10-Q

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 March 31, 2013

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: 574-523-3800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or shorter period that the registrant was required to submit and post such files).    Yes  x    No    ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of April 22, 2013: 33,520,551.

CTS CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

			Page
PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Unaudited Condensed Consolidated Statements of Earnings	3
		- For the Three Months Ended March 31, 2013 and April 1, 2012
		Unaudited Condensed Consolidated Statements of Comprehensive Earnings	4
		- For the Three Months Ended March 31, 2013 and April 1, 2012
		Unaudited Condensed Consolidated Balance Sheets	5
		- As of March 31, 2013 and December 31, 2012
		Unaudited Condensed Consolidated Statements of Cash Flows	6
		- For the Three Months Ended March 31, 2013 and April 1, 2012
		Notes to Unaudited Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
	Item 4.	Controls and Procedures	27
PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	27
	Item 1A.	Risk Factors	28
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	28
	Item 3	Defaults Upon Senior Securities	28
	Item 4	Mine Safety Disclosures	28
	Item 5	Other Information	28
	Item 6.	Exhibits	28
SIGNATURES			29

2

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED

(In thousands, except per share amounts)

	Three Months Ended
	March 31, 2013			April 1, 2012
Net sales	$	149,512		$	146,969
Costs and expenses:
Cost of goods sold		118,332			124,920
Insurance recovery for business interruption - casualties		—			(3,627	)
Selling, general, and administrative expenses		21,407			19,404
Research and development expenses		6,252			6,109
Insurance recovery for property damage - casualties		—			(1,769	)
Restructuring and impairment charge – Note M		559			—
Operating earnings		2,962			1,932
Other (expense)/income:
Interest expense		(915	)		(659	)
Interest income		413			449
Other		298			575
Total other (expense)/income		(204	)		365
Earnings before income taxes		2,758			2,297
Income tax (benefit)/expense		(810	)		14
Net earnings	$	3,568		$	2,283
Net earnings per share - Note J
Basic	$	0.11		$	0.07
Diluted	$	0.10		$	0.07
Cash dividends declared per share	$	0.035		$	0.035
Average common shares outstanding:
Basic		33,523			34,106
Diluted		34,176			34,718

See notes to unaudited condensed consolidated financial statements.

3

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - UNAUDITED

(In thousands of dollars)

	Three Months Ended
	March 31, 2013			April 1, 2012
Net earnings	$	3,568		$	2,283
Other comprehensive (loss)/earnings:
Cumulative translation adjustment, net of tax of $534 and tax benefit of $335		(1,741	)		1,162
Defined benefit and post-retirement benefit plans:
Amortization of prior service cost included in net periodic pension costs, net of tax of $59 and $59		91			92
Amortization of loss included in net periodic pension costs, net of tax of $774 and $606		1,245			980
Foreign exchange impact, net of tax of $74 and tax benefit of $42		207			(114	)
Reclassification adjustments included in net earnings– defined benefit and post-retirement benefit plans		1,543			958
Unrealized gain on interest swaps treated as cash flow hedges:
Unrealized holding gains arising during period, net of tax of $14		22			–
Reclassification adjustments for losses included in net earnings, net of tax of $30		47			–
Net change in unrealized holding loss on interest rate swaps		69			–
Other comprehensive (loss)/earnings		(129	)		2,120
Comprehensive earnings	$	3,439		$	4,403

See notes to unaudited condensed consolidated financial statements.

4

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(In thousands of dollars except share amounts)

	(Unaudited) March 31, 2012			December 31, 2012
ASSETS
Current Assets
Cash and cash equivalents	$	109,432		$	109,571
Accounts receivable, less allowances (2013 - $747; 2012 - $811)		93,730			89,342
Inventories - Note D		82,144			81,752
Other current assets		29,741			28,633
Total current assets		315,047			309,298
Property, plant and equipment, less accumulated depreciation (2013 - $235,382; 2012 - $240,693)		94,115			93,725
Other Assets
Goodwill – Note L		35,156			35,156
Other indefinite-lived intangible asset – Note L		820			820
Other intangible assets, net – Note L		45,785			47,538
Deferred income taxes		72,207			73,158
Other		1,420			1,484
Total other assets		155,388			158,156
Total Assets	$	564,550		$	561,179
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	68,328		$	67,973
Accrued liabilities		40,066			47,056
Total current liabilities		108,394			115,029
Long-term debt - Note E		164,000			153,500
Other long-term obligations		22,434			24,892
Shareholders’ Equity
Preferred stock - authorized 25,000,000 shares without par value; none issued		—			—
Common stock - authorized 75,000,000 shares without par value; 55,495,710 shares issued at March 31, 2013 and 55,263,082 shares issued at December 31, 2012		294,288			291,512
Additional contributed capital		37,979			40,008
Retained earnings		370,194			367,800
Accumulated other comprehensive loss		(120,733	)		(120,604	)
		581,728			578,716
Cost of common stock held in treasury (2013 – 21,935,218 and 2012 – 21,829,954 shares)		(312,006	)		(310,958	)
Total shareholders’ equity		269,722			267,758
Total Liabilities and Shareholders’ Equity	$	564,550		$	561,179

See notes to unaudited condensed consolidated financial statements.

5

CTS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(In thousands of dollars)

	Three Months Ended
	March 31, 2013			April 1, 2012
Cash flows from operating activities:
Net earnings	$	3,568		$	2,283
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization		5,886			4,790
Prepaid pension asset		—			(1,702	)
Equity-based compensation – Note B		1,318			1,214
Amortization of retirement benefit adjustments – Note F		2,168			1,734
Restructuring charge – Note M		559			—
Insurance recovery for business interruption and property damage - casualties		—			(5,396	)
Insurance proceeds for business interruption and property damage other than property, plant and equipment - casualties		—			4,966
Other		(2,235	)		(212	)
Changes in assets and liabilities, net of acquisition
Accounts receivable		(4,929	)		1,394
Inventories		(28	)		2,886
Other current assets		(1,354	)		(429	)
Accounts payable and accrued liabilities		(8,441	)		(15,634	)
Total adjustments		(7,056	)		(6,389	)
Net cash used in operating activities		(3,488	)		(4,106	)
Cash flows from investing activities:
Proceeds from sale of assets		70			—
Capital expenditures		(4,699	)		(4,369	)
Capital expenditures to replace property, plant and equipment damaged in casualties		—			(1,766	)
Insurance proceeds for property, plant and equipment damaged in casualties		—			2,250
Payment for acquisition, net of cash acquired		—			(14,689	)
Net cash used in investing activities		(4,629	)		(18,574	)
Cash flows from financing activities:
Payments of long-term debt – Note E		(1,206,100	)		(1,301,300	)
Proceeds from borrowings of long-term debt – Note E		1,216,600			1,335,600
Payments of short-term notes payable		(528	)		(1,284	)
Proceeds from borrowings of short-term notes payable		528			1,284
Purchase of treasury stock		(1,048	)		(2,734	)
Dividends paid		(1,171	)		(1,193	)
Exercise of stock options		266			710
Other		42			78
Net cash provided by financing activities		8,589			31,161
Effect of exchange rate on cash and cash equivalents		(611	)		(452	)
Net (decrease)/increase in cash and cash equivalents		(139	)		8,029
Cash and cash equivalents at beginning of year		109,571			76,412
Cash and cash equivalents at end of period	$	109,432		$	84,441
Supplemental cash flow information – outstanding
Cash paid during the period for:
Interest	$	659		$	537
Income taxes—net	$	1,295		$	1,007

See notes to unaudited condensed consolidated financial statements.

6

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2013

NOTE A – Basis of Presentation

The accompanying condensed consolidated 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 unaudited condensed consolidated financial statements should be read in conjunction with the financial statements, notes thereto, and other information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring items) necessary for a fair statement, in all material respects, of the financial position and results of operations for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year.

NOTE B – Equity-Based Compensation

At March 31, 2013, CTS had five equity-based compensation plans: the 1996 Stock Option Plan (“1996 Plan”), the 2001 Stock Option Plan (“2001 Plan”), the Nonemployee Directors’ Stock Retirement Plan (“Directors’ Plan”), the 2004 Omnibus Long-Term Incentive Plan (“2004 Plan”), and the 2009 Omnibus Equity and Performance Incentive Plan (“2009 Plan”). All of these plans, except the Directors’ Plan, were approved by shareholders. As of December 31, 2009, additional grants can only be made under the 2004 and 2009 Plans. CTS believes that equity-based awards align the interest of employees with those of its shareholders.

The 2009 Plan, and previously the 1996 Plan, 2001 Plan and 2004 Plan, provides for grants of incentive stock options or nonqualified stock options to officers, key employees, and nonemployee members of CTS’ board of directors. In addition, the 2009 Plan and the 2004 Plan allow for grants of stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other stock awards.

The following table summarizes the compensation expense included in the Unaudited Condensed Consolidated Statements of Earnings for the three months ended March 31, 2013 and April 1, 2012 relating to equity-based compensation plans:

($ in thousands)	March 31, 2013		April 1, 2012
Restricted stock units	$	1,318	$	1,214

The following table summarizes the status of these plans as of March 31, 2013:

	2009 Plan		2004 Plan		2001 Plan		1996 Plan
Awards originally available		3,400,000		6,500,000		2,000,000		1,200,000
Stock options outstanding				194,300		102,300		33,750
Restricted stock units outstanding		784,164		101,223
Options exercisable				194,300		102,300		33,750
Awards available for grant		1,628,220		262,686

7

Stock Options

Stock options are exercisable in cumulative annual installments over a maximum 10-year period, commencing at least one year from the date of grant. Stock options are generally granted with an exercise price equal to the market price of the Company’s stock on the date of grant. The stock options generally vest over four years and have a 10-year contractual life. The awards generally contain provisions to either accelerate vesting or allow vesting to continue on schedule upon retirement if certain service and age requirements are met. The awards also provide for accelerated vesting if there is a change in control event.

The Company estimated the fair value of the stock option on the grant date using the Black-Scholes option-pricing model and assumptions for expected price volatility, option term, risk-free interest rate, and dividend yield. Expected price volatilities were based on historical volatilities of the Company’s stock. The expected option term is derived from historical data on exercise behavior. The dividend yield was based on historical dividend payments. The risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant.

A summary of the status of stock options as of March 31, 2013 and April 1, 2012, and changes during the three-month periods then ended, is presented below:

	March 31, 2013					April 1, 2012
	Options			Weighted- Average Exercise Price		Options			Weighted- Average Exercise Price
Outstanding at beginning of year		392,550		$	10.91		728,050		$	10.24
Exercised		(45,800	)	$	8.41		(79,122	)	$	8.57
Expired		(15,400	)	$	7.75		(11,000	)	$	16.22
Forfeited		(1,000	)	$	9.78		(9,650	)	$	9.52
Outstanding at end of period		330,350		$	11.40		628,278		$	10.36
Exercisable at end of period		330,350		$	11.40		628,278		$	10.36

The total intrinsic value of share options exercised during the quarter ended March 31, 2013 was $93,000. The total intrinsic value of share options exercised during the quarter ended April 1, 2012 was $138,000.

The weighted average remaining contractual life of options outstanding and options exercisable at March 31, 2013 and April 1, 2012 were 1.5 years and 1.8 years, respectively. The aggregate intrinsic values of options outstanding and options exercisable at March 31, 2013 and April 1, 2012 were approximately $73,000 and $547,000, respectively.

There are no unvested stock options at March 31, 2013.

The following table summarizes information about stock options outstanding at March 31, 2013:

	Options Outstanding and Exercisable
Range of Exercise Prices	Number Outstanding at 3/31/13		Weighted  Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
$ 9.78 – 11.11		244,050		1.13	$	10.49
$ 13.68 – 16.24		86,300		2.50	$	13.97

Service-Based Restricted Stock Units

Service-based restricted stock units (“RSUs”) entitle the holder to receive one share of common stock for each unit when the unit vests. RSUs are issued to officers, key employees and non-employee directors as compensation. Generally, the RSUs vest over a three-year period. A summary of the status of RSUs as of March 31, 2013 and April 1, 2012, and changes during the three-month periods then ended is presented below:

	March 31, 2013					April 1, 2012
	RSUs			Weighted- average Grant-Date Fair Value		RSUs			Weighted- average Grant-Date Fair Value
Outstanding at beginning of year		751,798		$	9.82		701,449		$	9.35
Granted		336,100		$	10.17		221,250		$	10.46
Converted		(199,811	)	$	9.88		(144,533	)	$	9.55
Forfeited		(2,700	)	$	10.45		(8,897	)	$	9.19
Outstanding at end of period		885,387		$	9.94		769,269		$	9.63
Weighted-average remaining contractual life		7.5 years					7.3 years

8

CTS recorded compensation expense of approximately $824,000 and $752,000 related to service-based restricted stock units during the three months ended March 31, 2013 and April 1, 2012, respectively.

As of March 31, 2013, there was approximately $4,486,000 of unrecognized compensation cost related to nonvested RSUs. That cost is expected to be recognized over a weighted-average period of 1.2 years. CTS recognizes expense on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.

Performance-Based Restricted Stock Units

On February 2, 2010, CTS granted performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero percent to 200% of the target amount of 78,000 units in 2012 subject to certification of the 2011 fiscal year results by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of sales growth targets and, as a result, 49,320 units were awarded and vested.

On February 3, 2011, CTS granted performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero percent to 200% of the target amount of 53,200 units in 2013 subject to certification of the 2012 fiscal year results by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of sales growth targets. No awards were awarded as the targets were not met.

On February 8, 2012, CTS granted performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero percent to 200% of the target amount of 45,850 units in 2014 subject to certification of the 2013 fiscal year results by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of sales growth targets.

On February 8, 2012, CTS granted performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero to 200% of the target amount of 39,300 units in 2014 subject to certification of the 2013 fiscal year results by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of certain cash flow targets.

On February 11, 2013, CTS granted performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero percent to 200% of the target amount of 77,700 units in 2016 subject to certification of the 2015 fiscal year results by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of sales growth targets.

On February 11, 2013, CTS granted performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero to 200% of the target amount of 66,600 units in 2016 subject to certification of the 2015 fiscal year results by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of certain cash flow targets.

CTS recorded compensation expense of approximately $294,000 and $230,000 related to performance-based restricted stock units during the three months ended March 31, 2013 and April 1, 2012, respectively. As of March 31, 2013 there was approximately $2,079,000 of unrecognized compensation cost related to performance-based RSUs. That cost is expected to be recognized over a weighted-average period of 1.6 years.

Market-Based Restricted Stock Units

On July 2, 2007, CTS granted a market-based restricted stock unit award for an executive officer. An aggregate of 25,000 units may be earned in performance years ending in the following three consecutive years on the anniversary of the award date. Vesting may occur in the range from zero percent to 150% of the target award on the end date of each performance period and is tied exclusively to CTS total stockholder return relative to 32 enumerated peer group companies’ total stockholder return rates. The vesting rate will be determined using a matrix based on a percentile ranking of CTS total stockholder return with peer group total shareholder return over a three-year period. During the year ended December 31, 2010, 12,500 units was earned and awarded to the executive officer. There were no units awarded in 2011. On July 2, 2012, 8,334 units were earned and awarded to the executive officer.

On February 2, 2010, CTS granted market-based restricted stock unit awards for certain executives and key employees. Vesting may occur in the range from zero percent to 200% of the target amount of 117,000 units in 2012. Vesting is dependent upon CTS total stockholder return relative to 28 enumerated peer group companies’ stockholder return rates and, as a result, 67,130 units were awarded and vested.

9

On February 3, 2011, CTS granted market-based restricted stock unit awards for certain executives and key employees. Vesting may occur in the range from zero percent to 200% of the target amount of 79,800 units in 2013. Vesting is dependent upon CTS total stockholder return relative to 28 enumerated peer group companies’ stockholder return rates. On February 11, 2013, 80,940 units were earned and awarded.

On February 8, 2012, CTS granted market-based restricted stock unit awards for certain executives and key employees. Vesting may occur in the range from zero percent to 200% of the target amount of 45,850 units in 2014. Vesting is dependent upon CTS total stockholder return relative to 28 enumerated peer group companies’ stockholder return rates.

On February 11, 2013, CTS granted market-based restricted stock unit awards for certain executives and key employees. Vesting may occur in the range from zero percent to 200% of the target amount of 77,700 units in 2016. Vesting is dependent upon CTS total stockholder return relative to 20 enumerated peer group companies’ stockholder return rates.

On February 11, 2013, CTS granted a market-based restricted stock award to an executive officer. Vesting may occur in the range from zero percent to 200% of the target amount of 32,500 units in 2016. Vesting is dependent upon CTS total stockholder return relative to 20 enumerated peer group companies’ stockholder return rates.

CTS recorded compensation expense of approximately $200,000 and $232,000 related to market-based restricted stock units during the three months ended March 31, 2013 and April 1, 2012, respectively. As of March 31, 2013, there was approximately $1,540,000 of unrecognized compensation cost related to market-based RSUs. That cost is expected to be recognized over a weighted-average period of approximately 1.7 years.

Stock Retirement Plan

The Directors’ Plan provides for a portion of the total compensation payable to nonemployee directors to be deferred and paid in CTS stock. The Directors’ Plan was frozen effective December 1, 2004. All future grants will be from the 2009 Plan.

NOTE C – Acquisition

In December 2012, CTS acquired D&R Technology (“D&R”), a privately-held company located in Carol Stream, Illinois and Juarez, Mexico for $63.5 million. D&R is a leading manufacturer of custom designed sensors, switches and electromechanical assemblies primarily serving the automotive light-vehicle market. This acquisition expands CTS’ strategic automotive sensor product platform with new customers and a broader product portfolio. The acquisition also diversifies CTS’ Components and Sensors segment and brings new growth opportunities from sensor applications for safety systems and vehicle chassis management. Additionally, D&R brings strong sensor design and development engineering capabilities to complement CTS’ engineering team.

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 December 21, 2012
Current assets	$	13,839
Property, plant and equipment		8,635
Goodwill		26,991
Amortizable intangible assets		18,330
In-process research and development		500
Other assets		678
Fair value of assets acquired		68,973
Less fair value of liabilities acquired		(5,473	)
Net cash paid	$	63,500

Included in current assets is the fair value of accounts receivable of $7,693,000. 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. The goodwill is deductible for tax purposes over a 15-year period.

10

The following table summarizes the net sales and earnings before income taxes of D&R that is included in CTS’ Condensed Consolidated Statements of Earnings for the three months ended March 31, 2013:

($ in thousands)	March 31, 2013
Net Sales	$	12,702
Income before income taxes	$	150

The D&R acquisition is accounted for using the acquisition method of accounting whereby the total purchase price is allocated to tangible and intangible assets and liabilities based on the fair market values on the date of acquisition. CTS determines the purchase price allocations on the acquisition based on estimates of the fair values of the assets acquired and liabilities assumed. During the quarter ended March 31, 2013, the Company recorded a measurement period adjustment as a result of additional information provided by CTS’ external valuation consultants. This adjustment increased amortizable intangible assets by $1,457,000. Other measurement period adjustments were recorded for accounts receivable and accounts payable to reflect fair market values on the date of acquisition, which resulted in a decrease of $260,000 and an increase of $3,000, respectively. The net effect of these measurement period adjustments reduced goodwill by $1,194,000. The allocations for goodwill and other intangible assets is based on historical experience and third party evaluation. The allocations pertaining to goodwill and other intangible assets will be finalized in 2013.

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 Valpey-Fisher acquisition was accounted for using the acquisition method of accounting whereby the total purchase price was allocated to tangible and intangible assets and liabilities based on the fair market values on the date of acquisition. CTS determined the purchase price allocations on the acquisition based on the fair values of the assets acquired and liabilities assumed. CTS finalized the purchase price allocation at December 31, 2012.

The following table summarizes the pro-forma combined net sales and earnings before income taxes of CTS, D&R and Valpey-Fisher on a pro forma basis as if the acquisition date had occurred on January 1, 2011:

	April 1, 2012
($ in thousands)	(Unaudited Proforma)
Net Sales	$	161,120
Earnings before income taxes	$	3,075

NOTE D – Inventories

Inventories consist of the following:

($ in thousands)	March 31, 2013		December 31, 2012
Finished goods	$	13,877	$	16,267
Work-in-process		15,246		15,860
Raw materials		53,021		49,625
Total inventories	$	82,144	$	81,752

NOTE E – Debt

On January 10, 2012, CTS amended its November 18, 2010 unsecured revolving credit facility. This amendment provided for an increase in the revolving credit facility to $200 million and increased the accordion feature, whereby CTS can expand the facility to $300 million, subject to participating banks’ approval. Additionally, among other covenants, the amendment reduced the applicable margin by 25 basis points, increased the total consideration the company may pay for non-U.S. based acquisitions, and extended the term of the credit facility through January 10, 2017.

Long-term debt was comprised of the following:

($ in thousands)	March 31, 2013		December 31, 2012
Revolving credit facility, weighted-average interest rate of 1.8% (2013), and 1.8% (2012) due in 2017	$	164,000	$	153,500

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There was $164.0 million outstanding under the $200 million revolving credit facility at March 31, 2013, and $153.5 million at December 31, 2012. The Company had $33.4 million available under the $200 million credit facility at March 31, 2013, net of standby letters of credit of $2.6 million, and $43.9 million available at December 31, 2012, net of standby letters of credit of $2.6 million. Interest rates on the revolving credit facility fluctuate based upon London Interbank Offered Rate and the Company’s quarterly total leverage ratio. CTS pays a commitment fee on the undrawn portion of the revolving credit facility. The commitment fee varies based on the quarterly leverage ratio and was 0.35 percent and 0.30 percent per annum at March 31, 2013 and April 1, 2012, respectively. The revolving credit facility requires, among other things, that CTS comply with a maximum total leverage ratio and a minimum fixed charge coverage ratio. Failure of CTS to comply with these covenants could reduce the borrowing availability under the revolving credit facility. CTS was in compliance with all debt covenants at March 31, 2013. The revolving credit facility requires CTS to deliver quarterly financial statements, annual financial statements, auditors certifications and compliance certificates within a specified number of days after the end of a quarter and year. Additionally, the revolving facility contains restrictions limiting CTS’ ability to: dispose of assets; incur certain additional debt; repay other debt or amend subordinated debt instruments; create liens on assets; make investments, loans or advances; make acquisitions or engage in mergers or consolidations; engage in certain transactions with CTS’ subsidiaries and affiliates; and make stock repurchases and dividend payments.

CTS uses interest rate swaps to convert the line of credit’s variable rate of interest into a fixed rate. In the second quarter of 2012, CTS entered into four separate interest rate swap agreements to fix interest rates on $50 million of long-term debt for the periods January 2013 to January 2017. In the third quarter of 2012, CTS entered into four separate interest rate swap agreements to fix interest rates on $25 million of long-term debt for the periods January 2013 to January 2017. The difference to be paid or received under the terms of the swap agreements will be recognized as an adjustment to interest expense for the related line of credit when settled.

These swaps are treated as cash flow hedges and consequently, the changes in fair value were recorded in Other Comprehensive Income. An unrealized gain of approximately $36,000 was recorded in Other Comprehensive Income for the three months ended March 31, 2013. Approximately $304,000 was recorded as accrued liabilities and $1,216,000 recorded as a non-current liability in other long-term obligations on the Condensed Consolidated Balance Sheets. CTS also reclassed approximately $77,000 of realized loss out of other comprehensive income to interest expense for the quarter ended March 31, 2013.

As a result of the use of these derivative instruments, the Company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, the Company has a policy of only entering into contracts with carefully selected major financial institutions based upon their credit ratings and other factors. CTS’ established policies and procedures for mitigating credit risk on principal transactions include reviewing and establishing limits for credit exposure and continually assessing the creditworthiness of counterparties.

NOTE F – Retirement Plans

Net pension expense/(income) for the three months ended March 31, 2013 of $545,000 and April 1, 2012 of $106,000 for our domestic and foreign plans include the following components:

	Domestic Pension Plans						Foreign Pension Plans
($ in thousands)	March 31, 2013			April 1, 2012			March 31, 2013			April 1, 2012
Service cost	$	648		$	683		$	28		$	31
Interest cost		2,711			2,991			132			142
Expected return on plan assets (1)		(5,042	)		(5,376	)		(100	)		(109	)
Amortization of prior service cost		149			151			—			—
Amortization of loss		1,921			1,519			98			74
Expense/(income), net	$	387		$	(32	)	$	158		$	138

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

Net post retirement expense for the three months ended March 31, 2013 and April 1, 2012 for our post-retirement plan includes the following components:

	Three Months Ended
($ in thousands)	March 31, 2013		April 1, 2012
OTHER POSTRETIREMENT BENEFIT PLAN
Service cost	$	2	$	2
Interest cost		56		64
Amortization of gain		—		(10	)
Postretirement expense	$	58	$	56

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NOTE G – Segments

CTS reportable segments are grouped by entities that exhibit similar economic characteristics and the segment’s reporting results are regularly reviewed by CTS’ chief operating decision maker to make decisions about resources to be allocated to these segments and to evaluate the segment’s performance. CTS has two reportable segments: 1) Components and Sensors and 2) Electronics Manufacturing Services (“EMS”).

Components and sensors are products that 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 communications infrastructure and computer markets; terminators, including ClearONE™ terminators, used in computer and other high speed applications, switches, resistor networks and potentiometers used to serve multiple markets; and fabricated piezo-electric materials and substrates used primarily in medical, computer and industrial markets.

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 Original Equipment Manufacturer (“OEM”) or other contract manufacturer. Additionally for some customers, CTS provides full turnkey manufacturing and completion including design, bill-of-material management, logistics, and repair.

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 segment operating earnings/(loss) before restructuring and impairment charge, interest expense, interest income, other non-operating income/(expense), and income tax expense.

Summarized financial information concerning CTS’ reportable segments is shown in the following table:

($ in thousands)	Components and Sensors			EMS			Total
First Quarter of 2013
Net sales to external customers	$	98,062		$	51,450		$	149,512
Segment operating earnings before corporate and shared services charges		10,382			1,063			11,445
Corporate and shared services charges		(5,979	)		(1,682	)		(7,661	)
Segment operating earnings/(loss)		4,403			(619	)		3,784
Total assets		450,827			113,723			564,550
First Quarter of 2012
Net sales to external customers	$	76,418		$	70,551		$	146,969
Segment operating earnings before corporate and shared services charges		7,344			455			7,799
Corporate and shared services charges		(4,324	)		(1,543	)		(5,867	)
Segment operating earnings/(loss) (1)		3,020			(1,088	)		1,932
Total assets		357,687			150,979			508,666

⁽¹⁾  EMS segment’s operating loss of $(1,088) includes $1,769 of insurance recovery for property damage related to the flood at CTS Thailand’s manufacturing facility.

Reconciling information between reportable segments’ operating earnings and CTS’ consolidated earnings before income taxes is shown in the following table for three-month periods then ended:

($ in thousands)	March 31, 2013			April 1, 2012
Total segment operating earnings	$	3,784		$	1,932
Restructuring and restructuring-related charges — Components and Sensors		(227	)		—
Restructuring and restructuring-related charges — EMS		(595	)		—
Interest expense		(915	)		(659	)
Interest income		413			449
Other income		298			575
Earnings before income taxes	$	2,758		$	2,297

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NOTE H – 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 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.

CTS manufactures accelerator pedals for a number of automobile manufacturers, including subsidiaries of Toyota Motor Corporation (“Toyota”). In January 2010, Toyota initiated a recall of a substantial number of vehicles in North America containing pedals manufactured by CTS. The pedal recall and associated events have led to the Company being named as a co-defendant with Toyota in certain litigation. In February 2010, CTS entered into an agreement with Toyota whereby Toyota agreed that it will indemnify, defend, and hold the Company harmless from, and the parties will cooperate in the defense of, third-party civil claims and actions that are filed or asserted in the United States or Canada and that arise from or relate to alleged incidents of unintended acceleration of Toyota and Lexus vehicles. The limited exceptions to indemnification restrict CTS’ share of any liability to amounts collectable from its insurers.

Certain other claims are pending against CTS with respect to matters arising out of the ordinary conduct of the Company’s business. These claims, in the opinion of management, based upon past experience and presently available information, either adequate provision for anticipated costs has been reserved or the ultimate anticipated costs will not materially affect CTS’ consolidated financial position, results of operations, or cash flows.

Scotland EMS Manufacturing Facility Fire

During the second quarter of 2011, a fire occurred at the Company’s Scotland EMS manufacturing facility. The fire damaged approximately $1.6 million of inventory and $0.2 million of machinery and equipment at net book value. Property insurance coverage with a $0.1 deductible had substantially covered the costs of repairing and/or replacing the damaged inventory and machinery and equipment. Business interruption insurance had substantially covered the lost sales impact and related fixed costs in 2011.

In the first quarter of 2012, CTS recovered approximately $0.8 million from the Company’s insurance carriers and recorded a recovery of approximately $0.6 million for business interruption in CTS’ Condensed Consolidated Statements of Earnings for the quarter ended April 1, 2012 after deducting $0.1 million for certain expenses and relieving the insurance receivable of approximately $0.1 million at December 31, 2011. All claims were settled in 2012 with CTS’ insurance carrier.

Thailand EMS Manufacturing Facility Flood

During the fourth quarter of 2011, CTS’ Thailand EMS manufacturing facility was flooded. The flood damaged approximately $0.8 million of inventory and $0.5 million of fixed assets. CTS also incurred approximately $2.5 million of fixed costs at this facility. Local property insurance covered the costs of repairing and/or replacing the damaged inventory and machinery and equipment. CTS also had business interruption insurance under these policies that covers the lost sales impact and fixed costs. The maximum amount covered under the local insurance policy was approximately $2.4 million.

In the first quarter of 2012, CTS received cash of approximately $7.2 million from the Company’s insurance carriers. Out of the $7.2 million cash, approximately $4.4 million was for business interruption and the remaining $2.8 million was for the reimbursement of costs related to property damage. Part of the cash received was to relieve the insurance receivable balance of $2.4 million recorded at December 31, 2011. Consequently, CTS recorded a recovery of approximately $3.0 million for business interruption and $1.8 million for property damage in CTS’ Condensed Consolidated Statements of Earnings for the quarter ended April 1, 2012. All claims were settled in 2012 with CTS’ insurance carrier.

NOTE I—Fair Value Measurement

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The table below summarizes the financial liability that was measured at fair value on a recurring basis as of March 31, 2013:

($ in thousands)	Carrying Value at March 31, 2013		Quoted Prices in Active Markets for Identical (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Loss for Quarter Ended March 31, 2013
Interest rate swap – cash flow hedge	$	1,520	$	—	$	1,520	$	—	$	77

The fair value of CTS’ interest rate swaps were measured using a market approach which uses current industry information. There is a readily determinable market and these swaps are classified within level 2 of the fair value hierarchy. $304,000 of the fair value of these swaps is classified as a current liability and the remaining $1,216,000 is classified as a non-current liability on CTS’ Condensed Consolidated Balance Sheets.

CTS’ long-term debt consists of a revolving debt facility. There is a readily determinable market for CTS’ revolving credit debt and it is classified within Level 2 of the fair value hierarchy as the market is not deemed to be active. The fair value of long-term debt was measured using a market approach which uses current industry information and approximates carrying value.

NOTE J –Earnings Per Share

The table below provides a reconciliation of the numerator and denominator of the basic and diluted earnings per share (“EPS”) computations. Basic earnings per share is calculated using the weighted average number of common shares outstanding as the denominator and net earnings as the numerator. Diluted earnings per share is calculated by adding all potentially dilutive shares to the weighted average number of common shares outstanding for the numerator. All anti-

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dilutive shares are excluded from the computation of diluted earnings per share. The calculations below provide net earnings, weighted average common shares outstanding, and earnings per share for both basic and diluted EPS for the three months ended March 31, 2013 and April 1, 2012.

($ in thousands, except per share amounts)	Net Earnings (Numerator)		Shares (in thousands) (Denominator)		Per Share Amount
First Quarter 2013
Basic earnings per share	$	3,568		33,523	$	0.11
Effect of dilutive securities:
Equity-based compensation plans				653
Diluted earnings per share	$	3,568		34,176	$	0.10
First Quarter 2012
Basic earnings per share	$	2,283		34,106	$	0.07
Effect of dilutive securities:
Equity-based compensation plans				612
Diluted earnings per share	$	2,283		34,718	$	0.07

The following table shows the potentially dilutive securities which have been excluded from the first quarter 2013 and 2012 dilutive earnings per share calculation because they are either anti-dilutive, or the exercise price exceeds the average market price.

	Three Months Ended
(Number of shares in thousands)	March 31, 2013		April 1, 2012
Stock options		219		282

NOTE K – Treasury Stock

Common stock held in treasury totaled 21,935,218 shares with a cost of $312.0 million at March 31, 2013 and 21,829,954 shares with a cost of $311.0 million at December 31, 2012. Approximately 8.1 million shares are available for future issuances.

In August 2012, CTS’ Board of Directors authorized a program to repurchase up to one million shares of its common stock in the open market at a maximum price of $13 per share. The authorization has no expiration. Reacquired shares will be used to support equity-based compensation programs and for other corporate purposes. During the first three months of 2013, 105,264 shares were repurchased.

NOTE L – Goodwill and Other Intangible Assets

CTS has the following other intangible assets and goodwill as of:

	March 31, 2013					December 31, 2012
($ in thousands)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Customer lists/relationships	$	62,014	$	(26,015	)	$	62,014	$	(25,084	)
Patents		10,319		(10,319	)		10,319		(10,319	)
Other intangibles		11,280		(1,494	)		11,280		(672	)
Total		83,613		(37,828	)		83,613		(36,075	)
In-process research & development		820		—			820		—
Goodwill		35,156		—			35,156		—
Total other intangible assets and goodwill	$	119,589	$	(37,828	)	$	119,589	$	(36,075	)

During the quarter ended March 31, 2013, CTS retrospectively adjusted to provisional amounts recognized at the acquisition date for the D&R acquisition in December 2012. Customer lists/relationships were reduced by $7,988,000, other intangibles was increased by $9,445,000 and goodwill was reduced by $1,194,000 as a result of additional information provided by CTS’ external valuation consultants. The D&R allocations pertaining to goodwill and other intangible assets will be finalized in 2013. See Note C for further discussion.

Of the net intangible assets excluding goodwill and in-process research and development at March 31, 2013, $41.1 million relates to the Components and Sensors segment and $4.7 million relates to the EMS segment. The in-process research and development intangible at March 31, 2013 relates to the Components and Sensors Segment. Of the goodwill at March 31, 2013, $34.7 million relates to Components and Sensors segment and $0.5 million relates to the EMS segment. Of the goodwill at December 31, 2012, $35.9 relates to Components and Sensors and $0.5 million relates to the EMS segment.

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CTS recorded amortization expense of $1.8 million during the three month period ended March 31, 2013 and $0.8 million during the three month period ended April 1, 2012. The weighted average remaining amortization period for the amortizable intangible assets is 11.7 years. The weighted average remaining amortization period for customer lists/relationships is 12.4 years and for the other intangibles is 9.2 years. CTS estimates remaining amortization expense of $3.8 million in 2013, $4.8 million in 2014, $4.6 million in 2015, $4.3 million in 2016, $4.2 million in 2017 and $24.1 million thereafter.

NOTE M – Restructuring Charges

During December of 2012, CTS realigned its operations to suit the business needs of the Company. These realignment actions resulted in the elimination of approximately 190 positions. These actions were completed as of March 31, 2013. The following table displays the planned restructuring and restructuring-related charges associated with the realignment, as well as a summary of the actual costs incurred through March 31, 2013:

($ in millions)                    December 2012 Plan	Planned Costs		Actual incurred through March 31, 2013
Workforce reduction	$	1.7	$	1.8
Asset impairment charge		1.1		1.1
Other charge		0.3		0.4
Restructuring and impairment charges	$	3.1	$	3.3
Inventory write-down	$	0.5	$	0.5
Equipment relocation		0.1		0.3
Other charges		0.4		0.1
Restructuring-related charges	$	1.0	$	0.9
Total restructuring and restructuring-related charges		4.1		4.2

Approximately $0.8 million of the restructuring and restructuring-related charges of $4.2 million were incurred in the first quarter of 2013. $0.6 million of these charges related to the EMS segment and $0.2 million relates to the Components and Sensors segment. Restructuring and impairment charges are reported on a separate line on the Consolidated Statements of Earnings. Restructuring-related charges are reported as a component of Cost of Goods Sold on the Consolidated Statements of Earnings.

The following table displays the restructuring reserve activity related to the realignment for the period ended December 31, 2012:

($ in millions)                    December 2012 Plan
Restructuring liability at January 1, 2013	$	1.6
Restructuring and restructuring-related charges, excluding asset impairments and write-offs		0.8
Cost paid		(2.0	)
Restructuring liability at March 31, 2013	$	0.4

Note N – Other Comprehensive Income

The following table displays the changes in Accumulated Other Comprehensive Income by components for the three months ended March 31, 2013 (all amounts are stated net of tax):

($ in thousands)	Cumulative translation adjustment			Defined benefit pension items			Unrealized gains and losses on cash flow hedges			Total
Accumulated other comprehensive income - balance at January 1, 2013	$	1,219		$	(120,843	)	$	(980	)	$	(120,604	)
Other comprehensive earnings before reclassifications		(1,741	)		—			22			(1,719	)
Amounts reclassified from accumulated other comprehensive income (1)		—			1,543			47			1,590
Net current period other comprehensive income	$	(1,741	)	$	1,543		$	69		$	(129	)
Accumulated other comprehensive income - balance at March 31, 2013	$	(522	)	$	(119,300	)	$	(911	)	$	(120,733	)

⁽¹⁾  Includes $2,019 of actuarial loss that was reclassified to Cost of goods sold $700, Selling, general and administrative expenses $938 and Research and development expenses $381 on CTS’ Condensed Consolidated Statements of Earnings. The tax impact of this reclassification was $774.

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Note O – Recent Accounting Pronouncements

ASU 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity”

In March 2013, the FASB issued Accounting Standards Update 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity,” which requires an entity to release any related cumulative translation adjustment into net income when the entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights). Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. This amendment also clarifies that the sale of an investment in a foreign entity includes both (1) events that result in the loss of a controlling financial interest in a foreign entity (that is, irrespective of any retained investment) and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date. These provisions are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. CTS is in the process of evaluating the impact of these provisions on the Company’s consolidated financial statements. The Company does not expect these provisions to have a material impact on CTS’ financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

Forward-Looking Statements

This document contains statements that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, any financial or other guidance, statements that reflect our current expectations concerning future results and events, and any other statements that are not based solely on historical fact. Forward-looking statements are based on management’s expectations, certain assumptions and currently available information. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. These forward-looking statements are made subject to certain risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from those presented in the forward-looking statements. Examples of factors that may affect future operating results and financial condition include, but are not limited to: changes in the economy generally and in respect to the businesses in which CTS operates; unanticipated issues in integrating acquisitions; rapid technological change; general market conditions in the automotive, communications, and computer industries, as well as conditions in the industrial, defense and aerospace, and medical markets; reliance on key customers; unanticipated natural disasters or other events; the ability to protect our intellectual property; pricing pressures and demand for our products; and risks associated with our international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks. Many of these, and other risks and uncertainties are discussed in further detail in Item 1.A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012. We undertake no obligation to publicly update our forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.

Overview

CTS Corporation (“we”, “our”, “us”) is a global manufacturer of electronic components and sensors used primarily in the automotive, communications, and defense and aerospace markets. We also provide electronic manufacturing solutions, including design and supply chain management functions, primarily serving the defense and aerospace, communications, industrial and medical markets under contract arrangements with original equipment manufacturers.

As discussed in more detail throughout the MD&A:

• Sales in the first quarter of 2013 of $149.5 million were reported through two segments, Components and Sensors and Electronic Manufacturing Services (“EMS”). Sales increased by $2.5 million, or 1.7%, in the first quarter of 2013 from the first quarter of 2012. Sales in the Components and Sensors segment increased by 28.3% versus the first quarter of 2012, while net sales in the EMS segment decreased by 27.1%.

• Gross margin as a percent of sales was 20.9% in the first quarter of 2013 compared to 15.0% in the first quarter of 2012. The increase in gross margin primarily resulted from the favorable segment mix as the Components and Sensors segment percent of total sales increased to 65.6% of consolidated sales from 52.0% in the same period of 2012, and the first quarter 2012 expenses and lost margin of approximately $6.2 million related to the flood at our Thailand facility and the fire at our Scotland facility.

• Insurance recovery for business interruption due to the flood at our Thailand facility and the fire at our Scotland facility totaled $3.6 million in the first quarter of 2012. This recovery partially offset related expenses that negatively impacted our gross margin. There were no insurance recoveries for business interruption in the first quarter 2013 as all recoveries were completed in 2012.

• Selling, general and administrative (“SG&A”) expenses were $21.4 million, or 14.3% of sales, in the first quarter of 2013 versus $19.4 million, or 13.2% of sales, in the first quarter of 2012.

• Research and development (“R&D”) expenses were $6.3 million, or 4.2% of sales, in the first quarter of 2013 compared to $6.1 million, or 4.2% of sales, in the first quarter of 2012.

• Insurance recovery for property damage due to the flood at our Thailand facility was $1.8 million in the first quarter of 2012. There were no insurance recoveries for property damage in the first quarter of 2013 as all recoveries were completed in 2012.

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Interest and other expense was $0.2 million in the first quarter of 2013 compared to income of $0.4 million in the same quarter of 2012.

• Income tax benefit was $0.8 million and the effective tax rate was (29.4%) in the first quarter of 2013, versus an insignificant tax expense and effective tax rate in the first quarter of 2012.

• Net earnings were $3.6 million, or $0.10 per diluted share, in the first quarter of 2013. This compares with $2.3 million, or $0.07 per diluted share, in the first quarter of 2012.

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Critical Accounting Policies

MD&A discusses our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. 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 our consolidated financial statements:

• Inventory valuation, the allowance for doubtful accounts, and other accrued liabilities

• Long-lived and intangible assets valuation, and depreciation/amortization periods

• Income taxes

• Retirement plans

• Equity-based compensation

In the first quarter of 2013, there were no changes in the above critical accounting policies.

Results of Operations

Comparison of First Quarter 2013 and First Quarter 2012

Segment Discussion

Refer to Note G, “Segments,” for a description of our segments.

The following table highlights the segment results for the quarters ending March 31, 2013 and April 1, 2012:

($ in thousands)	Components and Sensors			EMS			Total
First Quarter 2013
Sales to external customers	$	98,062		$	51,450		$	149,512
Segment operating earnings before corporate and shared services charges	$	10,382		$	1,063		$	11,445
Corporate and shared services charges		(5,979	)		(1,682	)		(7,661	)
Segment operating earnings/(loss)	$	4,403		$	(619	)	$	3,784
% of Sales		4.5	%		(1.2	)%		2.5	%
First Quarter 2012
Sales to external customers	$	76,418		$	70,551		$	146,969
Segment operating earnings before corporate and shared services charges	$	7,344		$	455		$	7,799
Corporate and shared services charges		(4,324	)		(1,543	)		(5,867	)
Segment operating earnings/(loss) (1)	$	3,020		$	(1,088	)	$	1,932
% of Sales		4.0	%		(1.5	)%		1.3	%

⁽¹⁾  EMS segment’s operating loss of $(1,088) includes $1,769 of insurance recovery for property damage related to the flood at CTS Thailand’s manufacturing facility.

Sales in the Components and Sensors segment increased $21.6 million, or 28.3%, from the first quarter of 2012. The increase in sales was primarily attributable to a $17.4 million increase in sales to automotive markets due to incremental sales of $12.7 million from the acquisition of D&R Technology, and sales of $7.3 million from the recently-launched smart actuator product, partially offset by lower sales of $2.6 million in all other automotive products, mainly pedal modules. Sales of electronic components increased $4.2 million, or 14.8%, driven by higher sales of $3.5 million of piezoceramic products mainly for hard disk drive applications.

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The Components and Sensors segment recorded operating earnings of $4.4 million in the first quarter of 2013 versus $3.0 million in the first quarter of 2012. The favorable earnings change resulted primarily from higher sales, including the D&R Technology acquisition, partially offset by Chief Executive Officer (“CEO”) transition costs.

Sales in the EMS segment decreased $19.1 million, or 27.1%, in the first quarter of 2013 from the first quarter of 2012. Sales decreased $14.3 million in the defense and aerospace market, $7.1 million in the industrial market, $1.0 million in the medical market and $0.4 million in the computer market partially offset by higher sales of $3.7 million in the communications market.

EMS segment operating loss was $0.6 million in the first quarter of 2013 versus an operating loss of $1.1 million in the first quarter of 2012. Despite lower sales volume, the earnings change was favorable primarily due to lower net expenses related to the flood at our Thailand facility.

Total Company Discussion

The following table highlights changes in significant components of the Unaudited Condensed Consolidated Statements of Earnings for the quarters ended March 31, 2013 and April 1, 2012:

	Quarter ended
($ in thousands, except net earnings per share)	March 31, 2013			April 1, 2012			Increase (Decrease)
Sales	$	149,512		$	146,969		$	2,543
Gross margin (1)	$	31,180		$	22,049		$	9,131
% of sales		20.9	%		15.0	%		5.9	%
Insurance recovery for business interruption	$	—		$	(3,627	)	$	(3,627	)
Selling, general and administrative expenses	$	21,407		$	19,404		$	2,003
% of sales		14.3	%		13.2	%		1.1	%
Research and development expenses	$	6,252		$	6,109		$	143
% of sales		4.2	%		4.2	%		—	%
Insurance recovery for property damage	$	—		$	(1,769	)	$	(1,769	)
Restructuring charge	$	559		$	—		$	559
Operating earnings	$	2,962		$	1,932		$	1,030
% of sales		2.0	%		1.3	%		0.7	%
Interest and other (expense)/income	$	(204	)	$	365		$	(569	)
Income tax (benefit)/expense	$	(810	)	$	14		$	(824	)
Net earnings	$	3,568		$	2,283		$	1,285
% of sales		2.4	%		1.6	%		0.8	%
Net earnings per diluted share	$	0.10		$	0.07		$	0.03

⁽¹⁾  Gross margin included $264 of restructuring-related costs.

Sales of $149.5 million in the first quarter of 2013 increased $2.5 million, or 1.7%, from the first quarter of 2012 attributable to higher Component and Sensor segment sales of $21.6 million, offset by lower EMS segment sales of $19.1 million.

Gross margin as a percent of sales was 20.9% in the first quarter of 2013 compared to 15.0% in the first quarter of 2012. The increase in gross margin primarily resulted from the favorable segment mix as the Components and Sensors segment percent of total sales increased to 65.6% of consolidated sales from 52.0% in the same period of 2012, and the first quarter 2012 expenses and lost margin of approximately $6.2 million related to the flood at our Thailand facility and the fire at our Scotland facility.

Insurance recovery for business interruption due to the flood at our Thailand facility and the fire at our Scotland facility totaled $3.6 million in the first quarter of 2012. This recovery partially offset related expenses that negatively impacted our gross margin. There were no insurance recoveries for business interruption in the first quarter 2013 as all recoveries were completed in 2012.

SG&A expenses were $21.4 million, or 14.3% of sales, in the first quarter of 2013 versus $19.4 million, or 13.2% of sales, in the first quarter of 2012. SG&A expenses as a percentage of sales increased primarily due to the acquisition of D&R Technology and CEO transition costs.

22

R&D expenses were $6.3 million, or 4.2% of sales, in the first quarter of 2013 compared to $6.1 million, or 4.2% of sales, in the first quarter of 2012. R&D expenses are incurred by the Components and Sensors segment and are primarily focused on expanded applications of existing products and new product development, as well as current product and process enhancements.

There were no insurance recoveries for property damage in 2013. Insurance recovery for property damage due to the flood at our Thailand facility was $1.8 million in the first quarter of 2012.

Operating earnings were $3.0 million in the first quarter of 2013 compared to $1.9 million in the first quarter of 2012 as a result of the reasons discussed above.

Interest and other expense was $0.2 million in the first quarter of 2013 versus income of $0.4 million in the same quarter of 2012. The decrease was primarily due to higher net interest expense of $0.3 million as a result of higher debt balances, and $0.1 million of unfavorable foreign exchange impact.

The effective tax rate in the first quarter of 2013 was (29.4)% versus an insignificant amount in the first quarter of 2012. The decrease in tax rate resulted from the mix of earnings by jurisdiction and $1.6 million discrete tax benefit associated with the retroactive application of the U.S. research tax credit signed into law during January 2013 and granting of the China high technology incentive tax credit.

Net earnings were $3.6 million, or $0.10 per diluted share, in the first quarter of 2013 compared with net earnings of $2.3 million, or $0.07 per diluted share, in the first quarter of 2012.

Scotland EMS Manufacturing Facility Fire

During the second quarter of 2011, a fire occurred at our Scotland EMS manufacturing facility. The fire damaged approximately $1.6 million of inventory and $0.2 million of machinery and equipment at net book value. Property insurance coverage with a $0.1 deductible had substantially covered the costs of repairing and/or replacing the damaged inventory and machinery and equipment. Business interruption insurance had substantially covered the lost sales impact and related fixed costs in 2011.

In the first quarter of 2012, CTS recovered approximately $0.8 million from the Company’s insurance carriers and recorded a recovery of approximately $0.6 million for business interruption in CTS’ Condensed Consolidated Statements of Earnings for the quarter ended April 1, 2012 after deducting $0.1 million for certain expenses and relieving the insurance receivable of approximately $0.1 million at December 31, 2011. All claims were settled in 2012 with CTS’ insurance carrier.

Thailand EMS Manufacturing Facility Flood

During the fourth quarter of 2011, our Thailand EMS manufacturing facility was flooded. The flood damaged approximately $0.8 million of inventory and $0.5 million of fixed assets. We also incurred approximately $2.5 million of fixed costs at this facility. Local property insurance covered the costs of repairing and/or replacing the damaged inventory and machinery and equipment. We also had business interruption insurance under these policies that covers the lost sales impact and fixed costs. The maximum amount covered under the local insurance policy was approximately $2.4 million.

In the first quarter of 2012, we received cash of approximately $7.2 million from our insurance carriers. Out of the $7.2 million cash, approximately $4.4 million was for business interruption and the remaining $2.8 million was for the reimbursement of costs related to property damage. Part of the cash received was to relieve the insurance receivable balance of $2.4 million recorded at December 31, 2011. Consequently, we recorded a recovery of approximately $3.0 million for business interruption and $1.8 million for property damage in our Condensed Consolidated Statements of Earnings for the quarter ended April 1, 2012. All claims were settled in 2012 with our insurance carrier.

2013 Outlook

While the global macro economic environment remains cautious, primarily impacting the EMS segment, sales from new programs and the D&R acquisition in the Components and Sensors segment will benefit the earnings in the coming quarters. As a result, management is maintaining its full-year 2013 guidance, though at the low end of the sales increase of 12% to 15% over 2012, and adjusted diluted earnings per share in 2013, which excludes $0.02 per share of restructuring and related charges, is being maintained in the range of $0.73 to $0.78, including $0.05 per share of CEO transition costs.

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The following table reconciles U.S. GAAP diluted earnings per share to adjusted earnings per share for the Company:

	Full Year 2013
U.S. GAAP diluted earnings per share	$	0.71-0.76
Tax affected charges to reported diluted loss per share:
Restructuring and related charges		0.02
Adjusted diluted earnings per share	$	0.73-0.78

Liquidity and Capital Resources

Overview

Cash and cash equivalents were $109.4 million at March 31, 2013 and $109.6 million at December 31, 2012. Total debt on March 31, 2013 was $164.0 million, compared to $153.5 million at December 31, 2012, as we increased debt to fund domestic working capital requirements. Total debt as a percentage of total capitalization was 37.8% at the end of the first quarter of 2013, compared with 36.4% at December 31, 2012. Total debt as a percentage of total capitalization is defined as the sum of notes payable and long-term debt as a percentage of total debt and shareholders’ equity.

Working capital increased by $12.4 million in the first quarter of 2013 versus year-end 2012, primarily due to a decrease in other accrued liabilities of $7.0 million and an increase in accounts receivable of $4.4 million.

Cash Flow

Operating Activities

Net cash used by operating activities was $3.5 million during the first three months of 2013. Components of net cash used by operating activities included net changes in current assets and current liabilities of $14.8 million and pension liabilities of $2.0 million, which were partially offset by net earnings of $3.6 million and depreciation and amortization expense of $5.9 million, add-backs of other non-cash items such as equity-based compensation, amortization of retirement benefit and restructuring totaling $4.0 million. The net changes in assets and liabilities were primarily due to decreased accounts payable and accrued liabilities of $8.4 million, and increased accounts receivable of $4.9 million.

Net cash used by operating activities was $4.1 million during the first three months of 2012. Components of net cash used by operating activities included net changes in assets and liabilities of $11.8 million and an increase in prepaid pension asset of $1.7 million which were partially offset by net earnings of $2.3 million and depreciation and amortization expense of $4.8 million, add-backs of other non-cash items such as equity-based compensation, amortization of retirement benefit and net insurance recovery totaling $2.5 million. The changes in assets and liabilities were primarily due to decreased accounts payable and accrued liabilities of $15.6 million partially offset by decreased inventories of $2.9 million.

Investing Activities

Net cash used in investing activities for the first three months of 2013 was $4.6 million primarily for capital expenditures of $4.7 million, partially offset by proceeds from sale of assets of $0.1 million.

Net cash used in investing activities for the first three months of 2012 was $18.6 million for the Valpey-Fisher acquisition of $14.7 million, capital expenditures of $4.4 million, and capital expenditures to replace property damaged by casualty of $1.8 million partially offset by insurance proceeds for property damage due to casualty of $2.3 million.

Financing Activities

Net cash provided by financing activities for the first three months of 2013 was $8.6 million, consisting primarily of a net increase in long-term debt of $10.5 million, offset by and $1.2 million in dividend payments and $1.0 million in treasury stock purchases. The additional debt was primarily used to meet usual working capital requirements.

Net cash provided by financing activities for the first three months of 2012 was $31.2 million, consisting primarily of a net increase in long-term debt of $34.3 million, offset by $2.7 million in treasury stock purchases and $1.2 million in dividend payments. The additional debt was primarily used to meet usual working capital requirements and to fund the Valpey-Fisher acquisition.

24

Capital Resources

Refer to Note E, “Debt,” to our unaudited consolidated financial statements for further discussion.

On January 10, 2012, we amended our November 18, 2010 unsecured revolving credit facility. This amendment provided for an increase in the revolving credit facility to $200 million and increased the accordion feature, whereby we can expand the facility to $300 million, subject to participating banks’ approval. Additionally, among other covenants, the amendment reduced the applicable margin by 25 basis points, increased the total consideration we may pay for non-U.S. based acquisitions, and extended the term of the credit facility through January 10, 2017.

Long-term debt was comprised of the following:

($ in thousands)	March 31, 2013		December 31, 2012
Revolving credit facility, weighted-average interest rate of 1.8% (2013), and 1.8% (2012) due in 2017.	$	164,000	$	153,500

There was $164.0 million outstanding under the $200 million revolving credit facility at March 31, 2013, and $153.5 million at December 31, 2012. We had $33.4 million available under the $200 million credit facility at March 31, 2013, net of standby letters of credit of $2.6 million, and $43.9 million available at December 31, 2012, net of standby letters of credit of $2.6 million. Interest rates on the revolving credit facility fluctuate based upon London Interbank Offered Rate and our quarterly total leverage ratio. We pay a commitment fee on the undrawn portion of the revolving credit facility. The commitment fee varies based on the quarterly leverage ratio and was 0.35 percent and 0.30 percent per annum at March 31, 2013 and April 1, 2012, respectively. The revolving credit facility requires, among other things, that we comply with a maximum total leverage ratio and a minimum fixed charge coverage ratio. Our failure to comply with these covenants could reduce the borrowing availability under the revolving credit facility. We were in compliance with all debt covenants at March 31, 2013. The revolving credit facility requires us to deliver quarterly financial statements, annual financial statements, auditors certifications and compliance certificates within a specified number of days after the end of a quarter and year. Additionally, the revolving facility contains restrictions limiting our ability to: dispose of assets; incur certain additional debt; repay other debt or amend subordinated debt instruments; create liens on assets; make investments, loans or advances; make acquisitions or engage in mergers or consolidations; engage in certain transactions with our subsidiaries and affiliates; and make stock repurchases and dividend payments.

We use interest rate swaps to convert the line of credit’s variable rate of interest into a fixed rate. In the second quarter of 2012, we entered into four separate interest rate swap agreements to fix interest rates on $50 million of long-term debt for the periods January 2013 to January 2017. In the third quarter of 2012, we entered into four separate interest rate swap agreements to fix interest rates on $25 million of long-term debt for the periods January 2013 to January 2017. The difference to be paid or received under the terms of the swap agreements will be recognized as an adjustment to interest expense for the related line of credit when settled.

These swaps are treated as cash flow hedges and consequently, the changes in fair value were recorded in Other Comprehensive Income. An unrealized gain of approximately $36,000 was recorded in Other Comprehensive Income for the three months ended March 31, 2013. Approximately $304,000 was recorded as accrued liabilities and $1,216,000 recorded as a non-current liability in Other Long-term Obligations on the Condensed Consolidated Balance Sheets. We also reclassed approximately $77,000 of realized loss out of other comprehensive income to interest expense for the quarter ended March 31, 2013.

As a result of the use of these derivative instruments, we are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, we have a policy of only entering into contracts with carefully selected major financial institutions based upon their credit ratings and other factors. We established policies and procedures for mitigating credit risk on principal transactions include reviewing and establishing limits for credit exposure and continually assessing the creditworthiness of counterparties.

In August 2012, our Board of Directors authorized a program to repurchase up to one million shares of our common stock in the open market at a maximum price of $13 per share. The authorization has no expiration. Reacquired shares will be used to support equity-based compensation programs and for other corporate purposes. During the first three months of 2013, 105,264 shares were repurchased.

We have historically funded our capital and operating needs primarily through cash flows from operating activities, supported by available credit under our credit agreements. We believe that expected positive cash flows from operating activities and available borrowings under our current credit agreements will be adequate to fund our working capital, capital expenditures and debt service requirements for at least the next twelve months. However, we may choose to pursue additional equity and/or debt financing to provide additional liquidity and/or fund acquisitions.

25

Recent Accounting Pronouncements

ASU 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity”

In March 2013, the FASB issued Accounting Standards Update 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity,” which requires an entity to release any related cumulative translation adjustment into net income when the entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights). Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. This amendment also clarifies that the sale of an investment in a foreign entity includes both (1) events that result in the loss of a controlling financial interest in a foreign entity (that is, irrespective of any retained investment) and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date. These provisions are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. We are in the process of evaluating the impact of these provisions on our consolidated financial statements. We do not expect these provisions to have a material impact on our financial statements.

26

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no other material changes in our market risk since December 31, 2012.

Item 4. Controls and Procedures

Pursuant to Rule 13a-15(e) of the Securities and Exchange Act of 1934, management, under the direction of our Chief Executive Officer and Chief Financial Officer, evaluated our disclosure controls and procedures. Based on such evaluation our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2013, provided that the evaluation did not include an evaluation of the effectiveness of the internal control over financial reporting for the acquired business, as described further below.

Since the date of acquisition of D&R Technology, our management has not completed an evaluation of the business’s internal controls over financial reporting for the acquired entity, whose results are included in the financial statements and notes filed in this Form 10-Q.

Changes in Internal Control Over Financial Reporting

Other than the changes resulting from the acquisition described above, there were no changes in our internal control over financial reporting for the quarter ended March 31, 2013 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We manufacture accelerator pedals for a number of automobile manufacturers, including subsidiaries of Toyota. In January 2010, Toyota initiated a recall of a substantial number of vehicles in North America containing pedals manufactured by CTS. The pedal recall and associated events have led to us being named as a co-defendant with Toyota in certain litigation.

In February 2010, we entered into an agreement with Toyota whereby Toyota agreed that it will indemnify, defend, and hold us harmless from, and the parties will cooperate in the defense of, certain third-party civil claims and actions that are filed or asserted in the United States or Canada and that arise from or relate to alleged incidents of unintended acceleration of Toyota and Lexus vehicles. If it is determined that CTS acted negligently in selecting materials or processes where we had sole control over the selection process, in failing to meet Toyota’s specifications, or in making unapproved changes in component design or materials, and such negligence caused or contributed to a claim, we will be responsible for any judgment that may be rendered against us individually, or any portion of a judgment that may be allocated to us, but limited only to the extent of insurance collected from our insurers. Toyota would remain responsible to defend CTS in these actions and would remain responsible for any balance of the remaining liability over amounts recovered by insurance. The agreement also does not cover costs or liabilities in connection with government investigations, government hearings, or government recalls.

Presently, we have been served process and named as co-defendant with Toyota in approximately thirty-nine open lawsuits; we have been dismissed as a defendant from an additional thirty-one lawsuits. The claims generally fall into two categories, those that allege sudden unintended acceleration of Toyota vehicles led to injury or death, and those that allege economic harm to owners of Toyota vehicles related to vehicle defects. Some suits combine elements of both. Claims include demands for compensatory and special damages. To date, the only actions filed where we are aware we have been named as a co-defendant are civil actions filed in the Unites States or Canada. All currently open lawsuits are subject to the indemnification agreement described above. Some of these lawsuits arise out of incidents involving models for which we do not manufacture the pedal, such as all Lexus models, the Toyota Prius, and the Toyota Tacoma, or for which we manufacture only a portion of the pedals, such as the Toyota Camry. Many lawsuits have been consolidated in federal multidistrict litigation in the United States District Court, Southern District of California, though some remain in various other courts.

Certain other claims are pending against us with respect to matters arising out of the ordinary conduct of our business. For all other claims, in the opinion of management, based upon presently available information, either adequate provision for anticipated costs have been accrued or the ultimate anticipated costs will not materially affect our consolidated financial position, results of operations, or cash flows.

27

Item 1A. Risk Factors

There have been no significant changes to our risk factors since December 31, 2012.

Item 2. Unregistered sales of Equity Securities and Use of Proceeds

The following table summarizes the repurchases of CTS common stock made by the Company during the three-month period ending March 31, 2013:

	(a) Total Number  of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of  Shares Purchased as Part of Plans or Programs (1)		(d) Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
								468,305
January 1, 2013 – January 27, 2013		2,713	$	9.98		2,713		465,592
January 28, 2013 – February 24, 2013		57,000	$	9.97		57,000		408,592
February 25, 2013 – March 31, 2013		45,551	$	9.93		45,551		363,041
Total		105,264				105,264

Item 3. Default Upon Senior Securities

Not applicable

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Not applicable

Item 6. Exhibits

10(a)	2013 – 2015 Performance Restricted Stock Unit Plan.
10(b)	First Amendment to the CTS Corporation Executive Severance Policy.
(31)(a)	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31)(b)	Certification pursuant to Section 302 of the 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.
101.XML*	XBRL Instance Document
101.XSD*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not part of a registration statement or Prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

28

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/ John R. Dudek	/s/ Thomas A. Kroll
John R. Dudek	Thomas A. Kroll
Vice President, General Counsel and Secretary	Vice President and Chief Financial Officer
Dated: April 24, 2013	Dated: April 24, 2013

29

EX-10.A

EXHIBIT 10(a)

CTS Corporation

2013-2015 Performance Restricted Stock Unit Plan

SECTION 1. SUMMARY AND INTERPRETATION: The 2013-2015 Performance Restricted Stock Unit Plan (the “Plan”) is intended to provide financial and performance incentives to executive officers and key employees through the use of Restricted Stock Unit awards tied to specific performance incentives that management and the Board believe will be beneficial to the Company and its shareholders over the long-term. The CTS Corporation 2009 Omnibus Equity and Performance Incentive Plan (the “2009 Omnibus Plan”) is the governing document for the Plan. Capitalized terms not otherwise defined herein shall have the meanings set forth in the 2009 Omnibus Plan, as amended. The Plan is subject to the terms and conditions of the 2009 Omnibus Plan. In the event of any inconsistency between the provisions of the Plan and the 2009 Omnibus Plan, the 2009 Omnibus Plan will govern.

SECTION 2. PHILOSOPHY: The Board of Directors believes that compensation of executive officers and key employees should be partially “at risk” and variable, based in part on the Company’s performance against its peers in the marketplace, as well as the Company’s performance against certain pre-established goals. The Plan, along with other compensation plans of the Company, is intended to focus the efforts of the Participants on achieving those objectives in order to help ensure the sustained profitability and continual long-term growth of the Company. The Plan is structured to provide Participants with Restricted Stock Unit Awards based upon achievement of objectives that management and the Board believe are beneficial to the Company and shareholders over the long term. Therefore, performance will be measured over a three (3) year performance period, and Restricted Stock Units under the Plan will be awarded and earned only after a three (3) year performance period.

SECTION 3. OBJECTIVES:

• To attract and retain highly qualified personnel.

• To motivate improved financial performance, enhanced growth and shareholder value creation.

• To align the interests of executive officers and key employees of the Company with those of its shareholders.

SECTION 4. ADMINISTRATION: The Compensation Committee of the Board of Directors (the “Committee”) shall administer the Plan. The decision of the Committee shall be final as to the interpretation of the Plan or any rule, procedure or action related thereto.

SECTION 5. ELIGIBILITY: Only the employees designated by the Committee (the “Participants”) are eligible to participate in the Plan. The Committee has determined that the Participants identified in Exhibit A, attached hereto and incorporated herein by reference, are “Covered Employees” under this Plan. Awards to Covered Employees shall be subject to the provisions of Section 7 of the 2009 Omnibus Plan.

To receive an Award under the Plan, a Participant must be an active, full-time employee throughout the Performance Period, as defined in Section 8.

SECTION 6. DEFINITIONS:

Award: means a grant of Restricted Stock Units.

Performance Period: means January 1, 2013 through December 31, 2015.

Performance Goals: means Three Year Sales Growth, Three-Year Free Cash Flow, and Relative Total Stockholder Return.

Three Year Sales Growth: means the 2015 Corporate Sales divided by 2012 Corporate Sales, resulting in the expression of increase or decrease in Corporate Sales as a percentage.

Corporate Sales: means the Company’s Net Sales as stated in the Company’s Consolidated Statement of Earnings for the relevant fiscal year. In determining Awards for Participants who are not Covered Employees, Corporate Sales may be adjusted for unusual conditions, factors or events as determined by the Committee, provided that no such adjustment shall be made for any condition, factor or event which was specifically included in the 2012, 2013,,2014 or 2015 CTS Corporation Business Plans, as applicable.

Total Stockholder Return: means the appreciation in price of a share of common stock, plus reinvested dividends (paid in cash or other property), between January 1, 2013 and December 31, 2015.

Relative Total Stockholder Return: means the total stockholder return of the Company between January 1, 2013 and December 31, 2015, relative to the total stockholder return of a Peer Group of 20 entities over that same period. See Exhibit B for calculation.

Free Cash Flow: means the result of Operating Cash Flow minus Capital Expenditures.

Three Year Free Cash Flow: Each strategic business unit as well as corporate will set specific annual targets for Operating Cash Flow and Capital Expenditures. Using those Business Plan Targets, Free Cash Flow targets will be calculated. Free Cash Flow will be annualized over the three-year performance period for this award.

Peer Group: means a benchmark group of 20 companies, the names of which are attached hereto as Exhibit C, as the same may be adjusted from time-to-time in accord with the Peer Group Adjustment Protocol (Exhibit D).

RSU: means a Restricted Stock Unit to be settled upon vesting on the basis of one Share for each Restricted Stock Unit.

Target RSU Incentive: means the number of RSUs assigned to each Participant as a function of his or her position for purposes of calculating Awards.

Award Level: means the multiplier which is applied in calculating an Award based on the level of achievement of the Performance Goal.

Weight: means the percentage of Target RSU Incentive allocated to each Performance Goal.

SECTION 7. PERFORMANCE GOALS AND CALCULATION OF AWARDS:

The Target RSU Incentive for each Participant is set forth in the 2013-2015 Target RSU Incentive Statement provided to each Participant.

The settlement of an Award for any Participant may be as much as twice the Target RSU Incentive or as little as zero depending upon achieved results. After the Sales Growth and Free Cash Flow threshold is met, Award Levels for the Three-Year Sales Growth and Free Cash Flow Performance Goals will be interpolated between established steps or levels. There will be no interpolation of Awards for Sales Growth or Free Cash Flow below threshhold. After the Relative Total Stockholder Return threshold is met, Award Levels for the Relative Total Stockholder Return Performance Goal will be interpolated between established steps or levels. There will be no interpolation of Awards for Total Stockholder Return below threshold.

2

The Performance Goals, Weight and Award Levels for the Performance Period are detailed on Exhibit E.

The Committee may, in its discretion, adjust a Participant’s payout of an Award downward after consideration of other business factors, including overall performance of the Company and the individual Participant’s contribution to Company performance. The Committee may adjust a payout of an Award in its discretion to prevent the enlargement or dilution of the Award because of extraordinary events or circumstances as determined by the Committee. The Committee shall make no such adjustment with respect to the Award of a Covered Employee, however, if the effect of such adjustment would be to cause the related compensation to fail to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code. In no event shall the reduction of any Participant’s potential Award have the effect of increasing an Award payout payable to a Covered Employee. For purposes of Section 7(b) of the CTS Corporation 2009 Omnibus Plan, Awards shall constitute awards of Performance Shares and no Award to a Covered Employee may result in the Covered Employee receiving more than 125,000 Shares for the Performance Period.

SECTION 8. APPROVAL AND PAYMENT OF AWARDS: Participants must remain in continuous employ of the Company through the end of the Performance Period in order to earn an Award. Upon completion of Performance Period, and on or before March 15, 2016, the Compensation Committee shall certify to what extent the Performance Goals for the Performance Period were met and determine each Participant’s Award. The date of such certification and determination shall be the “Determination Date”. The Committee’s certification shall be subject to completion of the annual audit and certification of results by the Company’s independent auditor. Awards shall be made in the form of a grant of Restricted Stock Units under the terms and conditions of the form of Restricted Stock Unit Agreement attached hereto as Exhibit F. Restricted Stock Units granted under the 2013-2015 Performance Stock Unit Plan will vest on the Determination Date, and shall be settled as soon as practicable after the Determination Date, subject to the exceptions set forth in Exhibit F, but in no event later than March 15, 2016.

SECTION 9. RECOUPMENT OF AWARDS: If the Board learns of any intentional misconduct by a Participant which directly contributes to the Company having to restate all or a portion of its financial statements, the Board may, in its sole discretion, require the Participant to reimburse the Company for the difference between any Awards paid to the Participant based on achievement of financial results that were subsequently the subject of a restatement and the amount the Participant would have earned as awards under the Plan based on the financial results as restated.

SECTION 10. NO CONTRACT: The Plan is not and shall not be construed as an employment contract or as a promise or contract to pay Awards to Participants or their beneficiaries. The Plan shall be approved by the Committee and may be amended from time to time by the Committee without notice. No Participant or beneficiary may sell, assign, transfer, discount or pledge as collateral for a loan, or otherwise anticipate any right to payment of an Award under this Plan.

3

EXHIBIT A

COVERED EMPLOYEES

Vinod M. Khilnani

Kieran M. O’Sullivan

4

EXHIBIT B

Determining Relative Total Stockholder Return

For purposes of calculating Relative Total Stockholder Return (rounding shall be to the nearest tenth of a percent, with all hundredths of a percent equal to or greater than 5 rounded up to the nearest tenth of a percent):

• Company Return. For the Performance Period, the Company’s Total Stockholder Return will be a percentage amount determined based on (1) the average closing price of the Shares for the 20 business days immediately preceding the last trading day of the Performance Period (including aggregate dividends for the Performance Period) compared to (2) the average closing price of the Shares for the 20 business days immediately preceding the first trading day of the Performance Period.

• Peer Return. For the Performance Period, the Total Stockholder Return for each company in the Peer Group, (each a “Peer”) will be a percentage amount determined based on (1) the closing stock price on the last trading day of the Performance Period (including aggregate dividends for the Performance Period and adjusted for stock splits) compared to (2) the closing stock price on the first trading day of the Performance Period.

• Company Ranking. For each Performance Period, the Company’s and each Peer’s Total Stockholder Return will be ranked in decreasing order. Relative Total Stockholder Return equals the percentile rank (expressed as a percentage) of the Company’s Total Stockholder Return when compared to the rankings, from lowest to highest, of the Total Stockholder Returns of the Peers comprising the Peer Group for the Performance Period.

5

EXHIBIT C

Peer Group (20 Peers)

NAME	SYMBOL	STOCK EXCHANGE
API Technologies Corporation	ATNY	Nasdaq Capital Market
AVX Corporation	AVX	New York Stock Exchange
Benchmark Electronics, Inc.	BHE	New York Stock Exchange
Ducommun Incorporated	DCO	New York Stock Exchange
GenTex Corporation	GNTX	Nasdaq Global Select Market
Harman International Industries, Inc.	HAR	New York Stock Exchange
KEMET Corporation	KEM	New York Stock Exchange
Key Tronic Corporation	KTCC	Nasdaq Global Market
Kimball International, Inc.	KBALB	Nasdaq Global Select Market
LittelFuse, Inc.	LFUS	Nasdaq Global Select Market
Methode Electronics, Inc.	MEI	New York Stock Exchange
Molex Incorporated	MOLX	Nasdaq Global Select Market
Plexus Corp.	PLXS	Nasdaq Global Select Market
Pulse Electronics	PULS	New York Stock Exchange
RF Micro Devices, Inc.	RFMD	Nasdaq Global Select Market
Sparton Corporation	SPA	New York Stock Exchange
Stoneridge, Inc.	SRI	New York Stock Exchange
Strattec Security Corporation	STRT	Nasdaq Global Market
Sypris Solutions, Inc.	SYPR	Nasdaq Global Market
Vishay Intertechnology, Inc.	VSH	New York Stock Exchange

6

EXHIBIT D

Peer Group Adjustment Protocol

1. If a company files for bankruptcy and/or liquidation, is operating under bankruptcy protection, or is delisted from its stock exchange because it fails to meet the exchange listing requirement then it clearly shows bad performance and will, therefore, stay in the Peer Group as a bottom performer.

2. If, as of the last date of the Performance Period, a Peer no longer exists as a business entity for any other reason than bad performance, then:

• such Peer will be removed from the Peer Group for purposes of the Performance Period; and

• the Relative Total Stockholder Return for the Performance Period will be calculated as if such Peer had never been a member of the Peer Group.

3. The common equity of a CTS Peer Group member must be consecutively traded on any of the following exchanges: the New York Stock Exchange, the Nasdaq Stock Market LLC, the London Stock Exchange, or the American Stock Exchange. If, as of the last date of the Performance Period, a Peer Group member ceases to be traded on any of the above listed exchanges,

• such Peer will be removed from the Peer Group for purposes of the Performance Period; and

• the Relative Total Stockholder Return for the Performance Period will be calculated as if such Peer had never been a member of the Peer Group.

4. For purposes of this Agreement, if any member of the Peer Group is acquired, merged, or otherwise assumed by another business entity and the resulting legal entity is substantially the same in size and nature of business, then that entity will remain in our Peer Group even if the new entity has a different name, ticker symbol, etc. In the event, an acquisition substantially changes the former Peer Group business in size, scope, nature, etc., the CEO and CFO of CTS may recommend to the Compensation Committee that the new entity be removed from the Peer Group. The decision to retain or remove a member of the Peer Group resides with the Compensation Committee.

7

EXHIBIT E

Performance Goals, Weights, and Award Levels

1. Three-Year Sales Growth – Weighted 35%

3 yr	<	9.0	%	³	9.0	%	>	18.0	%	³	27.0	%	³	37.5	%
Annualized	<	3.0	%	³	3.0	%	³	6.0	%	³	9.0	%	³	12.5	%
Award		0	%		50	%		100	%		150	%		200	%

2. Three-Year Free Cash Flow – Weighted 30%

3 yr

<

30.0M

³

30.0M

³

45.0M

³

60.0M

³

75.0M

Annualized

<

10.0M

³

10.0M

³

15.0M

³

20.0M

³

25.0M

Award

0

%

50

%

100

%

150

%

200

%

3. Relative Total Shareholder Return (RTSR) – Weighted 35%

Performance versus Peer Group
RTSR	<30	%	>30	%	>70	%	>90	%
Award	0	%	50	%	150	%	200	%

• Award levels for Three-Year Sales Grow, and Three-Year Free Cash Flow and RTSR will be interpolated between established measurement levels.

8

EX-10.B

EXHIBIT 10(b)

CTS CORPORATION

FIRST AMENDMENT

TO THE

CTS CORPORATION EXECUTIVE SEVERANCE POLICY

This First Amendment (this “Amendment”) to the CTS Corporation Executive Severance Policy (the “Policy”), is adopted by the Board of Directors (the “Board”) of CTS Corporation, an Indiana corporation (the “Company”), as of March 13, 2013 (the “Board Approval Date”), but will be deemed to be effective as of September 9, 2012 (the “Amendment Effective Date”), such that the Policy will be considered to have been in full force and effect at all times since September 10, 2009.

WHEREAS, the Policy was originally effective on September 10, 2009 (“Original Effective Date”), but provided that it would remain in effect only until three years from its Original Effective Date;

WHEREAS, the Policy expired by its terms on September 10, 2012;

WHEREAS, it was the intention of the Board at the time the Policy expired, and it remains the desire of the Company, that the Policy continue to be effective thereafter in accordance with its original terms;

WHEREAS, it is the desire of the Board and the Company that, as of and after the Amendment Effective Date, the term of the Policy be perpetual in duration, subject to amendment and termination of the Policy pursuant to the provisions of Section I of the Policy; and

WHEREAS, it is the desire of the Board and the Company that the Policy be deemed to have been in full force and effect at all times from the Original Effective Date.

NOW, THEREFORE, as of the Board Approval Date, and effective as of the Amendment Effective Date, the Board hereby reinstates and amends the Policy as follows:

1. Amendment to Section I of the Policy. The last sentence of Section I of the Policy is hereby amended and restated in its entirety as follows:

“This policy will remain in effect until terminated or amended by CTS’ Board. CTS’ Board may terminate or amend this policy at any time (provided that such termination will not adversely affect any Severance Benefits to which an Executive has already become entitled prior to the date of such policy termination), and this policy shall be considered to have been in full force and effect at all times since its effective date until such time as terminated in accordance with this Section I.”

2. Miscellaneous. Except as amended by this Amendment, the Policy shall remain in full force and effect.

ISSUED AND APPROVED BY:
/s/ Scott A. Bowmar
Scott A. Bowmar
Vice President, Human Resources
/s/ Kieran O’Sullivan	/s/ Patricia K. Collawn
Kieran O’Sullivan	Patricia K. Collawn
President and Chief Executive Officer	Chairperson
	CTS Corporation
	Compensation Committee

2

EX-31.A

CTS Corporation

Form 10-Q

First Quarter 2013

EXHIBIT (31)(a)

CERTIFICATION

I, Kieran O’Sullivan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CTS Corporation:

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for external purposes in accordance with generally accepted accounting principles; and

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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

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

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

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 24, 2013	/s/ Kieran O’Sullivan
	Kieran O’Sullivan
	President and Chief Executive Officer

EX-31.B

CTS Corporation

Form 10-Q

First Quarter 2013

EXHIBIT (31)(b)

CERTIFICATION

I, Thomas A. Kroll, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CTS Corporation:

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for external purposes in accordance with generally accepted accounting principles; and

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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

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

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

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 24, 2013	/s/Thomas A. Kroll
	Thomas A. Kroll
	Vice President and Chief Financial Officer

EX-32.A

CTS Corporation

Form 10-Q

First Quarter 2013

EXHIBIT (32)(a)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of CTS Corporation (the Company) on Form 10-Q for the quarter ended March 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date: April 24, 2013	/s/ Kieran O’Sullivan
	Kieran O’Sullivan
	President and Chief Executive Officer

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

EX-32.B

CTS Corporation

Form 10-Q

First Quarter 2013

EXHIBIT (32)(b)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of CTS Corporation (the Company) on Form 10-Q for the quarter ended March 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

Date: April 24, 2013	/s/ Thomas A. Kroll
	Thomas A. Kroll
	Vice President and Chief Financial Officer

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

XML

Equity-Based Compensation (Details 4) (USD $)	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Summary of Service-Based Restricted Stock Units
Weighted average remaining contractual term, RSUs	7 years 6 months	7 years 3 months 18 days
RSUs [Member]
Summary of Service-Based Restricted Stock Units
Outstanding at beginning of year, RSUs	751,798	701,449
Outstanding at beginning of year, Weighted-average Grant-Date Fair Value	9.82	9.35
Granted, RSUs	336,100	221,250
Granted, Weighted-average Grant-Date Fair Value	10.17	10.46
Converted, RSUs	(199,811)	(144,533)
Converted, Weighted-average Grant-Date Fair Value	9.88	9.55
Forfeited, RSUs	(2,700)	(8,897)
Forfeited, Weighted-average Grant-Date Fair Value	10.45	9.19
Outstanding at end of period, RSUs	885,387	769,269
Outstanding at end of period, Weighted-average Grant-Date Fair Value	9.94	9.63

XML

Contingencies (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended			3 Months Ended								12 Months Ended	3 Months Ended
	Apr. 01, 2012 Scotland EMS Manufacturing Facility [Member] Business Interruption Caused Due To Fire [Member]	Apr. 01, 2012 Scotland EMS Manufacturing Facility [Member] Damage from fire [Member]	Jul. 03, 2011 Scotland EMS Manufacturing Facility [Member] Damage from fire [Member]	Jul. 03, 2011 Scotland EMS Manufacturing Facility [Member] Damage from fire [Member] Inventory [Member]	Jul. 03, 2011 Scotland EMS Manufacturing Facility [Member] Damage from fire [Member] Machinery and equipment [Member]	Apr. 01, 2012 Scotland EMS Manufacturing Facility [Member] Damage from flood [Member]	Mar. 31, 2013 Thailand EMS Manufacturing Facility [Member]	Apr. 01, 2012 Thailand EMS Manufacturing Facility [Member] Business Interruption Caused Due to Flood [Member]	Apr. 01, 2012 Thailand EMS Manufacturing Facility [Member] Property Damages Caused Due to Flood [Member]	Apr. 01, 2012 Thailand EMS Manufacturing Facility [Member] Damage from flood [Member]	Dec. 31, 2011 Thailand EMS Manufacturing Facility [Member] Damage from flood [Member]	Dec. 31, 2011 Thailand EMS Manufacturing Facility [Member] Damage from flood [Member]	Dec. 31, 2011 Thailand EMS Manufacturing Facility [Member] Damage from flood [Member] Inventory [Member]	Dec. 31, 2011 Thailand EMS Manufacturing Facility [Member] Damage from flood [Member] Machinery and equipment [Member]
Contingencies (Textual) [Abstract]
Net book value of assets damaged				$ 1.6	$ 0.2								$ 0.8	$ 0.5
Value of insurance converge deducted			0.1
Reimbursement of insurance claim		0.8						4.4	2.8	7.2
Recorded reimbursement for business interruption	0.6							3.0	1.8
Fixed costs incurred at facility											2.5
Insurance receivable recorded earlier, adjusted against proceeds							2.4
Insurance receivable relieved						$ 0.1						$ 2.4

XML

Retirement Plans (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Net pension expense/(income)
Expense/(income), net	$ 545,000	$ 106,000
Domestic Pension Plans [Member]
Net pension expense/(income)
Service cost	648,000	683,000
Interest cost	2,711,000	2,991,000
Expected return on plan assets	(5,042,000)	(5,376,000)
Amortization of prior service cost	149,000	151,000
Amortization of loss	1,921,000	1,519,000
Expense/(income), net	387,000	(32,000)
Foreign Pension Plans [Member]
Net pension expense/(income)
Service cost	28,000	31,000
Interest cost	132,000	142,000
Expected return on plan assets	(100,000)	(109,000)
Amortization of prior service cost
Amortization of loss	98,000	74,000
Expense/(income), net	$ 158,000	$ 138,000

XML

Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013
Financial liability measured at fair value on a recurring basis
Interest rate swap - cash flow hedge	$ 1,520
Quoted Prices in Active Markets for Identical (Level 1) [Member]
Financial liability measured at fair value on a recurring basis
Interest rate swap - cash flow hedge	0
Significant Other Observable Inputs (Level 2) [Member]
Financial liability measured at fair value on a recurring basis
Interest rate swap - cash flow hedge	1,520
Significant Unobservable Inputs (Level 3) [Member]
Financial liability measured at fair value on a recurring basis
Interest rate swap - cash flow hedge	0
Loss during the period [Member]
Financial liability measured at fair value on a recurring basis
Interest rate swap - cash flow hedge	$ 77

XML

Debt (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Long-term debt
Revolving credit facility, weighted-average interest rate of 1.8% (2013), and 1.8% (2012) due in 2017	$ 164,000	$ 153,500

XML

Restructuring Charges (Tables)

3 Months Ended

Mar. 31, 2013

Restructuring Cost And Reserve [Line Items]

Restructuring and restructuring-related charges of actual costs

The following table displays the planned restructuring and restructuring-related charges associated with the realignment, as well as a summary of the actual costs incurred through March 31, 2013:

($ in millions)                    December 2012 Plan	Planned Costs		Actual incurred through March 31, 2013
Workforce reduction	$	1.7	$	1.8
Asset impairment charge		1.1		1.1
Other charge		0.3		0.4
Restructuring and impairment charges	$	3.1	$	3.3
Inventory write-down	$	0.5	$	0.5
Equipment relocation		0.1		0.3
Other charges		0.4		0.1
Restructuring-related charges	$	1.0	$	0.9
Total restructuring and restructuring-related charges		4.1		4.2

Restructuring reserve activity

The following table displays the restructuring reserve activity related to the realignment for the period ended December 31, 2012:

($ in millions)                    December 2012 Plan
Restructuring liability at January 1, 2013	$	1.6
Restructuring and restructuring-related charges, excluding asset impairments and write-offs		0.8
Cost paid		(2.0	)
Restructuring liability at March 31, 2013	$	0.4

XML

Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Earnings per share
Net earnings	$ 3,568	$ 2,283
Basic earnings per share, Shares	33,523	34,106
Equity-based compensation plans, Shares	653	612
Diluted earnings per share, Shares	34,176	34,718
Basic earnings per share, Per Share Amount	$ 0.11	$ 0.07
Diluted earnings per share, Per Share Amount	$ 0.10	$ 0.07

XML

Acquisition (Tables)

3 Months Ended

Mar. 31, 2013

Acquisition [Abstract]

Summary of the estimated fair values of the assets acquired and the liabilities assumed

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 December 21, 2012
Current assets	$	13,839
Property, plant and equipment		8,635
Goodwill		26,991
Amortizable intangible assets		18,330
In-process research and development		500
Other assets		678
Fair value of assets acquired		68,973
Less fair value of liabilities acquired		(5,473	)
Net cash paid	$	63,500

Summary of net sales and earnings before income taxes

The following table summarizes the net sales and earnings before income taxes of D&R that is included in CTS’ Condensed Consolidated Statements of Earnings for the three months ended March 31, 2013:

($ in thousands)	March 31, 2013
Net Sales	$	12,702
Income before income taxes	$	150

Summary of pro-forma net sales and earnings before income taxes

The following table summarizes the pro-forma combined net sales and earnings before income taxes of CTS, D&R and Valpey-Fisher on a pro forma basis as if the acquisition date had occurred on January 1, 2011:

	April 1, 2012
($ in thousands)	(Unaudited Proforma)
Net Sales	$	161,120
Earnings before income taxes	$	3,075

XML

Retirement Plans (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Retirement Plans (Textual) [Abstract]
Net pension expense/(income)	$ 545,000	$ 106,000

XML

Acquisition (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Summary of net sales and earnings before income taxes
Net sales	$ 149,512	$ 146,969
Income before income taxes	2,758	2,297
D and R Technology [Member]
Summary of net sales and earnings before income taxes
Net sales	12,702
Income before income taxes	$ 150

XML

Equity-Based Compensation (Details 2) (USD $)	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Summary of status of stock options
Outstanding, Options at beginning of year	392,550	728,050
Outstanding, Weighted Average Exercise Price at beginning of year	$ 10.91	$ 10.24
Exercised, Options	(45,800)	(79,122)
Exercised, Weighted Average Exercise Price	$ 8.41	$ 8.57
Expired, Options	(15,400)	(11,000)
Expired, Weighted Average Exercise Price	$ 7.75	$ 16.22
Forfeited, Options	(1,000)	(9,650)
Forfeited, Weighted Average Exercise Price	$ 9.78	$ 9.52
Outstanding, Options at end of period	330,350	628,278
Outstanding, Weighted Average Exercise Price at end of period	$ 11.40	$ 10.36
Exercisable, Options at end of period	330,350	628,278
Exercisable, Weighted Average Exercise Price at end of period	$ 11.40	$ 10.36

XML

Segments (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Reconciling information between reportable segments' operating earnings before income taxes
Total segment operating earnings	$ 3,784	$ 1,932
Interest expense	(915)	(659)
Interest income	413	449
Other income	298	575
Earnings before income taxes	2,758	2,297
Components and Sensors [Member]
Reconciling information between reportable segments' operating earnings before income taxes
Total segment operating earnings	4,403	3,020
Restructuring and restructuring-related charges	(227)
EMS [Member]
Reconciling information between reportable segments' operating earnings before income taxes
Total segment operating earnings	(619)	(1,088)
Restructuring and restructuring-related charges	$ (595)

XML

Goodwill and Other Intangible Assets (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012	Dec. 31, 2012
Goodwill and Other Intangible Assets (Textual) [Abstract]
Intangible assets, other than goodwill and in-process research and development	$ 45,785,000		$ 47,538,000
Goodwill	35,156,000		35,156,000
The weighted average remaining amortization period for the amortizable intangible assets	11 years 8 months 12 days
Recorded Amortization Expense	1,800,000	800,000
Goodwill and Other Intangible Assets (Additional Textual) [Abstract]
Estimates remaining amortization expense in 2013	3,800,000
Estimates remaining amortization expense in 2014	4,800,000
Estimates remaining amortization expense in 2015	4,600,000
Estimates remaining amortization expense in 2016	4,300,000
Estimates remaining amortization expense in 2017	4,200,000
Estimates remaining amortization expense, thereafter	24,100,000
Components and Sensors segment [Member]
Goodwill and Other Intangible Assets (Textual) [Abstract]
Intangible assets, other than goodwill and in-process research and development	41,100,000
Goodwill	34,656,000		35,850,000
EMS segment [Member]
Goodwill and Other Intangible Assets (Textual) [Abstract]
Intangible assets, other than goodwill and in-process research and development	4,700,000
Goodwill	500,000		500,000
Customer lists/relationships [Member]
Goodwill and Other Intangible Assets (Textual) [Abstract]
The weighted average remaining amortization period for the amortizable intangible assets	12 years 4 months 24 days
(Decrease) in carrying amount subsequent to valuation of customer lists/relationships	62,014,000		62,014,000
Other intangibles [Member]
Goodwill and Other Intangible Assets (Textual) [Abstract]
The weighted average remaining amortization period for the amortizable intangible assets	9 years 2 months 12 days
Increase in carrying amount of other intangible assets subsequent to external valuation	11,280,000		11,280,000
External Valuation Adjustments [Member]
Goodwill and Other Intangible Assets (Textual) [Abstract]
(Decrease) in carrying amount subsequent to valuation of customer lists/relationships	(7,988,000)
Increase in carrying amount of other intangible assets subsequent to external valuation	9,445,000
Reduction in goodwill due to fair value adjustment	$ 1,194,000

XML

Debt (Details Textual) (USD $)	1 Months Ended	3 Months Ended			6 Months Ended
	Jan. 31, 2012	Mar. 31, 2013	Sep. 30, 2012 Swap	Apr. 01, 2012	Jun. 30, 2012 Swap	Dec. 31, 2012	Jan. 10, 2012	Mar. 31, 2013 Interest Rate Swap [Member]	Sep. 30, 2012 Third Quarter Interest Rate Swap [Member]	Mar. 31, 2013 Revolving Credit Facility [Member]	Dec. 31, 2012 Revolving Credit Facility [Member]	Dec. 31, 2011 Unsecure revolving credit facility [Member]	Jan. 31, 2012 Unsecure revolving credit facility [Member] Maximum [Member]	Mar. 31, 2013 Letter of credit [Member]	Dec. 31, 2012 Letter of credit [Member]
Debt (Textual) [Abstract]
Increase in revolving credit facility												$ 150,000,000	$ 200,000,000
Revolving credit facility, weighted-average interest rate of 1.8% (2013), and 1.8% (2012) due in 2017		164,000,000				153,500,000				164,000,000	153,500,000
Standby letters of credit														2,600,000	2,600,000
Accrued liability								304,000
Amount of swap agreement					50,000,000				25,000,000
Debt (Additional Textual) [Abstract]
Unsecured revolving credit facility amendment date							Jan. 10, 2012
Revolving credit facility expand	300,000,000
Reduced the applicable margin by basis points Percentage	0.25%
Revolving Credit Facility Extension Period							Jan. 10, 2017
Revolving credit facility, weighted-average interest rate		1.80%				1.80%
Revolving credit facility current		33,400,000				43,900,000
Percentage of commitment fee		0.35%		0.30%
Number of interest rate swap agreements			4		4
Unrealized gain on cash flow hedges		36,000
Non-current liability		1,216,000
Realized loss out of other comprehensive income to interest expense		$ 77,000
Interest Rate Swap Agreement Period covered in Agreement, beginning year		2013-01
Interest Rate Swap Agreement Period covered in Agreement, ending year		2017-01

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Equity-Based Compensation

3 Months Ended

Mar. 31, 2013

Equity-Based Compensation [Abstract]

Equity-Based Compensation

NOTE B – Equity-Based Compensation

At March 31, 2013, CTS had five equity-based compensation plans: the 1996 Stock Option Plan (“1996 Plan”), the 2001 Stock Option Plan (“2001 Plan”), the Nonemployee Directors’ Stock Retirement Plan (“Directors’ Plan”), the 2004 Omnibus Long-Term Incentive Plan (“2004 Plan”), and the 2009 Omnibus Equity and Performance Incentive Plan (“2009 Plan”). All of these plans, except the Directors’ Plan, were approved by shareholders. As of December 31, 2009, additional grants can only be made under the 2004 and 2009 Plans. CTS believes that equity-based awards align the interest of employees with those of its shareholders.

The 2009 Plan, and previously the 1996 Plan, 2001 Plan and 2004 Plan, provides for grants of incentive stock options or nonqualified stock options to officers, key employees, and nonemployee members of CTS’ board of directors. In addition, the 2009 Plan and the 2004 Plan allow for grants of stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and other stock awards.

The following table summarizes the compensation expense included in the Unaudited Condensed Consolidated Statements of Earnings for the three months ended March 31, 2013 and April 1, 2012 relating to equity-based compensation plans:

($ in thousands)	March 31, 2013		April 1, 2012
Restricted stock units	$	1,318	$	1,214

The following table summarizes the status of these plans as of March 31, 2013:

	2009 Plan		2004 Plan		2001 Plan		1996 Plan
Awards originally available		3,400,000		6,500,000		2,000,000		1,200,000
Stock options outstanding				194,300		102,300		33,750
Restricted stock units outstanding		784,164		101,223
Options exercisable				194,300		102,300		33,750
Awards available for grant		1,628,220		262,686

Stock Options

Stock options are exercisable in cumulative annual installments over a maximum 10-year period, commencing at least one year from the date of grant. Stock options are generally granted with an exercise price equal to the market price of the Company’s stock on the date of grant. The stock options generally vest over four years and have a 10-year contractual life. The awards generally contain provisions to either accelerate vesting or allow vesting to continue on schedule upon retirement if certain service and age requirements are met. The awards also provide for accelerated vesting if there is a change in control event.

The Company estimated the fair value of the stock option on the grant date using the Black-Scholes option-pricing model and assumptions for expected price volatility, option term, risk-free interest rate, and dividend yield. Expected price volatilities were based on historical volatilities of the Company’s stock. The expected option term is derived from historical data on exercise behavior. The dividend yield was based on historical dividend payments. The risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant.

A summary of the status of stock options as of March 31, 2013 and April 1, 2012, and changes during the three-month periods then ended, is presented below:

	March 31, 2013					April 1, 2012
	Options			Weighted- Average Exercise Price		Options			Weighted- Average Exercise Price
Outstanding at beginning of year		392,550		$	10.91		728,050		$	10.24
Exercised		(45,800	)	$	8.41		(79,122	)	$	8.57
Expired		(15,400	)	$	7.75		(11,000	)	$	16.22
Forfeited		(1,000	)	$	9.78		(9,650	)	$	9.52
Outstanding at end of period		330,350		$	11.40		628,278		$	10.36
Exercisable at end of period		330,350		$	11.40		628,278		$	10.36

The total intrinsic value of share options exercised during the quarter ended March 31, 2013 was $93,000. The total intrinsic value of share options exercised during the quarter ended April 1, 2012 was $138,000.

The weighted average remaining contractual life of options outstanding and options exercisable at March 31, 2013 and April 1, 2012 were 1.5 years and 1.8 years, respectively. The aggregate intrinsic values of options outstanding and options exercisable at March 31, 2013 and April 1, 2012 were approximately $73,000 and $547,000, respectively.

There are no unvested stock options at March 31, 2013.

The following table summarizes information about stock options outstanding at March 31, 2013:

	Options Outstanding and Exercisable
Range of Exercise Prices	Number Outstanding at 3/31/13		Weighted  Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
$ 9.78 – 11.11		244,050		1.13	$	10.49
$ 13.68 – 16.24		86,300		2.50	$	13.97

Service-Based Restricted Stock Units

Service-based restricted stock units (“RSUs”) entitle the holder to receive one share of common stock for each unit when the unit vests. RSUs are issued to officers, key employees and non-employee directors as compensation. Generally, the RSUs vest over a three-year period. A summary of the status of RSUs as of March 31, 2013 and April 1, 2012, and changes during the three-month periods then ended is presented below:

	March 31, 2013					April 1, 2012
	RSUs			Weighted- average Grant-Date Fair Value		RSUs			Weighted- average Grant-Date Fair Value
Outstanding at beginning of year		751,798		$	9.82		701,449		$	9.35
Granted		336,100		$	10.17		221,250		$	10.46
Converted		(199,811	)	$	9.88		(144,533	)	$	9.55
Forfeited		(2,700	)	$	10.45		(8,897	)	$	9.19
Outstanding at end of period		885,387		$	9.94		769,269		$	9.63
Weighted-average remaining contractual life		7.5 years					7.3 years

CTS recorded compensation expense of approximately $824,000 and $752,000 related to service-based restricted stock units during the three months ended March 31, 2013 and April 1, 2012, respectively.

As of March 31, 2013, there was approximately $4,486,000 of unrecognized compensation cost related to nonvested RSUs. That cost is expected to be recognized over a weighted-average period of 1.2 years. CTS recognizes expense on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.

Performance-Based Restricted Stock Units

On February 2, 2010, CTS granted performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero percent to 200% of the target amount of 78,000 units in 2012 subject to certification of the 2011 fiscal year results by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of sales growth targets and, as a result, 49,320 units were awarded and vested.

On February 3, 2011, CTS granted performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero percent to 200% of the target amount of 53,200 units in 2013 subject to certification of the 2012 fiscal year results by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of sales growth targets. No awards were awarded as the targets were not met.

On February 8, 2012, CTS granted performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero percent to 200% of the target amount of 45,850 units in 2014 subject to certification of the 2013 fiscal year results by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of sales growth targets.

On February 8, 2012, CTS granted performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero to 200% of the target amount of 39,300 units in 2014 subject to certification of the 2013 fiscal year results by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of certain cash flow targets.

On February 11, 2013, CTS granted performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero percent to 200% of the target amount of 77,700 units in 2016 subject to certification of the 2015 fiscal year results by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of sales growth targets.

On February 11, 2013, CTS granted performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero to 200% of the target amount of 66,600 units in 2016 subject to certification of the 2015 fiscal year results by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of certain cash flow targets.

CTS recorded compensation expense of approximately $294,000 and $230,000 related to performance-based restricted stock units during the three months ended March 31, 2013 and April 1, 2012, respectively. As of March 31, 2013 there was approximately $2,079,000 of unrecognized compensation cost related to performance-based RSUs. That cost is expected to be recognized over a weighted-average period of 1.6 years.

Market-Based Restricted Stock Units

On July 2, 2007, CTS granted a market-based restricted stock unit award for an executive officer. An aggregate of 25,000 units may be earned in performance years ending in the following three consecutive years on the anniversary of the award date. Vesting may occur in the range from zero percent to 150% of the target award on the end date of each performance period and is tied exclusively to CTS total stockholder return relative to 32 enumerated peer group companies’ total stockholder return rates. The vesting rate will be determined using a matrix based on a percentile ranking of CTS total stockholder return with peer group total shareholder return over a three-year period. During the year ended December 31, 2010, 12,500 units was earned and awarded to the executive officer. There were no units awarded in 2011. On July 2, 2012, 8,334 units were earned and awarded to the executive officer.

On February 2, 2010, CTS granted market-based restricted stock unit awards for certain executives and key employees. Vesting may occur in the range from zero percent to 200% of the target amount of 117,000 units in 2012. Vesting is dependent upon CTS total stockholder return relative to 28 enumerated peer group companies’ stockholder return rates and, as a result, 67,130 units were awarded and vested.

On February 3, 2011, CTS granted market-based restricted stock unit awards for certain executives and key employees. Vesting may occur in the range from zero percent to 200% of the target amount of 79,800 units in 2013. Vesting is dependent upon CTS total stockholder return relative to 28 enumerated peer group companies’ stockholder return rates. On February 11, 2013, 80,940 units were earned and awarded.

On February 8, 2012, CTS granted market-based restricted stock unit awards for certain executives and key employees. Vesting may occur in the range from zero percent to 200% of the target amount of 45,850 units in 2014. Vesting is dependent upon CTS total stockholder return relative to 28 enumerated peer group companies’ stockholder return rates.

On February 11, 2013, CTS granted market-based restricted stock unit awards for certain executives and key employees. Vesting may occur in the range from zero percent to 200% of the target amount of 77,700 units in 2016. Vesting is dependent upon CTS total stockholder return relative to 20 enumerated peer group companies’ stockholder return rates.

On February 11, 2013, CTS granted a market-based restricted stock award to an executive officer. Vesting may occur in the range from zero percent to 200% of the target amount of 32,500 units in 2016. Vesting is dependent upon CTS total stockholder return relative to 20 enumerated peer group companies’ stockholder return rates.

CTS recorded compensation expense of approximately $200,000 and $232,000 related to market-based restricted stock units during the three months ended March 31, 2013 and April 1, 2012, respectively. As of March 31, 2013, there was approximately $1,540,000 of unrecognized compensation cost related to market-based RSUs. That cost is expected to be recognized over a weighted-average period of approximately 1.7 years.

Stock Retirement Plan

The Directors’ Plan provides for a portion of the total compensation payable to nonemployee directors to be deferred and paid in CTS stock. The Directors’ Plan was frozen effective December 1, 2004. All future grants will be from the 2009 Plan.

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Restructuring Charges (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended
	Mar. 31, 2013	Mar. 31, 2013 December 2012 Plan [Member]	Mar. 31, 2013 December 2012 Plan [Member] Restructuring-related charges [Member]	Mar. 31, 2013 Asset impairment charge [Member] December 2012 Plan [Member]	Mar. 31, 2013 Workforce reduction [Member] December 2012 Plan [Member]	Mar. 31, 2013 Other charges [Member] December 2012 Plan [Member]	Mar. 31, 2013 Restructuring and impairment charges [Member] December 2012 Plan [Member]	Mar. 31, 2013 Inventory write-down [Member] December 2012 Plan [Member]	Mar. 31, 2013 Equipment relocation [Member] December 2012 Plan [Member]	Mar. 31, 2013 Other costs [Member] December 2012 Plan [Member]
Restructuring and restructuring-related charges of actual costs
Planned Costs		$ 4.1	$ 1.0	$ 1.1	$ 1.7	$ 0.3	$ 3.1	$ 0.5	$ 0.1	$ 0.4
Actual incurred through	$ 0.8	$ 4.2	$ 0.9	$ 1.1	$ 1.8	$ 0.4	$ 3.3	$ 0.5	$ 0.3	$ 0.1

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Acquisition (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Apr. 01, 2012
Summary of pro-forma net sales and earnings before income taxes
Net Sales	$ 161,120
Earnings before income taxes	$ 3,075

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Segments (Tables)

3 Months Ended

Mar. 31, 2013

Segments [Abstract]

Summarized financial information concerning reportable segments

Summarized financial information concerning CTS’ reportable segments is shown in the following table:

($ in thousands)	Components and Sensors			EMS			Total
First Quarter of 2013
Net sales to external customers	$	98,062		$	51,450		$	149,512
Segment operating earnings before corporate and shared services charges		10,382			1,063			11,445
Corporate and shared services charges		(5,979	)		(1,682	)		(7,661	)
Segment operating earnings/(loss)		4,403			(619	)		3,784
Total assets		450,827			113,723			564,550
First Quarter of 2012
Net sales to external customers	$	76,418		$	70,551		$	146,969
Segment operating earnings before corporate and shared services charges		7,344			455			7,799
Corporate and shared services charges		(4,324	)		(1,543	)		(5,867	)
Segment operating earnings/(loss) (1)		3,020			(1,088	)		1,932
Total assets		357,687			150,979			508,666

⁽¹⁾  EMS segment’s operating loss of $(1,088) includes $1,769 of insurance recovery for property damage related to the flood at CTS Thailand’s manufacturing facility.

Reconciling information between reportable segments' operating earnings and consolidated earnings before income taxes

Reconciling information between reportable segments’ operating earnings and CTS’ consolidated earnings before income taxes is shown in the following table for three-month periods then ended:

($ in thousands)	March 31, 2013			April 1, 2012
Total segment operating earnings	$	3,784		$	1,932
Restructuring and restructuring-related charges — Components and Sensors		(227	)		—
Restructuring and restructuring-related charges — EMS		(595	)		—
Interest expense		(915	)		(659	)
Interest income		413			449
Other income		298			575
Earnings before income taxes	$	2,758		$	2,297

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Retirement Plans (Tables)

3 Months Ended

Mar. 31, 2013

Retirement Plans [Abstract]

Net pension expense/(income)

Net pension expense/(income) for the three months ended March 31, 2013 of $545,000 and April 1, 2012 of $106,000 for our domestic and foreign plans include the following components:

	Domestic Pension Plans						Foreign Pension Plans
($ in thousands)	March 31, 2013			April 1, 2012			March 31, 2013			April 1, 2012
Service cost	$	648		$	683		$	28		$	31
Interest cost		2,711			2,991			132			142
Expected return on plan assets (1)		(5,042	)		(5,376	)		(100	)		(109	)
Amortization of prior service cost		149			151			—			—
Amortization of loss		1,921			1,519			98			74
Expense/(income), net	$	387		$	(32	)	$	158		$	138

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

Net post retirement expense for post-retirement plan

Net post retirement expense for the three months ended March 31, 2013 and April 1, 2012 for our post-retirement plan includes the following components:

	Three Months Ended
($ in thousands)	March 31, 2013		April 1, 2012
OTHER POSTRETIREMENT BENEFIT PLAN
Service cost	$	2	$	2
Interest cost		56		64
Amortization of gain		—		(10	)
Postretirement expense	$	58	$	56

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Fair Value Measurements (Details Textual) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013
Fair Value Measurement (Textual) [Abstract]
Interest rate swap recorded in consolidated balance sheet	$ 1,520
Level 2 [Member]
Fair Value Measurement (Textual) [Abstract]
Interest rate swap recorded in consolidated balance sheet	1,520
Current Liabilities [Member] | Level 2 [Member]
Fair Value Measurement (Textual) [Abstract]
Interest rate swap recorded in consolidated balance sheet	304
Non Current Liabilities [Member] | Level 2 [Member]
Fair Value Measurement (Textual) [Abstract]
Interest rate swap recorded in consolidated balance sheet	$ 1,216

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Acquisition (Details Textual) (USD $)			3 Months Ended
	Mar. 31, 2013 External Valuation Adjustments [Member]	Jan. 31, 2012 Valpey-Fisher [Member]	Mar. 31, 2013 D and R Technology [Member]	Dec. 31, 2012 D and R Technology [Member]
Acquisition (Textual) [Abstract]
Business acquisition price		$ 18,300,000		$ 63,500,000
Fair value of accounts receivable and (Decrease) due to external adjustments	(260,000)			7,693,000
Goodwill, Tax deduction period			15 years
Percentage of common stock acquired		100.00%
Increased amortizable intangible assets due to fair value adjustment	1,457,000
Reduction in goodwill due to fair value adjustment	1,194,000
Increased in account payable due to fair value adjustment	$ 3,000

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value Measurements [Abstract]

Financial liability measured at fair value on a recurring basis

The table below summarizes the financial liability that was measured at fair value on a recurring basis as of March 31, 2013:

($ in thousands)	Carrying Value at March 31, 2013		Quoted Prices in Active Markets for Identical (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Loss for Quarter Ended March 31, 2013
Interest rate swap – cash flow hedge	$	1,520	$	—	$	1,520	$	—	$	77

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

Earnings per share

The calculations below provide net earnings, weighted average common shares outstanding, and earnings per share for both basic and diluted EPS for the three months ended March 31, 2013 and April 1, 2012.

($ in thousands, except per share amounts)	Net Earnings (Numerator)		Shares (in thousands) (Denominator)		Per Share Amount
First Quarter 2013
Basic earnings per share	$	3,568		33,523	$	0.11
Effect of dilutive securities:
Equity-based compensation plans				653
Diluted earnings per share	$	3,568		34,176	$	0.10
First Quarter 2012
Basic earnings per share	$	2,283		34,106	$	0.07
Effect of dilutive securities:
Equity-based compensation plans				612
Diluted earnings per share	$	2,283		34,718	$	0.07

Potentially dilutive securities earnings per share

The following table shows the potentially dilutive securities which have been excluded from the first quarter 2013 and 2012 dilutive earnings per share calculation because they are either anti-dilutive, or the exercise price exceeds the average market price.

	Three Months Ended
(Number of shares in thousands)	March 31, 2013		April 1, 2012
Stock options		219		282

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Basis of Presentation

3 Months Ended

Mar. 31, 2013

Basis of Presentation [Abstract]

Basis of Presentation

NOTE A – Basis of Presentation

The accompanying condensed consolidated 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 unaudited condensed consolidated financial statements should be read in conjunction with the financial statements, notes thereto, and other information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring items) necessary for a fair statement, in all material respects, of the financial position and results of operations for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year.

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Goodwill and Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2013

Goodwill and Other Intangible Assets [Abstract]

Summary of Intangible assets

CTS has the following other intangible assets and goodwill as of:

	March 31, 2013					December 31, 2012
($ in thousands)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Customer lists/relationships	$	62,014	$	(26,015	)	$	70,002	$	(25,084	)
Patents		10,319		(10,319	)		10,319		(10,319	)
Other intangibles		11,280		(1,494	)		1,835		(672	)
Total		83,613		(37,828	)		82,156		(36,075	)
In-process research & development		820		—			820		—
Goodwill		35,156		—			36,350		—
Total other intangible assets and goodwill	$	119,589	$	(37,828	)	$	119,326	$	(36,075	)

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Equity-Based Compensation (Details Textual) (USD $)	3 Months Ended			3 Months Ended																										3 Months Ended		12 Months Ended
	Mar. 31, 2013 Plans	Apr. 01, 2012	Jul. 02, 2007	Mar. 31, 2013 Stock Options [Member]	Apr. 01, 2012 Stock Options [Member]	Mar. 31, 2013 Stock Options [Member] Minimum [Member]	Mar. 31, 2013 Stock Options [Member] Maximum [Member]	Mar. 31, 2013 Service Based Restricted Stock Units [Member]	Apr. 01, 2012 Service Based Restricted Stock Units [Member]	Mar. 31, 2013 Performance Based Restricted Stock Units [Member]	Apr. 01, 2012 Performance Based Restricted Stock Units [Member]	Feb. 03, 2011 Performance Based Restricted Stock Units [Member]	Feb. 02, 2010 Performance Based Restricted Stock Units [Member]	Feb. 03, 2011 Performance Based Restricted Stock Units [Member] Minimum [Member]	Feb. 02, 2010 Performance Based Restricted Stock Units [Member] Minimum [Member]	Feb. 03, 2011 Performance Based Restricted Stock Units [Member] Maximum [Member]	Feb. 02, 2010 Performance Based Restricted Stock Units [Member] Maximum [Member]	Feb. 11, 2013 Performance Based Restricted Stock Units [Member] Dependant upon achievement of sales growth targets [Member]	Feb. 08, 2012 Performance Based Restricted Stock Units [Member] Dependant upon achievement of sales growth targets [Member]	Feb. 11, 2013 Performance Based Restricted Stock Units [Member] Dependant upon achievement of sales growth targets [Member] Minimum [Member]	Feb. 08, 2012 Performance Based Restricted Stock Units [Member] Dependant upon achievement of sales growth targets [Member] Minimum [Member]	Feb. 11, 2013 Performance Based Restricted Stock Units [Member] Dependant upon achievement of sales growth targets [Member] Maximum [Member]	Feb. 08, 2012 Performance Based Restricted Stock Units [Member] Dependant upon achievement of sales growth targets [Member] Maximum [Member]	Feb. 11, 2013 Performance Based Restricted Stock Units [Member] Dependant upon achievement of free cash flow targets [Member]	Feb. 08, 2012 Performance Based Restricted Stock Units [Member] Dependant upon achievement of free cash flow targets [Member]	Feb. 11, 2013 Performance Based Restricted Stock Units [Member] Dependant upon achievement of free cash flow targets [Member] Minimum [Member]	Feb. 08, 2012 Performance Based Restricted Stock Units [Member] Dependant upon achievement of free cash flow targets [Member] Minimum [Member]	Feb. 11, 2013 Performance Based Restricted Stock Units [Member] Dependant upon achievement of free cash flow targets [Member] Maximum [Member]	Feb. 08, 2012 Performance Based Restricted Stock Units [Member] Dependant upon achievement of free cash flow targets [Member] Maximum [Member]	Mar. 31, 2013 Market Based Restricted Stock Units [Member]	Apr. 01, 2012 Market Based Restricted Stock Units [Member]	Dec. 31, 2012 Market Based Restricted Stock Units [Member]	Dec. 31, 2011 Market Based Restricted Stock Units [Member]	Dec. 31, 2010 Market Based Restricted Stock Units [Member]	Feb. 08, 2012 Market Based Restricted Stock Units [Member] Enumerated	Feb. 03, 2011 Market Based Restricted Stock Units [Member] Enumerated	Feb. 02, 2010 Market Based Restricted Stock Units [Member] Enumerated	Jul. 02, 2007 Market Based Restricted Stock Units [Member] Enumerated	Feb. 08, 2012 Market Based Restricted Stock Units [Member] Minimum [Member]	Feb. 03, 2011 Market Based Restricted Stock Units [Member] Minimum [Member]	Feb. 02, 2010 Market Based Restricted Stock Units [Member] Minimum [Member]	Jul. 02, 2007 Market Based Restricted Stock Units [Member] Minimum [Member]	Feb. 08, 2012 Market Based Restricted Stock Units [Member] Maximum [Member]	Feb. 03, 2011 Market Based Restricted Stock Units [Member] Maximum [Member]	Feb. 02, 2010 Market Based Restricted Stock Units [Member] Maximum [Member]	Jul. 02, 2007 Market Based Restricted Stock Units [Member] Maximum [Member]	Feb. 11, 2013 Market Based Restricted Stock Units [Member] Executive Officer [Member] Enumerated	Feb. 11, 2013 Market Based Restricted Stock Units [Member] Executive Officer [Member] Minimum [Member]	Feb. 11, 2013 Market Based Restricted Stock Units [Member] Executive Officer [Member] Maximum [Member]	Feb. 11, 2013 Market Based Restricted Stock Units [Member] Certain executives and key employees [Member] Enumerated	Feb. 11, 2013 Market Based Restricted Stock Units [Member] Certain executives and key employees [Member] Minimum [Member]	Feb. 11, 2013 Market Based Restricted Stock Units [Member] Certain executives and key employees [Member] Maximum [Member]
Equity-Based Compensation (Textual) [Abstract]
Vesting period						4 years	10 years	3 years																						3 years
Stock options exercisable cumulative annual installments period				10 years
Stock option exercises, commencement period from date of grant				P1Y
Weighted average remaining contractual life of options outstanding	1 year 6 months	1 year 9 months 18 days
Weighted average remaining contractual life of options exercisable	1 year 6 months	1 year 9 months 18 days
Aggregate intrinsic values of options outstanding	$ 73,000	$ 547,000
Exercised, Aggregate Intrinsic Value	73,000	547,000		93,000	138,000
Unvested stock options	0
Vesting performance-based restricted stock unit														0.00%	0.00%	200.00%	200.00%			0.00%	0.00%	200.00%	200.00%			0.00%	0.00%	200.00%	200.00%
Vesting market-based restricted stock unit																																							0.00%	0.00%	0.00%	0.00%	200.00%	200.00%	200.00%	150.00%		0.00%	200.00%		0.00%	200.00%
Number of shares issuable, against each unit of RSU								1
Compensation expense								824,000	752,000	294,000	230,000																			200,000	232,000
Unrecognized compensation cost								$ 4,486,000		$ 2,079,000																				$ 1,540,000
Weighted average period								1 year 2 months 12 days		1 year 7 months 6 days																				1 year 8 months 12 days
Aggregate market-based restricted stock unit			25,000
Number of enumerated peer group companies																																			28	28	28	32									20			20
Target based Vesting of market-based restricted stock unit																																			45,850	79,800	117,000										32,500			77,700
Restricted Stock Units, awarded and vested												0	49,320																								67,130
Earned and awarded performance and market-based restricted stock unit																														80,940		8,334	0	12,500
Target based Vesting of performance-based restricted stock unit												53,200	78,000					77,700	45,850					66,600	39,300
Performance-based restricted stock unit awards year of award granted												2013	2012					2016	2014					2016	2014										2014	2013	2012	2011									2016			2016
Equity-Based Compensation (Additional Textual) [Abstract]
Number of Equity Based Compensation Plan	5

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Segments (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013 Segment	Apr. 01, 2012
Segments (Textual) [Abstract]
Segment operating earnings	$ 3,784	$ 1,932
Insurance recovery for property damage - casualties		1,769
Segments (Additional Textual) [Abstract]
Number reportable segments	2
EMS [Member]
Segments (Textual) [Abstract]
Segment operating earnings	(619)	(1,088)
EMS [Member] | Flood [Member]
Segments (Textual) [Abstract]
Segment operating earnings		(1,088)
Insurance recovery for property damage - casualties		1,769
Components and Sensors segment [Member]
Segments (Textual) [Abstract]
Segment operating earnings	$ 4,403	$ 3,020

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Condensed Consolidated Statements of Earnings - Unaudited (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Condensed Consolidated Statements of Earnings [Abstract]
Net sales	$ 149,512	$ 146,969
Costs and expenses:
Cost of goods sold	118,332	124,920
Insurance recovery for business interruption - casualties		(3,627)
Selling, general, and administrative expenses	21,407	19,404
Research and development expenses	6,252	6,109
Insurance recovery for property damage - casualties		(1,769)
Restructuring and impairment charge - Note M	559
Operating earnings	2,962	1,932
Other (expense)/income:
Interest expense	(915)	(659)
Interest income	413	449
Other	298	575
Total other (expense)/income	(204)	365
Earnings before income taxes	2,758	2,297
Income tax (benefit)/expense	(810)	14
Net earnings	$ 3,568	$ 2,283
Net earnings per share - Note J
Basic	$ 0.11	$ 0.07
Diluted	$ 0.10	$ 0.07
Cash dividends declared per share	$ 0.035	$ 0.035
Average common shares outstanding:
Basic	33,523	34,106
Diluted	34,176	34,718

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Summary of inventories
Finished goods	$ 13,877	$ 16,267
Work-in-process	15,246	15,860
Raw materials	53,021	49,625
Total inventories	$ 82,144	$ 81,752

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Condensed Consolidated Balance Sheets (Parenthetical) - Unaudited (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Condensed Consolidated Balance Sheets [Abstract]
Allowance for Accounts receivable	$ 747	$ 811
Accumulated depreciation	$ 235,382	$ 240,693
Preferred stock, without par value
Preferred stock, shares authorized	25,000,000	25,000,000
Preferred stock, shares issued
Common stock, without par value
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	55,495,710	55,263,082
Common stock held in treasury, shares	21,935,218	21,829,954

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Treasury Stock (Details) (USD $) In Thousands, except Share data, unless otherwise specified			1 Months Ended	3 Months Ended
	Mar. 31, 2013	Dec. 31, 2012	Aug. 31, 2012 August 2012 Program [Member]	Mar. 31, 2013 August 2012 Program [Member]
Treasury Stock (Textual) [Abstract]
Shares repurchased				105,264
Shares repurchased, Per Share			$ 13
Authorization Expiration			The authorization has no expiration
Shares repurchased under Board of Directors authorized program			1,000,000
Treasury Stock (Additional Textual) [Abstract]
Cost of common stock held in treasury (2013 - 21,935,218 and 2012 - 21,829,954 shares)	$ (312,006)	$ (310,958)
Common stock held in treasury, shares	21,935,218	21,829,954
Approximate shares available for future issuances	8,100,000

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Equity-Based Compensation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Summarizes the equity-based compensation expense
Restricted stock units	$ 1,318	$ 1,214

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Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Changes in Accumulated Other Comprehensive Income
Accumulated other comprehensive income, Cumulative translation adjustment, Beginning balance	$ 1,219
Accumulated other comprehensive income, Defined benefit pension items, Beginning balance	(120,843)
Accumulated other comprehensive income, Unrealized gains and losses on cash flow hedges, Beginning balance	(980)
Accumulated other comprehensive income, Beginning balance	(120,604)
Other comprehensive earnings before reclassifications, Cumulative translation adjustment	(1,714)
Other comprehensive earnings before reclassifications, Defined benefit pension items
Other comprehensive earnings before reclassifications, Unrealized gains and losses on cash flow hedges	22
Other comprehensive earnings before reclassifications, Total	(1,719)
Amounts reclassified from accumulated other comprehensive income , Cumulative translation adjustment	0
Amounts reclassified from accumulated other comprehensive income, Defined benefit pension items	1,543	958
Amounts reclassified from accumulated other comprehensive income, Unrealized gains and losses on cash flow hedges	47
Amounts reclassified from accumulated other comprehensive income, Total	1,590
Net current period other comprehensive income, Cumulative translation adjustment	(1,741)	1,162
Subtotal-net reclassification to earnings-defined benefit and post-retirement benefit plans	1,543
Net change in unrealized holding loss on interest rate swaps	69
Other comprehensive (loss)/earnings	(129)	2,120
Accumulated other comprehensive income, Cumulative translation adjustment, Ending balance	(522)
Accumulated other comprehensive income, Unrealized gains and losses on cash flow hedges, Ending balance	(911)
Accumulated other comprehensive income, Defined benefit pension item, Ending balance	(119,300)
Accumulated other comprehensive income, Ending balance	$ (120,733)

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Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2013

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

Note O – Recent Accounting Pronouncements

ASU 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity”

In March 2013, the FASB issued Accounting Standards Update 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity,” which requires an entity to release any related cumulative translation adjustment into net income when the entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights). Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. This amendment also clarifies that the sale of an investment in a foreign entity includes both (1) events that result in the loss of a controlling financial interest in a foreign entity (that is, irrespective of any retained investment) and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date. These provisions are effective prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. CTS is in the process of evaluating the impact of these provisions on the Company’s consolidated financial statements. The Company does not expect these provisions to have a material impact on CTS’ financial statements.

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Equity-Based Compensation (Details 1)	Mar. 31, 2013
2009 Plan [Member]
Status of equity-based compensation plans
Awards originally available	3,400,000
Restricted stock units outstanding	784,164
Awards available for grant	1,628,220
2004 Plan [Member]
Status of equity-based compensation plans
Awards originally available	6,500,000
Stock options outstanding	194,300
Restricted stock units outstanding	101,223
Options exercisable	194,300
Awards available for grant	262,686
2001 Plan [Member]
Status of equity-based compensation plans
Awards originally available	2,000,000
Stock options outstanding	102,300
Options exercisable	102,300
1996 Plan [Member]
Status of equity-based compensation plans
Awards originally available	1,200,000
Stock options outstanding	33,750
Options exercisable	33,750

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Equity-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2013

Equity-Based Compensation [Abstract]

Summarizes equity-based compensation expense

The following table summarizes the compensation expense included in the Unaudited Condensed Consolidated Statements of Earnings for the three months ended March 31, 2013 and April 1, 2012 relating to equity-based compensation plans:

($ in thousands)	March 31, 2013		April 1, 2012
Restricted stock units	$	1,318	$	1,214

Status of equity-based compensation plans

The following table summarizes the status of these plans as of March 31, 2013:

	2009 Plan		2004 Plan		2001 Plan		1996 Plan
Awards originally available		3,400,000		6,500,000		2,000,000		1,200,000
Stock options outstanding				194,300		102,300		33,750
Restricted stock units outstanding		784,164		101,223
Options exercisable				194,300		102,300		33,750
Awards available for grant		1,628,220		262,686

Summary of status of stock options

A summary of the status of stock options as of March 31, 2013 and April 1, 2012, and changes during the three-month periods then ended, is presented below:

	March 31, 2013					April 1, 2012
	Options			Weighted- Average Exercise Price		Options			Weighted- Average Exercise Price
Outstanding at beginning of year		392,550		$	10.91		728,050		$	10.24
Exercised		(45,800	)	$	8.41		(79,122	)	$	8.57
Expired		(15,400	)	$	7.75		(11,000	)	$	16.22
Forfeited		(1,000	)	$	9.78		(9,650	)	$	9.52
Outstanding at end of period		330,350		$	11.40		628,278		$	10.36
Exercisable at end of period		330,350		$	11.40		628,278		$	10.36

Summarizes information about stock options

The following table summarizes information about stock options outstanding at March 31, 2013:

	Options Outstanding and Exercisable
Range of Exercise Prices	Number Outstanding at 3/31/13		Weighted  Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
$ 9.78 – 11.11		244,050		1.13	$	10.49
$ 13.68 – 16.24		86,300		2.50	$	13.97

Summary of Service-Based Restricted Stock Units

A summary of the status of RSUs as of March 31, 2013 and April 1, 2012, and changes during the three-month periods then ended is presented below:

	March 31, 2013					April 1, 2012
	RSUs			Weighted- average Grant-Date Fair Value		RSUs			Weighted- average Grant-Date Fair Value
Outstanding at beginning of year		751,798		$	9.82		701,449		$	9.35
Granted		336,100		$	10.17		221,250		$	10.46
Converted		(199,811	)	$	9.88		(144,533	)	$	9.55
Forfeited		(2,700	)	$	10.45		(8,897	)	$	9.19
Outstanding at end of period		885,387		$	9.94		769,269		$	9.63
Weighted-average remaining contractual life		7.5 years					7.3 years

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Condensed Consolidated Statements of Cash Flows - Unaudited (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Cash flows from operating activities:
Net earnings	$ 3,568	$ 2,283
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization	5,886	4,790
Prepaid pension asset		(1,702)
Equity-based compensation - Note B	1,318	1,214
Amortization of retirement benefit adjustments - Note F	2,168	1,734
Restructuring and impairment charge - Note M	559
Insurance recovery for business interruption and property damage - casualties		(5,396)
Insurance proceeds for business interruption and property damage other than property, plant and equipment - casualties		4,966
Other	(2,235)	(212)
Changes in assets and liabilities, net of acquisition
Accounts receivable	(4,929)	1,394
Inventories	(28)	2,886
Other current assets	(1,354)	(429)
Accounts payable and accrued liabilities	(8,441)	(15,634)
Total adjustments	(7,056)	(6,389)
Net cash used in operating activities	(3,488)	(4,106)
Cash flows from investing activities:
Proceeds from sale of assets	70
Capital expenditures	(4,699)	(4,369)
Capital expenditures to replace property, plant and equipment damaged in casualties		(1,766)
Insurance proceeds for property, plant and equipment damaged in casualties		2,250
Payment for acquisition, net of cash acquired		(14,689)
Net cash used in investing activities	(4,629)	(18,574)
Cash flows from financing activities:
Payments of long-term debt - Note E	(1,206,100)	(1,301,300)
Proceeds from borrowings of long-term debt - Note E	1,216,600	1,335,600
Payments of short-term notes payable	(528)	(1,284)
Proceeds from borrowings of short-term notes payable	528	1,284
Purchase of treasury stock	(1,048)	(2,734)
Dividends paid	(1,171)	(1,193)
Exercise of stock options	266	710
Other	42	78
Net cash provided by financing activities	8,589	31,161
Effect of exchange rate on cash and cash equivalents	(611)	(452)
Net (decrease)/increase in cash and cash equivalents	(139)	8,029
Cash and cash equivalents at beginning of year	109,571	76,412
Cash and cash equivalents at end of period	109,432	84,441
Cash paid during the period for:
Interest	659	537
Income taxes - net	$ 1,295	$ 1,007

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Condensed Consolidated Statements of Comprehensive Earnings - Unaudited (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Condensed Consolidated Statements of Comprehensive Earnings [Abstract]
Net earnings	$ 3,568	$ 2,283
Other comprehensive (loss)/earnings:
Cumulative translation adjustment, net of tax of $534 and tax benefit of $335	(1,741)	1,162
Defined benefit and post-retirement benefit plans:
Amortization of prior service cost included in net periodic pension costs, net of tax of $59 and $59	91	92
Amortization of loss included in net periodic pension costs, net of tax of $774 and $606	1,245	980
Foreign exchange impact, net of tax of $74 and tax benefit of $42	207	(114)
Reclassification adjustments included in net earnings- defined benefit and post-retirement benefit plans	1,543	958
Unrealized gain on interest swaps treated as cash flow hedges:
Unrealized holding gains arising during period, net of tax of $14	22
Reclassification adjustments for losses included in net earnings, net of tax of $30	47
Net change in unrealized holding loss on interest rate swaps	69
Other comprehensive (loss)/earnings	(129)	2,120
Comprehensive earnings	$ 3,439	$ 4,403

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Earnings Per Share

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

Earnings Per Share

NOTE J –Earnings Per Share

The table below provides a reconciliation of the numerator and denominator of the basic and diluted earnings per share (“EPS”) computations. Basic earnings per share is calculated using the weighted average number of common shares outstanding as the denominator and net earnings as the numerator. Diluted earnings per share is calculated by adding all potentially dilutive shares to the weighted average number of common shares outstanding for the numerator. All anti-dilutive shares are excluded from the computation of diluted earnings per share. The calculations below provide net earnings, weighted average common shares outstanding, and earnings per share for both basic and diluted EPS for the three months ended March 31, 2013 and April 1, 2012.

($ in thousands, except per share amounts)	Net Earnings (Numerator)		Shares (in thousands) (Denominator)		Per Share Amount
First Quarter 2013
Basic earnings per share	$	3,568		33,523	$	0.11
Effect of dilutive securities:
Equity-based compensation plans				653
Diluted earnings per share	$	3,568		34,176	$	0.10
First Quarter 2012
Basic earnings per share	$	2,283		34,106	$	0.07
Effect of dilutive securities:
Equity-based compensation plans				612
Diluted earnings per share	$	2,283		34,718	$	0.07

The following table shows the potentially dilutive securities which have been excluded from the first quarter 2013 and 2012 dilutive earnings per share calculation because they are either anti-dilutive, or the exercise price exceeds the average market price.

	Three Months Ended
(Number of shares in thousands)	March 31, 2013		April 1, 2012
Stock options		219		282

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Document and Entity Information	3 Months Ended
	Mar. 31, 2013	Apr. 22, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	CTS CORP
Entity Central Index Key	0000026058
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		33,520,551

XML

Treasury Stock

3 Months Ended

Mar. 31, 2013

Treasury Stock [Abstract]

Treasury Stock

NOTE K – Treasury Stock

Common stock held in treasury totaled 21,935,218 shares with a cost of $312.0 million at March 31, 2013 and 21,829,954 shares with a cost of $311.0 million at December 31, 2012. Approximately 8.1 million shares are available for future issuances.

In August 2012, CTS’ Board of Directors authorized a program to repurchase up to one million shares of its common stock in the open market at a maximum price of $13 per share. The authorization has no expiration. Reacquired shares will be used to support equity-based compensation programs and for other corporate purposes. During the first three months of 2013, 105,264 shares were repurchased.

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Condensed Consolidated Statements of Comprehensive Earnings (Parenthetical) - Unaudited (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Condensed Consolidated Statements of Comprehensive Earnings [Abstract]
Translation adjustment, tax expense (benefit)	$ 534	$ (335)
Amortization of prior service cost included in net periodic pension costs, tax	59	59
Amortization of loss included in net periodic pension costs, tax	774	606
Foreign exchange impact, tax expense (benefit)	74	(42)
Unrealized holding gains arising during period, tax	14
Reclassification adjustments for losses included in net earnings, tax	$ 30

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Debt

3 Months Ended

Mar. 31, 2013

Debt [Abstract]

Debt

NOTE E – Debt

On January 10, 2012, CTS amended its November 18, 2010 unsecured revolving credit facility. This amendment provided for an increase in the revolving credit facility to $200 million and increased the accordion feature, whereby CTS can expand the facility to $300 million, subject to participating banks’ approval. Additionally, among other covenants, the amendment reduced the applicable margin by 25 basis points, increased the total consideration the company may pay for non-U.S. based acquisitions, and extended the term of the credit facility through January 10, 2017.

Long-term debt was comprised of the following:

($ in thousands)	March 31, 2013		December 31, 2012
Revolving credit facility, weighted-average interest rate of 1.8% (2013), and 1.8% (2012) due in 2017	$	164,000	$	153,500

There was $164.0 million outstanding under the $200 million revolving credit facility at March 31, 2013, and $153.5 million at December 31, 2012. The Company had $33.4 million available under the $200 million credit facility at March 31, 2013, net of standby letters of credit of $2.6 million, and $43.9 million available at December 31, 2012, net of standby letters of credit of $2.6 million. Interest rates on the revolving credit facility fluctuate based upon London Interbank Offered Rate and the Company’s quarterly total leverage ratio. CTS pays a commitment fee on the undrawn portion of the revolving credit facility. The commitment fee varies based on the quarterly leverage ratio and was 0.35 percent and 0.30 percent per annum at March 31, 2013 and April 1, 2012, respectively. The revolving credit facility requires, among other things, that CTS comply with a maximum total leverage ratio and a minimum fixed charge coverage ratio. Failure of CTS to comply with these covenants could reduce the borrowing availability under the revolving credit facility. CTS was in compliance with all debt covenants at March 31, 2013. The revolving credit facility requires CTS to deliver quarterly financial statements, annual financial statements, auditors certifications and compliance certificates within a specified number of days after the end of a quarter and year. Additionally, the revolving facility contains restrictions limiting CTS’ ability to: dispose of assets; incur certain additional debt; repay other debt or amend subordinated debt instruments; create liens on assets; make investments, loans or advances; make acquisitions or engage in mergers or consolidations; engage in certain transactions with CTS’ subsidiaries and affiliates; and make stock repurchases and dividend payments.

CTS uses interest rate swaps to convert the line of credit’s variable rate of interest into a fixed rate. In the second quarter of 2012, CTS entered into four separate interest rate swap agreements to fix interest rates on $50 million of long-term debt for the periods January 2013 to January 2017. In the third quarter of 2012, CTS entered into four separate interest rate swap agreements to fix interest rates on $25 million of long-term debt for the periods January 2013 to January 2017. The difference to be paid or received under the terms of the swap agreements will be recognized as an adjustment to interest expense for the related line of credit when settled.

These swaps are treated as cash flow hedges and consequently, the changes in fair value were recorded in Other Comprehensive Income. An unrealized gain of approximately $36,000 was recorded in Other Comprehensive Income for the three months ended March 31, 2013. Approximately $304,000 was recorded as accrued liabilities and $1,216,000 recorded as a non-current liability in other long-term obligations on the Condensed Consolidated Balance Sheets. CTS also reclassed approximately $77,000 of realized loss out of other comprehensive income to interest expense for the quarter ended March 31, 2013.

As a result of the use of these derivative instruments, the Company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, the Company has a policy of only entering into contracts with carefully selected major financial institutions based upon their credit ratings and other factors. CTS’ established policies and procedures for mitigating credit risk on principal transactions include reviewing and establishing limits for credit exposure and continually assessing the creditworthiness of counterparties.

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Inventories

3 Months Ended

Mar. 31, 2013

Inventories [Abstract]

Inventories

NOTE D – Inventories

Inventories consist of the following:

($ in thousands)	March 31, 2013		December 31, 2012
Finished goods	$	13,877	$	16,267
Work-in-process		15,246		15,860
Raw materials		53,021		49,625
Total inventories	$	82,144	$	81,752

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Basis Of Presentation (Policies)

3 Months Ended

Mar. 31, 2013

Basis of Presentation [Abstract]

Basis of Presentation

The accompanying condensed consolidated 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 unaudited condensed consolidated financial statements should be read in conjunction with the financial statements, notes thereto, and other information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring items) necessary for a fair statement, in all material respects, of the financial position and results of operations for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year.

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Goodwill and Other Intangible Assets

3 Months Ended

Mar. 31, 2013

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

NOTE L – Goodwill and Other Intangible Assets

CTS has the following other intangible assets and goodwill as of:

	March 31, 2013					December 31, 2012
($ in thousands)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets:
Customer lists/relationships	$	62,014	$	(26,015	)	$	70,002	$	(25,084	)
Patents		10,319		(10,319	)		10,319		(10,319	)
Other intangibles		11,280		(1,494	)		1,835		(672	)
Total		83,613		(37,828	)		82,156		(36,075	)
In-process research & development		820		—			820		—
Goodwill		35,156		—			36,350		—
Total other intangible assets and goodwill	$	119,589	$	(37,828	)	$	119,326	$	(36,075	)

During the quarter ended March 31, 2013, CTS retrospectively adjusted to provisional amounts recognized at the acquisition date for the D&R acquisition in December 2012. Customer lists/relationships were reduced by $7,988,000, other intangibles was increased by $9,445,000 and goodwill was reduced by $1,194,000 as a result of additional information provided by CTS’ external valuation consultants. The D&R allocations pertaining to goodwill and other intangible assets will be finalized in 2013. See Note C for further discussion.

Of the net intangible assets excluding goodwill and in-process research and development at March 31, 2013, $41.1 million relates to the Components and Sensors segment and $4.7 million relates to the EMS segment. The in-process research and development intangible at March 31, 2013 relates to the Components and Sensors Segment. Of the goodwill at March 31, 2013, $34.7 million relates to Components and Sensors segment and $0.5 million relates to the EMS segment. Of the goodwill at December 31, 2012, $35.9 relates to Components and Sensors and $0.5 million relates to the EMS segment.

CTS recorded amortization expense of $1.8 million during the three month period ended March 31, 2013 and $0.8 million during the three month period ended April 1, 2012. The weighted average remaining amortization period for the amortizable intangible assets is 11.7 years. The weighted average remaining amortization period for customer lists/relationships is 12.4 years and for the other intangibles is 9.2 years. CTS estimates remaining amortization expense of $3.8 million in 2013, $4.8 million in 2014, $4.6 million in 2015, $4.3 million in 2016, $4.2 million in 2017 and $24.1 million thereafter.

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Contingencies

3 Months Ended

Mar. 31, 2013

Contingencies [Abstract]

Contingencies

NOTE H – 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 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.

CTS manufactures accelerator pedals for a number of automobile manufacturers, including subsidiaries of Toyota Motor Corporation (“Toyota”). In January 2010, Toyota initiated a recall of a substantial number of vehicles in North America containing pedals manufactured by CTS. The pedal recall and associated events have led to the Company being named as a co-defendant with Toyota in certain litigation. In February 2010, CTS entered into an agreement with Toyota whereby Toyota agreed that it will indemnify, defend, and hold the Company harmless from, and the parties will cooperate in the defense of, third-party civil claims and actions that are filed or asserted in the United States or Canada and that arise from or relate to alleged incidents of unintended acceleration of Toyota and Lexus vehicles. The limited exceptions to indemnification restrict CTS’ share of any liability to amounts collectable from its insurers.

Certain other claims are pending against CTS with respect to matters arising out of the ordinary conduct of the Company’s business. These claims, in the opinion of management, based upon past experience and presently available information, either adequate provision for anticipated costs has been reserved or the ultimate anticipated costs will not materially affect CTS’ consolidated financial position, results of operations, or cash flows.

Scotland EMS Manufacturing Facility Fire

During the second quarter of 2011, a fire occurred at the Company’s Scotland EMS manufacturing facility. The fire damaged approximately $1.6 million of inventory and $0.2 million of machinery and equipment at net book value. Property insurance coverage with a $0.1 deductible had substantially covered the costs of repairing and/or replacing the damaged inventory and machinery and equipment. Business interruption insurance had substantially covered the lost sales impact and related fixed costs in 2011.

In the first quarter of 2012, CTS recovered approximately $0.8 million from the Company’s insurance carriers and recorded a recovery of approximately $0.6 million for business interruption in CTS’ Condensed Consolidated Statements of Earnings for the quarter ended April 1, 2012 after deducting $0.1 million for certain expenses and relieving the insurance receivable of approximately $0.1 million at December 31, 2011. All claims were settled in 2012 with CTS’ insurance carrier.

Thailand EMS Manufacturing Facility Flood

During the fourth quarter of 2011, CTS’ Thailand EMS manufacturing facility was flooded. The flood damaged approximately $0.8 million of inventory and $0.5 million of fixed assets. CTS also incurred approximately $2.5 million of fixed costs at this facility. Local property insurance covered the costs of repairing and/or replacing the damaged inventory and machinery and equipment. CTS also had business interruption insurance under these policies that covers the lost sales impact and fixed costs. The maximum amount covered under the local insurance policy was approximately $2.4 million.

In the first quarter of 2012, CTS received cash of approximately $7.2 million from the Company’s insurance carriers. Out of the $7.2 million cash, approximately $4.4 million was for business interruption and the remaining $2.8 million was for the reimbursement of costs related to property damage. Part of the cash received was to relieve the insurance receivable balance of $2.4 million recorded at December 31, 2011. Consequently, CTS recorded a recovery of approximately $3.0 million for business interruption and $1.8 million for property damage in CTS’ Condensed Consolidated Statements of Earnings for the quarter ended April 1, 2012. All claims were settled in 2012 with CTS’ insurance carrier.

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Goodwill and Other Intangible Assets (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Goodwill and other intangible assets:
In-process research & development	$ 820,000	$ 820,000
Goodwill	35,156,000	35,156,000
Gross Carrying Amount, Total	119,589,000	119,589,000
Accumulated Amortization	(37,828,000)	(36,075,000)
Customer lists/relationships [Member]
Goodwill and other intangible assets:
Gross Carrying Amount	62,014,000	62,014,000
Accumulated Amortization	(26,015,000)	(25,084,000)
Patents [Member]
Goodwill and other intangible assets:
Gross Carrying Amount	10,319,000	10,319,000
Accumulated Amortization	(10,319,000)	(10,319,000)
Other intangibles [Member]
Goodwill and other intangible assets:
Gross Carrying Amount	11,280,000	11,280,000
Accumulated Amortization	(1,494,000)	(672,000)
Total definite lived intangible assets [Member]
Goodwill and other intangible assets:
Gross Carrying Amount	83,613,000	83,613,000
Accumulated Amortization	(37,828,000)	(36,075,000)
Goodwill [Member]
Goodwill and other intangible assets:
Goodwill	$ 35,156,000	$ 35,156,000

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Retirement Plans

3 Months Ended

Mar. 31, 2013

Retirement Plans [Abstract]

Retirement Plans

NOTE F – Retirement Plans

Net pension expense/(income) for the three months ended March 31, 2013 of $545,000 and April 1, 2012 of $106,000 for our domestic and foreign plans include the following components:

	Domestic Pension Plans						Foreign Pension Plans
($ in thousands)	March 31, 2013			April 1, 2012			March 31, 2013			April 1, 2012
Service cost	$	648		$	683		$	28		$	31
Interest cost		2,711			2,991			132			142
Expected return on plan assets (1)		(5,042	)		(5,376	)		(100	)		(109	)
Amortization of prior service cost		149			151			—			—
Amortization of loss		1,921			1,519			98			74
Expense/(income), net	$	387		$	(32	)	$	158		$	138

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

Net post retirement expense for the three months ended March 31, 2013 and April 1, 2012 for our post-retirement plan includes the following components:

	Three Months Ended
($ in thousands)	March 31, 2013		April 1, 2012
OTHER POSTRETIREMENT BENEFIT PLAN
Service cost	$	2	$	2
Interest cost		56		64
Amortization of gain		—		(10	)
Postretirement expense	$	58	$	56

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Segments

3 Months Ended

Mar. 31, 2013

Segments [Abstract]

Segments

NOTE G – Segments

CTS reportable segments are grouped by entities that exhibit similar economic characteristics and the segment’s reporting results are regularly reviewed by CTS’ chief operating decision maker to make decisions about resources to be allocated to these segments and to evaluate the segment’s performance. CTS has two reportable segments: 1) Components and Sensors and 2) Electronics Manufacturing Services (“EMS”).

Components and sensors are products that 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 communications infrastructure and computer markets; terminators, including ClearONE™ terminators, used in computer and other high speed applications, switches, resistor networks and potentiometers used to serve multiple markets; and fabricated piezo-electric materials and substrates used primarily in medical, computer and industrial markets.

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 Original Equipment Manufacturer (“OEM”) or other contract manufacturer. Additionally for some customers, CTS provides full turnkey manufacturing and completion including design, bill-of-material management, logistics, and repair.

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 segment operating earnings/(loss) before restructuring and impairment charge, interest expense, interest income, other non-operating income/(expense), and income tax expense.

Summarized financial information concerning CTS’ reportable segments is shown in the following table:

($ in thousands)	Components and Sensors			EMS			Total
First Quarter of 2013
Net sales to external customers	$	98,062		$	51,450		$	149,512
Segment operating earnings before corporate and shared services charges		10,382			1,063			11,445
Corporate and shared services charges		(5,979	)		(1,682	)		(7,661	)
Segment operating earnings/(loss)		4,403			(619	)		3,784
Total assets		450,827			113,723			564,550
First Quarter of 2012
Net sales to external customers	$	76,418		$	70,551		$	146,969
Segment operating earnings before corporate and shared services charges		7,344			455			7,799
Corporate and shared services charges		(4,324	)		(1,543	)		(5,867	)
Segment operating earnings/(loss) (1)		3,020			(1,088	)		1,932
Total assets		357,687			150,979			508,666

⁽¹⁾  EMS segment’s operating loss of $(1,088) includes $1,769 of insurance recovery for property damage related to the flood at CTS Thailand’s manufacturing facility.

Reconciling information between reportable segments’ operating earnings and CTS’ consolidated earnings before income taxes is shown in the following table for three-month periods then ended:

($ in thousands)	March 31, 2013			April 1, 2012
Total segment operating earnings	$	3,784		$	1,932
Restructuring and restructuring-related charges — Components and Sensors		(227	)		—
Restructuring and restructuring-related charges — EMS		(595	)		—
Interest expense		(915	)		(659	)
Interest income		413			449
Other income		298			575
Earnings before income taxes	$	2,758		$	2,297

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Fair Value Measurements

3 Months Ended

Mar. 31, 2013

Fair Value Measurements [Abstract]

Fair Value Measurements

NOTE I—Fair Value Measurement

The table below summarizes the financial liability that was measured at fair value on a recurring basis as of March 31, 2013:

($ in thousands)	Carrying Value at March 31, 2013		Quoted Prices in Active Markets for Identical (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Loss for Quarter Ended March 31, 2013
Interest rate swap – cash flow hedge	$	1,520	$	—	$	1,520	$	—	$	77

The fair value of CTS’ interest rate swaps were measured using a market approach which uses current industry information. There is a readily determinable market and these swaps are classified within level 2 of the fair value hierarchy. $304,000 of the fair value of these swaps is classified as a current liability and the remaining $1,216,000 is classified as a non-current liability on CTS’ Condensed Consolidated Balance Sheets.

CTS’ long-term debt consists of a revolving debt facility. There is a readily determinable market for CTS’ revolving credit debt and it is classified within Level 2 of the fair value hierarchy as the market is not deemed to be active. The fair value of long-term debt was measured using a market approach which uses current industry information and approximates carrying value.

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Restructuring Charges (Details Textual) (USD $)	3 Months Ended	6 Months Ended	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2013 December 2012 Plan [Member] Person	Mar. 31, 2013 December 2012 Plan [Member] Components and Sensors segment [Member]	Mar. 31, 2013 December 2012 Plan [Member] EMS [Member]
Restructuring Charges (Textual) [Abstract]
Restructuring and Impairment Charges	$ 559,000
Elimination of workforce		190
Planned restructuring costs		4,100,000
Restructuring and restructuring-related cost incurred	$ 800,000	$ 4,200,000	$ 200,000	$ 600,000

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Other Comprehensive Income (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Other Comprehensive Income (Textual) [Abstract]
Actuarial loss reclassified to net pension expense on consolidated statements of earning	$ 2,019
Amortization of loss included in net periodic pension costs, tax	774	606
Research and development expenses [Member]
Other Comprehensive Income (Textual) [Abstract]
Actuarial loss reclassified to net pension expense on consolidated statements of earning	381
Selling, general and administrative expenses [Member]
Other Comprehensive Income (Textual) [Abstract]
Actuarial loss reclassified to net pension expense on consolidated statements of earning	938
Cost of goods sold [Member]
Other Comprehensive Income (Textual) [Abstract]
Actuarial loss reclassified to net pension expense on consolidated statements of earning	$ 700

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Restructuring Charges (Details 1) (December 2012 Plan [Member], USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2013
December 2012 Plan [Member]
Restructuring reserve activity
Restructuring liability at beginning	$ 1.6
Restructuring and restructuring-related charges, excluding asset impairments and write-offs	0.8
Cost paid	(2.0)
Restructuring liability at ending	$ 0.4

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Other Comprehensive Income Tables

3 Months Ended

Mar. 31, 2013

Other Comprehensive Income [Abstract]

Changes in Accumulated Other Comprehensive Income

The following table displays the changes in Accumulated Other Comprehensive Income by components for the three months ended March 31, 2013 (all amounts are stated net of tax):

($ in thousands)	Cumulative translation adjustment			Defined benefit pension items			Unrealized gains and losses on cash flow hedges			Total
Accumulated other comprehensive income - balance at January 1, 2013	$	1,219		$	(120,843	)	$	(980	)	$	(120,604	)
Other comprehensive earnings before reclassifications		(1,741	)		—			22			(1,719	)
Amounts reclassified from accumulated other comprehensive income (1)		—			1,543			47			1,590
Net current period other comprehensive income	$	(1,741	)	$	1,543		$	69		$	(129	)
Accumulated other comprehensive income - balance at March 31, 2013	$	(522	)	$	(119,300	)	$	(911	)	$	(120,733	)

⁽¹⁾  Includes $2,019 of actuarial loss that was reclassified to Cost of goods sold $700, Selling, general and administrative expenses $938 and Research and development expenses $381 on CTS’ Condensed Consolidated Statements of Earnings. The tax impact of this reclassification was $774.

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Segments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012	Dec. 31, 2012
Summarized Segment Financial Information
Net sales to external customers	$ 149,512	$ 146,969
Segment operating earnings before corporate and shared services charges	11,445	7,799
Corporate and shared services charges	(7,661)	(5,867)
Segment operating earnings/(loss)	3,784	1,932
Total assets	564,550	508,666	561,179
Components and Sensors [Member]
Summarized Segment Financial Information
Net sales to external customers	98,062	76,418
Segment operating earnings before corporate and shared services charges	10,382	7,344
Corporate and shared services charges	(5,979)	(4,324)
Segment operating earnings/(loss)	4,403	3,020
Total assets	450,827	357,687
EMS [Member]
Summarized Segment Financial Information
Net sales to external customers	51,450	70,551
Segment operating earnings before corporate and shared services charges	1,063	455
Corporate and shared services charges	(1,682)	(1,543)
Segment operating earnings/(loss)	(619)	(1,088)
Total assets	$ 113,723	$ 150,979

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Other Comprehensive Income

3 Months Ended

Mar. 31, 2013

Other Comprehensive Income [Abstract]

Other Comprehensive Income

Note N – Other Comprehensive Income

The following table displays the changes in Accumulated Other Comprehensive Income by components for the three months ended March 31, 2013 (all amounts are stated net of tax):

($ in thousands)	Cumulative translation adjustment			Defined benefit pension items			Unrealized gains and losses on cash flow hedges			Total
Accumulated other comprehensive income - balance at January 1, 2013	$	1,219		$	(120,843	)	$	(980	)	$	(120,604	)
Other comprehensive earnings before reclassifications		(1,741	)		—			22			(1,719	)
Amounts reclassified from accumulated other comprehensive income (1)		—			1,543			47			1,590
Net current period other comprehensive income	$	(1,741	)	$	1,543		$	69		$	(129	)
Accumulated other comprehensive income - balance at March 31, 2013	$	(522	)	$	(119,300	)	$	(911	)	$	(120,733	)

⁽¹⁾  Includes $2,019 of actuarial loss that was reclassified to Cost of goods sold $700, Selling, general and administrative expenses $938 and Research and development expenses $381 on CTS’ Condensed Consolidated Statements of Earnings. The tax impact of this reclassification was $774.

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Inventories (Tables)

3 Months Ended

Mar. 31, 2013

Inventories [Abstract]

Summary of inventories

Inventories consist of the following:

($ in thousands)	March 31, 2013		December 31, 2012
Finished goods	$	13,877	$	16,267
Work-in-process		15,246		15,860
Raw materials		53,021		49,625
Total inventories	$	82,144	$	81,752

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Retirement Plans (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Net post retirement expense for post-retirement plan
Expense/(income), net	$ 545,000	$ 106,000
Other Postretirement Benefit Plan [Member]
Net post retirement expense for post-retirement plan
Service cost	2,000	2,000
Interest cost	56,000	64,000
Amortization of gain		(10,000)
Expense/(income), net	$ 58,000	$ 56,000

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Acquisition (Details) (D and R Technology [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 21, 2012 Estimated Fair Values [Member]
Summary of the estimated fair values of the assets acquired and the liabilities assumed
Current assets		$ 13,839
Property, plant and equipment		8,635
Goodwill		26,991
Amortizable intangible assets		18,330
In-process research and development		500
Other assets		678
Fair value of assets acquired		68,973
Less fair value of liabilities acquired		(5,473)
Net cash paid	$ 63,500	$ 63,500

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Condensed Consolidated Balance Sheets - Unaudited (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Current Assets
Cash and cash equivalents	$ 109,432	$ 109,571
Accounts receivable, less allowances (2013 - $747; 2012 - $811)	93,730	89,342
Inventories - Note D	82,144	81,752
Other current assets	29,741	28,633
Total current assets	315,047	309,298
Property, plant and equipment, less accumulated depreciation (2013 - $235,382; 2012 - $240,693)	94,115	93,725
Other Assets
Goodwill - Note L	35,156	35,156
Other indefinite-lived intangible asset - Note L	820	820
Other intangible assets, net - Note L	45,785	47,538
Deferred income taxes	72,207	73,158
Other	1,420	1,484
Total other assets	155,388	158,156
Total Assets	564,550	561,179
Current Liabilities
Accounts payable	68,328	67,973
Accrued liabilities	40,066	47,056
Total current liabilities	108,394	115,029
Long-term debt - Note E	164,000	153,500
Other long-term obligations	22,434	24,892
Shareholders' Equity
Preferred stock - authorized 25,000,000 shares without par value; none issued
Common stock - authorized 75,000,000 shares without par value; 55,495,710 shares issued at March 31, 2013 and 55,263,082 shares issued at December 31, 2012	294,288	291,512
Additional contributed capital	37,979	40,008
Retained earnings	370,194	367,800
Accumulated other comprehensive loss	(120,733)	(120,604)
Total shareholder's equity before treasury	581,728	578,716
Cost of common stock held in treasury (2013 - 21,935,218 and 2012 - 21,829,954 shares)	(312,006)	(310,958)
Total shareholders' equity	269,722	267,758
Total Liabilities and Shareholders' Equity	$ 564,550	$ 561,179

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Acquisition

3 Months Ended

Mar. 31, 2013

Acquisition [Abstract]

Acquisition

NOTE C – Acquisition

In December 2012, CTS acquired D&R Technology (“D&R”), a privately-held company located in Carol Stream, Illinois and Juarez, Mexico for $63.5 million. D&R is a leading manufacturer of custom designed sensors, switches and electromechanical assemblies primarily serving the automotive light-vehicle market. This acquisition expands CTS’ strategic automotive sensor product platform with new customers and a broader product portfolio. The acquisition also diversifies CTS’ Components and Sensors segment and brings new growth opportunities from sensor applications for safety systems and vehicle chassis management. Additionally, D&R brings strong sensor design and development engineering capabilities to complement CTS’ engineering team.

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 December 21, 2012
Current assets	$	13,839
Property, plant and equipment		8,635
Goodwill		26,991
Amortizable intangible assets		18,330
In-process research and development		500
Other assets		678
Fair value of assets acquired		68,973
Less fair value of liabilities acquired		(5,473	)
Net cash paid	$	63,500

Included in current assets is the fair value of accounts receivable of $7,693,000. 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. The goodwill is deductible for tax purposes over a 15-year period.

The following table summarizes the net sales and earnings before income taxes of D&R that is included in CTS’ Condensed Consolidated Statements of Earnings for the three months ended March 31, 2013:

($ in thousands)	March 31, 2013
Net Sales	$	12,702
Income before income taxes	$	150

The D&R acquisition is accounted for using the acquisition method of accounting whereby the total purchase price is allocated to tangible and intangible assets and liabilities based on the fair market values on the date of acquisition. CTS determines the purchase price allocations on the acquisition based on estimates of the fair values of the assets acquired and liabilities assumed. During the quarter ended March 31, 2013, the Company recorded a measurement period adjustment as a result of additional information provided by CTS’ external valuation consultants. This adjustment increased amortizable intangible assets by $1,457,000. Other measurement period adjustments were recorded for accounts receivable and accounts payable to reflect fair market values on the date of acquisition, which resulted in a decrease of $260,000 and an increase of $3,000, respectively. The net effect of these measurement period adjustments reduced goodwill by $1,194,000. The allocations for goodwill and other intangible assets is based on historical experience and third party evaluation. The allocations pertaining to goodwill and other intangible assets will be finalized in 2013.

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 Valpey-Fisher acquisition was accounted for using the acquisition method of accounting whereby the total purchase price was allocated to tangible and intangible assets and liabilities based on the fair market values on the date of acquisition. CTS determined the purchase price allocations on the acquisition based on the fair values of the assets acquired and liabilities assumed. CTS finalized the purchase price allocation at December 31, 2012.

The following table summarizes the pro-forma combined net sales and earnings before income taxes of CTS, D&R and Valpey-Fisher on a pro forma basis as if the acquisition date had occurred on January 1, 2011:

	April 1, 2012
($ in thousands)	(Unaudited Proforma)
Net Sales	$	161,120
Earnings before income taxes	$	3,075

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Earnings Per Share (Details 1) (Stock Options [Member]) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Stock Options [Member]
Potentially dilutive securities earnings per share
Antidilutive securities excluded from computation of EPS	219	282

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Debt (Tables)

3 Months Ended

Mar. 31, 2013

Debt [Abstract]

Long-term debt

Long-term debt was comprised of the following:

($ in thousands)	March 31, 2013		December 31, 2012
Revolving credit facility, weighted-average interest rate of 1.8% (2013), and 1.8% (2012) due in 2017	$	164,000	$	153,500

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Equity-Based Compensation (Details 3) (USD $)	3 Months Ended
	Mar. 31, 2013
$9.78 - 11.11 [Member]
Summarizes information about stock options
Range of Exercise Prices, Lower Range Limit	$ 9.78
Range of Exercise Prices, Upper Range Limit	$ 11.11
Number Outstanding and Exercisable	244,050
Weighted-Average Remaining Contractual Life (Years)	1 year 1 month 17 days
Weighted Average Exercise Price	$ 10.49
$ 13.68 - 16.24 [Member]
Summarizes information about stock options
Range of Exercise Prices, Lower Range Limit	$ 13.68
Range of Exercise Prices, Upper Range Limit	$ 16.24
Number Outstanding and Exercisable	86,300
Weighted-Average Remaining Contractual Life (Years)	2 years 6 months
Weighted Average Exercise Price	$ 13.97

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Restructuring Charges

3 Months Ended

Mar. 31, 2013

Restructuring Charges [Abstract]

Restructuring Charges

NOTE M – Restructuring Charges

During December of 2012, CTS realigned its operations to suit the business needs of the Company. These realignment actions resulted in the elimination of approximately 190 positions. These actions were completed as of March 31, 2013. The following table displays the planned restructuring and restructuring-related charges associated with the realignment, as well as a summary of the actual costs incurred through March 31, 2013:

($ in millions)                    December 2012 Plan	Planned Costs		Actual incurred through March 31, 2013
Workforce reduction	$	1.7	$	1.8
Asset impairment charge		1.1		1.1
Other charge		0.3		0.4
Restructuring and impairment charges	$	3.1	$	3.3
Inventory write-down	$	0.5	$	0.5
Equipment relocation		0.1		0.3
Other charges		0.4		0.1
Restructuring-related charges	$	1.0	$	0.9
Total restructuring and restructuring-related charges		4.1		4.2

Approximately $0.8 million of the restructuring and restructuring-related charges of $4.2 million were incurred in the first quarter of 2013. $0.6 million of these charges related to the EMS segment and $0.2 million relates to the Components and Sensors segment. Restructuring and impairment charges are reported on a separate line on the Consolidated Statements of Earnings. Restructuring-related charges are reported as a component of Cost of Goods Sold on the Consolidated Statements of Earnings.

The following table displays the restructuring reserve activity related to the realignment for the period ended December 31, 2012:

($ in millions)                    December 2012 Plan
Restructuring liability at January 1, 2013	$	1.6
Restructuring and restructuring-related charges, excluding asset impairments and write-offs		0.8
Cost paid		(2.0	)
Restructuring liability at March 31, 2013	$	0.4