Acquisition

3 Months Ended

Jul. 01, 2012

Acquisition [Abstract]

Acquisition

NOTE C — Acquisition

In January 2012, CTS acquired 100% of the common stock of Valpey-Fisher Corporation (“Valpey-Fisher”), a publicly held company located in Hopkinton, Massachusetts for approximately $18.3 million. Valpey-Fisher is a recognized technology leader in the design and manufacture of precision frequency crystal oscillators. This acquisition expands CTS’ technology, and brings strong engineering capabilities and management leadership to support the Company’s strategic initiatives in CTS’ Component and Sensors’ segment.

The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of acquisition:

	Estimated Fair Values
($ in thousands)	At January 23, 2012
Current assets	$	9,077
Property, plant and equipment		6,231
Goodwill		5,355
Amortizable intangible assets		3,570
Other assets		231
Fair value of assets acquired, including $3,578 cash acquired		24,464
Less fair value of liabilities acquired		(6,197	)
Net assets acquired		18,267
Cash acquired		3,578
Net cash paid	$	14,689

Included in current assets is the fair value of accounts receivable of $2,479. Goodwill recorded in connection with the above acquisition is primarily attributable to the synergies expected to arise after the Company’s acquisition of the business and the assembled workforce of the acquired business. None of the goodwill is expected to be deductible for tax purposes.

The following table summarizes the net sales and earnings before income taxes of Valpey-Fisher that is included in CTS’ Condensed Consolidated Statements of Earnings since the acquisition date, January 23, 2012, that is included in the consolidated statement of earnings for the three months and six months ended July 1, 2012:

	Three Months Ended			Six Months Ended
($ in thousands)	July 1, 2012			July 1, 2012
Net Sales	$	3,955		$	6,946
Loss before income taxes	$	(272	)	$	(111	)

The following table summarizes the combined net sales and earnings before income taxes of CTS and Valpey-Fisher on a pro forma basis as if the acquisition date had occurred at the beginning of the reporting period:

	Three Months Ended				Six Months Ended
($ in thousands)	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(Proforma)		(Proforma)		(Proforma)		(Proforma)
Net Sales	$	154,294	$	150,804	$	302,379	$	305,841
Earnings before income taxes	$	4,528	$	5,136	$	6,812	$	11,617

The Valpey-Fisher acquisition will be accounted for using the acquisition method of accounting whereby the total purchase price will be allocated to tangible and intangible assets and liabilities based on the fair market values on the date of acquisition. CTS will determine the purchase price allocations on the acquisition based on estimates of the fair values of the assets acquired and liabilities assumed. These allocations are expected to be finalized by the end of 2012.

In January 2011, CTS acquired certain assets and assumed certain liabilities of Fordahl SA, a privately held company located in Brugg, Switzerland. This business was acquired for approximately $2.9 million, net of cash acquired. The assets acquired include inventory, accounts receivable, leasehold improvements, machinery and equipment, and certain intangible assets.

The Fordahl SA product line includes high-performance temperature compensated crystal oscillators and voltage controlled crystal oscillators. This product line expanded CTS’ frequency product portfolio from clock and crystals to highly-engineered precision ovenized oscillators. This acquisition added new customers and opened up new market opportunities for CTS.

The Fordahl acquisition was accounted for using the acquisition method of accounting whereby the total purchase price was allocated to tangible and intangible assets based on the fair market values on the date of acquisition. CTS determined the purchase price allocations on the acquisition based on estimates of the fair values of the assets acquired and liabilities assumed. CTS finalized the purchase price allocation at December 31, 2011. The land and building, machinery and equipment and intangible assets are classified as Level 3 under the fair value hierarchy. The pro forma effect of this acquisition is not material to CTS’ results of operations or financial position.