-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G94nI9J5LxVX4AgmIdlT40hpDaDOjEfktDqPQboSoqdCP4n7dFIK14dyGnBrZvBK ncCwQGbz9/pOVP63NoUAFA== 0000026058-03-000034.txt : 20031029 0000026058-03-000034.hdr.sgml : 20031029 20031029091641 ACCESSION NUMBER: 0000026058-03-000034 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030928 FILED AS OF DATE: 20031029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CTS CORP CENTRAL INDEX KEY: 0000026058 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 350225010 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04639 FILM NUMBER: 03962287 BUSINESS ADDRESS: STREET 1: 905 WEST BOULEVARD NORTH CITY: ELKHART STATE: IN ZIP: 46514 BUSINESS PHONE: 5742937511 MAIL ADDRESS: STREET 1: 905 W BLVD NORTH CITY: ELKHART STATE: IN ZIP: 46514 10-Q 1 form10q-3qtr2003.htm 3RD QUARTER 2003 Form 10-Q 2003 Third Quarter

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
X   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
       For the Quarterly Period Ended September 28, 2003
       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)

	Indiana		35-0225010
	(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

	905 West Boulevard North, Elkhart, IN		46514
	(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 574-293-7511

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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes X No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of October 22, 2003: 35,836,060

CTS CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

			Page

PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements	1

	Condensed Consolidated Statements of Earnings (Loss)
	- For the Three Months and Nine Months Ended September 28, 2003 and September 29, 2002		1

	Condensed Consolidated Balance Sheets
	- As of September 28, 2003, and December 31, 2002		2

	Condensed Consolidated Statements of Cash Flows
	- For the Nine Months Ended September 28, 2003 and September 29, 2002		3

	Condensed Consolidated Statements of Comprehensive Earnings (Loss)
	- For the Three Months and Nine Months Ended September 28, 2003 and September 29, 2002		4

	Notes to Condensed Consolidated Interim Financial Statements		5

	Item 2.	Management's Discussion and Analysis of
		Financial Condition and Results of Operations	13

	Item 3.	Quantitative and Qualitative Disclosure about Market Risk	21

	Item 4.	Controls and Procedures	21

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	21

	Item 6.	Exhibits and Reports on Form 8-K	22

SIGNATURES			23

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) - UNAUDITED
(In thousands, except per share amounts)


			Three Months Ended						Nine Months Ended

			September 28, 2003			September 29, 2002			September 28, 2003			September 29, 2002

Net sales			$	108,496		$	110,944		$	330,962		$	341,262
Costs and expenses:
	Cost of goods sold			84,841			87,059			261,704			273,590
	Selling, general and administrative expenses			14,694			16,651			42,165			48,531
	Research and development expenses			5,052			5,390			16,083			18,544
	Restructuring and impairment charges — Note D			4,563			18,343			4,563			18,343

		Operating earnings (loss)		(654	)		(16,499	)		6,447			(17,746	)
Other (expense) income:
	Interest expense			(2,139	)		(2,192	)		(6,010	)		(7,744	)
	Interest income			75			113			225			281
	Other			298			150			323			682

		Total other expense		(1,766	)		(1,929	)		(5,462	)		(6,781	)

		Earnings (loss) before income taxes		(2,420	)		(18,428	)		985			(24,527	)
		Income tax benefit — Note H		(8,494	)		(4,607	)		(7,643	)		(6,132	)

		Net earnings (loss)	$	6,074		$	(13,821	)	$	8,628		$	(18,395	)

Net earnings (loss) per share — Note K
Basic			$	0.17		$	(0.41	)	$	0.25		$	(0.56	)

Diluted			$	0.17		$	(0.41	)	$	0.25		$	(0.56	)

Cash dividends declared per share			$	0.03		$	0.03		$	0.09		$	0.09

Average common shares outstanding:
	Basic			34,799			33,606			34,351			32,907
	Diluted			35,352			33,606			34,729			32,907

See notes to condensed consolidated financial statements.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 1. Financial Statements (Continued)

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


			September 28, 2003			December 31, 2002*

			(UNAUDITED)
ASSETS
Current Assets
	Cash		$	19,646		$	9,225
	Accounts receivable, less allowances (2003 -- $1,943; 2002 -- $1,694)			62,812			63,802
	Inventories — Note C			37,434			36,262
	Other current assets			8,533			7,212
	Deferred income taxes			36,027			35,833

		Total current assets		164,452			152,334
Property, plant and equipment,
less accumulated depreciation (2003 -- $255,837; 2002 -- $251,430)				127,350			148,632
Other Assets
	Prepaid pension asset			129,482			120,277
	Intangible assets			38,040			39,923
	Assets held for sale — Note E			17,768			23,135
	Other			5,881			5,731

		Total other assets		191,171			189,066

Total Assets			$	482,973		$	490,032

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
	Current maturities of long-term debt — Note G		$	—		$	28,350
	Accounts payable			47,342			44,490
	Accrued liabilities			35,658			38,199
	Income taxes payable — Note H			10,037			23,517

		Total current liabilities		93,037			134,556
Long-term debt — Note G				81,000			67,000
Other long-term obligations				12,038			11,501
Deferred income taxes				11,346			11,955
Shareholders’ Equity
	Preferred stock — authorized 25,000,000 shares without par value; none issued			—			—
	Common stock — authorized 75,000,000 shares without par value;
	52,178,730 shares issued at September 28, 2003 and
	50,718,883 shares issued at December 31, 2002			255,910			241,393
	Additional contributed capital			23,248			23,514
	Retained earnings			260,595			255,085
	Accumulated other comprehensive loss			(543	)		(835	)

				539,210			519,157
Cost of common stock held in treasury
(2003 -- 16,565,558 shares; 2002 --16,618,373 shares)				(253,658	)		(254,137	)

		Total shareholders’ equity		285,552			265,020

Total Liabilities and Shareholders' Equity			$	482,973		$	490,032

*The balance sheet at December 31, 2002, has been derived from the audited financial statements at that date. See notes to condensed consolidated financial statements.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 1. Financial Statements (Continued)

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands of dollars)


		Nine Months Ended

		September 28, 2003			September 29, 2002

Cash flows from operating activities:
	Net earnings (loss)	$	8,628		$	(18,395	)
	Adjustments to reconcile net earnings (loss)
	to net cash provided by operating activities:
	Depreciation and amortization		25,487			33,420
	Restructuring and impairment charges		4,563			18,343
	Other		364			(854	)
Changes in assets and liabilities:
	Accounts receivable		990			16,693
	Inventories		(1,172	)		9,172
	Other current assets		(1,321	)		(1,670	)
	Prepaid pension asset		(9,205	)		(10,820	)
	Accounts payable and accrued liabilities		(13,199	)		(29,241	)
	Other		342			523

	Total adjustments		6,849			35,566

	Net cash provided by operations		15,477			17,171

Cash flows from investing activities:
	Capital expenditures		(6,206	)		(11,341	)
	Proceeds from sales of assets		4,081			2,317
	Other		(129	)		(139	)

	Net cash used in investing activities		(2,254	)		(9,163	)

Cash flows from financing activities:
	Payments of long-term debt		(92,845	)		(75,088	)
	Proceeds from issuance of long-term debt		78,495			26,050
	Issuance of common stock		14,429			40,960
	Dividends paid		(3,078	)		(2,932	)
	Other		(47	)		117

	Net cash used in financing activities		(3,046	)		(10,893	)

Effect of exchange rate on cash			244			1,257

Net increase (decrease) in cash			10,421			(1,628	)

Cash and equivalents at beginning of year			9,225			13,255

Cash and equivalents at end of period		$	19,646		$	11,627

Supplemental cash flow information
Cash paid during the period for:
	Interest	$	3,638		$	4,316
	Income taxes--net	$	6,036		$	4,127

See notes to condensed consolidated financial statements.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 1. Financial Statements (Continued)

CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS) - UNAUDITED
(In thousands of dollars)


		Three Months Ended					Nine Months Ended

		September 28, 2003		September 29, 2002			September 28, 2003			September 29, 2002

Net earnings (loss)		$	6,074	$	(13,821	)	$	8,628		$	(18,395	)
Other comprehensive earnings (loss):
	Cumulative translation adjustments		43		366			309			1,138
	Deferred gain (loss) on forward contracts		20		14			(17	)		(373	)

Comprehensive earnings (loss)		$	6,137	$	(13,441	)	$	8,920		$	(17,630	)

See notes to condensed consolidated financial statements.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 1. Financial Statements (Continued)

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - UNAUDITED
September 28, 2003

NOTE A—Basis of Presentation

The accompanying condensed consolidated interim financial statements have been prepared by CTS Corporation (CTS 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 condensed consolidated interim 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, 2002.

The accompanying unaudited condensed consolidated interim 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 for the periods presented in the financial statements to conform to the classifications adopted in 2003.

NOTE B—Employee Stock-Based Compensation

CTS accounts for employee stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees" and its related interpretations. CTS has adopted the disclosure requirements of the Financial Accounting Standards Board's (FASB) Financial Accounting Standard (FAS) No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." Had employee compensation cost for CTS' fixed, stock-based compensation plans been determined based on the fair value method, as defined by FAS No. 123, "Accounting for Stock-Based Compensation," CTS' net earnings (loss) and net earnings (loss) per share would have been adjusted to the pro forma amounts indicated below:


	Three Months Ended						Nine Months Ended

	September 28, 2003			September 29, 2002			September 28, 2003			September 29, 2002

	($ in thousands, except per share amounts)
Net earnings (loss), as reported	$	6,074		$	(13,821	)	$	8,628		$	(18,395	)
Add: Stock-based employee compensation cost,
net of tax, included in net earnings (loss)		—			—			—			—
Deduct: Stock-based employee compensation cost,
net of tax, if fair value based method were used		(912	)		(767	)		(2,180	)		(2,213	)

Pro forma net earnings (loss)	$	5,162		$	(14,588	)	$	6,448		$	(20,608	)

Net earnings (loss) per share-basic, as reported	$	0.17		$	(0.41	)	$	0.25		$	(0.56	)
Pro forma net earnings (loss) per share-basic		0.15			(0.43	)		0.19			(0.63	)
Net earnings (loss) per share-diluted, as reported		0.17			(0.41	)		0.25			(0.56	)
Pro forma net earnings (loss) per share-diluted	$	0.15		$	(0.43	)	$	0.19		$	(0.63	)

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 1. Financial Statements (Continued)

NOTE C—Inventories

The components of inventory consist of the following:


	September 28, 2003		December 31, 2002

	*($ in thousands)*
Finished goods	$	10,795	$	12,503
Work-in-process		8,385		8,346
Raw materials		18,254		15,413

	$	37,434	$	36,262

NOTE D—Restructuring and Impairment Charges

During the third quarter of 2003, CTS recorded a $4.6 million pre-tax impairment charge to reduce the carrying value of certain assets, held by the Components and Sensors business segment, to their estimated fair value. Approximately $3.3 million of the impairment charge reflects a writedown for electronic equipment following final production of previously announced “end of life” products and a re-assessment of the current market value for equipment held for sale. An additional $1.3 million of the impairment charge relates to excess capacity on a production line following an assessment of future capacity needs.

In the third quarter of 2002, CTS recorded $18.3 million of pre-tax restructuring and impairment charges. The restructuring and impairment charges were incurred in order to effect operational improvements and related organizational realignments primarily in the Components and Sensors business segment involving the relocation of certain manufacturing operations. CTS completed substantially all of these restructuring actions by the end of 2002.

The restructuring charge of $5.0 million recorded in the third quarter of 2002 relates primarily to organizational realignment in the Components and Sensors business segment, and reductions in support staff for the design of new custom variations of certain product lines. Included in this amount is $4.6 million of severance costs associated with the separation of approximately 300 employees, substantially all of which have been severed as of September 28, 2003. Approximately 67% of the employees severed were salary and indirect employees and 33% were hourly production employees.

The following table displays the restructuring activity and restructuring reserve balances as of September 28, 2003 for actions initiated in 2002:


	Workforce			Other
	Reductions			Exit Costs			Total

	*($ in millions)*
Third quarter of 2002 charge	$	4.6		$	0.4		$	5.0
Items paid or utilized in 2002		(3.4	)		—			(3.4	)

Reserve balance at December 31, 2002		1.2			0.4			1.6
Items paid or utilized in first nine months of 2003		(1.0	)		(0.3	)		(1.3	)

Reserve balance at September 28, 2003	$	0.2		$	0.1		$	0.3

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 1. Financial Statements (Continued)

NOTE D—Restructuring and Impairment Charges (Continued)

The 2002 restructuring plan also included $12.5 million of asset impairment charges. Approximately $9.8 million of the impairment charge was the adjustment needed to recognize impairments resulting from the reduction in the remaining useful lives of certain manufacturing equipment. Approximately $2.1 million of the impairment charge related to the write-off of leasehold improvements at its engineering and design facility in Taiwan and at its manufacturing facility in China. Approximately $0.2 million related to impairment of certain intangible assets acquired in the 1999 acquisition of the Component Products Division of Motorola. The remaining $0.4 million impairment charge related to adjustments to the estimated fair value of certain assets held for sale.

CTS also recognized a pension plan curtailment loss of approximately $0.8 million in the third quarter of 2002, resulting from reduced employment levels as a result of the restructuring activities.

In 2001, CTS recorded $40.0 million of pre-tax restructuring and impairment charges, $14.0 million in the second quarter and $26.0 million in the fourth quarter. Plan actions were designed to permit the Company to operate more efficiently in the then-existing environment and, at the same time, position the Company for success when the economy improved. CTS completed these consolidations and transfers in fiscal 2002.

During the first nine months of 2002, CTS recorded in cost of sales, $1.3 million of restructuring-related, one-time charges, consisting primarily of equipment relocation and other employee-related costs. No unusual charges of this nature were incurred in the first nine months of 2003.

Note E—Assets Held for Sale

Assets held for sale at September 28, 2003 are comprised of facilities, primarily the Longtan, Taiwan, building and other machinery and equipment that has been removed from service and is to be disposed of pursuant to the Company’s restructuring activities (refer also to Note D, “Restructuring and Impairment Charges”). The assets are held by the Components and Sensors business segment. These assets are recorded at amounts not in excess of what management currently expects to receive upon sale, less cost of disposal; however, the amounts the Company will ultimately realize are dependent on numerous factors, some of which are beyond management’s ability to control, and could differ materially from the amounts currently recorded.

As described in Note D, during the third quarter of 2003, CTS further impaired certain electronic equipment associated primarily with previously announced “end-of-life” products. Also during the first nine months of 2003, CTS sold the production equipment from its 3.2x5mm TCXO production line. This equipment was classified as assets held for sale at December 31, 2002.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 1. Financial Statements (Continued)

Note F—Financial Instruments

In the second quarter of 2003, CTS entered into a series of forward exchange contracts to manage its risk to fluctuations in foreign currency exchange rates between the Euro and the United Kingdom Pound. These contracts, which expire monthly in 2003, are designed to hedge anticipated foreign currency transactions. In accordance with FAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” these forward contracts for forecasted transactions are designated as cash flow hedges and recorded as assets or liabilities on the balance sheet at fair value. Changes in the contracts’ fair values are recognized in accumulated other comprehensive income until they are recognized in earnings at the time the forecasted transaction occurs.

Note G—Long-Term Debt

The new credit agreement categorized this debt as senior to CTS´ $25 million convertible debentures. The debt is collateralized by substantially all U.S. assets and a pledge of 65% of the capital stock of certain non-U.S. subsidiaries. Interest rates on these borrowings fluctuate based upon LIBOR. CTS pays a commitment fee on the undrawn portion of the revolving credit agreement. The commitment fee varies based on performance under certain financial covenants, and is currently 0.50 percent per annum. The new credit agreement requires, among other things, that CTS comply with a minimum fixed charge coverage, maximum leverage ratio and a minimum tangible net worth. Failure of CTS to comply with these covenants could reduce the borrowing availability under the new credit agreement. Additionally, the new credit agreement limits the amounts allowed for dividends, capital expenditures and acquisitions. The new credit agreement also allows for expansion of the facility commitment to $75 million after January 14, 2004 if certain conditions are met by CTS.

NOTE H—Income Taxes Payable

NOTE I—Business Segments

FAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” requires companies to provide certain information about their operating segments. At the beginning of the fourth quarter of 2002, the Company renamed the reportable business segments and realigned the product lines included in each segment to reflect changes in its organizational structure and the manner that results are evaluated and resources allocated by the chief operating decision maker. All segment data included in these condensed consolidated financial statements reflects the reportable business segments adopted in 2002. CTS has two reportable business segments: 1) Components and Sensors and 2) Electronics Manufacturing Services (EMS).

Components and sensors are products which perform specific electronic functions for a given product family and are intended for use in customer assemblies. Components and sensors consist principally of automotive sensors and actuators used in commercial or consumer vehicles; electronic components used in cellular handsets; quartz crystals and oscillators used in the communications and computer markets; low temperature cofired ceramics (LTCC) used in global positioning systems (GPS) and electronic substrates used in various communications and automotive applications; pointing sticks/cursor controls for computers and games for the computer market; terminators, including ClearONE™ terminators, used in computer and other high speed applications, switches, resistor networks and potentiometers used to serve multiple markets.

Table of Contents

PART I - FINANCIAL INFORMATION(Continued)

Item 1. Financial Statements (Continued)

NOTE I—Business Segments (Continued)

EMS includes the higher level assembly of electronic and mechanical components into a finished subassembly or assembly performed under a contract manufacturing agreement with an OEM or other contract manufacturer. EMS also includes design of interconnect systems and complex backplanes, global supply-chain management services and related manufacturing and design services as may be required by the customer.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in the Company's annual report on Form 10-K. Management evaluates performance based upon operating earnings before interest and income taxes.

Summarized financial information concerning CTS’ reportable segments, including reclassification of prior years, is shown in the following table:


	Components and Sensors			EMS		Total

	*($ in thousands)*
Third Quarter 2003
Net sales to external customers	$	61,449		$	47,047	$	108,496
Segment operating earnings	$	1,505		$	2,404	$	3,909
Total assets	$	406,938		$	76,035	$	482,973

Third Quarter 2002
Net sales to external customers	$	68,757		$	42,187	$	110,944
Segment operating earnings (loss)	$	(423	)	$	2,374	$	1,951
Total assets	$	452,000		$	62,247	$	514,247

First Nine Months of 2003
Net sales to external customers	$	185,768		$	145,194	$	330,962
Segment operating earnings	$	3,615		$	7,395	$	11,010
Total assets	$	406,938		$	76,035	$	482,973

First Nine Months of 2002
Net sales to external customers	$	206,413		$	134,849	$	341,262
Segment operating earnings (loss)	$	(6,040	)	$	7,926	$	1,886
Total assets	$	452,000		$	62,247	$	514,247

Table of Contents

PART I - FINANCIAL INFORMATION(Continued)

Item 1. Financial Statements (Continued)

NOTE I—Business Segments (Continued)

Reconciling information between reportable segments and CTS' consolidated totals is shown in the following table:


	Three Months Ended						Nine Months Ended

	September 28, 2003			September 29, 2002			September 28, 2003			September 29, 2002

	*($ in thousands)*
Total segment operating earnings	$	3,909		$	1,951		$	11,010		$	1,886
Restructuring, asset impairment and related
one-time charges - Components and Sensors		(4,563	)		(18,348	)		(4,563	)		(19,498	)
Restructuring, asset impairment and related
one-time charges - EMS		—			(102	)		—			(134	)
Interest expense		(2,139	)		(2,192	)		(6,010	)		(7,744	)
Other income		373			263			548			963

Earnings (loss) before income taxes	$	(2,420	)	$	(18,428	)	$	985		$	(24,527	)

NOTE J—Contingencies

Certain processes in the manufacture of CTS’ current and past products create hazardous waste by-products as currently defined by federal and state laws and regulations. CTS has been notified by the U.S. Environmental Protection Agency, state environmental agencies and, in some cases, generator groups, that it is or may be a Potentially Responsible Party (PRP) regarding hazardous waste remediation at several non-CTS sites. In addition to these non-CTS sites, CTS has an ongoing practice of providing reserves for probable remediation activities at certain of its manufacturing locations and for claims and proceedings against CTS with respect to other environmental matters. In the opinion of management, based upon presently available information relating to all such matters, either adequate provision for probable costs has been made, or the ultimate costs resulting will not materially affect the consolidated financial position, results of operations or cash flows of CTS.

Certain claims are pending against CTS with respect to matters arising out of the ordinary conduct of its business. For all claims, in the opinion of management, based upon presently available information, either adequate provision for anticipated costs has been made by insurance, accruals or otherwise, or the ultimate anticipated costs resulting will not materially affect CTS’ consolidated financial position or results of operations.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 1. Financial Statements (Continued)

NOTE J—Contingencies (Continued)

In 1999, CTS acquired certain assets and liabilities of the Component Products Division of Motorola. The acquisition was accounted for under the purchase method of accounting. As part of the purchase agreement, CTS may be obligated to pay additional amounts. No amounts are due to Motorola in 2003 for 2002 under the agreement. CTS does not expect to make a material payment under this agreement in 2004 for 2003, which is the final year of potential obligations. The maximum remaining potential payment under the acquisition agreement was $17.4 million at September 28, 2003.

NOTE K—Earnings Per Share

FAS No. 128, “Earnings per Share,” requires companies to provide a reconciliation of the numerator and denominator of the basic and diluted earnings per share (EPS) computations. The calculation below provides net earnings, average common shares outstanding and the resultant earnings per share for both basic and diluted EPS for the nine months and quarter ending September 28, 2003.


	Net		Shares
($ in thousands,	Earnings		(In thousands)			Per Share
except per share amounts)	(Numerator)		(Denominator)			Amount

Third Quarter 2003
Basic EPS	$	6,074		34,799		$	0.17
Effect of dilutive securities:
Stock options				265
Other				288	⁽¹⁾

Diluted EPS	$	6,074		35,352		$	0.17

First Nine Months of 2003
Basic EPS	$	8,628		34,351		$	0.25
Effect of dilutive securities:
Stock options				106
Other				272	⁽¹⁾

Diluted EPS	$	8,628		34,729		$	0.25

⁽¹⁾

Includes 151 shares of CTS common stock to be issued to the former DCA shareholders who have not yet tendered their stock certificates for exchange at September 28, 2003.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 1. Financial Statements (Continued)

NOTE K—Earnings Per Share (Continued)

The following table shows the potentially dilutive securities which have been excluded from the diluted earnings per share calculation for the three and nine month periods ending September 28, 2003 and September 29, 2002 because they are either anti-dilutive or the exercise price exceeds the average market price:


	Three Months Ended					Nine Months Ended

*(Number of shares in thousands)*	September 28, 2003		September 29, 2002			September 28, 2003		September 29, 2002

Securities issuable in connection with stock purchase plans		—		245	⁽¹⁾		—		229	⁽¹⁾
Stock options where the exercise price exceeds the
average market price of common shares during the period		779		1,564			1,262		1,059
Stock options where the exercise price is below the
average market price of common shares during the period
which would be anti-dilutive		—		—			—		66
Securities related to the subordinated convertible debt		1,247		1,247			1,247		831

⁽¹⁾

Includes 152 shares of CTS common stock to be issued to the former DCA shareholders who have not yet tendered their stock certificates for exchange at September 29, 2002.

NOTE L—Accounting Pronouncements

In April 2003, the FASB issued FAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” FAS No. 149 amends and clarifies the accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under FAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” FAS No. 149 was generally effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. Adoption of FAS No. 149 did not have a significant impact on the Company’s financial position or results of operations.

In May 2003, the FASB issued FAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” FAS No. 150 requires that certain financial instruments, which under previous guidance were accounted for as equity, must now be accounted for as liabilities. The financial instruments affected include mandatorily redeemable stock, certain financial instruments that require or may require the issuer to buy back some of its shares in exchange for cash or other assets and certain obligations that can be settled with shares of stock. FAS No. 150 was effective for financial instruments entered into or modified after May 31, 2003 and must be applied to CTS´ existing financial instruments effective June 30, 2003, the beginning of the first interim period after June 15, 2003. The adoption of FAS No. 150 did not have a material impact on its results of operations or financial condition.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. This discussion includes certain non-GAAP financial measures which CTS' management believes are useful to investors in analyzing CTS' financial performance and results of operations over time. Reconciliations of these non-GAAP financial measures to the most comparable GAAP financial measures are included herein.

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Management believes that judgment and estimates related to the following critical accounting policies could materially affect its consolidated financial statements.

     • Estimating inventory valuation, the allowance for doubtful accounts and other accrued liabilities
     •  Valuation of long-lived and intangible assets and depreciation / amortization periods
     •  Income taxes
     •  Retirement plans

In the first nine months of 2003, there have been no changes in the above critical accounting policies.

Results of Operations

Comparison of Third Quarter 2003 and Third Quarter 2002

Business Segment Discussion

The following table highlights the business segment results for the three-month periods ending September 28, 2003 and September 29, 2002:

				Electronics
	Components			Manufacturing
	& Sensors			Services

	*($ in thousands)*
Third Quarter 2003
Sales	$	61,449		$	47,047
Segment operating earnings		1,505			2,404
% of sales		2.4	%		5.1	%

Third Quarter 2002
Sales	$	68,757		$	42,187
Segment operating earnings (loss)		(423	)		2,374
% of sales		(0.6	)%		5.6	%

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Results of Operations (Continued)

The third quarter of 2003 sales of components and sensors and EMS products, as a percentage of total sales, were 57% and 43% respectively. The third quarter of 2002 sales of components and sensors and EMS products, as a percentage of total sales, were 62% and 38% respectively. Refer also to Note I, "Business Segments," for a description of the Company's business segments.

Components and Sensors business segment sales decreased $7.3 million or 11% from the prior year quarter. The decrease was primarily due to a $5.2 million reduction in end-of-life product sales and general softness in the computer, communications and automotive markets. The segment operating earnings of $1.5 million increased $1.9 million. In the third quarter of 2003, lower manufacturing and selling, general and administrative expenses of approximately $2.4 million combined with lower depreciation and amortization of $2.5 million caused the segment operating earnings improvement despite lower sales volumes in 2003 and approximately $1.0 million pertaining to the resolution of a customer credit recorded in 2002.

EMS business segment sales increased $4.9 million, or 12%, from the prior year quarter. The incremental segment operating earnings generated from higher sales levels were impacted by less favorable product mix. This resulted in approximately the same level of segment operating earnings, $2.4 million, as in the third quarter of 2002.

Total Company Discussion

The following table highlights changes in significant components of the condensed consolidated statements of earnings (loss) for the three-month periods ended September 28, 2003 and September 29, 2002:

	September 28, 2003			September 29, 2002			Increase (Decrease)

	*($ in thousands)*
Net sales	$	108,496		$	110,944		$	(2,448	)
Gross margin		23,655			23,885			(230	)
Gross margin as a percent of sales		21.8	%		21.5	%		0.3	%

Selling, general and administrative expenses		14,694			16,651			(1,957	)
Selling, general and administrative expenses as a percent of sales		13.5	%		15.0	%		(1.5	)%

Research and development expenses		5,052			5,390			(338	)
Research and development expenses as a percent of sales		4.7	%		4.9	%		(0.2	)%

Restructuring and impairment charges		4,563			18,343			(13,780	)

Operating loss		(654	)		(16,499	)		(15,845	)
Operating loss as a percent of sales		(0.6	)%		(14.9	)%		(14.3)	%

Total other expense		(1,766	)		(1,929	)		(163	)
Loss before income taxes		(2,420	)		(18,428	)		(16,008	)
Income tax benefit		(8,494	)		(4,607	)		3,887

Net earnings (loss)	$	6,074		$	(13,821	)	$	19,895

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Results of Operations (Continued)

Compared to the third quarter of 2002, total sales were down $2.4 million, or 2%. However, excluding end-of-life product sales, net sales increased 2.6% quarter to quarter. These end-of-life product sales relate to products described in the third quarter 2002 restructuring plan, which include Voltage Controlled Oscillators (VCO) and Temperature Compensated Crystal Oscillators (TCXO).

The following table is a reconciliation of net sales to net sales excluding end-of-life products for the three-month periods ended September 28, 2003 and September 29, 2002:

	September 28, 2003		September 29, 2002		Increase (Decrease)			Increase (Decrease)
($ in millions)
Net sales	$	108.5	$	110.9	$	(2.4	)		(2.2	)%
End-of-life products		1.6		6.8		(5.2	)		(76.5	)%

Net sales excluding end-of-life products	$	106.9	$	104.1	$	2.8			2.6	%

The gross margin percent increased 0.3 percentage points over 2002, to 21.8% despite the lower net sales. Items contributing to the gross margin percentage increase included lower depreciation expense of $1.7 million, partially offset by $0.9 million in unfavorable impact, primarily due to a higher mix of EMS segment sales which inherently have lower margins compared to Component and Sensor segment sales. The prior year quarter gross margin also included approximately $1.0 million pertaining to the resolution of a customer credit.

Selling, general and administrative expenses were $14.7 million, or 14% of sales, compared to $16.7 million, or 15% of sales, in the prior year quarter. The reduction was primarily due to benefits of restructuring actions and cost reduction programs. Research and development expense levels remained relatively constant.

The operating loss of $0.7 million improved $15.8 million compared to the prior year quarter. This improvement was the result of lower depreciation and amortization of $2.4 million and a reduction in other operating expenses of $0.6 million, primarily in salaries and wages. In addition, the third quarter of 2003 included a $4.6 million asset impairment charge while the third quarter of 2002 included $18.4 million of restructuring, asset impairment and restructuring-related one-time charges and approximately $1.0 million pertaining to the resolution of a customer credit.

Interest expense, included in other expenses, remained relatively constant at approximately $2.1 million in both years. Interest expense in the third quarter of 2003, however, included $0.4 million relating to the write off of debt issue costs of the former credit agreement. Excluding the $0.4 million write-off, interest expense was lower due to reduced outstanding debt balances.

During the quarter ended September 28, 2003, CTS recorded a tax benefit of $7.9 million resulting from the reversal of reserves that were no longer required following the expiration of statutory deadlines. The reserve reduction will not impact CTS' anticipated fourth quarter 2003 effective income tax rate of 25%.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Results of Operations (Continued)

Comparison of Nine Months 2003 and Nine Months 2002

Business Segment Discussion

The following table highlights the business segment results for the nine month periods ending September 28, 2003 and September 29, 2002:

				Electronics
	Components			Manufacturing
	& Sensors			Services

	*($ in thousands)*
First Nine Months 2003
Sales	$	185,768		$	145,194
Segment operating earnings		3,615			7,395
% of sales		1.9	%		5.1	%

First Nine Month 2002
Sales	$	206,413		$	134,849
Segment operating earnings (loss)		(6,040	)		7,926
% of sales		(2.9	)%		5.9	%

During the first nine months of 2003, sales of components and sensors and EMS products, as a percentage of total sales, were 56% and 44% respectively. The first nine months of 2002 sales of components and sensors and EMS products, as a percentage of total sales, were 60% and 40% respectively. Refer also to Note I, "Business Segments," for a description of the Company's business segments.

Components and Sensors business segment sales decreased $20.6 million, or 10%, from the prior year. The decrease was primarily due to a reduction of end-of-life product sales of $13.7 million and a general softness in the computer, communications and automotive markets. Despite the sales decrease, segment operating earnings improved $9.7 million. Contributing to the improvement were lower salary and wage expenses of $10.9 million and lower depreciation and amortization expenses of $8.1 million. These improvements were partially reduced by the impact of lower volume of approximately $5 million and $4.1 million of favorable items occurring in 2002, related to certain customer reimbursements.

EMS business segment sales increased $10.3 million, or 7.7% from the prior year primarily in infrastructure systems equipment. The segment operating earnings of $7.4 million decreased $0.5 million primarily due to a less favorable product mix.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Results of Operations (Continued)

Total Company Discussion

The following table highlights changes in significant components of the condensed consolidated statements of earnings (loss) for the nine-month periods ended September 28, 2003 and September 29, 2002:

	September 28, 2003			September 29, 2002			Increase (Decrease)

	*($ in thousands)*
Net sales	$	330,962		$	341,262		$	(10,300	)
Gross margin		69,258			67,672			1,586
Gross margin as a percent of sales		20.9	%		19.8	%		1.1	%

Selling, general and administrative expenses		42,165			48,531			(6,366	)
Selling, general and administrative expenses as a percent of sales		12.7	%		14.2	%		(1.5	)%

Research and development expenses		16,083			18,544			(2,461	)
Research and development expenses as a percent of sales		4.9	%		5.4	%		(0.5	)%

Restructuring and impairment charges		4,563			18,343			(13,780	)

Operating earnings (loss)		6,447			(17,746	)		24,193
Operating earnings (loss) as a percent of sales		1.9	%		(5.2	)%		7.1	%

Total other expense		(5,462	)		(6,781	)		(1,319	)
Earnings (loss) before income taxes		985			(24,527	)		25,512
Income tax benefit		(7,643	)		(6,132	)		1,511

Net earnings (loss)	$	8,628		$	(18,395	)	$	27,023

Net sales decreased by $10.3 million, or 3% from the first nine months of 2002. The decline principally reflects the Company’s decision to exit and end-of-life certain component product lines of $13.7 million, used primarily in cell phone applications, and a sales reduction of $6.9 million in other components and sensor products. These decreases were partially offset by higher EMS product sales of $10.3 million, primarily infrastructure systems.

End-of-life product sales relate to products described in the third quarter 2002 restructuring plan, which include Voltage Controlled Oscillators (VCO) and Temperature Compensated Crystal Oscillators (TCXO), including product sales from the TCXO production line sold in the first quarter of 2003. The following table is a reconciliation of net sales to net sales excluding end-of-life products for the nine-month periods ended September 28, 2003 and September 29, 2002:

	September 28, 2003		September 29, 2002		Increase (Decrease)			Increase (Decrease)
($ in millions)
Net sales	$	331.0	$	341.3	$	(10.3	)		(3.0	)%
End-of-life products		5.4		19.1		(13.7	)		(71.7	)%

Net sales excluding end-of-life products	$	325.6	$	322.2	$	3.4			1.1	%

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Results of Operations (Continued)

Gross margin increased $1.6 million, or 1.1 percentage points, despite the lower sales volume. The 2003 gross margin dollar and percentage improvements were, in part, due to lower depreciation expense of $5.3 million. Also, gross margin in the first nine months of 2002 included $1.3 million of restructuring-related one-time charges, and favorable adjustments of $3.1 million for a customer reimbursement and approximately $1.0 million pertaining to the resolution of a customer credit.

Selling, general and administrative expenses in 2003 were $42.2 million, or 13% of sales, compared to $48.5 million, or 14% of sales, in the first nine months of 2002. The reduction was primarily due to benefits of the restructuring actions taken in 2002. Research and development expenses of $16.1 million decreased $2.5 million from the first nine months of 2002. The first nine months of 2003 included $4.6 million of asset impairment charges and 2002 included $19.6 million of restructuring, asset impairment and related one-time charges.

CTS announced restructuring plans during 2002 and 2001, designed to effect operational improvements and related organizational realignments and to size the Company to then-existing market realities, while continuing to put a priority on positioning the Company to be successful as the economy recovers and market growth returns. See Note D, “Restructuring and Impairment Charges,” for additional explanation of the plan actions. The expected 2003 pre-tax profitability improvement associated with the 2002 restructuring and asset impairment charges is estimated to be $17.0 million.

Total other expense of $5.5 million decreased $1.3 million, primarily due to reduced interest expense of $1.7 million on lower debt balances, partially offset by higher bank fee amortization of $0.2 million.

During the quarter ended September 28, 2003, CTS recorded a tax benefit of $7.9 million resulting from the reversal of reserves that were no longer required following the expiration of statutory deadlines. The reserve reduction will not impact CTS´ anticipated fourth quarter 2003 effective income tax rate of 25%.

During the first nine months of 2003, CTS completed the sale of its 3.2x5mm TCXO production line. The 3.2x5mm TCXO products are used primarily in mobile handset applications and sales of these 3.2x5mm TCXO products were insignificant in prior years.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Liquidity and Capital Resources

On July 14, 2003, CTS entered into a new, three-year credit agreement (the new credit agreement) containing a $55 million senior, secured revolving credit facility, replacing the former $85 million senior, secured credit agreement. The new credit agreement allows for the expansion of the facility commitment to $75 million after January 14, 2004, if certain conditions are met. The new credit agreement contains financial covenants briefly described in Note G, "Long-Term Debt." While these covenants are typical and CTS management currently expects to be in compliance with all financial covenants, there can be no assurance of this since certain factors, such as forecasted future operating results, are dependent upon future events, some of which are beyond CTS' ability to control. If CTS is unable to comply with the financial covenants, it will seek to obtain amendments or waivers from the lenders and/or identify other sources of liquidity such as raising additional capital and/or the sale of certain assets, including assets held for sale.

During the first nine months of 2003, net cash provided by the operating activities was $15.5 million, issuance of common stock generated $14.4 million and proceeds from the sales of assets were $4.1 million. With the available cash, CTS reduced the outstanding balance of the revolving credit facility by $14.4 million, incurred capital expenditures of $6.2 million, paid dividends of $3.1 million and increased the cash balance by $10.4 million.

For the nine months ended September 2003, cash flow from operations was $15.5 million. Positively impacting cash flow from operations were net earnings of $8.6 million and adjustments to reconcile earnings of $30.4 million, primarily from depreciation and amortization. Changes in assets and liabilities reduced cash flow from operations by $23.6 million, primarily in the prepaid pension asset and accounts payable and accrued liabilities. The reduction in accrued liabilities includes a $7.9 million tax reserve reversal. In the first nine months of 2002, cash flows provided by operating activities were $17.2 million. The net loss for the first nine months of 2002 combined with the increase in the pension asset and the net increase in working capital were more than offset by the depreciation and amortization and restructuring and impairment charges for the first nine months of 2002.

Cash flows used in investing activities totaled $2.3 million through the first nine months of 2003, including $6.2 million of capital expenditures, partially offset by $4.1 million of proceeds from the sale of assets. Cash flows used for investing activities totaled $9.2 million through the first nine months of 2002, including $11.3 million of capital expenditures, partially offset by $2.3 million of proceeds from the sale of assets.

Cash flows used for financing activities in the first nine months of 2003 were $3.0 million in 2003, consisting primarily of net repayment of debt of $14.4 million and stock dividends of $3.1 million, partially offset by proceeds from the issuance of common stock of $14.4 million. Cash flows used for financing activities were $10.9 million in the first nine months of 2002 consisting primarily of repayments of debt of $75.1 million and dividend payments of $2.9 million. These uses of cash were partially offset by proceeds from the issuance of common stock of $41.0 million and convertible subordinated debentures of $25.0 million.

CTS’ capital expenditures for 2003 are expected to total approximately $13 million, $6.2 million of which has been spent during the first nine months of the year. These capital expenditures are primarily for new products and cost savings initiatives. CTS was also obligated to make approximately $6 million of lease payments in 2003, of which approximately $4.5 million has been paid through September 28, 2003.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Liquidity and Capital Resources (Continued)

CTS believes cash flows from operations and available borrowings under its new revolving credit facility will be adequate to fund its working capital and capital expenditure requirements. However, if customer demand decreases significantly from forecasted levels or customer pricing pressures reduce revenues or profit margins significantly, CTS may need to find an alternative funding source. In this event, CTS may choose to pursue additional equity and/or debt financing. CTS may not be able to obtain additional financing, which would be affected by general economic and market conditions, on terms acceptable to CTS or at all.

On December 14, 1999, CTS’ shelf registration statement on Form S-3 was declared effective by the Securities and Exchange Commission. CTS could initially offer up to $500.0 million in any combination of debt securities, common stock, preferred stock or warrants under the registration statement. During the first nine months of 2003, CTS issued $10.7 million of common stock under this registration statement. CTS used the net proceeds of this equity issuance to repay the revolving loan under its credit agreement. As of September 28, 2003, CTS could offer up to $435.1 million of additional debt and/or equity securities under this registration statement.

On November 13, 2001, CTS’ Form S-3 registration statement registering two million shares of CTS common stock to be issued under CTS’ Direct Stock Purchase Plan was declared effective by the Securities and Exchange Commission. During the first nine months of 2003, CTS issued $3.7 million of common stock under this registration statement. CTS used the net proceeds of these equity issuances to repay revolving loans under its credit agreements. As of September 28, 2003, CTS could issue up to approximately 136,000 additional shares of common stock under this registration statement.

In April 2002, the Company issued $25 million of five-year, 6.5% convertible, subordinated debentures. These debentures are unsecured and convert into CTS common stock at a conversion price of $20.05 per share. At any time after the three-year anniversary of the issue date, the purchasers may accelerate the maturity of the debentures. CTS also has the right after such three-year anniversary and under certain circumstances, to force conversion of the debentures into common stock. CTS used the net proceeds from the offering to repay the outstanding term loans in full under its then existing credit facility, and the balance was applied to its revolving facility.

_________________

Statements about the Company’s earnings outlook and its plans, estimates and beliefs concerning the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations. Actual results may differ materially from those reflected in the forward-looking statements due to a variety of factors which could affect the Company’s operating results, liquidity and financial condition. We undertake no obligation to publicly update or revise any forward-looking statement. Factors that could impact future results include among others: the general market conditions in the automotive, computer and communications markets, and in the overall worldwide economies; reliance on key customers; the Company’s capabilities to implement measures to improve its financial condition and flexibility; the Company’s successful execution of its ongoing cost-reduction plans; pricing pressures and demand for the Company’s products, especially if economic conditions worsen or do not recover in the key markets; changes in the liability insurance markets which might impact the Company’s capability to obtain appropriate levels of insurance coverage; the effect of major health concerns such as Severe Acute Respiratory Syndrome (SARS) on our employees, customers and suppliers; and risks associated with our international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks. Investors are encouraged to examine the Company’s 2002 Form 10-K, which more fully describes the risks and uncertainties associated with the Company’s business.

Table of Contents

PART I - FINANCIAL INFORMATION (Continued)

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in CTS' market risk since December 31, 2002.

Item 4. Controls and Procedures

CTS maintains a set of disclosure controls and procedures designed to ensure information required to be disclosed by CTS in reports that it files or submits under the Securities Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Management recognizes that 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. As of September 28, 2003, the end of the quarter covered by this report, an evaluation was carried out under the supervision and with the participation of CTS' management, including the chief executive officer and chief financial officer, of the effectiveness of CTS' disclosure controls and procedures. Based upon that evaluation, the chief executive officer and chief financial officer have concluded that CTS' disclosure controls and procedures are effective at the reasonable assurance level referred to above. Subsequent to the date of their evaluation, there have been no significant changes in CTS' internal controls or in other factors that could significantly affect these controls. The company's management, including the CEO and CFO, does not expect its disclosure controls and procedures or its internal controls will prevent all error and all fraud.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Table of Contents

PART II - OTHER INFORMATION (Continued)

Item 6. Exhibits and Reports on Form 8-K

a. Exhibits

         (10) (a)   CTS Corporation 2003 Excess Benefit Retirement Plan, effective July 1, 2003

         (31) (a)   Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002

         (31) (b)   Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002

         (32) (a) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                        Act of 2002

         (32) (b) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
                        Act of 2002

b. Reports on Form 8-K

During the three-month period ending September 28, 2003, CTS filed the following reports on Form 8-K:

	•	Report dated July 21, 2003, under Item 9., Regulation FD Disclosure, containing the press release announcing that it had entered into a new credit agreement with its four major financial institutions.

	•	Report dated July 24, 2003, under item 7., Financial Statements and Exhibits, containing the press release announcing second quarter 2003 financial results.

	•	Report dated August 26, 2003, under Item 5., Other Items, disclosing the sale of 1,000,000 shares of its Common Stock to an institutional investor pursuant to a previously filed shelf registration statement on Form S-3. The Form 8-K also filed the opinion of counsel related to this transaction.

	•	Report dated September 25, 2003, under Item 9., Regulation FD Disclosure, containing a copy of material used in an investor relations presentation. The Form 8-K also contained a reconciliation of certain non-GAAP financial measures to the most directly comparable GAAP financial measures.

Table of Contents

SIGNATURES

Pursuant to the requirements 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/ Richard G. Cutter III			/s/ Vinod M. Khilnani

Richard G. Cutter III Vice President, Secretary and General Counsel			Vinod M. Khilnani Senior Vice President and Chief Financial Officer

Dated: October 28, 2003

EX-10 3 exhibit10-a.htm (A) 2003 EXCESS BENEFIT RETIREMENT PLAN Exhibit (10)(a) 2003 Excess Benefit Retirement Plan

Form 10-Q
Third Quarter 2003

EXHIBIT (10)(a)

CTS CORPORATION

2003 EXCESS BENEFIT RETIREMENT PLAN
As Adopted Effective July 1, 2003

CTS CORPORATION

2003 EXCESS BENEFIT RETIREMENT PLAN

ARTICLE I

Purpose

1.01 Purpose. It is the intention of CTS Corporation (the “Company”) to maintain appropriate levels of retirement benefits for employees of the Company or any of its subsidiaries who are entitled to benefits under the CTS Corporation Pension Plan (the “Pension Plan”). Accordingly, the Company hereby establishes the CTS Corporation 2003 Excess Benefit Retirement Plan (the “Plan”). This Plan is intended to provide benefits to eligible persons in order to maintain the level of total retirement benefits which, but for the limitations on annual benefits and compensation which may be taken into account under the Internal Revenue Code of 1986, as amended, (the “Code”) would otherwise be payable under, or as a consequence of, the provisions of the Pension Plan and to provide a competitive level of retirement benefits to the Company’s executives.

1.02 Effective Date. This Plan is effective as of July 1, 2003. However, in calculating the amounts described in Sections 3.01(a) and 3.01(b) amounts which accrued (or would have accrued) but for the Code limitations referred to in Section 3.01 prior to the effective date shall be taken into account.

ARTICLE II

Eligibility

2.01 Persons Eligible to Receive Benefits. Every individual who is listed on Appendix A shall be eligible to receive a “Benefit” as described in Section 3.01. Each such individual shall be known as a “Member”.

2.02 Beneficiary. Every individual who is eligible to receive a Benefit under the Pension Plan by reason of being the Beneficiary of another individual who was a Member under this Plan, shall be known as a “Beneficiary”. The term “Beneficiary” shall include joint pensioners, heirs-at-law, legal representatives, fiduciaries, and every other person (other than a Member) to whom Benefits may be distributed, as determined under the Pension Plan. A Beneficiary’s right to receive Benefits under this Plan shall be subject to the same conditions which apply to the Beneficiary’s right to receive benefits under the Pension Plan.

ARTICLE III

Benefits

3.01 Amount of Benefit. The amount of the Benefit which a Member (or Beneficiary, if applicable) is eligible to receive under this Plan shall be equal to the excess of (a) over (b):

(a)

The amount of benefit which such Member would be entitled to receive under the Pension Plan, if the percentage of Compensation (as defined in the Pension Plan) used in determining the Member’s benefit under the applicable provision of Section 6 of the Pension Plan was, instead of 1.25%:

1.35% if the date of determination occurs during the Member’s second year of participation in this Plan;

1.45% if the date of determination occurs during the Member’s third year of participation in this Plan;

1.55% if the date of determination occurs during the Member’s fourth year of participation in this Plan;

1.65% if the date of determination occurs during the Member’s fifth year of participation in this Plan;

1.75% if the date of determination occurs during any subsequent year of participation in this Plan;

and if such benefit were computed without giving effect to the limitations then currently imposed by Code Section 401(a)(17) and Code Section 415(b) and regulations thereunder and without regard to the benefit accrual determined under Section 6.13 of the Pension Plan. For purposes of this Section 3.01, a Member’s date of participation in this Plan shall be the later of July 1, 2003, or the effective date that the Member is first eligible to participate in the Plan in accordance with Article V. A Member’s “years of participation” will being on the Members’ date of participation and each subsequent anniversary thereof.

(b)

The amount of benefit which such Member actually receives under the Pension Plan.

3.02 Payment of Benefits. Payment of benefits shall be accomplished by means of unfunded payments directly from the Company. Except as provided in Section 3.03 and Article V, distribution of any such benefits, whether to a Beneficiary or a Member, shall be made at the same time and in the same manner and form and subject to the same conditions as the benefit provided by the Pension Plan.

3.03 Immediate Cashout. Notwithstanding the provisions of Section 3.02, if the Plan benefit is immediately payable to a Member or Beneficiary and the amount of the monthly benefit payable from the Plan to a Member or Beneficiary does not exceed $50, the actuarial present value of the immediate Plan benefit shall be paid in an immediate single lump sum cash payment in lieu of any other form of payment. Actuarial present values shall be determined using the actuarial assumptions employed under the Pension Plan for lump sum cashouts.

ARTICLE IV

Authority of Committee

4.01 Committee. The Plan shall be approved and administered by the Compensation Committee of the CTS Corporation Board of Directors (the "Committee");

4.02 Authority of Committee. The Committee shall have authority to control, delegate and manage the operation and administration of the Plan, including all rights and powers necessary or convenient to the carrying out of its functions hereunder, whether or not such rights and powers are specifically enumerated herein.

Without limiting the foregoing, and in addition to the other powers set forth in this Article IV, the Committee shall have the following express authorities:

(a)

To construe and interpret the Plan and determine the amount, manner and time of payment of any Benefits hereunder;

(b)

To prescribe procedures to be followed by Members or Beneficiaries filing any requests or applications in connection with Benefits hereunder;

(c)

To prepare and distribute, in such manner as the Committee determines to be appropriate, information explaining the Plan;

(d)

To receive from the Company and from Members and Beneficiaries such information as shall be necessary for the proper administration of the Plan;

(e)

To furnish the Company, upon request, such annual and other reports with respect to the administration of the Plan as are reasonable and appropriate;

(f)

To resolve all questions and make all factual determinations relating to any matter for which it has administrative responsibility; and

(g)

To delegate to the CTS Corporation Employee Benefit Committee such administrative powers and duties as it deems appropriate.

4.03 Disqualification of Committee Member. No member of the Committee or delegate of the Committee shall vote upon any question or exercise any discretion under the Plan relating specifically to himself or his Beneficiaries.

4.04 Records and Reports. The Committee shall take all such action as it deems necessary or appropriate to comply with any laws or regulations now or hereafter in existence relating to the maintenance of records, notifications or registrations.

ARTICLE V

Amendment or Termination

The Company intends the Plan to be permanent, but reserves the right, at any time, to modify, amend or terminate the Plan, provided, however, that no termination, amendment or modification of or to the Plan may, without written approval of a Member, reduce the total benefit payable under this Plan or the Pension Plan, assuming the Member retired, died or otherwise terminated employment as of the date of such termination, amendment or modification. Such amount shall constitute an irrevocable obligation of the Company. The Committee hereby delegates to the Chief Executive Officer of the Company the authority to add, in the Officer’s sole discretion, individuals to Appendix A who become members of the Company’s senior management after the Effective Date of the Plan, and to remove those individuals from Appendix A of the CTS Corporation 1996 Excess Benefit Retirement Plan, if they are members of that plan.

Notwithstanding any other provision of the Plan, if (i) a Member’s employment with the Company terminates following a Change in Control (as defined in Appendix B to the Plan) and (ii) as a result of such termination of employment the Member becomes entitled to change in control severance benefits under any severance agreement between the Company and the Member, the actuarial present value of the Member’s benefit under this Plan shall be paid immediately in a single lump sum cash payment in lieu of any other form of benefit. For purposes of calculating the lump sum payment, the Member shall be considered to be fully vested in both his or her benefit under this Plan and his or her benefit under the Pension Plan. If the Plan benefit would otherwise be payable immediately to the Member or Beneficiary, the actuarial present value shall be the present value of the immediate Plan benefit. If the Plan benefit is not otherwise payable immediately to the Member or Beneficiary, the actuarial present value shall be the present value of the deferred Plan benefit payable at the normal retirement benefit commencement date under the Pension Plan. Actuarial present values shall be determined using the actuarial assumptions employed under the Pension Plan for lump sum cashouts.

ARTICLE VI

Miscellaneous

6.01 No Guarantee of Employment. Neither the creation of this Plan nor anything contained herein shall be construed (a) to give any Member the right to remain in the employ of the Company or any of its subsidiaries, (b) to give any Member or Beneficiary any benefits not specifically provided by the Plan, or (c) to modify, in any manner, the right of the Company or any of its subsidiaries to modify, amend, or terminate any of its employee benefit plans.

6.02 Rights of Participants and Beneficiaries. Payment of Benefits to which any Member or Beneficiary is entitled shall be made only to such Member or Beneficiary. The expectation of such Benefits shall not be assignable by Member or Beneficiaries or by operation of law, or be subject to reduction for the debts or defaults of such Members or Beneficiaries whether to the Company or to others, or be subject to execution or attachment. The preceding sentence shall not apply to portions of Benefits applied at the direction of the person eligible to receive such Benefits to the payment of premiums on life or health insurance provided under any Company program, or to the withholding of federal income taxes.

6.03 Payments in Event of Final Determination. Notwithstanding any other provision of the Plan to the contrary, if any amounts accrued under the Plan by a Member or Beneficiary are found in a final determination to have been includable in the gross income of the Member or Beneficiary prior to the payment of such amounts to the Member or Beneficiary, the Company will, as soon as practicable, pay such amounts to or on behalf of the Member or Beneficiary. For purposes of the Plan, a “final determination” means (i) an assessment of tax by the Internal Revenue Service addressed to the Member or Beneficiary which is not timely appealed to the courts, (ii) a final determination by the United States Tax Court or any other federal court, the time for an appeal thereof having expired or been waived, or (iii) an opinion of counsel to the Company with respect to a change in any applicable law, regulation or ruling, in each case to the effect that amounts accrued under the Plan are subject to federal income tax to the Member or Beneficiary prior to payment. No final determination will be deemed to have occurred until the Committee has actually received a copy of the assessment, court order or opinion which forms the basis thereof and such other documents as it may reasonably request.

6.04 Claims Procedure.

(a)

If a Member or Beneficiary does not receive the benefits which the Member or Beneficiary believes he or she is entitled to receive under the Plan, the Member or Beneficiary may file a claim for benefits with the Committee. All claims must be made in writing and be signed by the claimant. If the claimant does not furnish sufficient information to enable the Committee to process the claim, the Committee will indicate to the claimant any additional information which is required.

(b)

Each claim will be approved or disapproved by the Committee within 90 days following the receipt of the information necessary to process the claim, or within 180 days if the Committee determines that special circumstances require an extension of the 90-day period and the claimant is notified of the extension within the original 90-day period. In the event the Committee denies a claim for benefits in whole or in part, the Committee will notify the claimant in writing of the adverse determination. Such notice by the Committee will also set forth, in a manner calculated to be understood by the claimant, the specific reason or reasons for the adverse determination, reference to the specific Plan provisions on which the determination is based, a description of any additional material or information necessary to perfect the claim with an explanation of why such material or information is necessary and an explanation of the Plan’s claim review procedure as set forth in Section 6.04(c).

(c)

A claimant may appeal an adverse benefit determination by requesting a review of the decision by the Committee or a person designated by the Committee. An appeal must be submitted in writing within 60 days after receiving notification of the adverse determination and must (i) request a review of the claim for benefits under the Plan, (ii) set forth all of the grounds upon which the claimant’s request for review is based and any facts in support thereof, and (iii) set forth any issues or comments which the claimant deems pertinent to the appeal. The claimant will be given the opportunity to submit written comments, documents, records and other information relating to the claim for benefits and will be provided, upon written request and free of charge, reasonable access to and copies of all documents, records and other information relevant to the claim for benefits, provided the Committee finds the requested documents or materials are relevant to the appeal. The Committee or the person designated by the Committee will make a full and fair review of each appeal and any materials submitted by the claimant relating to the claim, without regard to whether the information was submitted or considered in the initial determination. On the basis of its review, the Committee or person designated by the Committee will make an independent determination of the claimant’s eligibility for benefits under the Plan. The Committee or the person designated by the Committee will act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing, in which case the Committee will notify the claimant within the initial 60-day period of such special circumstances and will render a decision as soon as possible but not later than 120 days after the appeal is received. The decision of the Committee or person designated by the Committee on any claim for benefits will be final and conclusive upon all parties thereto. In the event the Committee or person designated by the Committee denies an appeal in whole or in part, it will give written notice of the determination to the claimant. Such notice will set forth, in a manner calculated to be understood by the claimant, the specific reason or reasons for the adverse determination, reference to the specific Plan provisions on which the determination is based, a statement that the claimant is entitled to receive, upon request and free of charge, access to and copies of all documents, records and other information relevant to the claim and a statement of the claimant’s right to bring an action under section 502(a) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), if applicable.

6.05 Expenses and Indemnity. All expenses and fees incurred in connection with the administration of the Plan will be paid by the Company. To the fullest extent permitted by applicable law, the Company will indemnify and save harmless the Committee, the Board and any delegate of the Committee who is an employee of the Company and any officers and employees of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims, arising out of their discharge in good faith of responsibilities under or incident to the Plan, other than expenses and liabilities arising out of willful misconduct. Without limiting the generality of the foregoing, the Company will, promptly upon request, advance funds to persons entitled to indemnification hereunder to the extent necessary to defray legal and other expenses incurred in the defense of such liabilities and claims, as and when incurred. This indemnity will not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise.

6.06 Withholding. There will be deducted from each payment made under the Plan all taxes which are required to be withheld by the Company in respect to such payment.

6.07 Receipt or Release. Any payment to a Member or the Member’s Beneficiary in accordance with the provisions of the Plan will, to the extent thereof, be in full satisfaction of all claims against the Committee and the Company with respect to the amount paid. The Committee may require such Member or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect.

6.08 Payments on Behalf of Persons Under Incapacity. In the event that any amount or distribution becomes payable under the Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefor, the Committee may direct that such distribution or payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any distribution or payment made pursuant to such determination will, to the extent thereof, constitute a full release and discharge of the Committee and the Company with respect to the distribution or amount paid.

6.09 Successors and Assigns. The Company may not assign its obligations under this Plan, whether by contract, merger, operation of law or otherwise, unless the assignment is to an assignee or successor entity (in either case, hereafter called a “Successor”) that has stockholders’ equity or the closest equivalent thereto (as measured by the most recent audited financial statements of such Successor) equal to or greater than the stockholders’ equity of the Company (as measured immediately prior to the event that causes such entity to become a Successor to the Company). The provisions of this Section 6.09 will be binding upon each and every Successor to the Company.

6.10 No Requirement to Fund. No provisions in the Plan, either directly or indirectly, shall be construed to require the Company to reserve, or otherwise set aside, funds for the payment of benefits hereunder, and Members and Beneficiaries shall have the status of general unsecured creditors with respect to the obligation of the Company to make payments under the Plan. The Plan is intended to provide benefits for “management or highly compensated employees” within the meaning of ERISA and therefore to be exempt from the provisions of Parts 2, 3 and 4 of the Title I of ERISA.

6.11 Controlling Law. To the extent not preempted by the laws of the United States of America, the laws of the State of Indiana shall be the controlling state law in all matters relating to the Plan and shall apply.

6.12 Severability. If any provisions of the Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts of the Plan; and the Plan shall be construed and enforced as if said illegal and invalid provisions had never been included herein.

6.13 Provisions of Pension Plan Unchanged. Any benefit payable under the Pension Plan shall be paid solely in accordance with the terms and provisions of the Pension Plan; and nothing in the Plan shall operate or be construed in any way to modify, amend or affect the terms and provisions of the Pension Plan.

6.14 Nature of Payments. Any benefits provided hereunder shall constitute nonqualified deferred compensation payments to the Member and shall not be taken into account in computing the amount of salary or compensation of the Member for the purposes of determining any pension, retirement, death or other benefits under (a) any pension, retirement, profit-sharing, bonus, life insurance or other employee benefit plan of the Company or any of its subsidiaries or (b) any agreement between the Company or any subsidiary and the Member except as such plan or agreement shall otherwise expressly provide.

6.15 Gender and Number. Masculine gender shall include the feminine; and the singular shall include the plural, unless the context clearly indicated otherwise.

IN WITNESS WHEREOF, CTS Corporation has caused the CTS Corporation 2003 Excess Benefit Retirement Plan to be executed by its proper officer duly authorized by its Board of Directors.

           CTS CORPORATION

By       /s/ James L. Cummins
            ———————————————

Title    Senior Vice President Administration
            ———————————————

EX-31 4 exhibit31-a.htm (A) CERTIFICATION UNDER SECTION 302 Exhibit (31)(a)

Form 10-Q
Third Quarter 2003

EXHIBIT (31)(a)

CERTIFICATION

I, Donald K. Schwanz, 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)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions 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

(c)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: October 28, 2003		/s/ Donald K. Schwanz

		Donald K. Schwanz, Chairman, President and Chief Executive Officer

EX-31 5 exhibit31-b.htm (B) CERTIFICATION UNDER SECTION 302 Exhibit (31)(b)

Form 10-Q
Third Quarter 2003

EXHIBIT (31)(b)

CERTIFICATION

I, Vinod M. Khilnani, 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)) for the registrant and have:

(a)

(b)

(c)

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)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: October 28, 2003		/s/ Vinod M. Khilnani

		Vinod M. Khilnani Senior Vice President and Chief Financial Officer

EX-32 6 exhibit32-a.htm (A) CERTIFICATION UNDER SECTION 906 Exhibit (32) (a)

Form 10-Q
Second Quarter 2003

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 September 28, 2003, 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: October 28, 2003	/s/ Donald K. Schwanz
	Donald K. Schwanz Chairman, President and Chief Executive Officer

EX-32 7 exhibit32-b.htm (B) CERTIFICATION UNDER SECTION 906 Exhibit (32) (b)

Form 10-Q
Second Quarter 2003

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

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: October 28, 2003	/s/ Vinod M. Khilnani
	Vinod M. Khilnani Sr. Vice President and Chief Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

FORM 10-Q

CTS CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS

SIGNATURES

EXHIBIT (10)(a)

EXHIBIT (31)(a)

CERTIFICATION

EXHIBIT (31)(b)

CERTIFICATION

EXHIBIT (32)(a)

EXHIBIT (32)(b)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

CTS CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS