in the sole and absolute discretion of the Administrator. An Eligible Window Participant may make a valid election by signing and returning the election confirmation form provided by the Administrator for this purpose.
Any Eligible Window Participant who does not submit a valid election hereunder by the Offer Closing Date, in accordance with procedures established and determined by the Administrator, shall not be eligible to receive the lump sum distribution or immediate annuity described in this section 6.19.
(e)Immediate Annuity Option Payment Forms. In the case of any Eligible Window Participant who is eligible to elect a lump sum distribution as described in this section 6.19, such person shall alternatively be permitted to elect an “immediately payable” annuity. Such immediately payable annuity shall be available in the following payment forms, as further described in Article 6 of this Appendix D, depending on the status of the Eligible Window Participant, and shall be payable as of the Lump Sum Determination Date, as described above. Such immediate annuity will commence under the terms of the Plan, and continue (as applicable) under the terms of the irrevocable annuity contract from the insurance company referenced in section 9.4(f).

An Eligible Window Participant described in subsection (c)(1) or (c)(2) above who is single may elect a single life annuity. If married, such person may elect a single life annuity, a Qualified Joint and Survivor Annuity, or an Optional Joint and Survivor Annuity. A Window Participant described in subsection (c)(3) above may elect a life annuity (if a surviving spouse or nonspouse beneficiary), or, if an alternate payee, may elect whatever payment forms are permissible, taking into account the terms of the qualified domestic relations order and the age of the applicable Participant as of the date of the alternate payee’s benefit commencement.


Notwithstanding the preceding paragraph, either—
(1)    a Terminated Vested Window Participant described in subsection (c)(2) above who has attained age 55, or
(2)    an Active Window Participant described in subsection (c)(1) above who has attained Normal Retirement Age,
shall be eligible to elect all other optional payment forms described in this Appendix D (if any).
(f)Determination of Amount of Lump Sum Distributions and Immediate Annuity Payments. In the case of an Eligible Window Participant who elects under subsection (d) to receive a lump sum distribution or immediate annuity described in subsection (b) or (e) above, such benefit shall be calculated as of the Lump Sum Determination Date, pursuant to the methodology described below, although such amounts may not actually be distributed until a later date in December.
(1)    Lump Sum Distributions. The amount of a Participant’s lump sum distribution under this section 6.19 shall be determined on the basis of the lump sum Actuarial Assumptions described in section 6.11 of the Core Document. For purposes of subparagraphs (A) and (B) below, Active Window Participants described in subsection (c)(1) above shall be assumed to have terminated employment with the Company and all Affiliated Employers immediately prior to the Lump Sum Determination Date.
(A)    Eligible Window Participants Who have not attained Age 55 as of Lump Sum Determination Date. For Eligible Window Participants who have not yet attained age 55 as of the Lump Sum Determination Date (or, in the case of a person described in subsection (c)(3)(A) above, such a person whose Plan benefit is derived from such an Eligible Window Participant who has not yet attained age 55), the amount of the lump sum benefit shall be determined on the basis of the benefit that such Participant or other person would have been entitled to receive at age 55, as described in section 5.2 or 5.4 of the Core Document, but in no event less than the lump sum value determined as of his Normal Retirement Age.
(B)    Eligible Window Participants Who have attained Age 55 as of Lump Sum Determination Date. Notwithstanding the above, in the case of an Eligible Window Participant who is entitled to a benefit under section 5.2 or 5.4 of this Appendix D as of the Lump Sum Determination Date (or, in the case of a person described in subsection (c)(3)(A) above, such a person whose Plan benefit is derived from such an Eligible Window Participant entitled to such a benefit), the lump sum value shall be determined on the basis of the annuity benefit that such Participant would have been entitled to receive beginning on that Lump Sum Determination Date. In no event, however, shall such lump sum value be less than the lump sum determined as of the Participant’s Normal Retirement Age.
(C)    
(2)    Immediate Annuity Payments to Certain Eligible Window Participants.
(A)    Benefit Commencement Prior to Age 55 for Terminated Vested Window Participants or Prior to Normal Retirement Age for Active Window Participants. For purposes of determining the amount of an immediately payable annuity under this section 6.19 that commences—
(i)    prior to age 55, in the case of a Terminated Vested Window Participant described in subsection (c)(2), or
(ii)    prior to a Participant’s Normal Retirement Age, in the case of an Active Window Participant described in subsection (c)(1),
the value of the lump sum distribution potentially payable to such Participant under paragraph (1) above shall be converted to a single life annuity, by applying the same Actuarial Factors that were used to convert the Early Retirement Age or age 65 annuity into the lump sum distribution (i.e., the IRS Mortality Table and IRS Interest Rate described in section 6.11(b) of the Core Document).The values of annuity payments in other forms shall be determined by the applicable provisions of Article 6 of the Core Document.
(B)    Benefit Commencement between Age 55 and Normal Retirement Age for Terminated Vested Window Participants or On or After Normal Retirement Age for Active Window Participants. For purposes of determining the amount of an immediately payable annuity to either—
(i)    a Terminated Vested Window Participant that commences on or after Age 55 and on or before Normal Retirement Age, or
(ii)    an Active Window Participant that commences on or after Normal Retirement Age,
the values of annuity payments shall be determined by the applicable provisions of Article 6 of the Core Document.
(g)Death After Election and Prior to Benefit Commencement. Notwithstanding anything to the contrary in Article 6 of Appendix D, in the case of an Eligible Window Participant who makes and files with the Administrator a valid election under subsection (c) above, on or before the Offer Closing Date, to receive a lump sum distribution or annuity payment, but who subsequently dies prior to receiving that distribution (otherwise payable in April, 2021), such election shall be deemed rescinded. A qualified preretirement survivor annuity (as described in section 6.6(c) of the Core Document may be payable to a surviving spouse of the Eligible Window Participant pursuant to section 6.6 of the Core Document.
(h)Alternative Dates. Notwithstanding the various dates described above within this section 6.19, the Administrator shall have discretion to offer the temporary lump sum program during an alternative period of time, beginning as early as November 2020; provided, however, that the incremental time periods shall be comparable to those described above, and that Eligible Window Participants shall be permitted a minimum of 30 days in order to consider the program and make any and all elections associated with form of payment and related matters.”
(i)
Changes to Appendix E
22.    Article 6 of Appendix E is amended to include a new section 6.19 to read as follows, effective as of August 1, 2020:
“6.19 Lump Sum Option Available to Terminated Vested and Active Participants for Limited Period of Time During 2020–2021.
(a)Definitions. For purposes of this section 6.19, the following definitions will apply:
(1)    “Eligible Window Participant” means a Participant who is eligible to make an election described in this section 6.19, as more fully described in subsection (c) below.
(2)    “Lump Sum Determination Date” means April 1, 2021, the date as of which lump sum distributions shall be calculated and payable, and the date as of which immediate annuity payments may commence; provided, however, the actual date on which a lump sum distribution is made or the initial annuity payment is made may be a short period of time following this Lump Sum Determination Date.
(3)    “Offer Closing Date” means the latest permissible date on which an Eligible Window Participant may elect to receive a lump sum distribution or other payment under the provisions of this section 6.19. Such date is expected to be March 5, 2021; provided, however, that the Administrator may choose in its sole and absolute discretion to permit extensions beyond such Offer Closing Date, provided that any such extensions are applied on a uniform and nondiscriminatory basis to all similarly situated persons.
(b)General. In addition to lump sum distributions for amounts not exceeding $5,000 described in section 6.7 of the Core Document, a lump sum distribution for amounts larger than $5,000 shall be made available to Eligible Window Participants, as further described in subsection (c) below.

These additional lump sum distributions shall only be made available for a limited period of time, as described further below.
(c)Eligible Window Participants. The single lump sum payment option (as well as the immediate annuity option described in subsection (e) below), shall be available to Active Window Participants, Terminated Vested Window Participants, and Other Window Participants, as described in paragraphs (1)-(3) below, but excluding any persons described in paragraph (4) below. These groups of eligible Participants shall collectively be known as Eligible Window Participants.
(1)    Active Window Participants. The term Active Window Participants shall include all Participants who—
(A)    are actively employed by the Company or an Affiliated Employer as of the date just before formal notice is provided, as described in subsection (d)(1) below,
(B)    are covered under the terms and provisions of this Appendix E, who are alive as of the Lump Sum Determination Date, and
(C)    are not excluded under paragraph (4) below.
(2)    Terminated Vested Window Participants. Unless excluded under paragraph (4), an Eligible Window Participant means a Participant—
(A)    who is covered under the terms and provisions of this Appendix E, and specifically including a Participant who is covered under the terms of Appendix E and therefore eligible to receive a “past service benefit” (commonly referred to as a “Wireless Participant”).
(B)    who has terminated employment with the Company and all Affiliated Employers on a date before the date on which formal notice is provided, as described in subsection (d)(1) below,
(C)    who is alive as of the Lump Sum Determination Date,
(D)    who is entitled to a retirement benefit under Article 6 of this Appendix E, and such benefit has not commenced to be paid (in the form of an annuity) and has not been paid out completely (in the form of a lump sum) as of the Lump Sum Determination Date, and
(E)    for whom the lump sum actuarial equivalent value of the Participant’s benefit, determined on the basis of the Actuarial Assumptions described in section 6.11 of the Core Document, and based on the methodology described in subsection (f) below, exceeds $5,000,
shall be classified as a Terminated Vested Participants for purposes of this section 6.19.
(3)    Other Window Participants. In addition to Active Window Participants and Terminated Vested Window Participants described above, any—
(A)    surviving spouse or nonspouse beneficiary or alternate payee whose benefits are derived from any of the previously described groups of Window Participants,
(B)    whose benefits under the Plan have not yet commenced, and
(C)    who is alive as of the Lump Sum Determination Date,
shall be considered as Other Window Participants, and shall thereby be designated as Eligible Window Participants; provided, however, that if a Participant otherwise described in paragraph (1) or (2) above, or an alternate payee is subject to the terms of a qualified domestic relations order which requires payment (to that specific person) in a form other than a lump sum, such Participant or alternate payee shall be treated as excluded under paragraph (4) below .
(4)    Excluded Persons. Notwithstanding paragraphs (1)-(3) above, Participants and other persons described in paragraphs (1), (2), and (3) above who are in payment status shall not be Eligible Window Participants. Similarly, Terminated Vested Window Participants described in paragraphs (2) above who have attained their Normal Retirement Date prior to the Lump Sum Determination Date shall not be Eligible Window Participants.
(d)Notice and Election Period. The following provisions relating to notices and elections shall be applicable to Eligible Window Participants.
(1)
Notification Dates and Timing Requirements. Eligible Window Participants were initially notified of the availability of the option to receive a lump sum distribution in May or June 2020. The formal notice describing all election rights (comparable to the notice described in section 4.7(a)(5) of the Core Document) will be distributed to Eligible Window Participants in January, 2021.
The lump sum distribution option described in subsection (b) above (and the immediate annuity option described in subsection (e) below) may only be elected during the election period beginning after the formal notice has been provided, and ending on the Offer Closing Date (as defined in subsection (a) above) (the “Election Period”). Immediate annuity payments for Eligible Window Participants who timely elect to receive such payments will be determined as of the Lump Sum Determination Date. Similarly, lump sum distributions will be determined as of the Lump Sum Determination Date.


The dates mentioned in the preceding two paragraphs, including the Offer Closing Date and the Lump Sum Determination Date, are anticipated to be accurate, but may need to be changed, and are permitted to be changed, in order to accommodate unanticipated administrative or other delays or, alternatively, in accordance with subsection (h) below. Regardless of the actual dates of notice and the dates of the Election Period described above, Eligible Window Participants shall be permitted a minimum of 30 days in order to consider the program described in this section 6.19, and to make any and all elections relating to form of payment and related matters.
(2)    Election, Waiver, Consent, and Revocation Requirements. In the case of Eligible Window Participants who are married, the provisions of section 6.5 relating to notice requirements, Qualified Joint and Survivor Annuity automatic payment form, waiver of the automatic payment form, spousal consent, and related requirements affecting the timing of the distribution, shall apply, except as otherwise provided in this section 6.19 or section 6.7 of the Core Document (relating to certain benefit amounts that do not exceed $5,000). In the case of Eligible Window Participants (regardless of whether single or married), such persons shall be notified of the lump sum distribution option, and also notified of all applicable payment forms for which they are eligible, as described in subsection (e).

In all cases, an Eligible Window Participant who elects to receive a lump sum distribution or immediate annuity pursuant to this section 6.19 may subsequently choose to revoke that election at any time prior to the Lump Sum Determination Date (including the period of time after the Offer Closing Date, but prior to the Lump Sum Determination Date).


In addition to the election, waiver, and consent requirements described in the preceding paragraph, Eligible Window Participants must comply with any reasonable requests of the Administrator related to payment of a benefit payable under this section 6.19, which requests shall be uniformly applied to similarly situated persons. Such requests may relate to, for example, required notarizations or proof of birthdate.
(3)    Failure to Submit an Election. For purposes of this section 6.19, an Eligible Window Participant must make a “valid” election in order to receive a lump sum distribution or an immediate annuity. This determination of whether an Eligible Window Participant has made a “valid” election shall be made in the sole and absolute discretion of the Administrator. An Eligible Window Participant may make a valid election by signing and returning the election confirmation form provided by the Administrator for this purpose.
Any Eligible Window Participant who does not submit a valid election hereunder by the Offer Closing Date, in accordance with procedures established and determined by the Administrator, shall not be eligible to receive the lump sum distribution or immediate annuity described in this section 6.19.
(e)Immediate Annuity Option Payment Forms. In the case of any Eligible Window Participant who is eligible to elect a lump sum distribution as described in this section 6.19, such person shall alternatively be permitted to elect an “immediately payable” annuity. Such immediately payable annuity shall be available in the following payment forms, as further described in Article 6 of this Appendix E, depending on the status of the Eligible Window Participant, and shall be payable as of the Lump Sum Determination Date, as described above. Such immediate annuity will commence under the terms of the Plan, and continue (as applicable) under the terms of the irrevocable annuity contract from the insurance company referenced in section 9.4(f),

An Eligible Window Participant described in subsection (c)(1) or (c)(2) above who is single may elect a single life annuity. If married, such person may elect a single life annuity, a Qualified Joint and Survivor Annuity, or an Optional Joint and Survivor Annuity. A Window Participant described in subsection (c)(3) above may elect a life annuity (if a surviving spouse or nonspouse beneficiary), or, if an alternate payee, may elect whatever payment forms are permissible, taking into account the terms of the qualified domestic relations order and the age of the applicable Participant as of the date of the alternate payee’s benefit commencement.


Notwithstanding the preceding paragraph, either—
(1)    a Terminated Vested Window Participant described in subsection (c)(2) above who has attained Early retirement Age (whether before or after termination of employment from the employer), or
(2)    an Active Window Participant described in subsection (c)(1) above who has attained Normal Retirement Age,
shall be eligible to elect all other optional payment forms described in this Appendix E (if any).
(f)Determination of Amount of Lump Sum Distributions and Immediate Annuity Payments. In the case of an Eligible Window Participant who elects under subsection (d) to receive a lump sum distribution or immediate annuity described in subsection (b) or (e) above, such benefit shall be calculated as of the Lump Sum Determination Date, pursuant to the methodology described below, although such amounts may not actually be distributed until a later date in December.
(1)    Lump Sum Distributions. The amount of a Participant’s lump sum distribution under this section 6.19 shall be determined on the basis of the lump sum Actuarial Assumptions described in section 6.11 of the Core Document. For purposes of subparagraphs (A) and (B) below, Active Window Participants described in subsection (c)(1) above shall be assumed to have terminated employment with the Company and all Affiliated Employers immediately prior to the Lump Sum Determination Date.
(A)    Eligible Window Participants Who have not attained Early Retirement Date as of Lump Sum Determination Date. For Eligible Window Participants who are not yet entitled to an early retirement or terminated vested benefit as of the Lump Sum Determination Date (or, in the case of a person described in subsection (c)(3)(A) above, such a person whose Plan benefit is derived from such an Eligible Window Participant not entitled to an early retirement benefit), the amount of the lump sum benefit shall be determined on the basis of the benefit that such Participant or other person would have been entitled to receive at his Early Retirement Date, as described in section 6.2 or 6.4 of this Appendix E, but in no event less than the lump sum value determined as of his Normal Retirement Age. 
(B)    Eligible Window Participants Who have attained Early Retirement Date as of Lump Sum Determination Date. Notwithstanding the above, in the case of an Eligible Window Participant who is entitled to an early retirement or terminated vested benefit under section 6.2 or 6.4 of this Appendix E as of the Lump Sum Determination Date (or, in the case of a person described in subsection (c)(3)(A) above, such a person whose Plan benefit is derived from such an Eligible Window Participant entitled to an early retirement or terminated vested benefit), the lump sum value shall be determined on the basis of the annuity benefit that such Participant would have been entitled to receive beginning on that Lump Sum Determination Date. In no event, however, shall such lump sum value be less than the lump sum determined as of the Participant’s Normal Retirement Age.
(2)    Immediate Annuity Payments to Certain Eligible Window Participants.
(A)    Benefit Commencement Prior to Early Retirement Age or Normal Retirement Age. For purposes of determining the amount of an immediately payable annuity under this section 6.19 that commences—
(i)    prior to a Participant’s Early Retirement Age (whether or not the Participant has terminated employment from the Employer), in the case of a Terminated Vested Window Participant described in subsection (c)(2), or
(ii)    prior to a Participant’s Normal Retirement Age, in the case of an Active Window Participant described in subsection (c)(1),
the value of the lump sum distribution potentially payable to such Participant under paragraph (1) above shall be converted to a single life annuity, by applying the same Actuarial Factors that were used to convert the Early Retirement Age or age 65 annuity into the lump sum distribution (i.e., the IRS Mortality Table and IRS Interest Rate described in section 6.11(b) of the Core Document).The values of annuity payments in other forms shall be determined by the applicable provisions of Article 6 of the Core Document.
(B)    Benefit Commencement between Early Retirement Age and Normal Retirement Age for Terminated Vested Window Participants or On or After Normal Retirement Age for Active Window Participants. For purposes of determining the amount of an immediately payable annuity to either—
(i)    a Terminated Vested Window Participant that commences on or after Early Retirement Age and on or before Normal Retirement Age, or
(ii)    an Active Window Participant that commences on or after Normal Retirement Age,
the values of annuity payments shall be determined by the applicable provisions of Article 6 of this Core Document.
(g)Death After Election and Prior to Benefit Commencement. Notwithstanding anything to the contrary in Article 6 of Appendix E, in the case of an Eligible Window Participant who makes and files with the Administrator a valid election under subsection (c) above, on or before the Offer Closing Date, to receive a lump sum distribution or annuity payment, but who subsequently dies prior to receiving that distribution (otherwise payable in April, 2021), such election shall be deemed rescinded. A qualified preretirement survivor annuity (as described in section 6.6(c) of the Core Document may be payable to a surviving spouse of the Eligible Window Participant pursuant to section 6.6 of the Core Document.
(h)Alternative Dates. Notwithstanding the various dates described above within this section 6.19, the Administrator shall have discretion to offer the temporary lump sum program during an alternative period of time, beginning as early as November 2020; provided, however, that the incremental time periods shall be comparable to those described above, and that Eligible Window Participants shall be permitted a minimum of 30 days in order to consider the program and make any and all elections associated with form of payment and related matters.”
(i)
Changes to Appendix F
23.    Article 6 of Appendix F is amended to include a new section 6.19 to read as follows, effective as of August 1, 2020:
“6.19 Lump Sum Option Available to Terminated Vested and Active Participants for Limited Period of Time During 2020–2021.
(a)Definitions. For purposes of this section 6.19, the following definitions will apply:
(1)    “Eligible Window Participant” means a Participant who is eligible to make an election described in this section 6.19, as more fully described in subsection (c) below.
(2)    “Lump Sum Determination Date” means April 1, 2021, the date as of which lump sum distributions shall be calculated and payable, and the date as of which immediate annuity payments may commence; provided, however, the actual date on which a lump sum distribution is made or the initial annuity payment is made may be a short period of time following this Lump Sum Determination Date.
(3)    “Offer Closing Date” means the latest permissible date on which an Eligible Window Participant may elect to receive a lump sum distribution or other payment under the provisions of this section 6.19. Such date is expected to be March 5, 2021; provided, however, that the Administrator may choose in its sole and absolute discretion to permit extensions beyond such Offer Closing Date, provided that any such extensions are applied on a uniform and nondiscriminatory basis to all similarly situated persons.
(b)General. In addition to lump sum distributions for amounts not exceeding $5,000 described in section 6.7 of the Core Document, a lump sum distribution for amounts larger than $5,000 shall be made available to Eligible Window Participants, as further described in subsection (c) below.

These additional lump sum distributions shall only be made available for a limited period of time, as described further below.
(c)Eligible Window Participants. The single lump sum payment option (as well as the immediate annuity option described in subsection (e) below), shall be available to Active Window Participants, Terminated Vested Window Participants, and Other Window Participants, as described in paragraphs (1)-(3) below, but excluding any persons described in paragraph (4) below. These groups of eligible Participants shall collectively be known as Eligible Window Participants.
(1)    Active Window Participants. The term Active Window Participants shall include all Participants who—
(A)    are actively employed by the Company or an Affiliated Employer as of the date just before formal notice is provided, as described in subsection (d)(1) below,
(B)    are covered under the terms and provisions of this Appendix F,
(C)    who are alive as of the Lump Sum Determination Date, and
(D)    are not excluded under paragraph (4) below.
(2)    Terminated Vested Window Participants. Unless excluded under paragraph (4), an Eligible Window Participant means a Participant—
(A)    who is covered under the terms and provisions of this Appendix F, and specifically including a Participant who is covered under the terms of Appendix F and therefore eligible to receive a “past service benefit” (commonly referred to as a “Wireless Participant”).
(B)    who has terminated employment with the Company and all Affiliated Employers on a date before the date on which formal notice is provided, as described in subsection (d)(1) below,
(C)    who is alive as of the Lump Sum Determination Date,
(D)    who is entitled to a retirement benefit under Article 6 of this Appendix F, and such benefit has not commenced to be paid (in the form of an annuity) and has not been paid out completely (in the form of a lump sum) as of the Lump Sum Determination Date, and
(E)    for whom the lump sum actuarial equivalent value of the Participant’s benefit, determined on the basis of the Actuarial Assumptions described in section 6.11 of the Core Document, and based on the methodology described in subsection (f) below, exceeds $5,000,
shall be classified as a Terminated Vested Participants for purposes of this section 6.19.
(3)    Other Window Participants. In addition to Active Window Participants and Terminated Vested Window Participants described above, any—
(A)    surviving spouse or nonspouse beneficiary or alternate payee whose benefits are derived from any of the previously described groups of Window Participants,
(B)    whose benefits under the Plan have not yet commenced, and
(C)    who is alive as of the Lump Sum Determination Date,
shall be considered as Other Window Participants, and shall thereby be designated as Eligible Window Participants; provided, however, that if a Participant otherwise described in paragraph (1) or (2) above, or an alternate payee is subject to the terms of a qualified domestic relations order which requires payment (to that specific person) in a form other than a lump sum, such Participant or alternate payee shall be treated as excluded under paragraph (4) below.
(4)    Excluded Persons. Notwithstanding paragraphs (1)-(3) above, Participants and other persons described in paragraphs (1), (2), and (3) above who are in payment status shall not be Eligible Window Participants. Similarly, Terminated Vested Window Participants described in paragraphs (2) above who have attained their Normal Retirement Date prior to the Lump Sum Determination Date shall not be Eligible Window Participants.
(d)Notice and Election Period. The following provisions relating to notices and elections shall be applicable to Eligible Window Participants.
(1)
Notification Dates and Timing Requirements. Eligible Window Participants were initially notified of the availability of the option to receive a lump sum distribution in May or June 2020. The formal notice describing all election rights (comparable to the notice described in section 4.7(a)(5) of the Core Document) will be distributed to Eligible Window Participants in January, 2021.

The lump sum distribution option described in subsection (b) above (and the immediate annuity option described in subsection (e) below) may only be elected during the election period beginning after the formal notice has been provided, and ending on the Offer Closing Date (as defined in subsection (a) above) (the “Election Period”). Immediate annuity payments for Eligible Window Participants who timely elect to receive such payments will be determined as of the Lump Sum Determination Date. Similarly, lump sum distributions will be determined as of the Lump Sum Determination Date.


The dates mentioned in the preceding two paragraphs, including the Offer Closing Date and the Lump Sum Determination Date, are anticipated to be accurate, but may need to be changed, and are permitted to be changed, in order to accommodate unanticipated administrative or other delays or, alternatively, in accordance with subsection (h) below. Regardless of the actual dates of notice and the dates of the Election Period described above, Eligible Window Participants shall be permitted a minimum of 30 days in order to consider the program described in this section 6.19, and to make any and all elections relating to form of payment and related matters.
(2)    Election, Waiver, Consent, and Revocation Requirements. In the case of Eligible Window Participants who are married, the provisions of section 6.5 relating to notice requirements, Qualified Joint and Survivor Annuity automatic payment form, waiver of the automatic payment form, spousal consent, and related requirements affecting the timing of the distribution, shall apply, except as otherwise provided in this section 6.19 or section 6.7 of the Core Document (relating to certain benefit amounts that do not exceed $5,000). In the case of Eligible Window Participants (regardless of whether single or married), such persons shall be notified of the lump sum distribution option, and also notified of all applicable payment forms for which they are eligible, as described in subsection (e).

In all cases, an Eligible Window Participant who elects to receive a lump sum distribution or immediate annuity pursuant to this section 6.19 may subsequently choose to revoke that election at any time prior to the Lump Sum Determination Date (including the period of time after the Offer Closing Date, but prior to the Lump Sum Determination Date).


In addition to the election, waiver, and consent requirements described in the preceding paragraph, Eligible Window Participants must comply with any reasonable requests of the Administrator related to payment of a benefit payable under this section 6.19, which requests shall be uniformly applied to similarly situated persons. Such requests may relate to, for example, required notarizations or proof of birthdate.
(3)    Failure to Submit an Election. For purposes of this section 6.19, an Eligible Window Participant must make a “valid” election in order to receive a lump sum distribution or an immediate annuity. This determination of whether an Eligible Window Participant has made a “valid” election shall be made in the sole and absolute discretion of the Administrator. An Eligible Window Participant may make a valid election by signing and returning the election confirmation form provided by the Administrator for this purpose.
Any Eligible Window Participant who does not submit a valid election hereunder by the Offer Closing Date, in accordance with procedures established and determined by the Administrator, shall not be eligible to receive the lump sum distribution or immediate annuity described in this section 6.19.
(e)Immediate Annuity Option Payment Forms. In the case of any Eligible Window Participant who is eligible to elect a lump sum distribution as described in this section 6.19, such person shall alternatively be permitted to elect an “immediately payable” annuity. Such immediately payable annuity shall be available in the following payment forms, as further described in Article 6 of this Appendix F, depending on the status of the Eligible Window Participant, and shall be payable as of the Lump Sum Determination Date, as described above. Such immediate annuity will commence under the terms of the Plan, and continue (as applicable) under the terms of the irrevocable annuity contract from the insurance company referenced in section 9.4(f).

An Eligible Window Participant described in subsection (c)(1) or (c)(2) above who is single may elect a single life annuity. If married, such person may elect a single life annuity, a Qualified Joint and Survivor Annuity, or an Optional Joint and Survivor Annuity. A Window Participant described in subsection (c)(3) above may elect a life annuity (if a surviving spouse or nonspouse beneficiary), or, if an alternate payee, may elect whatever payment forms are permissible, taking into account the terms of the qualified domestic relations order and the age of the applicable Participant as of the date of the alternate payee’s benefit commencement.


Notwithstanding the preceding paragraph, either—
(1)    a Terminated Vested Window Participant described in subsection (c)(2) above who has attained Early Retirement Age (whether before or after termination of employment from the Employer) as described in section 5.2 of this Appendix F, or
(2)    an Active Window Participant described in subsection (c)(1) above who has attained Normal Retirement Age,
shall be eligible to elect all other optional payment forms described in this Appendix F (if any).
(f)Determination of Amount of Lump Sum Distributions and Immediate Annuity Payments. In the case of an Eligible Window Participant who elects under subsection (d) to receive a lump sum distribution or immediate annuity described in subsection (b) or (e) above, such benefit shall be calculated as of the Lump Sum Determination Date, pursuant to the methodology described below, although such amounts may not actually be distributed until a later date in December.
(1)    Lump Sum Distributions. The amount of a Participant’s lump sum distribution under this section 6.19 shall be determined on the basis of the lump sum Actuarial Assumptions described in section 6.11 of the Core Document. For purposes of subparagraphs (A) and (B) below, Active Window Participants described in subsection (c)(1) above shall be assumed to have terminated employment with the Company and all Affiliated Employers immediately prior to the Lump Sum Determination Date.
(A)    Eligible Window Participants Who have not attained Early Retirement Date as of Lump Sum Determination Date. For Eligible Window Participants who are not yet entitled to an early retirement or terminated vested benefit as of the Lump Sum Determination Date (or, in the case of a person described in subsection (c)(3)(A) above, such a person whose Plan benefit is derived from such an Eligible Window Participant not entitled to an early retirement benefit), the amount of the lump sum benefit shall be determined on the basis of the benefit that such Participant or other person would have been entitled to receive at his Early Retirement Date, as described in section 6.2 or 6.4 of this Appendix F, but in no event less than the lump sum value determined as of his Normal Retirement Age. 
(B)    Eligible Window Participants Who have attained Early Retirement Date as of Lump Sum Determination Date. Notwithstanding the above, in the case of an Eligible Window Participant who is entitled to an early retirement or terminated vested benefit under section 6.2 or 6.4 of this Appendix F as of the Lump Sum Determination Date (or, in the case of a person described in subsection (c)(3)(A) above, such a person whose Plan benefit is derived from such an Eligible Window Participant entitled to an early retirement or terminated vested benefit), the lump sum value shall be determined on the basis of the annuity benefit that such Participant would have been entitled to receive beginning on that Lump Sum Determination Date. In no event, however, shall such lump sum value be less than the lump sum determined as of the Participant’s Normal Retirement Age.
(2)    Immediate Annuity Payments to Certain Eligible Window Participants.
(A)    Benefit Commencement Prior to Early Retirement Age or Normal Retirement Age. For purposes of determining the amount of an immediately payable annuity under this section 6.19 that commences—
(i)    prior to a Participant’s Early Retirement Age (whether or not the Participant has terminated employment from the Employer), in the case of a Terminated Vested Window Participant described in subsection (c)(2), or
(ii)    prior to a Participant’s Normal Retirement Age, in the case of an Active Window Participant described in subsection (c)(1),
the value of the lump sum distribution potentially payable to such Participant under paragraph (1) above shall be converted to a single life annuity, by applying the same Actuarial Factors that were used to convert the Early Retirement Age or age 65 annuity into the lump sum distribution (i.e., the IRS Mortality Table and IRS Interest Rate described in section 6.11(b) of the Core Document).The values of annuity payments in other forms shall be determined by the applicable provisions of Article 6 of the Core Document.
(B)    Benefit Commencement between Early Retirement Age and Normal Retirement Age for Terminated Vested Window Participants or On or After Normal Retirement Age for Active Window Participants. For purposes of determining the amount of an immediately payable annuity to either—
(i)    a Terminated Vested Window Participant that commences on or after Early Retirement Age and on or before Normal Retirement Age, or
(ii)    an Active Window Participant that commences on or after Normal Retirement Age,
the values of annuity payments shall be determined by the applicable provisions of Article 6 of this Core Document.
(g)Death After Election and Prior to Benefit Commencement. Notwithstanding anything to the contrary in Article 6 of Appendix F, in the case of an Eligible Window Participant who makes and files with the Administrator a valid election under subsection (c) above, on or before the Offer Closing Date, to receive a lump sum distribution or annuity payment, but who subsequently dies prior to receiving that distribution (otherwise payable in April, 2021), such election shall be deemed rescinded. A qualified preretirement survivor annuity (as described in section 6.6(c) of the Core Document may be payable to a surviving spouse of the Eligible Window Participant pursuant to section 6.6 of the Core Document.
(h)Alternative Dates. Notwithstanding the various dates described above within this section 6.19, the Administrator shall have discretion to offer the temporary lump sum program during an alternative period of time, beginning as early as November 2020; provided, however, that the incremental time periods shall be comparable to those described above, and that Eligible Window Participants shall be permitted a minimum of 30 days in order to consider the program and make any and all elections associated with form of payment and related matters.”
(i)
Changes to Appendix G
24.    Article 6 of Appendix G is amended to include a new section 6.19 to read as follows, effective as of August 1, 2020:
“6.19 Lump Sum Option Available to Terminated Vested and Active Participants for Limited Period of Time During 2020–2021.
(a)Definitions. For purposes of this section 6.19, the following definitions will apply:
(1)    “Eligible Window Participant” means a Participant who is eligible to make an election described in this section 6.19, as more fully described in subsection (c) below.
(2)    “Lump Sum Determination Date” means April 1, 2021, the date as of which lump sum distributions shall be calculated and payable, and the date as of which immediate annuity payments may commence; provided, however, the actual date on which a lump sum distribution is made or the initial annuity payment is made may be a short period of time following this Lump Sum Determination Date.
(3)    “Offer Closing Date” means the latest permissible date on which an Eligible Window Participant may elect to receive a lump sum distribution or other payment under the provisions of this section 6.19. Such date is expected to be March 5, 2021; provided, however, that the Administrator may choose in its sole and absolute discretion to permit extensions beyond such Offer Closing Date, provided that any such extensions are applied on a uniform and nondiscriminatory basis to all similarly situated persons.
(b)General. In addition to lump sum distributions for amounts not exceeding $5,000 described in section 6.7 of the Core Document, a lump sum distribution for amounts larger than $5,000 shall be made available to Eligible Window Participants, as further described in subsection (c) below.

These additional lump sum distributions shall only be made available for a limited period of time, as described further below.
(c)Eligible Window Participants. The single lump sum payment option (as well as the immediate annuity option described in subsection (e) below), shall be available to Active Window Participants, Terminated Vested Window Participants, and Other Window Participants, as described in paragraphs (1)-(3) below, but excluding any persons described in paragraph (4) below. These groups of eligible Participants shall collectively be known as Eligible Window Participants.
(1)    Active Window Participants. The term Active Window Participants shall include all Participants who—
(A)    are actively employed by the Company or an Affiliated Employer as of the date just before formal notice is provided, as described in subsection (d)(1) below,
(B)    are covered under the terms and provisions of this Appendix G,
(C)    who are alive as of the Lump Sum Determination Date, and
(D)    are not excluded under paragraph (4) below.
(2)    Terminated Vested Window Participants. Unless excluded under paragraph (4), an Eligible Window Participant means a Participant—
(A)    who is covered under the terms and provisions of this Appendix G, and specifically including a Participant who is covered under the terms of Appendix G and therefore eligible to receive a “past service benefit” (commonly referred to as a “Wireless Participant”).
(B)    who has terminated employment with the Company and all Affiliated Employers on a date before the date on which formal notice is provided, as described in subsection (d)(1) below,
(C)    who is alive as of the Lump Sum Determination Date,
(D)    who is entitled to a retirement benefit under Article 6 of this Appendix G, and such benefit has not commenced to be paid (in the form of an annuity) and has not been paid out completely (in the form of a lump sum) as of the Lump Sum Determination Date, and
(E)    for whom the lump sum actuarial equivalent value of the Participant’s benefit, determined on the basis of the Actuarial Assumptions described in section 6.11 of the Core Document, and based on the methodology described in subsection (f) below, exceeds $5,000,
shall be classified as a Terminated Vested Participants for purposes of this section 6.19.
(3)    Other Window Participants. In addition to Active Window Participants and Terminated Vested Window Participants described above, any—
(A)    surviving spouse or nonspouse beneficiary or alternate payee whose benefits are derived from any of the previously described groups of Window Participants,
(B)    whose benefits under the Plan have not yet commenced, and
(C)    who is alive as of the Lump Sum Determination Date,
shall be considered as Other Window Participants, and shall thereby be designated as Eligible Window Participants; provided, however, that if a Participant otherwise described in paragraph (1) or (2) above, or an alternate payee is subject to the terms of a qualified domestic relations order which requires payment (to that specific person) in a form other than a lump sum, such Participant or alternate payee shall be treated as excluded under paragraph (4) below.
(4)    Excluded Persons. Notwithstanding paragraphs (1)-(3) above, Participants and other persons described in paragraphs (1), (2), and (3) above who are in payment status shall not be Eligible Window Participants. Similarly, Terminated Vested Window Participants described in paragraphs (2) above who have attained age 65 prior to the Lump Sum Determination Date shall not Eligible Window Participants.
(d)Notice and Election Period. The following provisions relating to notices and elections shall be applicable to Eligible Window Participants.
(1)
Notification Dates and Timing Requirements. Eligible Window Participants were initially notified of the availability of the option to receive a lump sum distribution in May or June 2020. The formal notice describing all election rights (comparable to the notice described in section 4.7(a)(5) of the Core Document) will be distributed to Eligible Window Participants in January, 2021.

The lump sum distribution option described in subsection (b) above (and the immediate annuity option described in subsection (e) below) may only be elected during the election period beginning after the formal notice has been provided, and ending on the Offer Closing Date (as defined in subsection (a) above) (the “Election Period”). Immediate annuity payments for Eligible Window Participants who timely elect to receive such payments will be determined as of the Lump Sum Determination Date. Similarly, lump sum distributions will be determined as of the Lump Sum Determination Date.


The dates mentioned in the preceding two paragraphs, including the Offer Closing Date and the Lump Sum Determination Date, are anticipated to be accurate, but may need to be changed, and are permitted to be changed, in order to accommodate unanticipated administrative or other delays or, alternatively, in accordance with subsection (h) below. Regardless of the actual dates of notice and the dates of the Election Period described above, Eligible Window Participants shall be permitted a minimum of 30 days in order to consider the program described in this section 6.19, and to make any and all elections relating to form of payment and related matters.
(2)    Election, Waiver, Consent, and Revocation Requirements. In the case of Eligible Window Participants who are married, the provisions of section 6.5 relating to notice requirements, Qualified Joint and Survivor Annuity automatic payment form, waiver of the automatic payment form, spousal consent, and related requirements affecting the timing of the distribution, shall apply, except as otherwise provided in this section 6.19 or section 6.7 of the Core Document (relating to certain benefit amounts that do not exceed $5,000). In the case of Eligible Window Participants (regardless of whether single or married), such persons shall be notified of the lump sum distribution option, and also notified of all applicable payment forms for which they are eligible, as described in subsection (e).

In all cases, an Eligible Window Participant who elects to receive a lump sum distribution or immediate annuity pursuant to this section 6.19 may subsequently choose to revoke that election at any time prior to the Lump Sum Determination Date (including the period of time after the Offer Closing Date, but prior to the Lump Sum Determination Date).


In addition to the election, waiver, and consent requirements described in the preceding paragraph, Eligible Window Participants must comply with any reasonable requests of the Administrator related to payment of a benefit payable under this section 6.19, which requests shall be uniformly applied to similarly situated persons. Such requests may relate to, for example, required notarizations or proof of birthdate.
(3)    Failure to Submit an Election. For purposes of this section 6.19, an Eligible Window Participant must make a “valid” election in order to receive a lump sum distribution or an immediate annuity. This determination of whether an Eligible Window Participant has made a “valid” election shall be made in the sole and absolute discretion of the Administrator. An Eligible Window Participant may make a valid election by signing and returning the election confirmation form provided by the Administrator for this purpose.
Any Eligible Window Participant who does not submit a valid election hereunder by the Offer Closing Date, in accordance with procedures established and determined by the Administrator, shall not be eligible to receive the lump sum distribution or immediate annuity described in this section 6.19.
(e)Immediate Annuity Option Payment Forms. In the case of any Eligible Window Participant who is eligible to elect a lump sum distribution as described in this section 6.19, such person shall alternatively be permitted to elect an “immediately payable” annuity. Such immediately payable annuity shall be available in the following payment forms, as further described in Article 6 of this Appendix G, depending on the status of the Eligible Window Participant, and shall be payable as of the Lump Sum Determination Date, as described above. Such immediate annuity will commence under the terms of the Plan, and continue (as applicable) under the terms of the irrevocable annuity contract from the insurance company referenced in section 9.4(f).

An Eligible Window Participant described in subsection (c)(1) or (c)(2) above who is single may elect a single life annuity. If married, such person may elect a single life annuity, a Qualified Joint and Survivor Annuity, or an Optional Joint and Survivor Annuity. A Window Participant described in subsection (c)(3) above may elect a life annuity (if a surviving spouse or nonspouse beneficiary), or, if an alternate payee, may elect whatever payment forms are permissible, taking into account the terms of the qualified domestic relations order and the age of the applicable Participant as of the date of the alternate payee’s benefit commencement.


Notwithstanding the preceding paragraph, either—
(1)    a Terminated Vested Window Participant described in subsection (c)(2) above who has attained Early Retirement Age (whether before or after termination of employment from the Employer), as described in section 5.3 or 5.5 of this Appendix G, or
(2)    an Active Window Participant described in subsection (c)(1) above who has attained Normal Retirement Age,
shall be eligible to elect all other optional payment forms described in this Appendix G (if any)
(f)Determination of Amount of Lump Sum Distributions and Immediate Annuity Payments. In the case of an Eligible Window Participant who elects under subsection (d) to receive a lump sum distribution or immediate annuity described in subsection (b) or (e) above, such benefit shall be calculated as of the Lump Sum Determination Date, pursuant to the methodology described below, although such amounts may not actually be distributed until a later date in December.
(1)    Lump Sum Distributions. The amount of a Participant’s lump sum distribution under this section 6.19 shall be determined on the basis of the lump sum Actuarial Assumptions described in section 6.11 of the Core Document. For purposes of subparagraphs (A) and (B) below, Active Window Participants described in subsection (c)(1) above shall be assumed to have terminated employment with the Company and all Affiliated Employers immediately prior to the Lump Sum Determination Date.
(A)    Eligible Window Participants Who have not attained Early Retirement Date as of Lump Sum Determination Date. For Eligible Window Participants who are not yet entitled to an early retirement or terminated vested benefit as of the Lump Sum Determination Date (or, in the case of a person described in subsection (c)(3)(A) above, such a person whose Plan benefit is derived from such an Eligible Window Participant not entitled to an early retirement benefit), the amount of the lump sum benefit shall be determined on the basis of the benefit that such Participant or other person would have been entitled to receive at his Early Retirement Date, as described in section 5.3 or 5.5 of this Appendix G, but in no event less than the lump sum value determined as of his Normal Retirement Age. 
(B)    Eligible Window Participants Who have attained Early Retirement Date as of Lump Sum Determination Date. Notwithstanding the above, in the case of an Eligible Window Participant who is entitled to an early retirement or terminated vested benefit under section 5.3 or 5.5 of this Appendix G as of the Lump Sum Determination Date (or, in the case of a person described in subsection (c)(3)(A) above, such a person whose Plan benefit is derived from such an Eligible Window Participant entitled to an early retirement or terminated vested benefit), the lump sum value shall be determined on the basis of the annuity benefit that such Participant would have been entitled to receive beginning on that Lump Sum Determination Date. In no event, however, shall such lump sum value be less than the lump sum determined as of the Participant’s Normal Retirement Age.
(2)    Immediate Annuity Payments to Certain Eligible Window Participants.
(A)    Benefit Commencement Prior to Early Retirement Age or Normal Retirement Age. For purposes of determining the amount of an immediately payable annuity under this section 6.19 that commences—
(i)    prior to a Participant’s Early Retirement Age (whether or not the Participant has terminated employer from the Employer), in the case of a Terminated Vested Window Participant described in subsection (c)(2), or
(ii)    prior to a Participant’s Normal Retirement Age, in the case of an Active Window Participant described in subsection (c)(1),
the value of the lump sum distribution potentially payable to such Participant under paragraph (1) above shall be converted to a single life annuity, by applying the same Actuarial Factors that were used to convert the Early Retirement Age or age 65 annuity into the lump sum distribution (i.e., the IRS Mortality Table and IRS Interest Rate described in section 6.11(b) of the Core Document).The values of annuity payments in other forms shall be determined by the applicable provisions of Article 6 of the Core Document.
(B)    Benefit Commencement between Early Retirement Age and Normal Retirement Age for Terminated Vested Window Participants or On or After Normal Retirement Age for Active Window Participants. For purposes of determining the amount of an immediately payable annuity to either—
(i)    a Terminated Vested Window Participant that commences on or after Early Retirement Age and on or before Normal Retirement Age, or
(ii)    an Active Window Participant that commences on or after Normal Retirement Age,
the values of annuity payments shall be determined by the applicable provisions of Article 6 of this Core Document.
(g)Death After Election and Prior to Benefit Commencement. Notwithstanding anything to the contrary in Article 6 of Appendix G, in the case of an Eligible Window Participant who makes and files with the Administrator a valid election under subsection (c) above, on or before the Offer Closing Date, to receive a lump sum distribution or annuity payment, but who subsequently dies prior to receiving that distribution (otherwise payable in April, 2021), such election shall be deemed rescinded. A qualified preretirement survivor annuity (as described in section 6.6(c) of the Core Document may be payable to a surviving spouse of the Eligible Window Participant pursuant to section 6.6 of the Core Document.
(h)Alternative Dates. Notwithstanding the various dates described above within this section 6.19, the Administrator shall have discretion to offer the temporary lump sum program during an alternative period of time, beginning as early as November 2020; provided, however, that the incremental time periods shall be comparable to those described above, and that Eligible Window Participants shall be permitted a minimum of 30 days in order to consider the program and make any and all elections associated with form of payment and related matters.”
* * * * * * * * * * * * * * * * * *
In Witness Whereof, CTS Corporation has caused this Fifth Amendment to be signed on its behalf and attested by its duly authorized officers this ____ day of ______________, 2020, but effective as of the dates described above.

CTS Corporation

By:         

        
Attest:    
    
By:        

        


1    00366 PP-A5-v2-2020 R 7-1-15.DOC Ln
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: July 31, 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: July 31, 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 June 30, 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: July 31, 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 June 30, 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: July 31, 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.
 



v3.20.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2020
Jul. 28, 2020
Document and Entity Information    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 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 Q2  
Amendment Flag false  
Entity Common Stock, Shares Outstanding   32,267,524
v3.20.2
Consolidated Statements of Earnings - Unaudited - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Income Statement [Abstract]        
Net sales $ 84,197 $ 120,684 $ 187,272 $ 238,308
Cost of goods sold 57,630 79,480 127,806 156,490
Gross margin 26,567 41,204 59,466 81,818
Selling, general and administrative expenses 14,668 17,036 31,427 34,597
Research and development expenses 5,522 6,257 12,930 13,048
Restructuring charges 135 911 375 2,995
Gain on sale of assets 0 (83) 0 (122)
Operating earnings 6,242 17,083 14,734 31,300
Other (expense) income:        
Interest expense (909) (467) (1,760) (933)
Interest income 304 440 635 872
Other (expense) income, net 256 (1,107) (1,726) (1,010)
Total other (expense) income. net (349) (1,134) (2,851) (1,071)
Earnings before income taxes 5,893 15,949 11,883 30,229
Income tax expense 1,036 4,006 3,218 6,867
Net earnings $ 4,857 $ 11,943 $ 8,665 $ 23,362
Earnings per share:        
Basic (in dollars per share) $ 0.15 $ 0.36 $ 0.27 $ 0.71
Diluted (in dollars per share) $ 0.15 $ 0.36 $ 0.27 $ 0.70
Basic weighted - average common shares outstanding (in shares): 32,262 32,799 32,364 32,803
Effect of dilutive securities (in shares) 242 406 284 422
Diluted weighted - average common shares outstanding (in shares) 32,504 33,205 32,648 33,225
Cash dividends declared per share (in dollars per share) $ 0.04 $ 0.04 $ 0.08 $ 0.08
v3.20.2
Condensed Consolidated Statements of Comprehensive Earnings - Unaudited - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Statement of Comprehensive Income [Abstract]        
Net earnings $ 4,857 $ 11,943 $ 8,665 $ 23,362
Other comprehensive (loss) earnings:        
Changes in fair market value of derivatives, net of tax 644 (294) (3,770) (216)
Changes in unrealized pension cost, net of tax 1,209 1,026 2,494 2,048
Cumulative translation adjustment, net of tax (14) (87) (153) 4
Other comprehensive (loss) earnings 1,839 645 (1,429) 1,836
Comprehensive earnings $ 6,696 $ 12,588 $ 7,236 $ 25,198
v3.20.2
Condensed Consolidated Balance Sheets - Unaudited - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Current Assets    
Cash and cash equivalents $ 145,981 $ 100,241
Accounts receivable, net 59,798 78,008
Inventories, net 44,266 42,237
Other current assets 14,750 16,992
Total current assets 264,795 237,478
Property, plant and equipment, net 99,349 105,038
Operating lease assets 24,369 24,644
Other Assets    
Prepaid pension asset 64,104 62,082
Goodwill 106,056 106,056
Other intangible assets, net 80,622 85,215
Deferred income taxes 21,278 19,795
Other 2,816 3,046
Total other assets 274,876 276,194
Total Assets 663,389 643,354
Current Liabilities    
Accounts payable 32,820 48,219
Operating lease obligations 3,051 2,787
Accrued payroll and benefits 8,725 9,564
Accrued expenses and other liabilities 33,175 36,378
Total current liabilities 77,771 96,948
Long-term debt 141,300 99,700
Long-term operating lease obligations 24,473 24,926
Long-term pension obligations 6,504 6,632
Deferred income taxes 6,303 5,637
Other long-term obligations 6,146 4,292
Total Liabilities 262,497 238,135
Shareholders’ Equity    
Common stock 310,953 307,932
Additional contributed capital 39,775 43,689
Retained earnings 515,841 509,766
Accumulated other comprehensive loss (93,155) (91,726)
Total shareholders’ equity before treasury stock 773,414 769,661
Treasury stock (372,522) (364,442)
Total shareholders’ equity 400,892 405,219
Total Liabilities and Shareholders’ Equity $ 663,389 $ 643,354
v3.20.2
Condensed Consolidated Statements of Cash Flows - Unaudited - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net earnings $ 8,665 $ 23,362
Adjustments to reconcile net earnings to net cash provided by operating activities:    
Depreciation and amortization 13,143 11,919
Pension and other post-retirement plan expense 1,348 502
Stock-based compensation 1,045 2,793
Deferred income taxes (466) 1,937
(Gain) on sales of fixed assets 0 (122)
Impairment of fixed assets 1,016 892
(Gain) loss on foreign currency hedges, net of cash (133) 88
Changes in assets and liabilities, net of acquisition:    
Accounts receivable 17,850 (5,394)
Inventories (2,328) 360
Operating lease assets (275) 1,780
Other assets 1,460 (2,370)
Accounts payable (12,294) (1,582)
Accrued payroll and benefits (512) (4,713)
Accrued liabilities (4,026) (3,622)
Income taxes payable (974) (588)
Operating lease liabilities (189) 1,986
Accrued expenses and other liabilities (26) 660
Pension and other post-retirement plans (130) (144)
Net cash provided by operating activities 23,724 24,184
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures (7,245) (9,430)
Proceeds from sale of assets 0 122
Net cash used in investing activities (7,245) (9,308)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Payments of long-term debt (2,207,450) (309,100)
Proceeds from borrowings of long-term debt 2,249,050 309,100
Purchase of treasury stock (8,080) (5,002)
Dividends paid (2,598) (2,625)
Taxes paid on behalf of equity award participants (1,903) (2,637)
Net cash provided by (used) in financing activities 29,019 (10,264)
Effect of exchange rate changes on cash and cash equivalents 242 33
Net increase (decrease) in cash and cash equivalents 45,740 4,645
Cash and cash equivalents at beginning of period 100,241 100,933
Cash and cash equivalents at end of period 145,981 105,578
Supplemental cash flow information:    
Cash paid for interest 1,442 574
Cash paid for income taxes, net 4,114 5,448
Capital expenditures incurred but not yet paid $ 1,158 $ 4,807
v3.20.2
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, 2018 377,929 306,697 42,820 478,847 (97,739) (352,696)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net earnings 23,362          
Changes in fair market value of derivatives, net of tax (216)          
Changes in unrealized pension cost, net of tax 2,048          
Cumulative translation adjustment, net of tax 4          
Ending Balance at Jun. 30, 2019 395,545 307,775 41,786 499,585 (95,903) (357,698)
Beginning Balance at Mar. 31, 2019 386,893 307,664 40,371 488,951 (96,548) (353,545)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net earnings 11,943     11,943    
Changes in fair market value of derivatives, net of tax (294)       (294)  
Changes in unrealized pension cost, net of tax 1,026       1,026  
Cumulative translation adjustment, net of tax (87)       (87)  
Cash dividends (1,309)     (1,309)    
Acquired shares for treasury stock (4,153)         4,153
Issued shares on vesting of restricted stock units 0 111 (111)      
Stock compensation 1,526   1,526      
Ending Balance at Jun. 30, 2019 395,545 307,775 41,786 499,585 (95,903) (357,698)
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)
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 8,665          
Changes in fair market value of derivatives, net of tax (3,770)          
Changes in unrealized pension cost, net of tax 2,494          
Cumulative translation adjustment, net of tax (153)          
Ending Balance at Jun. 30, 2020 400,892 310,953 39,775 515,841 (93,155) (372,522)
Beginning Balance at Mar. 31, 2020 397,466 310,098 39,832 512,276 (94,994) (369,746)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net earnings 4,857     4,857    
Changes in fair market value of derivatives, net of tax 644       644  
Changes in unrealized pension cost, net of tax 1,209       1,209  
Cumulative translation adjustment, net of tax (14)       (14)  
Cash dividends (1,292)     (1,292)    
Acquired shares for treasury stock (2,776)         (2,776)
Issued shares on vesting of restricted stock units 0 855 (855)      
Stock compensation 798   798      
Ending Balance at Jun. 30, 2020 $ 400,892 $ 310,953 $ 39,775 $ 515,841 $ (93,155) $ (372,522)
v3.20.2
Condensed Consolidated Statement of Shareholders Equity (parenthetical) - $ / shares
3 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Statement of Stockholders' Equity [Abstract]        
Cash dividends declared per share (in dollars per share) $ 0.04 $ 0.04 $ 0.04 $ 0.04
Treasury Stock, Shares, Acquired 122,000 220,731 148,466 31,500
v3.20.2
Basis of Presentation
6 Months Ended
Jun. 30, 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. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. The reclassifications had no impact on previously reported net earnings.
v3.20.2
Revenue Recognition
6 Months Ended
Jun. 30, 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 June 30, 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
 
Six Months Ended
 
June 30, 2020
 
June 30, 2019
 
June 30, 2020
 
June 30, 2019
Transportation
$
38,129

 
$
80,343

 
$
99,663

 
$
159,184

Industrial
20,213

 
19,500

 
41,056

 
37,656

Medical
13,038

 
8,973

 
22,408

 
18,639

Aerospace & Defense
9,373

 
6,988

 
18,378

 
14,511

Telecom & IT
3,444

 
4,880

 
5,767

 
8,318

Total
$
84,197

 
$
120,684

 
$
187,272

 
$
238,308


v3.20.2
Accounts Receivable
6 Months Ended
Jun. 30, 2020
Receivables [Abstract]  
Accounts Receivable
NOTE 3 – Accounts Receivable 

The components of accounts receivable, net are as follows:
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Accounts receivable, gross
$
60,425

 
$
78,269

Less: Allowance for credit losses
(627
)
 
(261
)
Accounts receivable, net
$
59,798

 
$
78,008


v3.20.2
Inventories
6 Months Ended
Jun. 30, 2020
Inventory Disclosure [Abstract]  
Inventories
NOTE 4 – Inventories 
Inventories, net consist of the following:
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Finished goods
$
8,937

 
$
9,447

Work-in-process
15,754

 
14,954

Raw materials
24,943

 
23,363

Less: Inventory reserves
(5,368
)
 
(5,527
)
Inventories, net
$
44,266

 
$
42,237


v3.20.2
Property, Plant and Equipment
6 Months Ended
Jun. 30, 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
 
June 30,
 
December 31,
 
2020
 
2019
Land and land improvements
$
1,095

 
$
1,095

Buildings and improvements
68,424

 
68,350

Machinery and equipment
226,465

 
224,312

Less: Accumulated depreciation
(196,635
)
 
(188,719
)
Property, plant and equipment, net
$
99,349

 
$
105,038

 
 
 
 
Depreciation expense for the six months ended June 30, 2020
 
 
$
8,580

Depreciation expense for the six months ended June 30, 2019
 
 
$
8,537

v3.20.2
Retirement Plans
6 Months Ended
Jun. 30, 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
 
Six Months Ended

June 30,

June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Net pension expense
$
666

 
$
249

 
$
1,330

 
$
499


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

Three Months Ended
 
Three Months Ended
 
June 30,

June 30,

June 30,

June 30,
 
2020
 
2019
 
2020
 
2019
Service cost
$

 
$

 
$
8

 
$
9

Interest cost
1,443

 
1,931

 
6

 
7

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

 
1,311

 
44

 
42

Total expense, net
$
611

 
$
195

 
$
55

 
$
54

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

 
Domestic Pension Plans
 
Foreign Pension Plans
 
Six Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Service cost
$

 
$

 
$
15

 
$
18

Interest cost
2,886

 
3,862

 
13

 
15

Expected return on plan assets(1)
(4,908
)
 
(6,094
)
 
(7
)
 
(9
)
Amortization of loss
3,244

 
2,623

 
87

 
84

Total expense, net
$
1,222

 
$
391

 
$
108

 
$
108

(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 plan ("Plan") at management's discretion, subject to certain conditions. On June 1, 2020, we entered into the Fifth Amendment to the Plan whereby we set an effective termination date of July 31, 2020. The Plan termination process is expected to take twelve to eighteen months and requires certain approvals from both the Internal Revenue Service and Pension Benefit Guaranty Corporation. Once we receive such approvals, an insurance company will be selected to purchase annuities and fulfill the obligations of the Plan including administering payments to participants. Upon settlement of the pension liabilities, we will reclassify the related pension losses currently recorded in accumulated other comprehensive loss into earnings.  We do not expect any cash contributions from the Company to the Plan as a result of this termination because plan assets exceed estimated liabilities.
    










Other Post-retirement Benefit Plan
 
Net post-retirement expense for our other post-retirement plan includes the following components:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Service cost
$

 
$
1

 
$

 
$
1

Interest cost
30

 
43

 
60

 
85

Amortization of gain
(21
)
 
(42
)
 
(42
)
 
(83
)
Total expense, net
$
9

 
$
2

 
$
18

 
$
3


v3.20.2
Other Intangible Assets
6 Months Ended
Jun. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Other Intangible Assets
NOTE 7 – Other Intangible Assets
 
Other intangible assets, net consist of the following components:
 
As of
 
June 30, 2020
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Amount
Customer lists/relationships
$
92,194

 
$
(41,370
)
 
$
50,824

Technology and other intangibles
47,925

 
(20,327
)
 
27,598

In process research and development
2,200

 

 
2,200

Other intangible assets, net
$
142,319

 
$
(61,697
)
 
$
80,622

Amortization expense for the three months ended June 30, 2020


 
$
2,268

 


Amortization expense for the six months ended June 30, 2020
 
 
$
4,563

 
 
 
 
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 June 30, 2019
 

 
$
1,692

 
 

Amortization expense for the six months ended June 30, 2019
 

 
$
3,382

 
 


Remaining amortization expense for other intangible assets as of June 30, 2020 is as follows: 

Amortization
expense
2020
$
4,459

2021
8,893

2022
8,657

2023
6,651

2024
6,489

Thereafter
45,473

Total amortization expense
$
80,622

v3.20.2
Costs Associated with Exit and Restructuring Activities
6 Months Ended
Jun. 30, 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 are as follows:
 
Three Months Ended
 
June 30, 2020
 
June 30, 2019
Restructuring charges
$
135

 
$
911

 

 
Six Months Ended
 
June 30, 2020
 
June 30, 2019
Restructuring charges
$
375

 
$
2,995

 

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 $0 and $911 during the three months ended June 30, 2020 and June 30, 2019, respectively. Restructuring charges under this plan were $(32) and $2,995 during the six months ended June 30, 2020 and June 30, 2019, respectively. The total restructuring liability related to the June 2016 Plan was $48 at June 30, 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 June 30, 2020:

 
 
Actual costs
 
Planned
 
incurred through
June 2016 Plan
Costs
 
June 30, 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 and six months ended June 30, 2019. There were no restructuring charges incurred under this plan during the three or six months ended June 30, 2020. The total restructuring liability related to the April 2014 Plan was $672 at June 30, 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 and six months ended June 30, 2020, we incurred restructuring charges of $135 and $407, respectively, primarily relating to workforce reduction actions taken during the quarter. There were no such charges incurred during the three and six months ended June 30, 2019. The total remaining restructuring liability associated with these actions was $183 at June 30, 2020 and $1,057 at December 31, 2019.
The following table displays the restructuring liability activity included in Accrued expenses and other liabilities for all plans for the six months ended June 30, 2020
Restructuring liability at January 1, 2020
$
1,993

Restructuring charges
375

Cost paid
(1,039
)
Other activity(1)
(426
)
Restructuring liability at June 30, 2020
$
903

(1) Other activity includes the effects of currency translation, non-cash asset write-downs and other charges that do not flow through restructuring expense.
v3.20.2
Accrued Liabilities
6 Months Ended
Jun. 30, 2020
Other Liabilities Disclosure [Abstract]  
Accrued Liabilities
NOTE 9 – Accrued Liabilities
 
The components of Accrued expenses and other liabilities are as follows: 
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Accrued product related costs
$
3,090

 
$
2,950

Accrued income taxes
6,921

 
7,903

Accrued property and other taxes
1,948

 
1,574

Accrued professional fees
903

 
1,599

Accrued customer related liabilities
3,673

 
4,391

Dividends payable
1,291

 
1,299

Remediation reserves
9,300

 
11,444

Derivative liabilities
2,220

 

Other accrued liabilities
3,829

 
5,218

Total accrued expenses and other liabilities
$
33,175

 
$
36,378


v3.20.2
Contingencies
6 Months Ended
Jun. 30, 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
 
June 30, 2020
 
December 31, 2019
Balance at beginning of period
$
11,444

 
$
11,274

Remediation expense
791

 
2,602

Net remediation payments
(2,956
)
 
(2,455
)
Other activity(1)
21

 
23

Balance at end of the period
$
9,300

 
$
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.
v3.20.2
Debt
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Debt
NOTE 11 - Debt
 
Long-term debt was comprised of the following:
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Total credit facility
$
300,000

 
$
300,000

Balance outstanding
141,300

 
99,700

Standby letters of credit
1,740

 
1,800

Amount available, subject to covenant restrictions
$
157,000

 
$
198,500

Weighted-average interest rate
2.17
%
 
3.25
%
Commitment fee percentage per annum
0.25
%
 
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 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 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 Credit Agreement 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 credit facility. We were in compliance with all debt covenants at June 30, 2020. The Credit Agreement 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, it 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 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 and six months ended June 30, 2020 and 2019 was approximately $42 and $41 and $84 and $77, respectively. 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.
v3.20.2
Derivative Financial Instruments
6 Months Ended
Jun. 30, 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. In accordance with FASB Staff Q&A - Topic 815: Cash Flow Hedge Accounting Affected by the COVID-19 Pandemic (“FASB Staff Q&A Hedge”) issued in April 2020, companies may elect to assess the ineffectiveness of our cashflow hedges utilizing the two-month grace period for assessing whether forecasted transactions will occur. We have made this election in assessing the effectiveness of our cash flow hedges during the three months ended June 30, 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 June 30, 2020, we had a net unrealized loss of $1,247 in accumulated other comprehensive (loss) income, of which $1,037 is expected to be reclassified to earnings within the next 12 months. At June 30, 2019 we had a net unrealized gain of $784 in accumulated other comprehensive (loss) income. The notional amount of foreign currency forward contracts outstanding was $24,434 at June 30, 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 June 30, 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 $505

The location and fair values of derivative instruments designated as hedging instruments in the Condensed Consolidated Balance Sheets as of June 30, 2020, are shown in the following table:
 
As of

June 30,
 
December 31,
 
2020
 
2019
Interest rate swaps reported in Other current assets
$

 
$
82

Interest rate swaps reported in Accrued liabilities
$
(656
)
 
$

Interest rate swaps reported in Other long-term obligations
$
(1,959
)
 
$
(78
)
Foreign currency hedges reported in Other current assets
$

 
$
580

Foreign currency hedges reported in Accrued liabilities
$
(1,564
)
 
$



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 $57 and foreign currency derivative liabilities of $1,621 at June 30, 2020.

The effect of derivative instruments on the Condensed Consolidated Statements of Earnings is as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Foreign Exchange Contracts:
 
 
 
 
 
 
 
Amounts reclassified from AOCI to earnings:
 
 
 
 
 
 
 
Net sales
$
73

 
$

 
$
73

 
$

Cost of goods sold
(519
)
 
233

 
(271
)
 
276

Selling, general and administrative expense

 
23

 
(5
)
 
39

Total (loss) gain reclassified from AOCI to earnings
(446
)
 
256

 
(203
)
 
315

Gain recognized in other expense for hedge ineffectiveness
3

 

 
3

 

Total derivative (loss) gain on foreign exchange contracts recognized in earnings
$
(443
)
 
$
256

 
$
(200
)
 
$
315

 
 
 
 
 
 
 
 
Interest Rate Swaps:
 
 
 
 
 
 
 
(Expense) benefit recorded in Interest expense
$
(109
)
 
$
156

 
$
(71
)
 
$
313

Total (losses) gains on derivatives
$
(552
)
 
$
412

 
$
(271
)
 
$
628


v3.20.2
Accumulated Other Comprehensive (Loss) Income
6 Months Ended
Jun. 30, 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 gains (losses) for the three and six months ended June 30, 2020 were $892 and $(379), respectively and transaction losses for the three and six months ended June 30, 2019 were $829 and $355, 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 June 30, 2020, are as follows:

 
 
 
 
 
Loss
 
 
 
As of
 
Gain (Loss)
 
Reclassified
 
As of
 
March 31,
 
Recognized
 
from AOCI
 
June 30,

2020
 
in OCI
 
to Income
 
2020
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
(5,044
)
 
$
250

 
$
555

 
$
(4,239
)
Income tax benefit (expense)
1,139

 
(44
)
 
(117
)
 
978

Net
(3,905
)
 
206

 
438

 
(3,261
)


 

 

 

Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(122,480
)
 

 
1,574

 
(120,906
)
Income tax benefit (expense)
33,643

 

 
(365
)
 
33,278

Net
(88,837
)
 

 
1,209

 
(87,628
)



 

 


 


Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,252
)
 
(14
)
 

 
(2,266
)
Income tax benefit

 

 

 

Net
(2,252
)
 
(14
)
 

 
(2,266
)
Total accumulated other comprehensive (loss) income
$
(94,994
)
 
$
192

 
$
1,647

 
$
(93,155
)

The components of accumulated other comprehensive (loss) income for the three months ended June 30, 2019, are as follows:
 
 
 
 
 
(Gain) Loss
 
 
 
As of
 
Gain (Loss)
 
Reclassified
 
As of
 
March 31,
 
Recognized
 
from AOCI
 
June 30,

2019
 
in OCI
 
to Income
 
2019
Changes in fair market value of hedges:

 

 
 
 
 
Gross
$
1,416

 
$
32

 
$
(412
)
 
$
1,036

Income tax (expense) benefit
(320
)
 
(7
)
 
93

 
(234
)
Net
1,096

 
25

 
(319
)
 
802



 

 

 

Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(131,135
)
 

 
1,325

 
(129,810
)
Income tax benefit (expense)
35,596

 

 
(299
)
 
35,297

Net
(95,539
)
 

 
1,026

 
(94,513
)
 
 
 
 
 
 
 
 
Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,203
)
 
(84
)
 

 
(2,287
)
Income tax benefit (expense)
98

 
(3
)
 

 
95

Net
(2,105
)
 
(87
)
 

 
(2,192
)
Total accumulated other comprehensive (loss) income
$
(96,548
)
 
$
(62
)
 
$
707

 
$
(95,903
)


The components of accumulated other comprehensive (loss) income for the six months ended June 30, 2020, are as follows:

 
 
 
 
 
Loss
 
 
 
As of
 
Loss
 
Reclassified
 
As of
 
December 31,
 
Recognized
 
from AOCI
 
June 30,
 
2019
 
in OCI
 
to Income
 
2020
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
659

 
$
(5,172
)
 
274

 
$
(4,239
)
Income tax (expense) benefit
(150
)
 
1,181

 
(53
)
 
978

Net
509

 
(3,991
)
 
221

 
(3,261
)
 
 
 
 
 
 
 
 
Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(124,140
)
 

 
3,234

 
(120,906
)
Income tax benefit (expense)
34,018

 

 
(740
)
 
33,278

Net
(90,122
)
 

 
2,494

 
(87,628
)
 
 
 
 
 
 
 
 
Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,211
)

(55
)
 

 
(2,266
)
Income tax benefit (expense)
98


(98
)
 

 

Net
(2,113
)

(153
)
 

 
(2,266
)
Total accumulated other comprehensive (loss) income
$
(91,726
)

$
(4,144
)
 
$
2,715

 
$
(93,155
)










The components of accumulated other comprehensive (loss) income for the six months ended June 30, 2019, are as follows:
 
 
 
 
 
Loss
 
 
 
As of
 
Gain
 
Reclassified
 
As of
 
December 31,
 
Recognized
 
from AOCI
 
June 30,
 
2018
 
in OCI
 
to Income
 
2019
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
1,316

 
$
348

 
$
(628
)
 
$
1,036

Income tax (expense) benefit
(298
)
 
(78
)
 
142

 
(234
)
Net
1,018

 
270

 
486

 
802

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

 
2,644

 
(129,810
)
Income tax benefit (expense)
35,893

 

 
(596
)
 
35,297

Net
(96,561
)
 

 
2,048

 
(94,513
)
 
 
 
 
 
 
 
 
Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,291
)
 
4

 

 
(2,287
)
Income tax benefit
95

 

 

 
95

Net
(2,196
)
 
4

 

 
(2,192
)
Total accumulated other comprehensive (loss) income
$
(97,739
)
 
$
274

 
$
1,562

 
$
(95,903
)

v3.20.2
Shareholders' Equity
6 Months Ended
Jun. 30, 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
 
June 30,
 
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
57,066,930

 
56,929,298

Shares outstanding
32,267,307

 
32,472,406

Treasury stock
 
 
 
Shares held
24,799,623

 
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 six months ended June 30, 2020 and 2019, 342,731 and 179,966 shares of common stock were repurchased for $8,080 and $5,002, respectively. Approximately $5,740 is available for future purchases.

A roll-forward of common shares outstanding is as follows:
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
Balance at the beginning of the year
32,472,406

 
32,750,727

Repurchases
(342,731
)
 
(179,966
)
Restricted share issuances
137,632

 
136,520

Balance at the end of the period
32,267,307

 
32,707,281

 
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 for the three months ended June 30, 2020 was 84,720. There were no anti-dilutive awards outstanding for the three months ended June 30, 2019. The number of outstanding awards that were anti-dilutive for the six months ended June 30, 2020 and June 30, 2019 were 61,780 and 108,894, respectively.
v3.20.2
Equity-Based Compensation
6 Months Ended
Jun. 30, 2020
Share-based Payment Arrangement [Abstract]  
Equity-Based Compensation
NOTE 15 - Stock-Based Compensation
 
At June 30, 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
 
Six Months Ended

June 30,

June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Service-based RSUs
$
779

 
$
488

 
$
1,359

 
$
1,094

Performance-based RSUs
19

 
1,038

 
(349
)
 
1,586

Cash-settled RSUs
19


53

 
35

 
113

Total
$
817

 
$
1,579

 
$
1,045

 
$
2,793

Income tax benefit
189

 
357

 
240

 
631

Net expense
$
628

 
$
1,222

 
$
805

 
$
2,162



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

June 30, 2020
 
Period
Service-based RSUs
$
2,860

 
1.53
Performance-based RSUs
2,968

 
2.12
Total
$
5,828

 
1.83

 
We recognize expense on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.
 
The following table summarizes the status of these plans as of June 30, 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

 

 

 

 

Maximum potential RSU and cash settled awards outstanding
536,819

 
200,804

 
75,200

 
35,952

 
5,522

Maximum potential awards outstanding
536,819

 
200,804

 
75,200

 
35,952

 
5,522

RSUs and cash settled awards vested and released
35,637

 

 

 

 

Awards available for grant
1,927,544

 

 

 

 


 





Performance-Based Stock Options

During 2015, the Compensation Committee of the Board of Directors granted a total of 350,000 performance-based stock option awards for certain employees under the 2014 Plan. We did not recognized any expense on these awards because the attainment of the performance target was not deemed to be likely to occur. These performance options expired unexercised in May 2020.

Service-Based Restricted Stock Units
 
The following table summarizes the service-based RSU activity for the six months ended June 30, 2020
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
364,396

 
$
19.87

Granted
92,996

 
27.73

Vested and released
(90,595
)
 
22.71

Forfeited
(3,893
)
 
28.43

Outstanding at June 30, 2020
362,904

 
$
21.08

Releasable at June 30, 2020
185,974

 
$
14.63

 
Performance and Market-Based Restricted Stock Units

The following table summarizes the performance and market-based RSU activity for the six months ended June 30, 2020:
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
217,229

 
$
27.73

Granted
120,521

 
28.65

Attained by performance
38,820

 
23.84

Released
(111,838
)
 
23.74

Forfeited
(11,884
)
 
25.69

Outstanding at June 30, 2020
252,848

 
$
29.31

Releasable at June 30, 2020

 
$



The following table summarizes each grant of performance awards outstanding at June 30, 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

Focus 2025 Performance RSUs
April 23, 2020
2024
Cumulative revenues of $750 million over a trailing four-quarter period
48,000

48,000

      Total



252,848

457,696




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 June 30, 2020 and December 31, 2019 we had 33,697 and 17,271 cash-settled RSUs outstanding, respectively. At June 30, 2020 and December 31, 2019, liabilities of $154 and $353, respectively, were included in Accrued expenses and other liabilities on our Condensed Consolidated Balance Sheets.
v3.20.2
Fair Value Measurements
6 Months Ended
Jun. 30, 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.  Due to changes in interest rates and foreign exchange rates, these fair values fluctuated significantly during the second quarter and may continue to fluctuate based on market conditions and other factors.

The table below summarizes our financial liabilities that were measured at fair value on a recurring basis at June 30, 2020:
 
 
 
Quoted
 
 
 
 
 

 
Prices
 
 
 
 
 
Liability
 
in Active
 
Significant
 
 
 
Carrying
 
Markets for
 
Other
 
Significant
 
Value at
 
Identical
 
Observable
 
Unobservable
 
June 30,
 
Instruments
 
Inputs
 
Inputs

2020
 
(Level 1)
 
(Level 2)
 
(Level 3)
Interest rate swaps
$
(2,615
)
 
$

 
$
(2,615
)
 
$

Foreign currency hedges
$
(1,564
)
 
$

 
$
(1,564
)
 
$

 
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.
v3.20.2
Income Taxes
6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 17 — Income Taxes
The effective tax rates for the three and six-month periods ended June 30, 2020 and 2019 are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Effective tax rate
17.6
%
 
25.1
%
 
27.1
%
 
22.7
%

 
Our effective income tax rate was 17.6% and 25.1% in the second quarters of 2020 and 2019, respectively. This decrease is primarily attributed to the change in the mix of earnings by jurisdiction, a reduction in reserves related to uncertain tax positions, and other favorable permanent items, partially offset by a provision recorded due to the company's decision to no longer permanently reinvest the earnings from our Taiwan subsidiary. The second quarter 2020 tax rate was lower than the U.S. statutory federal tax rate for the same reasons as noted above. The second quarter 2019 tax rate was higher than the U.S. statutory federal tax rate primarily due to state taxes and foreign earnings that are taxed at higher rates.

Our effective income tax rate was 27.1% and 22.7% in the first half of 2020 and 2019, respectively. This increase is primarily attributed to establishment of valuation allowances on certain U.S. tax credits and the company's decision to no longer reinvest the earnings of its Taiwan subsidiary, offset by a reduction in reserves related to uncertain tax positions. The tax rate in the first half of 2020 was higher than the U.S. statutory federal tax rate for the same reasons noted above. The tax rate in the first half of 2019 was higher than the U.S. statutory federal tax rate primarily due to higher foreign tax rates applicable on foreign earnings offset by tax benefits recorded upon vesting of restricted stock units.
v3.20.2
Leases
6 Months Ended
Jun. 30, 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.

In accordance with FASB Staff Q&A - Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic ("FASB Staff Q&A") issued in April 2020, we have elected to account for any lease concessions resulting directly from COVID-19 as if the enforceable rights and obligations for the concessions existed in the respective contracts at lease inception and as such we will not account for any concession as a lease modification. Guidance from the FASB Staff Q&A provided methods to account for rent deferrals which include the option to treat the lease as if no changes to the lease contract were made or to treat deferred payments as variable lease payments. The FASB Staff Q&A allows entities to select the most practical approach and does not require the same approach be applied consistently to all leases. As a result, we have accounted for lease deferrals as if no changes to the lease contract were made and will continue to recognize lease expense, on a straight-line basis, during the deferral periods. During the three and six months ended June 30, 2020, these rent concessions related to COVID-19 were not material.

Components of lease expense for the three and six months ended June 30, 2020 were as follows:


Three Months Ended
 
Six Months Ended

June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Operating lease cost
$
1,190

 
$
1,075

 
$
2,389

 
$
2,069

Short-term lease cost
170

 
176

 
337

 
249

Total lease cost
$
1,360

 
$
1,251

 
$
2,726

 
$
2,318


Supplemental cash flow information related to leases was as follows:
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
Cash paid for amounts included in the measurement of lease liabilities
$
2,299

 
$
1,862

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
 
June 30,
 
December 31,
 
2020
 
2019
Balance Sheet Classification:
 
 
 
Operating lease obligations
$
3,051

 
$
2,787

Long-term operating lease obligations
24,473

 
24,926

Total lease liabilities
$
27,524

 
$
27,713

 
 
 
 
Weighted-average remaining lease terms (years)
8.43

 
9.04



 
 
Weighted-average discount rate
6.46
%
 
6.54
%





Remaining maturity of our existing lease liabilities as of June 30, 2020 is as follows:
 
Operating Leases(1)
2020
$
2,344

2021
4,686

2022
4,547

2023
4,185

2024
4,075

Thereafter
16,950

Total
$
36,787

Less: interest
(9,263
)
Present value of lease liabilities
$
27,524

(1) Operating lease payments include $3,822 of payments related to options to extend lease terms that are reasonably expected to be exercised.
v3.20.2
Business Acquisitions
6 Months Ended
Jun. 30, 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



v3.20.2
Recent Accounting Pronouncements
6 Months Ended
Jun. 30, 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 Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("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. 2020-04 "Reference Rate Reform"

In March 2020, the FASB issued ASU 2020-04, “ Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides temporary optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as it relates to our LIBOR indexed instruments. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022, and an entity may elect to apply ASU 2020-04 for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.

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

In December 2019, the 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 FASB issued 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.
v3.20.2
Basis of Presentation (Policies)
6 Months Ended
Jun. 30, 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 Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("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. 2020-04 "Reference Rate Reform"

In March 2020, the FASB issued ASU 2020-04, “ Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides temporary optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as it relates to our LIBOR indexed instruments. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022, and an entity may elect to apply ASU 2020-04 for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.

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

In December 2019, the 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 FASB issued 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.
v3.20.2
Revenue Recognition Disaggregated Revenue (Tables)
6 Months Ended
Jun. 30, 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
 
Six Months Ended
 
June 30, 2020
 
June 30, 2019
 
June 30, 2020
 
June 30, 2019
Transportation
$
38,129

 
$
80,343

 
$
99,663

 
$
159,184

Industrial
20,213

 
19,500

 
41,056

 
37,656

Medical
13,038

 
8,973

 
22,408

 
18,639

Aerospace & Defense
9,373

 
6,988

 
18,378

 
14,511

Telecom & IT
3,444

 
4,880

 
5,767

 
8,318

Total
$
84,197

 
$
120,684

 
$
187,272

 
$
238,308


v3.20.2
Accounts Receivable (Tables)
6 Months Ended
Jun. 30, 2020
Receivables [Abstract]  
Components of Accounts Receivable
The components of accounts receivable, net are as follows:
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Accounts receivable, gross
$
60,425

 
$
78,269

Less: Allowance for credit losses
(627
)
 
(261
)
Accounts receivable, net
$
59,798

 
$
78,008


v3.20.2
Inventories (Tables)
6 Months Ended
Jun. 30, 2020
Inventory Disclosure [Abstract]  
Summary of Inventories
Inventories, net consist of the following:
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Finished goods
$
8,937

 
$
9,447

Work-in-process
15,754

 
14,954

Raw materials
24,943

 
23,363

Less: Inventory reserves
(5,368
)
 
(5,527
)
Inventories, net
$
44,266

 
$
42,237


v3.20.2
Property, Plant and Equipment (Tables)
6 Months Ended
Jun. 30, 2020
Property, Plant and Equipment [Abstract]  
Summary of Property, Plant and Equipment Property, plant and equipment is comprised of the following:
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Land and land improvements
$
1,095

 
$
1,095

Buildings and improvements
68,424

 
68,350

Machinery and equipment
226,465

 
224,312

Less: Accumulated depreciation
(196,635
)
 
(188,719
)
Property, plant and equipment, net
$
99,349

 
$
105,038

 
 
 
 
Depreciation expense for the six months ended June 30, 2020
 
 
$
8,580

Depreciation expense for the six months ended June 30, 2019
 
 
$
8,537

v3.20.2
Retirement Plans (Tables)
6 Months Ended
Jun. 30, 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
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Service cost
$

 
$
1

 
$

 
$
1

Interest cost
30

 
43

 
60

 
85

Amortization of gain
(21
)
 
(42
)
 
(42
)
 
(83
)
Total expense, net
$
9

 
$
2

 
$
18

 
$
3


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
 
Six Months Ended

June 30,

June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Net pension expense
$
666

 
$
249

 
$
1,330

 
$
499


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

Three Months Ended
 
Three Months Ended
 
June 30,

June 30,

June 30,

June 30,
 
2020
 
2019
 
2020
 
2019
Service cost
$

 
$

 
$
8

 
$
9

Interest cost
1,443

 
1,931

 
6

 
7

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

 
1,311

 
44

 
42

Total expense, net
$
611

 
$
195

 
$
55

 
$
54

 
(1) Expected return on plan assets is net of expected investment expenses and certain administrative expenses.
v3.20.2
Other Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2020
Goodwill [Line Items]  
Summary of other intangible assets
 
Other intangible assets, net consist of the following components:
 
As of
 
June 30, 2020
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Amount
Customer lists/relationships
$
92,194

 
$
(41,370
)
 
$
50,824

Technology and other intangibles
47,925

 
(20,327
)
 
27,598

In process research and development
2,200

 

 
2,200

Other intangible assets, net
$
142,319

 
$
(61,697
)
 
$
80,622

Amortization expense for the three months ended June 30, 2020


 
$
2,268

 


Amortization expense for the six months ended June 30, 2020
 
 
$
4,563

 
 
 
Summary of amortization expense remaining for other intangible assets
Remaining amortization expense for other intangible assets as of June 30, 2020 is as follows: 

Amortization
expense
2020
$
4,459

2021
8,893

2022
8,657

2023
6,651

2024
6,489

Thereafter
45,473

Total amortization expense
$
80,622

v3.20.2
Costs Associated with Exit and Restructuring Activities (Tables)
6 Months Ended
Jun. 30, 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 are as follows:
 
Three Months Ended
 
June 30, 2020
 
June 30, 2019
Restructuring charges
$
135

 
$
911

 

 
Six Months Ended
 
June 30, 2020
 
June 30, 2019
Restructuring charges
$
375

 
$
2,995

 

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 $0 and $911 during the three months ended June 30, 2020 and June 30, 2019, respectively. Restructuring charges under this plan were $(32) and $2,995 during the six months ended June 30, 2020 and June 30, 2019, respectively. The total restructuring liability related to the June 2016 Plan was $48 at June 30, 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 June 30, 2020:

 
 
Actual costs
 
Planned
 
incurred through
June 2016 Plan
Costs
 
June 30, 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 and six months ended June 30, 2019. There were no restructuring charges incurred under this plan during the three or six months ended June 30, 2020. The total restructuring liability related to the April 2014 Plan was $672 at June 30, 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 and six months ended June 30, 2020, we incurred restructuring charges of $135 and $407, respectively, primarily relating to workforce reduction actions taken during the quarter. There were no such charges incurred during the three and six months ended June 30, 2019. The total remaining restructuring liability associated with these actions was $183 at June 30, 2020 and $1,057 at December 31, 2019.
The following table displays the restructuring liability activity included in Accrued expenses and other liabilities for all plans for the six months ended June 30, 2020
Restructuring liability at January 1, 2020
$
1,993

Restructuring charges
375

Cost paid
(1,039
)
Other activity(1)
(426
)
Restructuring liability at June 30, 2020
$
903

(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 six months ended June 30, 2020
Restructuring liability at January 1, 2020
$
1,993

Restructuring charges
375

Cost paid
(1,039
)
Other activity(1)
(426
)
Restructuring liability at June 30, 2020
$
903

(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 and six months ended June 30, 2020, we incurred restructuring charges of $135 and $407, respectively, primarily relating to workforce reduction actions taken during the quarter. There were no such charges incurred during the three and six months ended June 30, 2019. The total remaining restructuring liability associated with these actions was $183 at June 30, 2020
Restructuring Charges [Member]  
Restructuring and Related Activities Disclosure [Text Block] Consolidated Statement of Earnings. 
 
Total restructuring charges are as follows:
 
Three Months Ended
 
June 30, 2020
 
June 30, 2019
Restructuring charges
$
135

 
$
911

 

 
Six Months Ended
 
June 30, 2020
 
June 30, 2019
Restructuring charges
$
375

 
$
2,995

 

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 $0 and $911 during the three months ended June 30, 2020 and June 30, 2019, respectively. Restructuring charges under this plan were $(32) and $2,995 during the six months ended June 30, 2020 and June 30, 2019, respectively. The total restructuring liability related to the June 2016 Plan was $48 at June 30, 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 June 30, 2020:

 
 
Actual costs
 
Planned
 
incurred through
June 2016 Plan
Costs
 
June 30, 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 and six months ended June 30, 2019. There were no restructuring charges incurred under this plan during the three or six months ended June 30, 2020. The total restructuring liability related to the April 2014 Plan was $672 at June 30, 2020, and $703 at December 31, 2019
v3.20.2
Accrued expenses and other liabilities (Tables)
6 Months Ended
Jun. 30, 2020
Other Liabilities Disclosure [Abstract]  
Components of Accrued Liabilities
The components of Accrued expenses and other liabilities are as follows: 
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Accrued product related costs
$
3,090

 
$
2,950

Accrued income taxes
6,921

 
7,903

Accrued property and other taxes
1,948

 
1,574

Accrued professional fees
903

 
1,599

Accrued customer related liabilities
3,673

 
4,391

Dividends payable
1,291

 
1,299

Remediation reserves
9,300

 
11,444

Derivative liabilities
2,220

 

Other accrued liabilities
3,829

 
5,218

Total accrued expenses and other liabilities
$
33,175

 
$
36,378


v3.20.2
Debt (Tables)
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Summary of Long-Term Debt
Long-term debt was comprised of the following:
 
As of
 
June 30,
 
December 31,
 
2020
 
2019
Total credit facility
$
300,000

 
$
300,000

Balance outstanding
141,300

 
99,700

Standby letters of credit
1,740

 
1,800

Amount available, subject to covenant restrictions
$
157,000

 
$
198,500

Weighted-average interest rate
2.17
%
 
3.25
%
Commitment fee percentage per annum
0.25
%
 
0.23
%

v3.20.2
Derivative Financial Instruments (Tables)
6 Months Ended
Jun. 30, 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 June 30, 2020, are shown in the following table:
 
As of

June 30,
 
December 31,
 
2020
 
2019
Interest rate swaps reported in Other current assets
$

 
$
82

Interest rate swaps reported in Accrued liabilities
$
(656
)
 
$

Interest rate swaps reported in Other long-term obligations
$
(1,959
)
 
$
(78
)
Foreign currency hedges reported in Other current assets
$

 
$
580

Foreign currency hedges reported in Accrued liabilities
$
(1,564
)
 
$


Derivative Instruments, Gain (Loss)
The effect of derivative instruments on the Condensed Consolidated Statements of Earnings is as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Foreign Exchange Contracts:
 
 
 
 
 
 
 
Amounts reclassified from AOCI to earnings:
 
 
 
 
 
 
 
Net sales
$
73

 
$

 
$
73

 
$

Cost of goods sold
(519
)
 
233

 
(271
)
 
276

Selling, general and administrative expense

 
23

 
(5
)
 
39

Total (loss) gain reclassified from AOCI to earnings
(446
)
 
256

 
(203
)
 
315

Gain recognized in other expense for hedge ineffectiveness
3

 

 
3

 

Total derivative (loss) gain on foreign exchange contracts recognized in earnings
$
(443
)
 
$
256

 
$
(200
)
 
$
315

 
 
 
 
 
 
 
 
Interest Rate Swaps:
 
 
 
 
 
 
 
(Expense) benefit recorded in Interest expense
$
(109
)
 
$
156

 
$
(71
)
 
$
313

Total (losses) gains on derivatives
$
(552
)
 
$
412

 
$
(271
)
 
$
628


v3.20.2
Accumulated Other Comprehensive (Loss) Income (Tables)
6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Schedule of Accumulated Other Comprehensive (Loss) Income
The components of accumulated other comprehensive (loss) income for the three months ended June 30, 2020, are as follows:

 
 
 
 
 
Loss
 
 
 
As of
 
Gain (Loss)
 
Reclassified
 
As of
 
March 31,
 
Recognized
 
from AOCI
 
June 30,

2020
 
in OCI
 
to Income
 
2020
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
(5,044
)
 
$
250

 
$
555

 
$
(4,239
)
Income tax benefit (expense)
1,139

 
(44
)
 
(117
)
 
978

Net
(3,905
)
 
206

 
438

 
(3,261
)


 

 

 

Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(122,480
)
 

 
1,574

 
(120,906
)
Income tax benefit (expense)
33,643

 

 
(365
)
 
33,278

Net
(88,837
)
 

 
1,209

 
(87,628
)



 

 


 


Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,252
)
 
(14
)
 

 
(2,266
)
Income tax benefit

 

 

 

Net
(2,252
)
 
(14
)
 

 
(2,266
)
Total accumulated other comprehensive (loss) income
$
(94,994
)
 
$
192

 
$
1,647

 
$
(93,155
)

The components of accumulated other comprehensive (loss) income for the three months ended June 30, 2019, are as follows:
 
 
 
 
 
(Gain) Loss
 
 
 
As of
 
Gain (Loss)
 
Reclassified
 
As of
 
March 31,
 
Recognized
 
from AOCI
 
June 30,

2019
 
in OCI
 
to Income
 
2019
Changes in fair market value of hedges:

 

 
 
 
 
Gross
$
1,416

 
$
32

 
$
(412
)
 
$
1,036

Income tax (expense) benefit
(320
)
 
(7
)
 
93

 
(234
)
Net
1,096

 
25

 
(319
)
 
802



 

 

 

Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(131,135
)
 

 
1,325

 
(129,810
)
Income tax benefit (expense)
35,596

 

 
(299
)
 
35,297

Net
(95,539
)
 

 
1,026

 
(94,513
)
 
 
 
 
 
 
 
 
Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,203
)
 
(84
)
 

 
(2,287
)
Income tax benefit (expense)
98

 
(3
)
 

 
95

Net
(2,105
)
 
(87
)
 

 
(2,192
)
Total accumulated other comprehensive (loss) income
$
(96,548
)
 
$
(62
)
 
$
707

 
$
(95,903
)


The components of accumulated other comprehensive (loss) income for the six months ended June 30, 2020, are as follows:

 
 
 
 
 
Loss
 
 
 
As of
 
Loss
 
Reclassified
 
As of
 
December 31,
 
Recognized
 
from AOCI
 
June 30,
 
2019
 
in OCI
 
to Income
 
2020
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
659

 
$
(5,172
)
 
274

 
$
(4,239
)
Income tax (expense) benefit
(150
)
 
1,181

 
(53
)
 
978

Net
509

 
(3,991
)
 
221

 
(3,261
)
 
 
 
 
 
 
 
 
Changes in unrealized pension cost:
 
 
 
 
 
 
 
Gross
(124,140
)
 

 
3,234

 
(120,906
)
Income tax benefit (expense)
34,018

 

 
(740
)
 
33,278

Net
(90,122
)
 

 
2,494

 
(87,628
)
 
 
 
 
 
 
 
 
Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,211
)

(55
)
 

 
(2,266
)
Income tax benefit (expense)
98


(98
)
 

 

Net
(2,113
)

(153
)
 

 
(2,266
)
Total accumulated other comprehensive (loss) income
$
(91,726
)

$
(4,144
)
 
$
2,715

 
$
(93,155
)










The components of accumulated other comprehensive (loss) income for the six months ended June 30, 2019, are as follows:
 
 
 
 
 
Loss
 
 
 
As of
 
Gain
 
Reclassified
 
As of
 
December 31,
 
Recognized
 
from AOCI
 
June 30,
 
2018
 
in OCI
 
to Income
 
2019
Changes in fair market value of hedges:
 
 
 
 
 
 
 
Gross
$
1,316

 
$
348

 
$
(628
)
 
$
1,036

Income tax (expense) benefit
(298
)
 
(78
)
 
142

 
(234
)
Net
1,018

 
270

 
486

 
802

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

 
2,644

 
(129,810
)
Income tax benefit (expense)
35,893

 

 
(596
)
 
35,297

Net
(96,561
)
 

 
2,048

 
(94,513
)
 
 
 
 
 
 
 
 
Cumulative translation adjustment:
 

 
 
 
 

 
 

Gross
(2,291
)
 
4

 

 
(2,287
)
Income tax benefit
95

 

 

 
95

Net
(2,196
)
 
4

 

 
(2,192
)
Total accumulated other comprehensive (loss) income
$
(97,739
)
 
$
274

 
$
1,562

 
$
(95,903
)

v3.20.2
Shareholders' Equity (Tables)
6 Months Ended
Jun. 30, 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
 
June 30,
 
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
57,066,930

 
56,929,298

Shares outstanding
32,267,307

 
32,472,406

Treasury stock
 
 
 
Shares held
24,799,623

 
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 six months ended June 30, 2020 and 2019, 342,731 and 179,966 shares of common stock were repurchased for $8,080 and $5,002, respectively. Approximately $5,740 is available for future purchases.
Summary of Common Shares Outstanding
A roll-forward of common shares outstanding is as follows:
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
Balance at the beginning of the year
32,472,406

 
32,750,727

Repurchases
(342,731
)
 
(179,966
)
Restricted share issuances
137,632

 
136,520

Balance at the end of the period
32,267,307

 
32,707,281

 
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 for the three months ended June 30, 2020 was 84,720. There were no anti-dilutive awards outstanding for the three months ended June 30, 2019. The number of outstanding awards that were anti-dilutive for the six months ended June 30, 2020 and June 30, 2019 were 61,780 and 108,894, respectively.
v3.20.2
Equity-Based Compensation (Tables)
6 Months Ended
Jun. 30, 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
 
Six Months Ended

June 30,

June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Service-based RSUs
$
779

 
$
488

 
$
1,359

 
$
1,094

Performance-based RSUs
19

 
1,038

 
(349
)
 
1,586

Cash-settled RSUs
19


53

 
35

 
113

Total
$
817

 
$
1,579

 
$
1,045

 
$
2,793

Income tax benefit
189

 
357

 
240

 
631

Net expense
$
628

 
$
1,222

 
$
805

 
$
2,162


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

June 30, 2020
 
Period
Service-based RSUs
$
2,860

 
1.53
Performance-based RSUs
2,968

 
2.12
Total
$
5,828

 
1.83

Summary of Status of Equity-Based Compensation Plans
The following table summarizes the status of these plans as of June 30, 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

 

 

 

 

Maximum potential RSU and cash settled awards outstanding
536,819

 
200,804

 
75,200

 
35,952

 
5,522

Maximum potential awards outstanding
536,819

 
200,804

 
75,200

 
35,952

 
5,522

RSUs and cash settled awards vested and released
35,637

 

 

 

 

Awards available for grant
1,927,544

 

 

 

 


Summary of Service-Based Restricted Stock Units
The following table summarizes the service-based RSU activity for the six months ended June 30, 2020
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
364,396

 
$
19.87

Granted
92,996

 
27.73

Vested and released
(90,595
)
 
22.71

Forfeited
(3,893
)
 
28.43

Outstanding at June 30, 2020
362,904

 
$
21.08

Releasable at June 30, 2020
185,974

 
$
14.63

 
Schedule of Components of Performance-Based RSU's
The following table summarizes the performance and market-based RSU activity for the six months ended June 30, 2020:
 
Units
 
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
217,229

 
$
27.73

Granted
120,521

 
28.65

Attained by performance
38,820

 
23.84

Released
(111,838
)
 
23.74

Forfeited
(11,884
)
 
25.69

Outstanding at June 30, 2020
252,848

 
$
29.31

Releasable at June 30, 2020

 
$



The following table summarizes each grant of performance awards outstanding at June 30, 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

Focus 2025 Performance RSUs
April 23, 2020
2024
Cumulative revenues of $750 million over a trailing four-quarter period
48,000

48,000

      Total



252,848

457,696




v3.20.2
Fair Value Measurement (Tables)
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Summary of Financial Liability Measured at Fair Value on a Recurring Basis
The table below summarizes our financial liabilities that were measured at fair value on a recurring basis at June 30, 2020:
 
 
 
Quoted
 
 
 
 
 

 
Prices
 
 
 
 
 
Liability
 
in Active
 
Significant
 
 
 
Carrying
 
Markets for
 
Other
 
Significant
 
Value at
 
Identical
 
Observable
 
Unobservable
 
June 30,
 
Instruments
 
Inputs
 
Inputs

2020
 
(Level 1)
 
(Level 2)
 
(Level 3)
Interest rate swaps
$
(2,615
)
 
$

 
$
(2,615
)
 
$

Foreign currency hedges
$
(1,564
)
 
$

 
$
(1,564
)
 
$

 
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
 
Six Months Ended
 
June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Foreign Exchange Contracts:
 
 
 
 
 
 
 
Amounts reclassified from AOCI to earnings:
 
 
 
 
 
 
 
Net sales
$
73

 
$

 
$
73

 
$

Cost of goods sold
(519
)
 
233

 
(271
)
 
276

Selling, general and administrative expense

 
23

 
(5
)
 
39

Total (loss) gain reclassified from AOCI to earnings
(446
)
 
256

 
(203
)
 
315

Gain recognized in other expense for hedge ineffectiveness
3

 

 
3

 

Total derivative (loss) gain on foreign exchange contracts recognized in earnings
$
(443
)
 
$
256

 
$
(200
)
 
$
315

 
 
 
 
 
 
 
 
Interest Rate Swaps:
 
 
 
 
 
 
 
(Expense) benefit recorded in Interest expense
$
(109
)
 
$
156

 
$
(71
)
 
$
313

Total (losses) gains on derivatives
$
(552
)
 
$
412

 
$
(271
)
 
$
628


v3.20.2
Leases Operating Cost (Tables)
6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Lease, Cost [Table Text Block] lease expense for the three and six months ended June 30, 2020 were as follows:


Three Months Ended
 
Six Months Ended

June 30,
 
June 30,
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Operating lease cost
$
1,190

 
$
1,075

 
$
2,389

 
$
2,069

Short-term lease cost
170

 
176

 
337

 
249

Total lease cost
$
1,360

 
$
1,251

 
$
2,726

 
$
2,318


v3.20.2
Leases Future Lease Schedule (Tables)
6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]
Remaining maturity of our existing lease liabilities as of June 30, 2020 is as follows:
 
Operating Leases(1)
2020
$
2,344

2021
4,686

2022
4,547

2023
4,185

2024
4,075

Thereafter
16,950

Total
$
36,787

Less: interest
(9,263
)
Present value of lease liabilities
$
27,524

(1) Operating lease payments include $3,822 of payments related to options to extend lease terms that are reasonably expected to be exercised.
v3.20.2
Business Acquisitions (Tables)
6 Months Ended
Jun. 30, 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


v3.20.2
Revenue Recognition Disaggregated Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Disaggregation of Revenue [Line Items]        
Revenues $ 84,197 $ 120,684 $ 187,272 $ 238,308
Aerospace and Defense [Member]        
Disaggregation of Revenue [Line Items]        
Revenues 38,129 80,343 99,663 159,184
Industrial [Member]        
Disaggregation of Revenue [Line Items]        
Revenues 20,213 19,500 41,056 37,656
Medical [Member]        
Disaggregation of Revenue [Line Items]        
Revenues 13,038 8,973 22,408 18,639
Telecommunications & IT [Member]        
Disaggregation of Revenue [Line Items]        
Revenues 9,373 6,988 18,378 14,511
Transportation [Member]        
Disaggregation of Revenue [Line Items]        
Revenues $ 3,444 $ 4,880 $ 5,767 $ 8,318
v3.20.2
Accounts Receivable - Components of Accounts Receivable (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Accounts Receivable    
Accounts receivable, gross $ 60,425 $ 78,269
Less: Allowance for credit losses (627) (261)
Accounts receivable, net $ 59,798 $ 78,008
v3.20.2
Inventories - Summary of Inventories (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Inventories    
Finished goods $ 8,937 $ 9,447
Work-in-process 15,754 14,954
Raw materials 24,943 23,363
Less: Inventory reserves (5,368) (5,527)
Inventories, net $ 44,266 $ 42,237
v3.20.2
Property, Plant and Equipment - Summary of Property, Plant and Equipment (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Property, plant and equipment      
Less: Accumulated depreciation $ (196,635)   $ (188,719)
Property, plant and equipment, net 99,349   105,038
Depreciation 8,580 $ 8,537  
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 68,424   68,350
Machinery and equipment      
Property, plant and equipment      
Property, plant and equipment gross $ 226,465   $ 224,312
v3.20.2
Retirement Plans - Net Pension Income (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Pension Plans        
Defined Benefit Plan Disclosure        
Net pension expense $ 666 $ 249 $ 1,330 $ 499
v3.20.2
Retirement Plans - Net Pension Income Domestic and Foreign (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Pension Plans        
Net pension expense (income)        
Total expense, net $ 666 $ 249 $ 1,330 $ 499
UNITED STATES        
Net pension expense (income)        
Service cost 0 0 0 0
Interest cost 1,443 1,931 2,886 3,862
Defined Benefit Plan, Expected Return (Loss) on Plan Assets (2,454) (3,047) (4,908) (6,094)
Amortization of loss 1,622 1,311 3,244 2,623
Total expense, net 611 195 1,222 391
Foreign Plan [Member]        
Net pension expense (income)        
Service cost 8 9 15 18
Interest cost 6 7 13 15
Defined Benefit Plan, Expected Return (Loss) on Plan Assets (3) (4) (7) (9)
Amortization of loss 44 42 87 84
Total expense, net $ 55 $ 54 $ 108 $ 108
v3.20.2
Retirement Plans - Other Postretirement Benefit Plan (Details) - Other Postretirement Benefits Plan [Member] - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Defined Benefit Plan Disclosure        
Service cost $ 0 $ 1 $ 0 $ 1
Interest cost 30 43 60 85
Amortization of gain (21) (42) (42) (83)
Total expense, net $ 9 $ 2 $ 18 $ 3
v3.20.2
Other Intangible Assets - Summary of Intangible Assets (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Other Intangible Assets          
Gross Carrying Amount $ 142,319   $ 142,319   $ 142,319
Accumulated Amortization (61,697)   (61,697)   (57,104)
Total amortization expense 80,622   80,622   85,215
Amortization expense 2,268 $ 1,692 4,563 $ 3,382  
Customer lists/relationships          
Other Intangible Assets          
Gross Carrying Amount 92,194   92,194   92,194
Accumulated Amortization (41,370)   (41,370)   (38,682)
Total amortization expense 50,824   50,824   53,512
Technology and other intangibles          
Other Intangible Assets          
Gross Carrying Amount 47,925   47,925   47,925
Accumulated Amortization (20,327)   (20,327)   (18,422)
Total amortization expense 27,598   27,598   29,503
In process research and development          
Other Intangible Assets          
Gross Carrying Amount         2,200
Total amortization expense 2,200   2,200   $ 2,200
Indefinite-lived Intangible Assets (Excluding Goodwill) $ 2,200   $ 2,200    
v3.20.2
Other Intangible Assets - Summary of Amortization Expense (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule    
2020 $ 4,459  
2021 8,893  
2022 8,657  
2023 6,651  
2024 6,489  
Thereafter 45,473  
Total amortization expense $ 80,622 $ 85,215
v3.20.2
Costs Associated with Exit and Restructuring Activities - Summary (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Restructuring Cost and Reserve [Line Items]        
Document Period End Date     Jun. 30, 2020  
Total restructuring, impairment and restructuring related charges        
Restructuring charges $ 135 $ 911 $ 375 $ 2,995
April 2014 Plan and June 2016 Plan [Member]        
Total restructuring, impairment and restructuring related charges        
Restructuring charges     375  
Operating Earnings | April 2014 Plan and June 2016 Plan [Member]        
Total restructuring, impairment and restructuring related charges        
Restructuring charges $ 135 $ 911 $ 375 $ 2,995
v3.20.2
Costs Associated with Exit and Restructuring Activities Costs Associated with Exit and Restructuring Activities - June 2016 Plan (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Jun. 03, 2016
Total restructuring, impairment and restructuring related charges            
Restructuring charges $ 135,000 $ 911,000 $ 375,000 $ 2,995,000    
Document Period End Date     Jun. 30, 2020      
June 2016 Plan            
Restructuring Cost and Reserve [Line Items]            
Actual costs incurred 10,530,000   $ 10,530,000      
Total restructuring, impairment and restructuring related charges            
Restructuring charges 0 $ 911,000 32,000 $ 2,995    
Restructuring Reserve 48,000   48,000   $ 233,000  
June 2016 Plan | Operating Earnings            
Restructuring Cost and Reserve [Line Items]            
Planned Costs           $ 13,400,000
Actual costs incurred 15,998,000   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   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   $ 3,312,000      
v3.20.2
Costs Associated with Exit and Restructuring Activities - April 2014 Plan (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 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 are as follows:
 
Three Months Ended
 
June 30, 2020
 
June 30, 2019
Restructuring charges
$
135

 
$
911

 

 
Six Months Ended
 
June 30, 2020
 
June 30, 2019
Restructuring charges
$
375

 
$
2,995

 

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 $0 and $911 during the three months ended June 30, 2020 and June 30, 2019, respectively. Restructuring charges under this plan were $(32) and $2,995 during the six months ended June 30, 2020 and June 30, 2019, respectively. The total restructuring liability related to the June 2016 Plan was $48 at June 30, 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 June 30, 2020:

 
 
Actual costs
 
Planned
 
incurred through
June 2016 Plan
Costs
 
June 30, 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 and six months ended June 30, 2019. There were no restructuring charges incurred under this plan during the three or six months ended June 30, 2020. The total restructuring liability related to the April 2014 Plan was $672 at June 30, 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 and six months ended June 30, 2020, we incurred restructuring charges of $135 and $407, respectively, primarily relating to workforce reduction actions taken during the quarter. There were no such charges incurred during the three and six months ended June 30, 2019. The total remaining restructuring liability associated with these actions was $183 at June 30, 2020 and $1,057 at December 31, 2019.
The following table displays the restructuring liability activity included in Accrued expenses and other liabilities for all plans for the six months ended June 30, 2020
Restructuring liability at January 1, 2020
$
1,993

Restructuring charges
375

Cost paid
(1,039
)
Other activity(1)
(426
)
Restructuring liability at June 30, 2020
$
903

(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 $ (135,000) $ (911,000) $ (375,000) $ (2,995,000)  
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 and six months ended June 30, 2019. There were no restructuring charges incurred under this plan during the three or six months ended June 30, 2020. The total restructuring liability related to the April 2014 Plan was $672 at June 30, 2020, and $703 at December 31, 2019
   
Restructuring Reserve $ 672,000   $ 672,000   $ 703,000
Total restructuring, impairment and restructuring related charges          
Restructuring charges       $ (248,000)  
v3.20.2
Costs Associated with Exit and Restructuring Activities - Restructuring Reserve Activity (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Restructuring reserve activity        
Restructuring charges $ 135 $ 911 $ 375 $ 2,995
April 2014 Plan and June 2016 Plan [Member]        
Restructuring reserve activity        
Restructuring liability at beginning     1,993  
Restructuring charges     375  
Cost paid     (1,039)  
Restructuring liability at ending $ 903   903  
Restructuring Reserve, Translation and Other Adjustment     $ (426)  
v3.20.2
Costs Associated with Exit and Restructuring Activities Other Restructuring Activities (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Restructuring Cost and Reserve [Line Items]          
Restructuring Charges $ (135) $ (911) $ (375) $ (2,995)  
Document Period End Date     Jun. 30, 2020    
Other Restructuring Activities [Member]          
Restructuring Cost and Reserve [Line Items]          
Restructuring Charges (135)   $ (407)    
Restructuring Reserve $ 183   $ 183   $ 1,057
v3.20.2
Accrued Liabilities - Components of Accrued Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Dec. 31, 2018
Accrued Liabilities      
Accrued product related costs $ 3,090 $ 2,950  
Accrued income taxes 6,921 7,903  
Accrued property and other taxes 1,948 1,574  
Accrued professional fees 903 1,599  
Contract with Customer, Liability 3,673 4,391  
Dividends payable 1,291 1,299  
Remediation reserves 9,300 11,444 $ 11,274
Derivative Liability 2,220 0  
Other accrued liabilities 3,829 5,218  
Total accrued expenses and other liabilities $ 33,175 $ 36,378  
v3.20.2
Contingencies Remediation Liability (Details) - USD ($)
$ in Thousands
6 Months Ended 12 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Dec. 31, 2018
Loss Contingencies [Line Items]      
Accrued Environmental Loss Contingencies, Current $ 9,300 $ 11,444 $ 11,274
Accrual for Environmental Loss Contingencies, Charges to Expense for New Losses 791 2,602  
Accrual for Environmental Loss Contingencies Payments, Net of Reimbursements (2,956) (2,455)  
Accrual for Environmental Loss Contingencies, Foreign Currency Translation Gain (Loss) $ 21 $ 23  
v3.20.2
Debt - Long-Term Debt (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Feb. 12, 2019
May 23, 2016
Long-term debt              
Total credit facility $ 300,000   $ 300,000        
Amount available 157,000   157,000   $ 198,500    
Long-term Line of Credit, Noncurrent 141,300   141,300   99,700    
Letters of Credit Outstanding, Amount 1,740   1,740   1,800    
Amortization of Debt Issuance Costs 42 $ 41 84 $ 77      
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 $ 141,300   $ 141,300        
Weighted-average interest rate 2.17%   2.17%   3.25%    
Commitment fee percentage per annum     0.25%   0.23%    
Line of Credit | Revolving Credit Facility [Member]              
Long-term debt              
Long-term Line of Credit, Noncurrent         $ 99,700    
v3.20.2
Debt - Narratives (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Feb. 12, 2019
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
May 23, 2016
Line of Credit Facility              
Line of credit maximum borrowing amount   $ 300,000   $ 300,000      
Debt amortization expense   42 $ 41 84 $ 77    
Long-term Line of Credit, Noncurrent   141,300   $ 141,300   $ 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       0.25%   0.23%  
Long-term Line of Credit, Noncurrent   $ 141,300   $ 141,300      
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%            
v3.20.2
Derivative Financial Instruments - Narratives (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Derivative      
Unrealized Gain (Loss) on Foreign Currency Derivatives, Net, before Tax $ 1,247 $ 784  
Derivative Liability 2,220   $ 0
Foreign currency derivatives      
Derivative      
Derivative Asset 57    
Derivative Liability 1,621    
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 1,037    
Derivative, notional amount 24,434    
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 $ 505    
v3.20.2
Derivative Financial Instruments - Fair Value of Derivative Instruments (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Derivative Liability    
Derivative Liability $ 2,220 $ 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 (1,959) (78)
Cash Flow Hedging [Member] | Other Current Liabilities [Member] | Interest rate swap    
Derivative Liability    
Derivative Liability (656) 0
Foreign currency hedges | Other Current Liabilities [Member] | Cash Flow Hedging [Member]    
Derivative Liability    
Derivative Liability (1,564) 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 $ 1,037  
v3.20.2
Derivative Financial Instruments - Income Statement (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Derivative, Gain (Loss) on Derivative, Net        
Derivative, Gain (Loss) on Derivative, Net $ (552) $ 412 $ (271) $ 628
Foreign currency derivatives | Designated As Hedging        
Derivative Instruments, Gain (Loss) [Line Items]        
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net (446) 256 (203) 315
Derivative, Gain (Loss) on Derivative, Net        
Derivative, Gain (Loss) on Derivative, Net (443) 256 (200) 315
Foreign currency derivatives | Foreign currency derivatives | Designated As Hedging        
Derivative Instruments, Gain (Loss) [Line Items]        
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net 73 0    
Derivative, Gain (Loss) on Derivative, Net        
Derivative, Gain (Loss) on Derivative, Net     73 0
Foreign currency derivatives | 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 (519) 233    
Derivative, Gain (Loss) on Derivative, Net        
Derivative, Gain (Loss) on Derivative, Net     (271) 276
Foreign currency derivatives | 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 0 23    
Derivative, Gain (Loss) on Derivative, Net        
Derivative, Gain (Loss) on Derivative, Net     (5) 39
Foreign currency derivatives | Other income and expenses | Designated As Hedging        
Derivative, Gain (Loss) on Derivative, Net        
Derivative, Gain (Loss) on Derivative, Net     3 0
Derivative, Net Hedge Ineffectiveness Gain (Loss) 3 0    
Interest rate swap | Interest expense | Designated As Hedging        
Derivative, Gain (Loss) on Derivative, Net        
Derivative, Gain (Loss) on Derivative, Net $ (109) $ 156 $ (71) $ 313
v3.20.2
Accumulated Other Comprehensive (Loss) Income - Summary of Components of Other Comprehensive Loss (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Dec. 31, 2018
Foreign currency transaction loss                
Foreign currency transaction gain (loss) $ 892 $ 829 $ (379) $ 355        
AOCI Attributable to Parent, Net of Tax                
Total accumulated other comprehensive (loss) income, end of period (93,155)   (93,155)     $ (91,726)    
Accumulated Other Comprehensive Earnings/(Loss)                
AOCI Attributable to Parent, Net of Tax                
Gain (Loss) recognized in OCI, Net 192 (62) (4,144) 274        
Gain (Loss) reclassified from AOCI to income, Net 1,647 707 2,715 1,562        
Total accumulated other comprehensive (loss) income, end of period (93,155) (95,903) (93,155) (95,903) $ (94,994) (91,726) $ (96,548) $ (97,739)
Changes in fair market value of hedges                
Changes in AOCI, Gross                
Gross, beginning of the period (5,044) 1,416 659 1,316        
Other Comprehensive Income (Loss), before Reclassifications, before Tax 250 32 (5,172) 348        
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax 555 (412) 274 (628)        
Gross, ending balance (4,239) 1,036 (4,239) 1,036        
Changes in AOCI, Income tax (benefit)                
Income tax (benefit), beginning of period 1,139 (320) (150) (298)        
Income tax (benefit), Gain (Loss) recognized in OCI (44) (7) 1,181 (78)        
Income tax (benefit), Gain (Loss) reclassified from AOCI to income (117) 93 (53) 142        
Income tax (benefit), ending of period 978 (234) 978 (234)        
AOCI Attributable to Parent, Net of Tax                
Gain (Loss) recognized in OCI, Net 206 25 (3,991) 270        
Gain (Loss) reclassified from AOCI to income, Net 438 (319) 221 486        
Total accumulated other comprehensive (loss) income, end of period (3,261) 802 (3,261) 802 (3,905) 509 1,096 1,018
Changes in unrealized pension cost                
Changes in AOCI, Gross                
Gross, beginning of the period (122,480) (131,135) (124,140) (132,454)        
Other Comprehensive Income (Loss), before Reclassifications, before Tax 0 0 0 0        
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax 1,574 1,325 3,234 2,644        
Gross, ending balance (120,906) (129,810) (120,906) (129,810)        
Changes in AOCI, Income tax (benefit)                
Income tax (benefit), beginning of period 33,643 35,596 34,018 35,893        
Income tax (benefit), Gain (Loss) recognized in OCI 0 0 0 0        
Income tax (benefit), Gain (Loss) reclassified from AOCI to income (365) (299) (740) (596)        
Income tax (benefit), ending of period 33,278 35,297 33,278 35,297        
AOCI Attributable to Parent, Net of Tax                
Gain (Loss) recognized in OCI, Net 0 0 0 0        
Gain (Loss) reclassified from AOCI to income, Net 1,209 1,026 2,494 2,048        
Total accumulated other comprehensive (loss) income, end of period (87,628) (94,513) (87,628) (94,513) (88,837) (90,122) (95,539) (96,561)
Cumulative translation adjustment                
Changes in AOCI, Gross                
Gross, beginning of the period (2,252) (2,203) (2,211) (2,291)        
Other Comprehensive Income (Loss), before Reclassifications, before Tax (14) (84) (55) 4        
Reclassification from Accumulated Other Comprehensive Income, Current Period, before Tax 0 0 0 0        
Gross, ending balance (2,266) (2,287) (2,266) (2,287)        
Changes in AOCI, Income tax (benefit)                
Income tax (benefit), beginning of period 0 98 98 95        
Income tax (benefit), Gain (Loss) recognized in OCI 0 (3) (98) 0        
Income tax (benefit), Gain (Loss) reclassified from AOCI to income 0 0 0 0        
Income tax (benefit), ending of period 0 95 0 95        
AOCI Attributable to Parent, Net of Tax                
Gain (Loss) recognized in OCI, Net (14) (87) (153) 4        
Gain (Loss) reclassified from AOCI to income, Net 0 0 0 0        
Total accumulated other comprehensive (loss) income, end of period $ (2,266) $ (2,192) $ (2,266) $ (2,192) $ (2,252) $ (2,113) $ (2,105) $ (2,196)
v3.20.2
Shareholders' Equity - Summary of Share Count and Par Value Data Related to Shareholders' Equity (Details) - shares
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Dec. 31, 2018
Preferred Stock          
Preferred stock, shares authorized 25,000,000 25,000,000   25,000,000  
Preferred stock, shares outstanding 0 0   0  
Common Stock          
Common stock, shares authorized 75,000,000 75,000,000   75,000,000  
Common stock, shares issued 57,066,930 57,066,930   56,929,298  
Common stock, shares outstanding 32,267,307 32,267,307 32,707,281 32,472,406 32,750,727
Treasury stock          
Treasury stock, shares held 24,799,623 24,799,623   24,456,892  
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount 84,720 61,780 108,894    
v3.20.2
Shareholders' Equity - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2020
Jun. 30, 2019
Feb. 07, 2019
Stockholders' Equity Note [Abstract]        
Treasury Shares Authorized to be Purchased       $ 25,000
Common stock repurchased, shares   342,731 179,966  
Common stock repurchased, value   $ 8,080 $ 5,002  
Shares are available for future issuances $ 5,740 $ 5,740    
Antidilutive securities excluded from computation of earnings per share (shares) 84,720 61,780 108,894  
v3.20.2
Shareholders' Equity - Summary of Common Shares Outstanding (Details) - shares
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Roll forward of common shares outstanding    
Balance at the beginning of the year 32,472,406 32,750,727
Restricted share issuances 137,632 136,520
Balance at the end of the period 32,267,307 32,707,281
v3.20.2
Equity-Based Compensation - Summary of Equity-Based Compensation Expense (Details)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
USD ($)
plan
$ / shares
shares
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
plan
$ / shares
shares
Jun. 30, 2019
USD ($)
Dec. 31, 2019
$ / shares
shares
Share-based Compensation          
Number of Equity-Based Compensation Plans | plan 5   5    
Restricted stock units     $ (1,045) $ (2,793)  
Share-based Payment Arrangement, Expense, after Tax $ 628 $ 1,222 805 2,162  
Service-Based RSUs          
Share-based Compensation          
Restricted stock units (779) (488) (1,359) (1,094)  
Performance-Based RSUs          
Share-based Compensation          
Restricted stock units $ (19) (1,038) $ (349) (1,586)  
Cash Settled Awards          
Share-based Compensation          
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number | shares 33,697   33,697   17,271
Restricted stock units $ (19)   $ (35) (113)  
Restricted Stock Expense (Benefit)   53      
RSUs          
Share-based Compensation          
Restricted stock units (817) (1,579) (1,045) (2,793)  
Income tax benefit $ 189 $ 357 $ 240 $ 631  
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     3,893    
Releasable - weighted average fair value | $ / shares $ 14.63   $ 14.63    
Granted - shares | shares     92,996    
Forfeited - weighted average fair value | $ / shares     $ 28.43    
Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Released Number | shares     90,595    
Granted - weighted average fair value | $ / shares     $ 27.73    
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value | $ / shares $ 21.08   21.08   $ 19.87
Converted - weighted average fair value | $ / shares     $ 22.71    
Releasable - shares | shares 185,974   185,974    
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number | shares 362,904   362,904   364,396
v3.20.2
Equity-Based Compensation - Summary of Equity-Based Compensation Expense related to Non-Vested RSUs (Details)
$ in Thousands
6 Months Ended
Jun. 30, 2020
USD ($)
Service-Based RSUs  
Share-based Compensation  
Unrecognized compensation cost $ 2,860
Weighted average period 1 year 6 months 10 days
Performance-Based RSUs  
Share-based Compensation  
Unrecognized compensation cost $ 2,968
Weighted average period 2 years 1 month 13 days
RSUs  
Share-based Compensation  
Unrecognized compensation cost $ 5,828
Weighted average period 1 year 9 months 29 days
v3.20.2
Equity-Based Compensation - Summary of Status of Equity-Based Compensation Plans (Details) - USD ($)
$ / shares in Units, $ in Thousands
6 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Summary of Status of Equity-Based Compensation Plans    
Other accrued liabilities $ 3,829 $ 5,218
2018 Plan    
Summary of Status of Equity-Based Compensation Plans    
Awards originally available 2,500,000  
Shares outstanding 536,819  
Stock options outstanding 536,819  
Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Released Number 35,637  
Awards available for grant 1,927,544  
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 200,804  
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 75,200  
RSUs | 2014 Plan    
Summary of Status of Equity-Based Compensation Plans    
Shares outstanding 200,804  
RSUs | 2009 Plan    
Summary of Status of Equity-Based Compensation Plans    
Shares outstanding 75,200  
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  
Stock options outstanding 0  
Cash Settled Awards    
Summary of Status of Equity-Based Compensation Plans    
Other accrued liabilities $ 154 $ 353
Officers, key employees, and non-employee directors | Service-Based RSUs    
Share-based Compensation    
Releasable - weighted average fair value $ 14.63  
v3.20.2
Equity-Based Compensation - Performance-Based Stock Options (Details)
6 Months Ended
Jun. 30, 2020
$ / shares
shares
Performance and Market-based Restricted Stock Units  
Share-based Compensation  
Attained by performance - weighted average fair value | $ / shares $ 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
v3.20.2
Equity-Based Compensation - Summary of Service-Based Restricted Stock Units (Details) - Officers, key employees, and non-employee directors - Service-Based RSUs
6 Months Ended
Jun. 30, 2020
$ / shares
shares
Units  
Outstanding at beginning of year - shares | shares 364,396
Granted - shares | shares 92,996
Released - shares | shares (90,595)
Forfeited - shares | shares (3,893)
Outstanding at end of year - shares | shares 362,904
Releasable - shares | shares 185,974
Weighted Average Grant Date Fair Value  
Beginning of year - weighted average fair value | $ / shares $ 19.87
Granted - weighted average fair value | $ / shares 27.73
Converted - weighted average fair value | $ / shares 22.71
Forfeited - weighted average fair value | $ / shares 28.43
End of year - weighted average fair value | $ / shares 21.08
Releasable - weighted average fair value | $ / shares $ 14.63
v3.20.2
Equity-Based Compensation - Schedule of Performance-Based RSUs (Details) - shares
Jun. 30, 2020
Apr. 23, 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 252,848 48,000 72,521 1,750 6,945    
Shared Based Compensation Maximum Potential Awards 457,696 48,000 145,042 3,500 13,890    
v3.20.2
Equity-Based Compensation Equity-Based Compensation - Performance and Market Based RSUs (Details) - $ / shares
6 Months Ended
Jun. 30, 2020
Apr. 23, 2020
Feb. 06, 2020
Sep. 04, 2019
Feb. 07, 2019
Performance Goal [Member]          
Units          
Target Units Outstanding 252,848 48,000 72,521 1,750 6,945
Shared Based Compensation Maximum Potential Awards 457,696 48,000 145,042 3,500 13,890
Performance and Market-based Restricted Stock Units          
Units          
Outstanding at beginning of year - shares 217,229        
Granted - shares 120,521        
Attained by performance - shares 38,820        
Vested and released - shares (111,838)        
Forfeited - shares (11,884)        
Outstanding at end of year - shares 252,848        
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 28.65        
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 29.31        
Maximum potential units outstanding at June 30, 2016 - weighted average fair value $ 0        
v3.20.2
Fair Value Measurements - Summary of Financial Liability Measured at Fair Value on a Recurring Basis (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Recurring financial liability that was measured at carrying value    
Derivative liability $ (2,220) $ 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 2,615 (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 (1,564)  
Recurring | Carrying Value | Interest rate swap | Designated As Hedging | Cash Flow Hedge    
Recurring financial liability that was measured at carrying value    
Derivative liability 2,615 (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 $ (1,564)  
v3.20.2
Fair Value Measurements - Reconciliation of Recurring Financial Liability Related to Interest Rate Swaps (Details)
$ in Thousands
Jun. 30, 2020
USD ($)
Reconciliation of the recurring financial derivatives  
Beginning balance, derivative liability $ 0
Total gains/(losses) for the period:  
Ending balance, derivative liability $ (2,220)
v3.20.2
Income Taxes - Schedule of Effective Income Tax Rate (Details)
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Income Tax Disclosure [Abstract]        
Effective income tax rate 17.60% 25.10% 27.10% 22.70%
v3.20.2
Leases Lease Cost (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Leases [Abstract]        
Operating Lease, Expense $ 1,190 $ 1,075 $ 2,389 $ 2,069
Short-term Lease Payments 170 176 337 249
Operating Leases, Rent Expense, Net $ 1,360 $ 1,251 $ 2,726 $ 2,318
v3.20.2
Leases Schedule of Future Minimum Rental Payments for Operating Leases (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Leases [Abstract]    
2020 $ 2,344  
2021 4,686  
2022 4,547  
2023 4,185  
2024 4,075  
Thereafter 16,950  
Total 36,787  
Less: Interest (9,263)  
Present value of lease liabilities $ 27,524 $ 27,713
v3.20.2
Leases Operating Lease Disclosure (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Leases [Abstract]      
Operating Lease, Weighted Average Remaining Lease Term 8 years 5 months 4 days   9 years 14 days
Operating lease obligations $ 3,051   $ 2,787
Long-term operating lease obligations 24,473   24,926
Operating Lease, Liability $ 27,524   $ 27,713
Operating Lease, Weighted Average Discount Rate, Percent 6.46%   6.54%
Operating Lease, Payments, Use $ 2,299 $ 1,862  
v3.20.2
Leases Supplemental Cashflow Information (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Supplemental Cash Flow Information [Abstract]    
Operating Lease, Payments, Use $ 2,299 $ 1,862
Lessee, Operating Lease Payment on Extension Option $ 1,179 $ 2,961
v3.20.2
Business Acquisition (Details) - USD ($)
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2020
Jun. 30, 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 6,221,000  
Property, plant and equipment 2,567,000 2,567,000  
Other assets 29,000 29,000  
Business Acquisition, Goodwill, Expected Tax Deductible Amount 34,999,000 34,999,000  
Business Acquisitions, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill 32,800,000 32,800,000  
Fair Value of Assets Acquired   76,616,000  
Business Acquisitions, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities (2,710,000) $ (2,710,000)  
Net cash paid $ 73,906,000   $ 73,906,000
v3.20.2
Business Acquisitions Schedule of Finite Lived Intangibles Acquired (Details)
$ in Thousands
6 Months Ended
Jun. 30, 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
v3.20.2
Business Acquisitions Schedule of intangible assets acquired (Details) - USD ($)
3 Months Ended 12 Months Ended
Jun. 30, 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