8-K

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


                                    FORM 8-K

                                 CURRENT REPORT
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


          DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MAY 5, 2004



                                 CTS CORPORATION
             (Exact name of registrant as specified in its charter)

                                                              
            INDIANA                            1-4639                    35-0225010
(State or other jurisdiction of       (Commission File Number)        (I.R.S. Employer
 incorporation or organization)                                     Identification Number)



                   905 WEST BOULEVARD NORTH, ELKHART, IN 46514
          (Address of principal executive offices, including zip code)

                                 (574) 293-7511
              (Registrant's telephone number, including area code)

                                       NA
          (Former name or former address, if changed since last report)







ITEM 5. OTHER EVENTS.

         Attached as supplemental business disclosure and risk factors relating
to CTS Corporation, an Indiana corporation.

                     Exhibits

    99.01            Supplemental Business Disclosure and Risk Factors, filed
                     herewith.






                                    SIGNATURE

         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, hereunto duly authorized.


                          CTS CORPORATION


                          By:     /s/ Richard G. Cutter
                                 ----------------------------------------------
                          Name:  Richard G. Cutter
                          Title:  Vice President, Secretary and General Counsel


Date: May 5, 2004





                                  EXHIBIT INDEX




 EXHIBIT NUMBER                      DESCRIPTION
 --------------          ------------------------------------
                      
     99.01               Supplemental Business Disclosure and
                         Risk Factors, filed herewith.

EX-99.01

                                                                   EXHIBIT 99.01


                                CTS CORPORATION

OUR BUSINESS

     We are a global manufacturer of electronic components and sensors primarily
for the automotive, computer and communications markets. Within the
communications market, we design and manufacture products for both mobile
handsets and wireline and wireless equipment, generally referred as
communication infrastructure. We also offer specialized electronics
manufacturing, design and supply-chain services to computer and communications
original equipment manufacturers, or OEMs, as well as a growing number of
industrial and medical OEMs. Founded in 1896, we are headquartered in Elkhart,
Indiana and have engineering and manufacturing operations in North America, Asia
and Europe.

     We operate our business through two reportable segments: (1) Components and
Sensors and (2) electronics manufacturing services, or EMS. Through our
Components and Sensors segment, we design and manufacture a broad product line
of components and sensors, principally electronic and electro-mechanical sensors
and actuators used in cars and some commercial vehicles; electronic components
used in mobile handsets and various products in the communications
infrastructure and computer markets; switches, resistive technology based
termination devices, cursor control devices used in computer, consumer and
industrial applications; and ceramic components and assemblies used in medical,
industrial and other applications. Our principal customers in the Components and
Sensors segment include OEMs in the automotive industry and their largest direct
suppliers, known as Tier 1 suppliers, and OEMs and contract manufacturers in the
computer and communications industries. Our automotive product manufacturing
operations are located in the United States, Canada, Mexico, Scotland, Taiwan
and China. Our electronic components manufacturing operations are located
primarily in Asia, with some smaller operations in the United States.

     Through our EMS segment, we assemble electronic and mechanical components
into finished sub-assemblies, such as printed circuit board assemblies, and
perform the final assembly of products under contract manufacturing agreements
with OEMs. Our EMS segment also provides global supply-chain management
services, such as the development and sourcing of required materials, the
coordination of new product launches and transportation services. Our EMS
segment serves OEMs in the computer and communications markets and, with
increasing frequency, the networking, medical diagnostic and imaging, industrial
and automotive industries. Our EMS operations are located in the United States,
Scotland, Singapore and China.

OUR STRATEGY

     We focus on niche markets with growth potential where we believe our
strengths in applications engineering, materials technology and manufacturing
execution, as well as our global presence, position us to achieve profitability
and growth by providing value that differentiates us from our competitors.

     In our Components and Sensors segment, we focus on the following strategic
initiatives:

     - Aggressively introduce innovative products.  We have invested in research
       and development and enhanced our product development process to increase
       the rate at which we introduce new products.

                                        1


       We also seek to increase opportunities to supply additional materials or
       labor services by providing end products that provide additional value to
       our customers. Our integrated accelerator pedal module is an example of a
       product with increased value. This product combines an accelerator pedal
       and our pedal position sensor in a single modular unit that
       electronically transmits accelerator motion to the automotive engine. The
       module sells for approximately two times more the average price of our
       stand-alone pedal position sensors. Another example of products that
       provide greater value to customers is our line of crystal-based frequency
       control modules, which incorporate into high-level assemblies our
       precision frequency control electronic components, essentially
       timekeeping devices that determine the sequence of operations within
       electronic equipment. These modules sell for two to seven times the price
       of the frequency control components that form a part of the modules.

     - Expand our auto sensors business in Asia.  While the market for
       automobiles in China is still small relative to North America and Europe,
       car sales in China grew by approximately 70% in 2003 to reach 2.1 million
       units. We believe that our significant infrastructure in Asia and our
       experience as a significant supplier of automotive sensors in North
       America and Europe position us to capitalize on the rapid growth in auto
       sales in China. In 2002 and 2003, we expanded our direct sales presence
       in Shanghai, China and Nagoya, Japan, and initiated automotive
       manufacturing operations in our facilities in Kaohsiung, Taiwan and
       Dongguan, China.

     - Broaden our customer base.  We are focused on developing new customers
       and increasing our market penetration. Our sales engineers service our
       largest customers by designing and developing products to meet specific
       customer requirements. By maintaining sales offices in the United States,
       Scotland, China, Hong Kong, Japan, Taiwan and Singapore, we intend to
       create a global engineering presence that can respond to specific design
       needs from both new and existing customers around the world.

     - Pursue growth opportunities in the communications infrastructure
       market.  We believe that our strong technology, extensive applications
       knowledge and ability to manufacture and deliver products and services in
       an efficient manner position us well to expand our market share in the
       communications infrastructure market. Recently, we capitalized on
       opportunities in this market through the introduction of our new line of
       crystal-based frequency control modules.

     - Consolidate electronic components manufacturing operations in Asia to
       lower costs.  We have components and sensors production capabilities in
       the United States, Canada, Mexico, Scotland, Taiwan, China and Singapore.
       Since late 2001, we have consolidated our frequency control products and
       most of our ceramics components manufacturing operations in Asia, where
       we have significant manufacturing capabilities. The consolidation of
       operations in Asia has resulted in lower overhead and labor costs. To
       improve our manufacturing cost position further, we are continuing to
       transfer additional product manufacturing capacity to China.

     Our EMS business model focuses on customers that produce a number of varied
products, but with low or medium volumes in any particular product line or
model. These customers require a full supply-chain capability, similar to their
larger competitors. To grow this business, we have implemented the following key
strategies:

     - Capitalize on our global manufacturing strengths and supply-chain
       capabilities.  We believe that few of our EMS competitors offer
       integrated, global and full supply-chain services to customers that
       produce a number of varied products. The largest EMS providers typically
       focus on customers with very high volume and low product variation.
       Smaller EMS providers generally lack the broad supply-chain service
       capability and global presence desired by customers seeking an EMS
       provider that can grow with them.

     - Expand our customer base.  We will continue to support large existing
       customers, such as Hewlett-Packard and Motorola, in the computing and
       communications markets, while seeking to expand and diversify our
       customer base. In particular, we intend to target OEMs in the medical,
       industrial and automotive markets, which have the high product mix and
       low to medium volumes requirements well suited to our EMS capabilities.

                                        2


     - Expand geographically to better serve customers.  We believe that our
       network of strategically positioned facilities can reduce costs, simplify
       and shorten an OEM's supply chain and reduce the time required to bring a
       product to market. We intend to pursue geographic expansion to support
       our global customers with cost-effective and timely delivery of quality
       products and services that they require worldwide, as well as to lower
       our manufacturing costs. In 2004, to meet the needs of a major customer,
       we extended our EMS capabilities into Singapore. We now deliver finished
       products for this customer from multiple locations.

     In addition, with respect to both our Components and Sensors and EMS
segments, we intend to selectively pursue strategic acquisitions. We seek
acquisitions that give us the opportunity to access new customers and markets,
broaden our manufacturing and service capabilities and geographic presence,
further develop our existing customer relationships or utilize excess capacity.
We intend to evaluate and pursue acquisition opportunities on a selective and
strategic basis.

COMPONENTS AND SENSORS PRODUCTS

     We design, manufacture and sell electronic components and sensors that are
primarily used within the automotive, computer and communications markets. The
following is a description of some of our products:

     Our automotive products include:

     - sensors used in engine air and fuel management systems, such as throttle
       position and exhaust gas recirculation sensors;

     - sensors used in position measurement systems, such as seat position
       sensors;

     - integrated accelerator pedal modules, which transmit accelerator motion
       to the automotive engine;

     - belt tension sensors, which measure seat belt tension to assist in proper
       airbag deployment.

     - fuel level sensors, which provide accurate fuel level measurement; and

     - active manifold actuators, which, when used in combination with our
       throttle position sensors, control engine airflow under dynamic engine
       conditions to improve performance and reduce emissions.

     Our electronic components include:

     - crystal-based frequency control components and assemblies, such as
       ovenized oscillators and frequency control modules used primarily in
       communications infrastructure applications;

     - ceramic duplexers and filters used in mobile handsets and other
       communications applications;

     - resistor technology based products, including high-density resistor
       arrays used as terminating devices in computing and electronic storage
       systems;

     - human interface devices, such as cursor controls used in computers and
       games;

     - various switches and potentiometers used in commercial and industrial
       applications; and

     - ceramic components and assemblies used in various applications, such as
       ink jet printers, sonar applications and medical ultrasound equipment.

EMS

     In our EMS segment, we design and build printed circuit assemblies and
complex backplanes for high-end computing and communications equipment,
primarily using components and materials designed and manufactured by other
parties. Printed circuit assembly involves attaching electronic components, such
as integrated circuits, capacitors, microprocessors, resistors and memory
modules, to printed circuit boards. Printed circuit boards are made of laminated
materials and contain electrical circuits and connections that interconnect and
transmit electrical signals among the components that are assembled on the
printed circuit boards. Backplanes are very large printed circuit boards that
serve as the backbones of sophisticated

                                        3


electronics products and provide interconnections for printed circuit boards,
integrated circuits and other electronic components.

     We offer our EMS customers comprehensive and integrated design and
manufacturing services, from initial product design to volume production and
direct order fulfillment. In the EMS process, we provide specialized design and
engineering services to our customers to complement their initial product
development efforts; we work with our customers' product development engineers
to optimize product designs to improve the manufacturing efficiency and to
reduce the manufacturing costs of these products; we build tests to identify
product defects and failures; we build and test prototypes for our customers;
and we provide final assembly and testing of our customers' products.

OUR INTELLECTUAL PROPERTY

     We hold various United States and foreign patents relating to certain of
the products which we have designed and manufactured, as well as certain of the
processes and equipment used in our manufacturing technology. In addition, we
have registered trademarks in the United States and various other countries
throughout the world. For other proprietary processes, we rely primarily on
trade secret protection. We believe that our success is not materially dependent
on the existence or duration of any patent, group of patents or trademarks.

RECENT DEVELOPMENTS

     Our business has improved considerably in recent months. Among other
indications of this improvement:

     - Sales increased by 14% for the six months ended March 28, 2004 from the
       six months ended March 30, 2003, due primarily to the implementation of
       our growth strategies and an economic upturn in our served markets.

     - Reduced depreciation and other expenses attributable to the facilities we
       closed as a part of our restructuring initiatives and a general
       improvement in the management and allocation of our fixed costs have
       improved earnings.

     - Our belt tension sensor has been selected for application on 15 vehicle
       models.

     - Our new integrated accelerator pedal modules have captured positions in
       22 vehicle models.

     - Our automotive product sales in Asia increased from approximately $2
       million in 2001 to over $10 million in 2003.

     - Our EMS business continues to grow with nine new customers added in 2003,
       including customers from the medical, automotive and industrial markets.

RECENT RESTRUCTURING ACTIVITIES

     In 2001, 2002 and 2003, we recorded restructuring and impairment charges of
$40.0 million, $18.3 million and $4.6 million, respectively, primarily relating
to our Components and Sensors segment. In 2003, we recorded an impairment charge
to reduce the carrying value of certain assets in the Components and Sensors
segment to their estimated fair value following the final production of
previously announced discontinued products and a reassessment of the current
market value of certain equipment held for sale. The 2001 and 2002 restructuring
programs primarily involved the relocation and consolidation of certain
manufacturing operations to realize operational improvements and realign our
manufacturing capacity. Also, in 2001 and 2002, we recognized expenses of $10.7
million and $1.3 million, respectively, for inventory write downs, equipment
relocation and other employee costs related to our restructuring initiatives. Of
the restructuring and impairment charges and operating expenses described above,
$23.1 million involved the expenditure of funds, while the remainder were
non-cash in nature. We completed our restructuring programs in 2003.

                                        4


                                  RISK FACTORS

                         RISKS RELATED TO OUR BUSINESS

BECAUSE WE CURRENTLY DERIVE A SIGNIFICANT PORTION OF OUR REVENUES FROM A SMALL
NUMBER OF CUSTOMERS, ANY DECREASE IN ORDERS FROM THESE CUSTOMERS COULD HAVE AN
ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS.

     We depend on a small number of customers for a large portion of our
business, and changes in the level of our customers' orders have, in the past,
had a significant impact on our results of operations. Our 15 largest customers
represent a substantial portion of our sales, approximately 71% of net sales in
2003, 73% of net sales in 2002 and 75% of net sales in 2001. Our two largest
customers are Hewlett-Packard Company and Motorola, Inc., which represented
approximately 33% and 13%, respectively, of our net sales in 2003. If a major
customer significantly cancels, delays or reduces the amount of business it does
with us, there could be an adverse effect on our business, financial condition
and operating results. Such adverse effect likely would be material if one of
our largest customers significantly reduced its amount of business. Significant
pricing and margin pressures exerted by a key customer could also materially
adversely affect our operating results. In addition, we generate significant
accounts receivable from sales to our major customers. If one or more of our
largest customers were to become insolvent or otherwise unable to pay or were to
delay payment for our services, our business, financial condition and operating
results could be materially adversely affected.

OUR CUSTOMERS HAVE CANCELED AND MAY IN THE FUTURE CANCEL THEIR ORDERS, CHANGE
PRODUCTION QUANTITIES OR LOCATIONS OR DELAY PRODUCTION.

     We generally do not obtain firm, long-term purchase commitments from our
customers, and we often experience reduced lead times in customer orders.
Customers cancel their orders, change production quantities and delay production
for a number of reasons. Uncertain economic and geopolitical conditions have
resulted, and may continue to result, in some of our customers delaying the
delivery of some of the products we manufacture for them and placing purchase
orders for lower volumes of products than previously anticipated. Cancellations,
reductions or delays by a significant customer or by a group of customers have
harmed, and may continue to harm, our results of operations by reducing the
volumes of products manufactured by us, as well as by causing a delay in the
recovery of our expenditures for inventory in preparation for customer orders
and lower asset utilization resulting in lower gross margins. In addition,
customers may require that manufacturing of their products be transitioned from
one facility to another to achieve cost and other objectives. Such transfers
result in inefficiencies and costs due to resulting excess capacity and overhead
at one facility and capacity constraints and the inability to fulfill all orders
at another.

     In addition, we make significant decisions, including determining the
levels of orders that we will seek and accept, production schedules, component
procurement commitments, personnel needs and other resource requirements, based
on our estimates of customer requirements. The short-term nature of our
customers' commitments and the changes in demand for their products reduce our
ability to estimate accurately future customer requirements. This makes it
difficult to schedule production and maximize utilization of our manufacturing
capacity. Anticipated orders may not materialize and delivery schedules may be
deferred as a result of changes in demand for our products or our customers'
products. We often increase staffing and capacity, and incur other expenses to
meet the anticipated demand of our customers, which cause reductions in our
gross margins if customer orders are delayed or canceled. On occasion, customers
require rapid increases in production, which may stress our resources and reduce
margins. We may not have sufficient capacity at any given time to meet our
customers' demands. In addition, because many of our costs and

                                        5


operating expenses are relatively fixed over the short term, a reduction in
customer demand harms our gross profit and operating income until such time as
adjustments can be made to levels and structural costs.

BECAUSE WE DERIVE A SUBSTANTIAL PORTION OF OUR REVENUES FROM CUSTOMERS IN THE
AUTOMOTIVE, COMPUTER AND COMMUNICATIONS INDUSTRIES, WE ARE SUSCEPTIBLE TO TRENDS
AND FACTORS AFFECTING THOSE INDUSTRIES AS WELL AS THE SUCCESS OF OUR CUSTOMERS'
PRODUCTS.

     Net sales to the automotive, computer and communications industries
represent a substantial portion of our revenues. Factors negatively affecting
these industries and the demand for their products also negatively affect our
business, financial condition and operating results. Any adverse occurrence,
including industry slowdown, recession, political instability, costly or
constraining regulations, armed hostilities, terrorism, excessive inflation,
prolonged disruptions in one or more of our customers' production schedules or
labor disturbances, that results in significant decline in the volume of sales
in these industries, or in an overall downturn in the business and operations of
our customers in these industries, could materially adversely affect our
business, financial condition and operating results. For example, the trend
toward consolidation in the computer and communications industries could result
in a lower level of acceptance of our products, reduced product requirements,
purchasing delays by combined entities or the loss of one or more customers.
Also, the automotive industry is generally highly unionized and some of our
customers have, in the past, experienced labor disruptions. Furthermore, the
automotive industry is highly cyclical in nature and sensitive to changes in
general economic conditions, consumer preferences and interest rates.

     Our customers are primarily original equipment manufacturers, or OEMs, in
the automotive, computer and communications industries. Our future sales are
dependent on the success of our customers. Our customers may discontinue or
modify products containing components that we manufacture or develop products
requiring new manufacturing processes. In addition, the computer and
communications industries are subject to rapid technological change and changes
in demand for our products and services. If our customers are unable to develop
products that keep pace with the changing technological environment, our
customers' products could lose market acceptance, and the demand for our
products and services could decline significantly. If we are unable to offer
technologically advanced, easily adaptable and cost effective services in
response to changing customer requirements, demand for our products and services
will decline.

WE MAY BE UNABLE TO COMPETE EFFECTIVELY AGAINST COMPETITORS IN OUR COMPONENTS
AND SENSORS SEGMENT.

     Our Components and Sensors segment is operated in highly competitive
industries that are characterized by price erosion and rapid technological
change. We compete against many domestic and foreign companies, some of which
have substantially greater manufacturing, financial, research and development
and marketing resources than we do. Additionally, many of our customers are
seeking to consolidate their business among one or more preferred or qualified
suppliers. If any customer becomes dissatisfied with our prices, quality or
timeliness of delivery, among other things, it could award future business or
even move existing business to our competitors. Moreover, some of our customers
could choose to manufacture and develop particular components themselves rather
than purchase them from us. Increased competition could result in price
reductions, reduced profit margins and loss of market share, each of which could
materially adversely affect our business, financial condition and operating
results. In addition, some of our competitors have engaged, and may in the
future engage, in merger and acquisition transactions. Consolidations by
competitors are likely to create entities with increased market share, customer
bases, proprietary technology, marketing expertise and sales force size. These
developments may materially adversely affect our ability to compete against
these competitors. We cannot assure you that our products will continue to
compete successfully with our competitors' products, including OEMs, many of
which are significantly larger than us and have greater financial and other
resources than we do.

WE ARE SUBJECT TO INTENSE COMPETITION IN THE EMS INDUSTRY.

     We compete against many providers of electronics manufacturing services.
Some of our competitors have substantially greater manufacturing and financial
resources and in some cases have more geographically diversified international
operations than we do. Our competitors, such as Benchmark Electronics, Inc.,
                                        6


Solectron, Inc., Sanmina -- SCI Corporation and Teradyne, Inc., include both
large global EMS providers and smaller EMS companies that often have a regional,
product, service or industry specific focus. We also face competition from the
manufacturing operations of our current and future OEM customers, which may
elect to manufacture their own products internally rather than outsource the
manufacturing to EMS providers. In addition, we could face competition in the
future from other large global EMS providers, such as Celestica, Inc.,
Flextronics International Ltd. and Jabil Circuit, Inc., which currently provide
services to some of our largest customers for different products. We may be at a
competitive disadvantage with respect to price when compared to manufacturers
with lower cost structures, particularly those with significant offshore
facilities located where labor and other costs are lower. Competition may
intensify further if more companies enter the markets in which we operate. Our
failure to compete effectively could materially adversely affect our business,
financial condition and operating results.


WE MAY BE UNABLE TO KEEP PACE WITH RAPID TECHNOLOGICAL CHANGES THAT COULD MAKE
SOME OF OUR PRODUCTS OR PROCESSES OBSOLETE BEFORE WE REALIZE A RETURN ON OUR
INVESTMENT.

     The technologies relating to some of our products have undergone, and are
continuing to undergo, rapid and significant changes. Specifically, end markets
for electronic components and assemblies are characterized by technological
change, frequent new product introductions and enhancements, changes in customer
requirements and emerging industry standards. The introduction of products
embodying new technologies and the emergence of new industry standards could
render our existing products obsolete and unmarketable before we can recover any
or all of our research, development and commercialization expenses on capital
investments. Furthermore, the life cycles of our products and the products we
manufacture for others vary, may change and are difficult to estimate.

     Our future success will depend upon our ability to develop and introduce
new products and product enhancements on a timely basis that keep pace with
technological developments and emerging industry standards and address
increasingly sophisticated requirements of our customers. We have incurred, and
expect to continue to incur, expenses typical of the electronics industry
associated with research and development activities and the introduction and
promotion of new products. There can be no assurance that the expenses incurred
will not exceed research and development cost estimates or that new products
will achieve market acceptance and generate sales sufficient to offset
development costs. We also cannot assure you that we will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of these new products or product enhancements or that
our new products or product enhancements will adequately meet the requirements
of the marketplace and achieve market acceptance. There can be no assurance that
products or technologies developed by others will not render our products
non-competitive or obsolete. If we are unable, for technological or other
reasons, to develop and market new products or product enhancements in a timely
and cost-effective manner, our business, financial condition and operating
results could be materially adversely affected.

WE SELL PRODUCTS TO CUSTOMERS IN CYCLICAL INDUSTRIES, WHICH ARE SUBJECT TO
SIGNIFICANT DOWNTURNS THAT COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS,
FINANCIAL CONDITION AND OPERATING RESULTS.

     We sell products to customers in cyclical industries, which have
experienced economic and industry downturns. These markets for our electronic
components and sensors and electronics manufacturing services products have
softened and may continue to soften in the future. We incurred sizeable net
losses in each of 2001 and 2002 of approximately $45.4 million and $17.9
million, respectively. We may face reduced end-customer demand, underutilization
of our manufacturing capacity, changes in our revenue mix and other factors that
could adversely affect our results of operations in the near term. We cannot
predict whether we will achieve profitability in future periods.

     Deterioration of revenues and earnings, beyond current levels, could have a
negative effect on our business, financial condition and operating results. This
could also have a negative effect on the price of our common stock and could
also make it difficult for us to service our debt, including our obligations
under our credit facility and our 6 1/2% convertible subordinated debentures,
and comply with the covenants in our credit facility and other agreements
governing our indebtedness. Violation of the

                                       7


covenants in our credit facility could require substantial fees to our banks
until the violation is corrected. In the event the violation cannot be
corrected, all of the indebtedness under our credit facility and the 6 1/2%
convertible subordinated debentures, as well as certain other indebtedness, may
be accelerated. If our indebtedness is accelerated, we cannot be certain that we
will have sufficient funds to pay the accelerated indebtedness or that we will
have the ability to refinance the accelerated indebtedness on terms favorable to
us or at all.

OUR OPERATING RESULTS VARY SIGNIFICANTLY FROM PERIOD TO PERIOD.

     We experience fluctuations in our operating results. Some of the principal
factors that contribute to these fluctuations are:

     - changes in demand for our products and services;

     - our effectiveness in managing manufacturing processes, costs and timing
       of our component purchases so that components are available when needed
       for production, while mitigating the risks of purchasing inventory in
       excess of immediate production needs;

     - the degree to which we are able to utilize our available manufacturing
       capacity;

     - changes in the cost and availability of labor and components, which often
       occur in the electronics manufacturing industry and which affect our
       margins and our ability to meet delivery schedules;

     - general economic and served industry conditions; and

     - local conditions and events that may affect our production volumes, such
       as labor conditions, political instability and local holidays.

     In addition, due to the significant differences in the operating income
margins in our two reporting segments, the mix of sales between our Components
and Sensors segment and our EMS segment affect our operating results from period
to period. We expect that operating income margins in our EMS business will
decline in the near term due to continued pricing pressure from our customers.
In addition, although our restructuring activities and relocation of some of our
manufacturing operations to Asia should result in improved operating income
margins in our Components and Sensors segment, we can provide no assurances that
this will occur.

WE MAY FURTHER RESTRUCTURE OUR OPERATIONS, WHICH MAY MATERIALLY ADVERSELY AFFECT
OUR BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS.

     In 2001, 2002 and 2003, we recorded restructuring and impairment charges of
$40.0 million, $18.3 million and $4.6 million, respectively, relating to costs
incurred to effect operational improvements and related organizational
realignments, primarily in our Components and Sensors segment. We completed
these restructuring actions, including the relocation of certain manufacturing
operations, in 2003. We may incur additional restructuring and impairment
charges in the future if circumstances warrant. If we restructure our operations
in the future and are unsuccessful in implementing our restructuring plans, we
may experience disruptions in our operations and higher ongoing costs, which may
materially adversely affect our business, financial condition and operating
results.

WE FACE RISKS RELATING TO OUR INTERNATIONAL OPERATIONS.

     Because we have significant international operations, our operating results
and financial condition could be materially adversely affected by economic,
political, health, regulatory and other factors existing in foreign countries in
which we operate. Our international operations are subject to inherent risks,
which may materially adversely affect us, including:

     - political and economic instability in countries in which our products are
       manufactured;

     - expropriation or the imposition of government controls;

                                        8


     - changes in government regulation;

     - export license requirements;

     - trade restrictions;

     - earnings expatriation restrictions;

     - exposure to different legal standards;

     - less favorable intellectual property laws;

     - health conditions and standards;

     - currency controls;

     - fluctuations in exchange rates;

     - increases in the duties and taxes we pay;

     - high levels of inflation or deflation;

     - greater difficulty in collecting our accounts receivable and longer
       payment cycles;

     - changes in labor conditions and difficulties in staffing and managing our
       international operations;

     - limitations on insurance coverage against geopolitical risks, natural
       disasters and business operations; and

     - communication among and management of international operations.

In addition, these same factors may also place us at a competitive disadvantage
to some of our foreign competitors.

     To respond to competitive pressures and customer requirements, we may
further expand internationally at lower cost locations, particularly in Asia. If
we continue to expand in these locations, we may incur additional capital
expenditures. We cannot assure you that we will realize the anticipated
strategic benefits of our international operations or that our international
operations will contribute positively to, and not adversely affect, our
business, financial condition and operating results.

     Furthermore, because a significant portion of our products is manufactured
in Asia, primarily in China and Taiwan, any conflict or uncertainty in these
countries, including due to public health or safety concerns, such as Severe
Acute Respiratory Syndrome (SARS), or natural disasters, such as earthquakes,
could have a material adverse effect on our business, financial condition and
operating results. In addition, if the government of any country in which our
products are manufactured or sold sets technical standards for products made in
or imported into their country that are not widely shared, some of our customers
may suspend imports of their products into that country, require manufacturers
in that country to manufacture products with different technical standards or
disrupt cross-border manufacturing partnerships, which, in each case, could
materially adversely affect our business, financial condition and operating
results.

WE ARE EXPOSED TO FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES THAT HAVE
ADVERSELY AFFECTED, AND MAY CONTINUE TO ADVERSELY AFFECT, OUR BUSINESS,
FINANCIAL CONDITION AND OPERATING RESULTS.

     We transact business in various foreign countries. We present our
consolidated financial statements in U.S. dollars, but a portion of our revenues
and expenditures is transacted in other currencies. As a result, we are exposed
to fluctuations in foreign currencies. We have currency exposure arising from
both sales and purchases denominated in currencies other than the U.S. dollar.
Volatility in the exchange rates between the foreign currencies and the U.S.
dollar could harm our business, financial condition and operating results.
Furthermore, to the extent we sell our products in foreign markets, currency
fluctuations may result in our products becoming too expensive for foreign
customers. For example, our EMS business located in the United Kingdom sells
primarily in U.S. dollars while most of the operating expenses and some material
purchases are made in U.K. pounds sterling. Accordingly, when the U.S. dollar
weakens against the U.K. pound
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sterling, our EMS segment operating results generally worsen. As the U.S. dollar
strengthens against the U.K. pound sterling and the Euro, our Components and
Sensors segment operating results generally worsen. We also manufacture products
in China, most of which we sell in U.S. dollars. An appreciation of the Chinese
renminbi against the U.S. dollar would increase our expenses when translated
into U.S. dollars.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY OR WE INFRINGE, OR ARE
ALLEGED TO INFRINGE, ON ANOTHER PERSON'S INTELLECTUAL PROPERTY, OUR BUSINESS,
FINANCIAL CONDITION AND OPERATING RESULTS COULD BE MATERIALLY ADVERSELY
AFFECTED.

     The success of our business depends, in part, upon our ability to protect
trade secrets, copyrights and patents, obtain or license patents and operate
without infringing on the intellectual property rights of others. We rely on a
combination of trade secrets, copyrights, patents, nondisclosure agreements and
technical measures to protect our proprietary rights in our products and
technology. The steps taken by us in this regard may not be adequate to prevent
misappropriation of our technology. In addition, the laws of some foreign
countries in which we operate do not protect our proprietary rights to the same
extent as do the laws of the United States. Although we continue to evaluate and
implement protective measures, we cannot assure you that these efforts will be
successful. Our inability to protect our intellectual property rights could
diminish or eliminate the competitive advantages that we derive from our
technology, cause us to lose sales or otherwise harm our business.

     We believe that patents will continue to play an important role in our
business. However, we cannot assure you that we will be successful in securing
patents for claims in any pending patent application or that any issued patent
will provide us with any competitive advantage. We also cannot assure you that
the patents will not be challenged by third parties or that the patents of
others will not materially adversely affect our ability to do business.

     We may become involved in litigation in the future to protect our
intellectual property or because others may allege that we infringe on their
intellectual property. These claims and any resulting lawsuit could subject us
to liability for damages and invalidate our intellectual property rights. If an
infringement claim is successfully asserted by a holder of intellectual property
rights, we may be required to cease marketing or selling certain products, pay a
penalty for past infringement and spend significant time and money to develop a
non-infringing product or process or to obtain licenses for the technology,
process or information from the holder. We may not be successful in the
development of a non-infringing alternative, or licenses may not be available on
commercially acceptable terms, if at all, in which case we may lose sales and
profits. In addition, any litigation could be lengthy and costly and could
materially adversely affect us even if we are successful in the litigation.

WE ARE SUBJECT TO A VARIETY OF ENVIRONMENTAL LAWS AND REGULATIONS THAT EXPOSE US
TO POTENTIAL FINANCIAL LIABILITY.

     Our operations are regulated by a number of federal, state, local and
foreign environmental and safety laws and regulations that govern, among other
things, the discharge of hazardous materials into the air and water as well as
the handling, storage and disposal of these materials. These laws and
regulations include the Clean Air Act, the Clean Water Act, the Resource,
Conservation and Recovery Act and the Comprehensive Environmental Response,
Compensation and Liability Act, as well as analogous state and foreign laws.
Compliance with these environmental laws is a major consideration for us because
we use hazardous materials in our manufacturing processes. If we violate
environmental laws or regulations, we could be held liable for substantial
fines, damages, and costs of remedial actions. Our environmental permits could
also be revoked or modified, which could require us to cease or limit production
at one or more of our facilities, thereby materially adversely affecting our
business, financial condition and operating results. Environmental laws and
requirements, including environmental laws in the European Union and other
foreign jurisdictions, have generally become more stringent over time and could
continue to do so, imposing greater compliance costs and increasing risks and
penalties associated with any violation, which also could materially affect our
business, financial condition and operating results.

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     In addition, because we are a generator of hazardous wastes, even if we
fully comply with applicable environmental laws and requirements, we may be
subject to financial exposure for costs, including costs of an investigation and
any remediation, associated with contaminated sites at which hazardous
substances from our operations have been stored, treated or disposed of. We may
also be subject to exposure for such costs at sites that we currently own or
operate or formerly owned or operated. Such exposure may be joint and several,
so that we may be held responsible for more than our share of the contamination
or even for the entire contamination.

     We have been notified by the Environmental Protection Agency, state
environmental agencies and, in some cases, generator groups that we are or may
be a potentially responsible party regarding hazardous substances at several
sites not owned or operated by us, as well as several sites that we own.
Although we estimate our potential liability with respect to environmental
violations or alleged violations and other environmental liabilities and reserve
for such matters, we cannot assure you that our reserves will be sufficient to
cover the actual costs that we incur as a result of these matters. We also
cannot assure you that additional contamination will not be found in the future,
either at sites currently known to us or at other sites. Any liability we may
have for such matters could materially adversely affect our business, financial
condition and operating results.

WE INTEND TO EXPLORE ACQUISITIONS, JOINT VENTURES AND OTHER TRANSACTIONS THAT
COMPLEMENT OR EXPAND OUR BUSINESS. WE MAY NOT BE ABLE TO COMPLETE SUCH
TRANSACTIONS AND SUCH TRANSACTIONS, IF EXECUTED, POSE SIGNIFICANT RISKS AND MAY
MATERIALLY ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND OPERATING
RESULTS.

     We intend to explore opportunities to buy other businesses or technologies
that could complement, enhance or expand our current business or product lines
or that might otherwise offer us growth opportunities. We may have difficulty
finding such opportunities or, if we do identify such opportunities, we may not
be able to complete such transactions for reasons including a failure to secure
financing. Any transactions that we are able to identify and complete may
involve a number of risks, including:

     - the diversion of our management's attention from our existing business to
       integrate the operations and personnel of the acquired or combined
       business or joint venture;

     - possible adverse effects on our operating results during the integration
       process; and

     - our possible inability to achieve the intended objectives of the
       transaction.

     In addition, we may not be able to successfully or profitably integrate,
operate, maintain and manage our newly acquired operations or employees. We may
not be able to maintain uniform standards, controls, procedures and policies,
and this may lead to operational inefficiencies. In addition, future
acquisitions may result in dilutive issuances of equity securities or the
incurrence of additional debt.

WE MAY EXPERIENCE RAW MATERIAL SHORTAGES AND SHORTAGES OF REQUIRED ELECTRONIC
COMPONENTS, WHICH COULD CAUSE US TO DELAY SHIPMENTS TO CUSTOMERS AND REDUCE OUR
BUSINESS, FINANCIAL CONDITION AND OPERATING RESULTS.

     In the past, from time to time, there have been shortages in certain raw
materials used in the manufacture of our components and sensors and certain
electronic components purchased by us and incorporated into assemblies and
subassemblies. Unanticipated raw material or electronic component shortages may
prevent us from making scheduled shipments to customers. Our inability to make
scheduled shipments could cause us to experience a shortfall in revenue,
increase our costs and adversely affect our relationship with affected customers
and our reputation as a reliable service provider. Raw material and electronic
component shortages may also increase our cost of goods sold because we may be
required to pay higher prices for raw materials or electronic components in
short supply and order such raw materials or electronic components in greater
quantities to compensate for variable delivery times. As a result, raw material
or electronic component shortages could adversely affect our operating results
for a particular period due to the resulting revenue shortfall and increased
costs.

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OUR CREDIT FACILITY AND THE AGREEMENTS GOVERNING OUR 6 1/2% CONVERTIBLE
SUBORDINATED DEBENTURES CONTAIN PROVISIONS THAT COULD MATERIALLY RESTRICT OUR
BUSINESS.

     Our credit facility contains a number of significant covenants that, among
other things, limit our ability to:

     - dispose of assets;

     - incur additional debt (including pursuant to capital leases);

     - guarantee third-party obligations;

     - 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;

     - make capital expenditures; and

     - engage in certain transactions with our subsidiaries and affiliates.

In addition, under our credit facility, we are required to meet a number of
financial ratios and tests.

     The agreements governing our 6 1/2% convertible subordinated debentures
contain covenants that, among other things, limit our ability to:

     - pay dividends on, redeem or repurchase capital stock;

     - make payments with respect to any indebtedness that ranks junior to our
       6 1/2% convertible subordinated debentures; and

     - engage in certain transactions with our subsidiaries and affiliates.

     The restrictions contained in our credit facility and in the agreements
governing our 6 1/2% convertible subordinated debentures could limit our ability
to plan for or react to market conditions or meet capital needs or could
otherwise restrict our activities or business plans. These restrictions could
adversely affect our ability to finance our operations, strategic acquisitions,
investments or other capital needs or to engage in other business activities
that could be in our interests.

     Our ability to comply with these covenants may be affected by events beyond
our control. If we breach any of these covenants or restrictions, it could
result in an event of default under our credit facility, the agreements
governing our 6 1/2% convertible subordinated debentures, or documents governing
any other existing or future indebtedness. A default, if not cured or waived,
may permit acceleration of our indebtedness. In addition, our lenders could
terminate their commitments to make further extensions of credit under our
credit facility. If our indebtedness is accelerated, we cannot be certain that
we will have sufficient funds to pay the accelerated indebtedness or that we
will have the ability to refinance accelerated indebtedness on terms favorable
to us or at all.

LOSS OF OUR KEY MANAGEMENT AND OTHER PERSONNEL, OR AN INABILITY TO ATTRACT SUCH
MANAGEMENT AND OTHER PERSONNEL, COULD MATERIALLY AFFECT OUR BUSINESS.

     We depend on our senior executive officers and other key personnel to run
our business. We do not have long-term retention contracts with our key
personnel. The loss of any of these officers or other key personnel could
adversely affect our operations. Competition for qualified employees among
companies that rely heavily on engineering and technology is at times intense,
and the loss of qualified employees or an inability to attract, retain and
motivate additional highly skilled employees required for the operation and
expansion of our business could hinder our ability to conduct research
activities successfully and develop marketable products.

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