What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-23 compared with 2023-02-24 · 380 added, 464 removed, 1268 unchanged (40% of the section changed)

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We are subject to challenges including periodic market softness, competition from other suppliers, changes in technology, and the ability to add new customers, launch new products or penetrate new markets.

On February 28, 2022, we acquired 100% of the outstanding shares of TEWA for $24,515.

TEWA is a designer and manufacturer of high-quality temperature sensors.

TEWA has complementary capabilities with our existing temperature sensing platform, and the acquisition supports our end market diversification strategy and expands our presence in Europe.

On June 30, 2022, we acquired 100% of the outstanding shares of Ferroperm for $72,340.

Ferroperm specializes in the design and manufacture of high performance piezoceramic components for use in complex and demanding medical, industrial, and aerospace applications.

Ferroperm has complementary capabilities with our existing medical diagnostics and imaging product lines.

The acquisition supports our end market diversification strategy and expands our presence in European end markets.

On February 6, 2023, we acquired 100% of the outstanding shares of maglab AG ("Maglab") for $4,164 in cash subject to additional earnout payments based on future performance.

Maglab has deep expertise in magnetic system design and current measurement solutions for use in e-mobility, industrial automation, and renewable energy applications.

Maglab's domain expertise coupled with CTS’

commercial, technical and operational capabilities position us to advance our status as a recognized innovator in electric motor sensing and controls markets.

COVID-19 Impact and Supply Chain Uncertainties

The COVID-19 pandemic and subsequent supply chain uncertainties have had a significant negative impact on the global economy in 2022 and 2021.

These events have disrupted the financial markets, negatively impacted the global supply chain and increased the cost of materials and operations, particularly within the global automotive industry.

Key semiconductor chip and other critical part shortages continue to force OEMs to shut down production, often on short notice.

With customers changing orders on short notice, we run the risk of carrying excess inventory in these situations.

These developments are outside of our control, remain highly uncertain, and cannot be predicted.

In addition, the supply chain shortages continue to put pressure on our manufacturing costs and our gross margins.

We continue to actively monitor the ongoing impacts of the COVID-19 pandemic and supply chain issues and will seek to mitigate and minimize their impact on our business, when possible.

We anticipate the supply chain disruptions to continue to impact our results in 2023 and we remain cautious about the financial impact of these potential disruptions on our business.

Maglab's domain expertise coupled with CTS’ commercial, technical and operational capabilities position us to advance our status as a recognized innovator in electric motor sensing and controls markets.

Results of Operations:

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(Amounts in thousands, except percentages and per share amounts):

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The following table highlights changes in significant components of the Consolidated Statements of Earnings (Loss) for the years ended December 31, 2022, and December 31, 2021:

The following table highlights changes in significant components of the Consolidated Statements of Earnings for the years ended December 31, 2023, and December 31, 2022:

Years Ended December 31,

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Operating earnings

Total other (expense) income, net

Earnings (loss) before taxes

Income tax expense (benefit)

Net earnings (loss)

Diluted earnings (loss) per share:

Diluted net earnings (loss) per share

Net sales were $586,869 for the year ended December 31, 2022, an increase of $73,944, or 14.4% from 2021.

Net sales growth was driven by increased demand for our products in all end markets we serve.

Net sales to transportation markets increased $19,615 or 6.9%.

Net sales to other markets increased $54,329, or 23.7%.

The TEWA and Ferroperm acquisitions added sales of $23,489 in 2022.

Total other income (expense), net

Earnings before taxes

Income tax expense

Diluted earnings per share:

Diluted net earnings per share

Net sales were $550,422 for the year ended December 31, 2023, a decrease of $36,447, or 6.2% from 2022.

The decline in net sales was primarily driven by decreased volume of industrial and commercial vehicle products.

Net sales to the non-transportation markets decreased $34,203 or 12.1%, while net sales to the transportation markets decreased $2,245 or 0.8%.

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The TEWA Temperature Sensors SP.

(“TEWA”) and Meggitt A/S (a/k/a Ferroperm Piezoceramics A/S, “Ferroperm”) acquisitions, both completed in 2022, added net sales of $37,460 and $23,477 in 2023 and 2022, respectively, while the Maglab acquisition added net sales of $1,755 in 2023.

Changes in foreign exchange rates decreased net sales by $2,459 year-over-year primarily due to the U.S.

Dollar appreciating compared to the Chinese Renminbi and Euro.

Gross margin was $210,538 for the year ended December 31, 2022, an increase of $25,919 or 14.0% from the year ended December 31, 2021.

The increase in gross margin was driven by sales volume and mix partially offset by increased material freight costs, changes in foreign exchange rates of $3,577 and $4,048 in inventory step-up amortization charges taken relating to the TEWA and Ferroperm acquisitions.

We continue to experience significant inflation in material and freight costs as well as interruptions in the supply chain, particularly due to the global semiconductor chip shortages.

The impact of the supply chain shortages and OEM shutdowns are expected to continue to have an adverse effect on our operations that we are continuing to attempt to mitigate.

Dollar appreciating compared to the Chinese Renminbi.

Gross margin was $190,859 for the year ended December 31, 2023, a decrease of $19,679 or 9.3% from the year ended December 31, 2022.

The decrease in gross margin was driven by lower sales volumes as well as changes in foreign exchange rates of $6,247 primarily due to the U.S.

Dollar appreciating compared to the Chinese Renminbi and Peso.

Selling, general and administrative ("SG&A") expenses were $83,816, or 15.2% of sales for the year ended December 31, 2023, versus $91,520 or 15.6% of sales in 2022.

The increase in SG&A expenses was driven by the acquisitions and increased incentive compensation.

Research and development (“R&D”) expenses were $24,100, or 4.1% of sales in 2022 compared to $23,856, or 4.7% of sales in 2021, in line with our commitment to continue investing in research and product development to drive organic growth.

The decrease in SG&A expenses was primarily driven by lower incentive compensation associated with lower financial performance as well as cost reduction measures implemented due to challenging market conditions.

Research and development (“R&D”) expenses were $24,918, or 4.5% of sales in 2023 compared to $24,100, or 4.1% of sales in 2022, in line with our commitment to continue investing in research and product development to drive organic growth.

Restructuring charges were $7,074, or 1.3% of net sales in 2023, compared to $1,912, or 0.3% of net sales in 2022.

We continue to implement certain restructuring actions to improve our cost structure and competitive position.

The restructuring charges in the year ended December 31, 2023 were primarily related to costs associated with our plant closure and consolidation activities.

See Note 9 “Costs Associated with Exit and Restructuring Activities” in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further information.

Other income and expense items are summarized in the following table:

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Total other (expense), net

The reduction in other expense, net was primarily driven by decreased pension expense due to the U.S.

pension plan termination, effective in 2021.

Other expense, net for the year ended December 31, 2022 was primarily driven by $6,803 in excise taxes incurred as part of the U.S.

pension plan termination, $1,776 in derivative losses associated with the acquisition of Ferroperm, and foreign currency losses primarily related to the Euro and Chinese Renminbi offset partially by income from the U.S.

pension plan investments realized prior to the final termination.

Other expense, net in 2021 was primarily driven by increased pension expense including $126,269 in

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settlement charges from our U.S.

pension plan termination process in the second and third quarters of 2021 as well as foreign currency translation losses, mainly due to the appreciation of the U.S.

Dollar compared to the Czech Koruna and Mexican Peso.

Interest income increased due to investments of available cash into short-term, cash equivalent, high yield deposit accounts.

Other expense, net for 2023 is primarily driven by foreign currency losses primarily related to the Chinese Renminbi offset partially by income from the qualified replacement plan assets.

Other expense, net for 2022 was primarily driven by $6,803 in excise taxes incurred as part of the U.S.

pension plan termination and $1,776 in derivative losses associated with the acquisition of Ferroperm, as well as foreign currency losses primarily related to the Chinese Renminbi offset partially by income from the U.S.

pension plan investments realized prior to its final termination.

Years Ended December 31,

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The effective income tax rate in 2023 was 19.5% compared to 26.2% in the prior year.

The decrease in our effective income tax rate is primarily attributed to a one-time non-cash settlement expense related to the termination of the U.S.

pension plan incurred in the second and third quarters of 2021.

The decrease is primarily attributed to 2023 tax benefits associated with foreign tax credits related to a 2023 tax law change, research and development credits, and lower discrete tax impacts associated with executive incentive compensation and pension termination costs.

Liquidity and Capital Resources

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However, we may choose to pursue additional equity and debt financing to provide additional liquidity or to fund acquisitions.

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Cash and cash equivalents were $163,876 at December 31, 2023 and $156,910 at December 31, 2022, of which $99,940 and $90,244, respectively, were held outside the United States.

Total debt as of December 31, 2023 and December 31, 2022 was $67,500 and $83,670, respectively.

Total debt as a percentage of total capitalization, defined as long-term debt as a percentage of total debt and shareholders’

equity, was 14.2% at December 31, 2022, compared to 9.7% at December 31, 2021.

Cash Flows from Operating Activities

Net cash provided by operating activities was $88,811 during the year ended December 31, 2023.

Components of net cash provided by operating activities included net earnings of $60,532, depreciation and amortization expense of $28,710, other net non-cash items totaling $3,108, offset by a net cash outflow from changes in assets and liabilities of $(3,539) primarily driven by reductions in accounts payable and accrued payroll and benefits as a result of lower sales and incentive compensation accruals.

Net cash provided by operating activities was $121,197 during the year ended December 31, 2022.

Components of net cash provided by operating activities included net earnings of $59,575, depreciation and amortization expense of $29,753, other net non-cash items totaling $10,260, and a net cash inflow from changes in assets and liabilities of $21,609 primarily driven by $34,016 received from the U.S.

pension plan termination.

Net cash provided by operating activities was $86,141 during the year ended December 31, 2021.

Components of net cash provided by operating activities included net loss of $(41,866), depreciation and amortization expense of $26,930, non-cash pension and other post-retirement plan expenses of $132,650, and other net non-cash items totaling $24,912, and a net cash outflow from changes in assets and liabilities of $6,661.

Cash Flows from Investing Activities

Net cash used in investing activities for the year ended December 31, 2023 was $18,097, driven by capital expenditures of $14,738 and $3,359 of acquisition payments, primarily from the Maglab acquisition as well as final working capital adjustments from the TEWA and Ferroperm acquisitions.

See Note 3, "Business Acquisitions," in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.

Net cash used in investing activities for the year ended December 31, 2022 was $111,188, driven by the acquisition payments for the TEWA and Ferroperm acquisitions of $96,855 and capital expenditures of $14,333.

See Note 3, "Business Acquisitions," in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.

Net cash used in investing activities for the year ended December 31, 2021, was $15,896, driven primarily by capital expenditures.

Cash Flows from Financing Activities

Net cash used by financing activities for the year ended December 31, 2023, was $65,399.

The net cash outflow was the result of treasury stock purchases of $40,926, net cash for debt paydowns of $16,170, dividend payments of $5,040, and taxes paid on behalf of equity award participants of $3,263.

Net cash provided by financing activities for the year ended December 31, 2022, was $4,336.

The net cash inflow was the result of net cash from debt of $33,638 associated with completed acquisitions, partially offset by treasury stock purchases of $21,447, dividend payments of $5,131, taxes paid on behalf of equity award participants of $1,524, and contingent consideration payments of $1,200.

Net cash used in financing activities for the year ended December 31, 2021, was $20,712.

The net cash outflow was the result of net payments of long-term debt of $4,600, treasury stock purchases of $8,786, dividend payments of $5,173, taxes paid on behalf of equity award participants of $1,503, and contingent consideration payments of $650.

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Capital Resources

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Weighted-average interest rate

On December 15, 2021, we entered into a second amended and restated five-year credit agreement with a group of banks (the “Revolving Credit Facility”) to (i) increase the total credit facility availability to $400,000 which may be increased by $200,000 at the request of the Company, subject to the administrative agent's approval, (ii) extend the maturity of the Revolving Credit Facility from February 12, 2024 to December 15, 2026, (iii) replace LIBOR with SOFR as the primary reference rate used to calculate interest on the loans under the Revolving Credit Facility, (iv) increase available sublimits for letters of credit, and swingline loans as well as providing for additional alternative currency borrowing capabilities, and (v) modify the financial and non-financial covenants to provide the Company additional flexibility.

This new unsecured credit facility replaced the prior $300,000 unsecured credit facility, which would have expired February 12, 2024.

Borrowings in U.S.

dollars under the Revolving Credit Facility bear interest, at a per annum rate equal to the applicable Term SOFR rate (but not less than 0.0%), plus the Term SOFR adjustment, and plus an applicable margin, which ranges from 1.00% to 1.75%, based on our net leverage ratio.

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on our net leverage ratio.

Similarly, borrowings of alternative currencies under the Revolving Credit Facility bear interest equal to a defined risk-free reference rate, plus the applicable risk-free rate adjustment and plus an applicable margin, which ranges from 1.00% to 1.75%, based on our net leverage ratio.

We use interest rate swaps to convert a portion of our revolving credit facility's outstanding balance from a variable rate of interest to a fixed rate.

The contractual rate of these arrangements ranges from 1.49% to 2.49%.

The Revolving Credit Facility includes a swing line sublimit of $20,000 and a letter of credit sublimit of $20,000.

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We were in compliance with all debt covenants at December 31, 2023.

Our liquidity, access to capital, and borrowing costs could be adversely impacted by declines in our credit rating, our financial performance, and global credit market conditions, as well as a broad range of other factors, including those related to the COVID-19 pandemic discussed in this Annual Report on Form 10-K.

See “Item 1A.

Risk Factors”

for additional discussion of these and other risks that our business faces.

In addition, we have $99,940 of foreign cash balances and our ability to repatriate these funds timely and in a tax efficient manner may be restricted.

See “Item 1A.

Risk Factors” for additional discussion of risks that our business faces.

As of December 31, 2023, our material cash requirements for our known contractual and other obligations were as follows:

Long-term debt, including interest –

Outstanding principal on our Revolving Credit Facility was $83,670 at December 31, 2022, with no amounts payable within 12 months.

• Long-term debt, including interest – Outstanding principal on our Revolving Credit Facility was $67,500 at December 31, 2023, with no amounts payable within 12 months.

Additionally, we have minimum contractual future interest payments on our hedged borrowings under our Revolving Credit Facility estimated to be $4,655 through maturity, with approximately $1,955 payable within 12 months based on the December 31, 2023 exchange rate.

We may paydown certain portions of these obligations early.

See Note 13 and 14, "Debt" and “Derivatives,”

respectively, in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further details of our debt and hedging activities.

Operating lease payments –

We enter into various noncancelable lease agreements for land, buildings and equipment under non-cancellable operating leases used in our operations.

As of December 31, 2023, we had interest rate swaps that fix interest costs on $50,000 of our long-term debt through December 2026 and a cross-currency swap on $17,500 of our long-term debt through June 2027.

See Note 13, “Debt” and Note 14, “Derivatives,” in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further details of our debt and hedging activities.

• Operating lease payments – We enter into various noncancelable lease agreements for land, buildings and equipment used in our operations.

Operating lease obligations were $37,856, with $6,215 payable within 12 months.

See Note 12, “Leases,”

in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further detail of our obligations and the timing of expected future payments.

Retirement obligations –

Expected future contributions relating to our defined benefit postretirement plans were $6,240, with $759 payable in 12 months.

See Note 7, “Retirement Plan,”

in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further detail of our obligations and the timing of expected future payments.

See Note 12, “Leases,” in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further detail of our obligations and the timing of expected future payments.

• Retirement obligations – Expected future contributions relating to our defined benefit postretirement plans were $5,781, with $750 payable in 12 months.

See Note 7, “Retirement Plans,” in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further detail of our obligations and the timing of expected future payments.

We have no off-balance sheet arrangements that have a material current effect or are reasonably likely to have a material future effect on our financial condition or changes in our financial condition.

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The net cash payment of $24,515 for this acquisition was funded by the Company's cash on hand.

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On June 30, 2022, we acquired Ferroperm, a designer and manufacturer of high performance piezoceramic components for use in complex and demanding medical, industrial, and aerospace applications.

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Critical Accounting Estimates and Policies

The Securities and Exchange Commission ("SEC") has defined a company’s critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and results of operations, and which require a company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.

Based on this definition, we have identified the critical accounting policies and judgments addressed below.

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Actual results may differ from these estimates.

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Critical Accounting Estimates

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The valuations of the acquired assets and liabilities assumed will impact the determination of future operating results.

Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, revenue growth rates, discount rates, customer attrition rates, asset lives, contributory asset charges, and market multiples, among other items.

We determine the fair values of intangible assets acquired generally in consultation with third-party valuation advisors.

Intangible assets other than goodwill are recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed or exchanged, regardless of the Company’s intent to do so.

Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination and is reviewed annually for impairment or more frequently if impairment indicators arise.

Finite-lived intangible assets are reviewed for impairment if facts and circumstances warrant.

Impairment Assessment –

Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination.

Impairment Assessment – Goodwill

Goodwill of a reporting unit is tested for impairment on the first day of its fiscal fourth quarter, or more frequently if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.

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If, after assessing the totality of events or circumstances we determine that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, we do not need to perform a quantitative analysis.

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If a quantitative assessment is required, we estimate the fair value of each reporting unit using a combination of discounted cash flow analysis and market-based valuation methodologies.

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We will monitor future results and will perform a test if indicators trigger an impairment review.

Impairment Assessment –

Other Intangible Assets and Other Long-Lived Assets

Impairment Assessment – Other Intangible Assets and Other Long-Lived Assets

We evaluate the impairment of identifiable intangibles and other long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

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• Significant underperformance relative to expected historical or projected future operating results,

Significant changes in the manner of use of the acquired assets or the strategy for the overall business,

• Significant changes in the manner of use of the acquired assets or the strategy for the overall business, and

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• Significant negative industry or economic trends.

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If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value.

Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid.

We are subject to income taxes in the United States and numerous foreign jurisdictions.

Significant judgments and estimates are required in the determination of consolidated income tax provision.

Significant judgments and estimates are required in the determination of our consolidated income tax provision.

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.

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The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations.

Accounting Standards Codification (“ASC”) 740 states that a tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, on the basis of its technical merits.

We record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available.

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Revenue Recognition

We recognize revenue in accordance with the Financial Accounting Standards Board’s (“FASB”) ASC 606 Revenue from Contracts with Customers, net of estimated reserves.

We recognize revenue in accordance with the Financial Accounting Standards Board’s (“FASB”) ASC 606, Revenue from Contracts with Customers, net of estimated reserves.

Our revenue reserves contain uncertainties because they require management to make assumptions and to apply judgment to estimate the value of future credits to customers for price adjustments.

We base these estimates on the most likely value method considering all reasonably available information, including our historical experience and current expectations, and are reflected in the transaction price when sales are recorded.

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Product Warranties

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Changes in actual demand or market conditions could adversely impact our reserve calculations.

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Over the last three years, our reserves for excess and obsolete inventories have ranged from 13.7% to 17.4% of gross inventory.

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Quantitative and Qualita tive Disclosures About Market Risk

(in thousands)

(in thousands, except percentages)

Our cash flows and earnings are subject to fluctuations resulting from changes in foreign currency exchange rates, interest rates and commodity prices.

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There was $67,500 and $83,670 outstanding under our Revolving Credit Facility at December 31, 2023 and 2022, respectively.

As of December 31, 2022, we had interest rate swaps that fix interest costs on $50,000 of our long-term debt through December 2026 and $22,500 of our long-term debt through June 2027.

The remaining long-term debt is unhedged as of December 31, 2022.

A 100-basis point change in interest rates would not materially impact our total interest expense.

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were approximately 44% of total net sales.

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The Company’s foreign exchange exposures result primarily from the sale of products in foreign currencies, foreign currency denominated purchases, and employee-related and other costs of running operations in foreign countries.

Changes in foreign exchange rates could affect the Company’s sales, costs, balance sheet values and earnings;

therefore, we have entered into foreign currency forward contracts with notional values of $13,548 and $31,787 as of December 31, 2023 to hedge our exposure against the Euro and Mexican Peso, respectively.

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The assumptions used in measuring fair value of the cross-currency swap are considered level 2 inputs, which are based upon the Krone to United States Dollar exchange rate market.

At December 31, 2022 we had a net unrealized loss of $557 in accumulated other comprehensive (loss) income.

At December 31, 2023, we had a net unrealized loss of $1,138 in accumulated other comprehensive income (loss).

Commodity Price Risk

Many of our products require the use of raw materials that are produced in only a limited number of regions around the world or are available from only a limited number of suppliers.

Our most significant raw materials and purchased components include conductive

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inks and contactors, passive connectivity components, integrated circuits and semiconductors, certain rare earth elements ("REEs"), ceramic powders, plastic components, molding compounds, printed circuit boards and assemblies, quartz blanks and crystals, wire harness assemblies, copper, brass, silver, gold, platinum, lead, aluminum, and steel-based raw materials and components.

Our results of operations may be materially and adversely affected if we have difficulty obtaining these raw materials, the quality of available raw materials deteriorates, or there are significant price increases for these raw materials.

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For periods in which the prices are declining, we may be required to write down our inventory carrying cost of these raw materials, since we record our inventory at the lower of cost or net realizable value.

Due to the impact from the COVID-19 pandemic, freight costs increased significantly in 2022.

While the Company is exposed to significant changes in certain commodity prices and expects higher freight costs into 2023, the Company actively monitors these exposures and may take various actions from time to time to mitigate any negative impacts relating thereto.

As the Company is exposed to significant changes in certain commodity prices, we actively monitor these exposures and may take various actions from time to time to mitigate any negative impacts relating thereto.

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Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of CTS Corporation (an Indiana corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of earnings (loss), comprehensive earnings, changes in shareholders’

equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedules included under Item 15(a) (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of CTS Corporation (an Indiana corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of earnings (loss), comprehensive earnings, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedules included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 24, 2023 expressed an unqualified opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 23, 2024, expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Acquisition of TEWA Temperature Sensors SP.

As described further in Note 3 to the financial statements, the Company acquired TEWA Temperature Sensors SP.

(“TEWA”) on February 28, 2022 for a total purchase price of $24.5 million.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets of approximately $13.7 million, which is primarily comprised of customer relationships of $13 million.

Ferroperm Piezoceramics A/S acquisition – valuation of acquired customer relationships

As described further in Note 3 to the financial statements, the Company acquired Ferroperm Piezoceramics A/S (“Ferroperm”) on June 30, 2022 for a total purchase price of $72.4 million.

Accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets of approximately $38.1 million, which is primarily comprised of customer relationships of $31.8 million.

The Company estimated the fair value of the customer relationships using the multi-period excess earnings method, which is an income approach that required management to make significant estimates and assumptions related to future revenues and cash flows and the selection of the discount rate.

We identified the measurement of the acquisition-date fair value of the acquired customer relationships as a critical audit matter.

The principal considerations for our determination that the acquisition-date fair value of the acquired customer relationships is a critical audit matter was the high degree of auditor judgment and an increased extent of effort, which included utilizing specialists, to test

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management’s internally developed assumptions for which there was limited observable market information.

The principal considerations for our determination that the acquisition-date fair value of the acquired customer relationships is a critical audit matter were the high degree of auditor judgment and an increased extent of effort, which included utilizing specialists, to test management’s internally developed assumptions for which there was limited observable market information.

These assumptions were:

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Our audit procedures related to the critical audit matter included the following, among others.

We tested certain internal controls over the Company’s acquisition-date valuation process, including controls over the development of the key assumptions such as the forecasted revenues, customer attrition rate, and the discount rate.

We evaluated the Company’

forecasted revenue growth rates for existing customers by comparing the forecasted growth assumptions to peer and historical results.

We tested, with the assistance of specialists, the Company’s selected customer attrition rate by comparing it to TEWA’s historical customer attrition data.

We assessed, with the assistance of specialists, the Company’s discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable peers and performing a sensitivity analysis based on that data.

• We tested certain internal controls over the Company’s acquisition-date valuation process, including controls over the development of the key assumptions such as the forecasted revenues, customer attrition rate, and discount rate.

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• We evaluated the Company’s forecasted revenue growth rates for existing customers by comparing the forecasted growth assumptions to peer and historical results.

• We compared, with the assistance of specialists, the Company’s selected customer attrition rate to Ferroperm’s historical customer attrition data.

• We assessed, with the assistance of specialists, the Company’s discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable peers and performing a sensitivity analysis based on that data.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2005.

Chicago, Illinois

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Other (expense) income

Total other (expense) income, net

Total other income (expense), net

Earnings (loss) before taxes

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Cumulative translation adjustment, net of tax

Other comprehensive earnings (loss)

Other comprehensive earnings

Comprehensive earnings

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Operating lease assets, net

Prepaid pension asset

Other intangible assets, net

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Retained earnings

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Total shareholders' equity before treasury stock

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Non-cash inventory charges

Pensions and other post-retirement plan (income) expense

Pensions and other post-retirement plan expense (income)

Stock-based compensation

Asset impairment charges

Restructuring non-cash charges

Deferred income taxes

Gain on foreign current hedges, net of tax

Change in fair value of contingent consideration liability

Loss (gain) on foreign currency hedges, net of cash

Changes in assets and liabilities, net of acquisitions:

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Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTVITIES:

CASH FLOWS FROM FINANCING ACTIVITIES:

Payments of long-term debt

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Contingent consideration payments

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

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Capital expenditures incurred not paid

Excise taxes on purchase of treasury stock incurred not paid

The accompanying notes are an integral part of the consolidated financial statements.

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Consolidated Statements of Shareholders' Equity

(in thousands)

(in thousands, except share and per share amounts)

Comprehensive

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(in thousands, except for share and per share data)

NOTE 1 —

Summary of Significant Accounting Policies

NOTE 1 — Summary of Significant Accounting Policies

Description of Business:

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Depreciation is computed primarily over the estimated useful lives of the various classes of assets using the straight-line method.

Useful lives for buildings and improvements range from 10 to 45 years , machinery and equipment from three to 15 year s, and software from 2 to 15 year s.

Useful lives for buildings and improvements range from 10 to 45 years , machinery and equipment from three to 15 years , and software from two to 15 years .

Depreciation on leasehold improvements is computed over the lesser of the lease term or estimated useful lives of the assets.

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Goodwill represents the excess of the purchase price over the fair values of the net assets acquired in a business combination.

In accordance with ASC 350, Intangibles—Goodwill and Other , goodwill is not amortized, but instead is tested for impairment annually or more frequently if circumstances indicate a possible impairment may exist.

Absent any interim indicators of impairment, the Company tests for goodwill impairment as of the first day of its fourth fiscal quarter of each year.

Based upon our latest assessment, we determined that our goodwill was no t impaired as of October 1, 2023.

In addition to goodwill, we also had an acquired in-process research and development ("IPR&D") intangible asset that was treated as indefinite-lived intangible assets and therefore was not subject to amortization until the completion or abandonment of the associated research and development efforts.

In the third quarter of 2020, due to the restructuring actions further outlined in Note 9 - "Costs Associated with Exit and Restructuring Activities", we identified a triggering event associated with a specific asset group including IPR&D due to executed restructuring actions.

This resulted in the recognition of $ 2,200 of impairment charges, and a revaluation of associated contingent liabilities totaling $ 1,900 .

The net impact of $ 300 was recorded as restructuring charges in the Consolidated Statements of Earnings (Loss) in 2020.

Other Intangible Assets and Long-lived Assets:

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Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

In 2020, we recorded a charge of $ 1,016 due to the impairment of a specific asset group that was recorded in selling, general and administrative expenses in the Consolidated Statements of Earnings (Loss).

Intangible assets (excluding indefinite-lived intangible assets) consist primarily of technology, customer lists and relationships, patents, and trade names.

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We assess useful lives based on the period over which the asset is expected to contribute to cash flows.

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Revenue Recognition:

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4) allocate the transaction price to the performance obligations in the contract;

5) recognize revenue when (or as) the entity satisfies a performance obligation.

and 5) recognize revenue when (or as) the entity satisfies a performance obligation.

Our revenue reserves contain uncertainties because they require management to make assumptions and to apply judgment to estimate the value of future credits to customers for product returns, price adjustments, and stock rotation adjustments.

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Research and Development:

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We estimate the fair value of our cash, cash equivalents, accounts receivable and accounts payable as cost due to the short-term nature of these instruments.

Please refer to Note 13 - "Debt" and Note 14 - "Accumulated Other Comprehensive (Loss) Income" for information on the method of determining fair value for our debt and financial derivatives, respectively.

Debt Issuance Costs:

We have debt issuance costs related to our long-term debt that are being amortized using the straight-line method over the term of the debt.

Debt issuance costs are capitalized and reflected as an asset in deferred financing costs in the accompanying Consolidated Balance Sheets.

Amortization of debt issuance costs are recorded in interest expense.

Please refer to Note 13, - "Debt" and Note 14, - "Accumulated Other Comprehensive Income (Loss)," for information on the method of determining fair value for our debt and financial derivatives, respectively.

Stock-Based Compensation:

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The grant date fair value of our market-based RSUs is determined by using a simulation, or Monte Carlo, approach.

Under this approach, stock returns from a comparative group of companies are simulated over the performance period, considering both stock price

CTS CORPORATION 39

volatility and the correlation of returns.

Under this approach, stock returns from a comparative group of companies are simulated over the performance period, considering both stock price volatility and the correlation of returns.

The simulated results are then used to estimate the future payout based on the performance and payout relationship established by the conditions of the award.

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See Note 17, "Stock-Based Compensation" for further information.

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Earnings (Loss) Per Share:

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If the common stock equivalents have an anti-dilutive effect, they are excluded from the computation of diluted earnings per share.

There was no anti-dilutive impact for the year ended December 31, 2021 as result of a net loss incurred in the period.

There was no anti-dilutive impact for the year ended December 31, 2021 as a result of a net loss incurred in the period.

If there is a net loss for the period, then basic earnings (loss) per share equals diluted earnings (loss) per share.

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Years Ended December 31,

Foreign currency (losses) gains

Foreign currency losses

The assets and liabilities of our non-U.S.

dollar functional subsidiaries are translated into U.S.

dollars at the current exchange rate at period end, with the resulting translation adjustments made directly to the "accumulated other comprehensive loss" component of shareholders' equity.

dollars at the current exchange rate at period end, with the resulting translation adjustments made directly to the "accumulated other comprehensive income (loss)" component of shareholders' equity.

Our Consolidated Statements of Earnings (Loss) accounts are translated at the average rates during the period.

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The reclassifications had no impact on previously reported net earnings.

Accounting Pronouncements Recently Adopted

2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting"

Recently issued accounting pronouncements not yet adopted

2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosure"

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires public entities to disclose information about their reportable segments' significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as existing segment disclosures and reconciliation required under ASC 280 on an interim and annual basis.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for the interim periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of adopting ASU 2023-07.

2023-09, "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures"

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which requires public entities, on an annual basis, to provide disclosure of specific categories in the reconciliation of the effective tax rate, as well as disclosure of income taxes paid, disaggregated by jurisdiction.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of adopting ASU 2023-09.

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In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting as it relates to our LIBOR indexed instruments.

ASU 2020-04 provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022, and an entity may elect to apply ASU 2020-04 for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued.

We amended and restated our credit and underlying interest rate swap agreements effective December 15, 2021.

We have elected to continue to apply hedge accounting as we have determined that the hedge remains effective.

See Note 13 - "Debt" for further discussion of the credit agreement modification.

NOTE 2 –

Revenue Recognition

NOTE 2 – Revenue Recognition

The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

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Aerospace & Defense

In the above table, Telecommunications and Information Technology net sales are included in the Industrial end-market for all periods presented.

The end-market sales for 2022 were adjusted by immaterial amounts to align the classification of certain customers in connection with our recent acquisitions with our enterprise-level end market information.

NOTE 3 - Business Acquisitions

TEWA Temperature Sensors SP.

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On February 28, 2022, we acquired 100 % of the outstanding shares of TEWA Temperature Sensors SP.

(“TEWA”).

TEWA is a designer and manufacturer of high-quality temperature sensors.

TEWA has complementary capabilities with our existing temperature sensing platform, and the acquisition supports our end market diversification strategy and expands our presence in Europe.

The purchase price of $ 24,515 , which includes assumed changes in working capital, net of cash acquired of $ 2,979 , has been allocated to the fair values of assets and liabilities acquired as of February 28, 2022.

The allocation of the purchase price continues to be preliminary pending the completion of the working capital settlement in the first quarter of 2023.

The purchase price will be reduced by $ 794 due to final settlements in the first quarter of 2023.

The following table summarizes the consideration paid and the fair values of the assets acquired, and the liabilities assumed as of the date of acquisition:

The final purchase price of $ 23,721 , net of cash acquired of $ 2,979 , has been allocated to the fair values of assets and liabilities acquired as of February 28, 2022.

The purchase price was reduced by $ 794 for the final settlement of net working capital during the first quarter of 2023.

The purchase accounting was completed in the first quarter of 2023.

The following table summarizes the consideration paid, the fair values of the assets acquired, and the liabilities assumed as of the date of acquisition:

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Fair Values at

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Trademarks, tradenames, and other intangibles

Supplemental pro forma disclosures are not included as the amounts are deemed to be immaterial.

Ferroperm Piezoceramics A/S Acquisition

On June 30, 2022, we acquired 100 % of the outstanding shares of Ferroperm Piezoceramics A/S (“Ferroperm”).

Ferroperm specializes in the design and manufacture of high performance piezoceramic components for use in complex and demanding medical, industrial, and aerospace applications.

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The acquisition supports our end market diversification strategy and expands our presence in European end markets.

The purchase price of $ 72,340 , which includes assumed changes in working capital, net of cash acquired of $ 5,578 , has been allocated to the fair values of assets and liabilities acquired as of June 30, 2022.

The allocation of the purchase price continues to be preliminary pending the completion of the valuation of intangible assets.

The final purchase price allocation may result in a materially different allocation than that recorded as of December 31, 2022.

The following table summarizes the consideration paid, the fair values of the assets acquired, and the liabilities assumed as of the date of acquisition:

CTS CORPORATION 42

The final purchase price of $ 72,340 , net of cash acquired of $ 5,578 , has been allocated to the fair values of assets and liabilities acquired as of June 30, 2022.

The valuation of intangible assets and associated deferred tax liability was finalized in the first quarter of 2023.

The following table summarizes the final consideration paid, the fair values of the assets acquired, and the liabilities assumed as of the date of acquisition:

Fair Values at

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Purchase price

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Goodwill represents value the Company expects to be created by combining the operations of the acquired business with the Company's operations, including the expansion of customer relationships, access to new customers, and potential cost savings and synergies.

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The step-up was amortized as a non-cash charge to cost of goods sold as the acquired inventory was sold with all of it recognized in the twelve months ended December 31, 2022.

Intangible assets acquired have been assigned a provisional value of $ 36,448 with an estimated weighted average amortization period of 12 years .

They are included as customer lists/relationships in our Condensed Consolidated Balance Sheets and subsequent notes.

Due to the timing of the acquisition, the identification and valuation of all intangible assets remains incomplete;

however, management used historical experience and projections to estimate the potential value at December 31, 2022.

The amount and assumptions included above remain an estimate that will be adjusted once purchase accounting is complete.

The following table summarizes the carrying amounts and weighted average lives of the acquired intangible assets:

Customer lists/relationships

Technology and other intangibles

Supplemental pro forma disclosures are not included as the amounts are deemed to be immaterial.

Maglab AG Acquisition

On February 6, 2023, we acquired 100 % of the outstanding sh ares of maglab AG ("maglab") for $ 4,164 in cash subject to additional earnout payments based on future performance.

On February 6, 2023, we acquired 100 % of the outstanding shares of maglab AG ("Maglab").

Maglab has deep expertise in magnetic system design and current measurement solutions for use in e-mobility, industrial automation, and renewable energy applications.

Maglab's domain expertise coupled with CTS’

commercial, technical and operational capabilities position us to advance our status as a recognized innovator in electric motor sensing and controls markets.

NOTE 4 —

Accounts Receivable, net

The final purchase price of $ 7,717 has been allocated to the fair values of assets and liabilities acquired as of February 6, 2023.

The purchase price was increased by $ 3 for the final settlement of net working capital during the second quarter of 2023.

The following table summarizes the final consideration paid, the fair values of the assets acquired, and the liabilities assumed as of the date of acquisition:

Consideration Paid

Cash paid, net of cash acquired of $ 14

Contingent consideration

Purchase price

Fair Values at

February 6, 2023

Accounts receivable

Other current assets

Property, plant and equipment

Intangible assets

Fair value of assets acquired

Less fair value of liabilities acquired

Purchase price

Goodwill related to the acquisition is expected to be deductible for tax purposes.

The following table summarizes the carrying amounts and weighted average lives of the acquired intangible assets:

CTS CORPORATION 44

Customer lists/relationships

Technology and other intangibles

All contingent consideration is payable in cash and is based on success factors related to the integration process as well as upon the achievement of annual revenue and customer order targets through the fiscal year ending December 31, 2025.

The Company recorded $ 3,564 as the acquisition date fair value of the contingent consideration based on the estimate of the probability of achieving the performance targets.

This amount is also reflected as an addition to the purchase price.

The contingent consideration has a maximum payout of $ 6,300 .

Supplemental pro forma disclosures are not included as the amounts are deemed to be immaterial.

NOTE 4 — Accounts Receivable, net

The components of accounts receivable, net are as follows:

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Accounts receivable, net

NOTE 5 —

Inventories, net

NOTE 5 — Inventories, net

Inventories, net consist of the following:

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Inventories, net

CTS CORPORATION 43

NOTE 6 —

Property, Plant and Equipment, net

NOTE 6 — Property, Plant and Equipment, net

Property, plant and equipment, net is comprised of the following:

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Depreciation expense

NOTE 7 —

Retirement Plans

As of December 31, 2022, we have two active noncocntributory defined benefit pension plans ("pension plans") covering less than 1 % of our active employees.

These two plans consist of a U.S.

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NOTE 7 — Retirement Plans

As of December 31, 2023, we have two active noncontributory defined benefit pension plans ("Pension Plans") covering less than 1 % of our active employees.

These Pension Plans consist of a U.S.

supplemental retirement plan ("SERP") and a Taiwan pension plan.

The SERP is comprised entirely of participants who were past employees of the Company.

The SERP is comprised entirely of participants who are former employees of the Company.

We also provide post-retirement life insurance benefits for certain retired employees.

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The measurement dates for the Pension Plans for our U.S.

locations were December 31, 2022 and 2021.

In February 2020, the CTS Board of Directors authorized management to explore termination of the U.S.-based pension plan ("Plan"), subject to certain conditions.

locations and the post-retirement life insurance plan was December 31, 2023 and 2022.

In February 2020, our Board of Directors authorized management to explore termination of the U.S.-based pension plan ("Plan"), subject to certain conditions.

On June 1, 2020, we entered into the fifth amendment to the Plan whereby we set an effective termination date for the Plan of July 31, 2020.

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Upon the partial settlement of the pension liability due to the lump sum offering in the second quarter of 2021, the Company recognized a non-cash and non-operating settlement charge of $ 20,063 related to pension losses, reclassified from accumulated other comprehensive loss to other (income) expense in the Company's Condensed Consolidated Statements of Earnings (Loss).

On July 29, 2021, the Plan purchased a group annuity contract that transferred our benefit obligations for approximately 2,700 CTS participants and beneficiaries in the United States (“Transferred Participants”).

As part of the purchase of the group annuity contract, Plan benefit obligations and related annuity administration services for Transferred Participants were irrevocably assumed and guaranteed by the insurance company effective as of August 3, 2021.

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The purchase of the group annuity contract was fully funded directly by Plan assets.

CTS CORPORATION 44

As a result of the final settlement of the pension liability with the purchase of annuities, we reclassified the remaining related unrecognized pension losses of $ 106,206 that were previously recorded in accumulated other comprehensive loss to the Consolidated Statements of Earnings (Loss) in the third quarter of 2021.

As a result of the final settlement of the pension liability with the purchase of annuities, we reclassified the remaining related unrecognized pension losses of $ 106,206 that were previously recorded in accumulated other comprehensive income (loss) to the Consolidated Statements of Earnings (Loss) in the third quarter of 2021.

In January 2022, we transferred approximately $ 17,500 of funds from Plan assets to a qualified replacement plan (QRP) managed by the Company.

This plan requires that these assets be used to fund future annual Company contributions to our U.S.

The QRP requires that these assets be used to fund future annual Company contributions to our U.S.

401(k) program.

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As a result, approximately $ 34,016 was transferred to the Company, which resulted in $ 6,803 of excise tax being recorded in Other Expense in the Company's Condensed Consolidated Statements of Earnings (Loss).

The following table provides a reconciliation of benefit obligation, plan assets, and the funded status of the pension plans for U.S.

As a result of the termination of the Plan and final reversion activities in 2022, no assets remained in the Plan as of December 31, 2022.

The following table provides a reconciliation of the benefit obligation, plan assets, and the funded status of the pension plans for U.S.

locations at the measurement dates.

Pension Plans

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Pension Plans

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Actuarial (gain) loss

Plan settlements

Foreign exchange impact

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Benefits paid

Plan settlements

Qualified replacement plan transfer

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Funded status (plan assets less projected benefit obligations)

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The measurement dates for the post-retirement life insurance plan were December 31, 2022 and 2021.

The following table provides a reconciliation of benefit obligation, plan assets, and the funded status of the post-retirement life insurance plan at those measurement dates.

The following table provides a reconciliation of the benefit obligation, plan assets, and the funded status of the post-retirement life insurance plan at those measurement dates.

Post-Retirement

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Assets at fair value at January 1

Actual return on assets

Company contributions

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Funded status (plan assets less projected benefit obligations)

The components of the prepaid (accrued) cost of the domestic and foreign pension plans are classified in the following lines in the Consolidated Balance Sheets at December 31:

Pension Plans

The components of the accrued cost of the domestic and foreign pension plans are classified in the following lines in the Consolidated Balance Sheets at December 31:

Pension Plans

Prepaid pension asset

Accrued expenses and other liabilities

Long-term pension obligations

Net (accrued) prepaid cost

Net accrued cost

The components of the accrued cost of the post-retirement life insurance plan are classified in the following lines in the Consolidated Balance Sheets at December 31:

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Post-Retirement

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Total accrued cost

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We have also recorded the following amounts to accumulated other comprehensive loss for the U.S.

We have also recorded the following amounts to accumulated other comprehensive income (loss) for the U.S.

pension plans, net of tax:

Pension Plans

Balance at January 1, 2022

Amortization of retirement benefits, net of tax

Net actuarial gain

Settlement charges

Net actuarial (loss) gain

Foreign exchange impact

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Balance at December 31, 2023

We have recorded the following amounts to accumulated other comprehensive loss for the post-retirement life insurance plan, net of tax:

We have recorded the following amounts to accumulated other comprehensive income (loss) for the post-retirement life insurance plan, net of tax:

Balance at January 1, 2022

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Amortization of retirement benefits, net of tax

Net actuarial loss

Net actuarial gain

Balance at December 31, 2023

The accumulated actuarial gains and losses included in other comprehensive earnings are amortized in the following manner:

The component of unamortized net gains or losses related to our qualified pension plan is amortized based on the expected future life expectancy of the plan participants (estimated to be approximately 11 years at December 31, 2022 ), because substantially all of the participants in those plans are inactive.

The component of unamortized net gains or losses related to our post-retirement life insurance plan is amortized based on the estimated remaining future service period of the plan participants (estimated to be approximately 3 years at December 31, 2022 ).

The component of unamortized net gains or losses related to our qualified pension plan is amortized based on the future life expectancy of the plan participants (estimated to be approximately 11 years at December 31, 2023 ), because substantially all of the participants in those plans are former employees who are now retired.

The Company uses a market-related approach to value plan assets, reflecting changes in the fair value of plan assets over a five-year period.

The variance resulting from the difference between the expected and actual return on plan assets is included in the amortization calculation upon reflection in the market-related value of plan assets.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for those pension plans with accumulated benefit obligation in excess of fair value of plan assets is shown below:

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for those pension plans with accumulated benefit obligation in excess of the fair value of plan assets is shown below:

As of December 31,

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Pension Plans

Interest cost

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(2) During the fourth quarter of each year, we review our actuarial assumptions in light of current economic factors to determine if the assumptions need to be adjusted.

2020 assumptions reflect termination basis accounting for our Plan.

Net post-retirement expense includes the following components:

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(1) During the fourth quarter of each year, we review our actuarial assumptions in light of current economic factors to determine if the assumptions need to be adjusted.

All pension plan assets were allocated to fixed income/debt securities as of December 31, 2021.

Historically, we employed a liability-driven investment strategy whereby a mix of equity and fixed-income investments are used to pursue a de-risking strategy which over time seeks to reduce interest rate mismatch risk and other risks while achieving a return that matches or exceeds the growth in projected pension plan liabilities.

Risk tolerance was established through careful consideration of plan liabilities and funded status.

The investment portfolio primarily contained a diversified mix of equity and fixed-income investments.

Other assets such as private equity were used modestly to enhance long-term returns while improving portfolio diversification.

Investment risk was measured and monitored on an

CTS CORPORATION 48

ongoing basis through quarterly investment portfolio reviews, annual liability measurements, and asset/liability studies at regular intervals.

As a result of the termination of the Plan and final reversion activities in 2022, no assets remained in the Plan as of December 31, 2022.

The following table summarizes the fair values of our pension plan assets:

As of December 31,

Equity securities - U.S.

Bond funds - other (3) (4)

Cash and cash equivalents (2)

Total fair value of plan assets

The fair values at December 31, 2021, are classified within the following categories in the fair value hierarchy:

Equity securities - U.S.

Bond funds - other (3) (4)

Cash and cash equivalents (2)

(1) Comprised of common stocks of companies in various industries.

The Pension Plan fund manager may shift investments from value to growth strategies or vice-versa, from small cap to large cap stocks or vice-versa, in order to meet the Pension Plan's investment objectives, which are to provide for a reasonable amount of long-term growth of capital without undue exposure to volatility and protect the assets from erosion of purchasing power.

(2) Comprised of investment grade short-term investment and money-market funds.

(3) Comprised predominately of investment grade U.S.

corporate bonds with various maturities and U.S.

high-yield corporate bonds;

emerging market debt (local currency sovereign bonds, U.S.

dollar-denominated sovereign bonds and U.S.

dollar-denominated corporate bonds);

(4) Comprised of investments that are measured at fair value using the NAV per share practical expedient.

In accordance with the provisions of ASC 820-10, these investments have not been classified in the fair value hierarchy.

The fair value amount not leveled is presented to allow reconciliation of the fair value hierarchy to total fund pension plan assets.

The pension plan assets recorded at fair value are measured and classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs available in the marketplace used to measure fair value as discussed below:

Fair value measurements that are based on quoted prices (unadjusted) in active markets that the pension plan trustees have the ability to access for identical assets or liabilities.

Market price data generally is obtained from exchange or dealer markets.

Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly.

Level 2 inputs include quoted prices for similar assets in active or inactive markets, and inputs other than quoted prices that are observable for the asset, such as interest rates and yield curves that are observable at commonly quoted intervals.

Fair value measurements based on valuation techniques that use significant inputs that are unobservable.

The table below reconciles the Level 3 partnership assets within the fair value hierarchy:

Fair value of Level 3 partnership assets at January 1, 2021

Capital contributions

Realized and unrealized loss

Capital distributions

Fair value of Level 3 partnership assets at December 31, 2021

Capital contributions

Realized and unrealized loss

Capital distributions

Fair value of Level 3 partnership assets at December 31, 2022

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The partnership fund manager used a market approach in estimating the fair value of the plan's Level 3 assets.

The market approach estimates fair value by first determining the entity's earnings before interest, taxes, depreciation, and amortization and then multiplying that value by an estimated multiple.

When establishing an appropriate multiple, the fund manager considered recent comparable private company transactions and multiples paid.

The entity's net debt was then subtracted from the calculated amount to arrive at an estimated fair value for the entity.

The fair value of assets in the non-U.S.

pension plan are 100% categorized as cash and cash equivalents, which use Level 1 inputs in the fair value determination.

We expect to make $ 99 of contributions to the U.S.

plans and $ 171 of contributions to the non-U.S.

plans during 2023.

Expected benefit payments under the defined benefit pension plans and the postretirement benefit plan, for the next five years subsequent to 2022 and in the aggregate for the following five years are as follows:

plan during 2024.

Expected benefit payments under the Pension Plans and the postretirement benefit plan, for the five years subsequent to 2023 (i.e., 2024-2028, inclusive), and in the aggregate for the five years thereafter (i.e., 2029-2033, inclusive) are as follows:

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Defined Contribution Plans

We sponsor a 401(k) plan that covers substantially all of our U.S.

employees as well as offer similar defined contribution plans at certain foreign locations.

employees as well as offer similar defined contribution plans to employees at certain foreign locations.

Contributions and costs were generally determined as a percentage of the covered employee's annual salary.

We ceased matching employee contributions in the second quarter of 2020 in light of COVID-19 concerns, and we reimplemented the match in February 2021.

During 2022, our investment committee, in consultation with the plan’s advisors, determined the 401(k) plan’s position in CTS stock would be liquidated and funds would be reinvested in other investments.

This was completed in the fourth quarter of 2022.

During 2022, our investment committee, in consultation with the plan’s advisors, determined the 401(k) plan’s position in CTS common stock would be liquidated and the resulting funds would be reinvested in other investments.

That process was completed in the fourth quarter of 2022.

Effective January 1, 2022, in connection with the U.S.

Plan termination process, we amended our 401(k) plan and transitioned to a non-elective contribution for all U.S.

employees that is also determined as a percentage of the covered employee's salary, provides for immediate vesting and is provided regardless of individual contribution plans.

employees that is also determined as a percentage of the covered employee's salary, provides for immediate vesting and is provided regardless of whether the individual employee contributes to the applicable plan.

In addition, we began offering a Roth 401(k) option to employees.

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401(k) and other defined contribution plan expense

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NOTE 8 —

Goodwill and Other Intangible Assets

NOTE 8 — Goodwill and Other Intangible Assets

Other Intangible Assets

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Amortization expense for the year ended December 31, 2023

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As of December 31, 2022

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Amortization expense for the year ended December 31, 2021

The changes in the gross carrying amounts of intangible assets are primarily due to a business acquisition and purchase accounting activity as discussed in Note 3, "Business Acquisitions," as well as foreign exchange impacts.

The estimated amortization expense for the next five years and thereafter is as follows:

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Goodwill as of December 31, 2021

Increase due to acquisition

Increase due to acquisitions

Decrease from purchase accounting adjustments

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Goodwill as of December 31, 2023

Refer to Note 3 - "Business Acquisitions" for further information on the increase due to acquisitions in 2022.

Refer to Note 3 - "Business Acquisitions," for further information on the increase due to acquisitions.

We performed our annual impairment test as of October 1, 2023, our measurement date, and concluded that there was no impairment in any of our reporting units.

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The Company's fair value estimates for the purposes of determining the goodwill impairment charge are considered Level 3 fair value measurements.

The fair value estimates were based on assumptions management believes to be reasonable, but that are inherently

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uncertain, including estimates of future revenues and operating margins and assumptions about the overall economic climate and the competitive environment for the business.

NOTE 9 —

Costs Associated with Exit and Restructuring Activities

The fair value estimates were based on assumptions management believes to be reasonable, but that are inherently uncertain, including estimates of future revenues and operating margins and assumptions about the overall economic climate and the competitive environment for the business.

NOTE 9 — Costs Associated with Exit and Restructuring Activities

Restructuring charges are reported as a separate line within operating earnings in the Consolidated Statements of Earnings (Loss).

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September 2020 Plan

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In September 2020, we initiated a restructuring plan focused on optimizing our manufacturing footprint and improving operational efficiency by better utilizing our systems capabilities.

This plan includes transitioning certain administrative functions to a shared service center, realignment of manufacturing locations, and certain other efficiency improvement actions ("September 2020 Plan").

This plan included transitioning certain administrative functions to a shared service center, realignment of manufacturing locations, and certain other efficiency improvement actions ("September 2020 Plan").

The restructuring cost of the September 2020 Plan is now estimated to be in the range of $ 3,900 to $ 4,500 , including workforce reduction charges, building and equipment relocation charges, other contract and asset-related costs.

We have incurred $ 3,896 in program costs to date.

We recorded $ 266 and $ 662 in workforce reduction costs during the three and twelve months ended December 31, 2022.

The total restructuring liability associated with these actions was $ 634 as of December 30, 2022.

There was no liability related to the September 2020 Plan as of December 31, 2021.

During the twelve months ended December 31, 2023, we recorded $ 1,837 in restructuring charges comprised of $ 513 and $ 1,324 in workforce reduction and asset impairment charges respectively.

The total restructuring liability associated with these actions as of December 31, 2023 was $ 83 .

The total restructuring liability as of December 31, 2022 was $ 634 .

Closure and Consolidation of Juarez Manufacturing Facility and Operations

During the first quarter of 2023, we announced the shutdown of our Juarez manufacturing facility.

As a part of this activity, operations from the Juarez plant are being consolidated into our expanded Matamoros facility (collectively, the "Matamoros Consolidation").

We expect the Matamoros Consolidation to be completed in 2024.

The total restructuring cost of the Matamoros Consolidation is now estimated to be in the range of $ 4,000 and $ 5,000 , including workforce reduction charges, building and equipment relocation charges and other contract and asset-related costs.

In addition to these charges, we expect to incur an additional $ 1,500 to $ 2,500 of other costs relating to the Matamoros Consolidation that would not qualify as restructuring charges, but represent duplicative expenses arising from the transition process such as excess rent, utilities, personnel-related and other costs.

During the year ended December 31, 2023, we incurred $ 3,699 in restructuring costs associated with the Matamoros Consolidation, comprised of $ 2,572 , $ 200 , $ 63 , and $ 864 in workforce reduction, building and equipment relocation costs, asset impairment and other charges, respectively.

We also incurred $ 571 in other related costs.

The restructuring liability associated with the Matamoros Consolidation was $ 194 and $ 17 as of December 31, 2023 and December 31, 2022.

Other Restructuring Activities

From time to time we incur other restructuring activities that are not part of a formal plan.

During the years ended December 31, 2022 and 2021, we incurred restructuring charges of $ 1,250 and $ 1,717 , respectively, for exit and disposal activities at four sites, building and equipment relocation, and workforce reduction costs across the Company.

During the year ended December 31, 2023, we incurred total other restructuring charges of $ 1,539 , comprised of $ 942 , $ 279 and $ 318 in workforce reduction, building and equipment relocation costs, and asset impairment and other charges, respectively.

The remaining restructuring liability associated with these actions was $ 246 and $ 218 at December 31, 2023 and December 31, 2022, respectively.

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The total liability of $ 523 is included in accrued expenses and other liabilities at December 31, 2023.

NOTE 10 —

Accrued Expenses and Other Liabilities

NOTE 10 — Accrued Expenses and Other Liabilities

The components of accrued expenses and other liabilities are as follows:

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NOTE 11 —

Contingencies

Certain processes in the manufacture of our current and past products create by-products classified as hazardous waste.

We have been notified by the U.S.

Environmental Protection Agency ("EPA"), state environmental agencies, and in some cases, groups of potentially responsible parties, that we may be potentially liable for environmental contamination at several sites currently and formerly owned or operated by us.

Two of those sites, Asheville, North Carolina and Mountain View, California, are designated National Priorities List sites under the U.S.

Environmental Protection Agency’s Superfund program.

The increase in Other accrued liabilities is primarily due to a contingent liability accrual associated with the 2023 Maglab acquisition.

Refer to Note 3 “Business Acquisitions”, for further discussion.

NOTE 11 — Contingencies

Certain processes in the manufacture of our current and past products may create by-products classified as hazardous waste.

As a result, we have been notified by the U.S.

Environmental Protection Agency (“EPA”), state environmental agencies and in some cases, groups of potentially responsible parties, that we may be potentially liable for environmental contamination at several sites currently or formerly owned or operated by us.

Currently, none of these costs and accruals relate to sites that provide revenue generating activities for the Company.

Two of those sites, Asheville, North Carolina (the "Asheville Site") and Mountain View, California, are designated National Priorities List sites under the EPA’s Superfund program.

We accrue a liability for probable remediation activities, claims, and proceedings against us with respect to environmental matters if the amount can be reasonably estimated, and provide disclosures including the nature of a loss whenever it is probable or reasonably possible that a potentially material loss may have occurred but cannot be estimated.

We record contingent loss accruals on an undiscounted basis.

A roll-forward of remediation reserves included in accrued expenses and other liabilities in the Consolidated Balance Sheets is comprised of the following:

A roll-forward of remediation reserves included in accrued expenses and other liabilities in the Consolidated Balance Sheets is composed of the following:

Years Ended December 31,

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(1) Other activity includes currency translation adjustments not recorded through remediation expense.

The Company operates under and in accordance with a federal consent decree, dated March 7, 2017, with the EPA for the CTS of Asheville, Inc.

Superfund Site (“Site”).

On February 8, 2023, the Company received a letter from the EPA (the “EPA Letter”) seeking reimbursement of its past response costs and interest thereon relating to any release or threatened release of hazardous substances at the Site in the amount of $ 9,955 from the three potentially responsible parties associated with the site, including the Company.

The Company is analyzing its potential exposure for the costs sought i n the EPA Letter and will respond thereto in due course;

however, at this time, we are unable to reasonably estimate the liability from the EPA Letter, and therefore, we did not record an accrual for the EPA Letter in our December 31, 2022 financial statements.

The Company operates under and in accordance with a federal consent decree, dated March 7, 2017, with the EPA for the Asheville Site.

On February 8, 2023, the Company received a letter from the EPA (the “EPA Letter”) seeking reimbursement of its past response costs and interest thereon relating to any release or threatened release of hazardous substances at the Asheville Site in the aggregate amount of $ 9,955 from the three potentially responsible parties associated with the Asheville Site, including the Company.

The Company expects its potential exposure to be between $ 1,900 and $ 9,955 .

We have determined that no point within this range is more likely than another and therefore we have recorded a loss estimate of $ 1,900 as of December 31, 2023 in the Consolidated Balance Sheets.

Unrelated to the environmental claims described above, certain other legal claims are pending against us with respect to matters arising out of the ordinary conduct of our business.

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Our accrued liabilities and disclosures will be adjusted accordingly if additional information becomes available in the future.

NOTE 12 —

NOTE 12 — Leases

We lease certain land, buildings and equipment under non-cancellable operating leases used in our operations.

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Variable lease payments that depend on an index or a rate are included in lease payments using the prevailing index or rate in effect at lease commencement.

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Options to extend or terminate a lease are included in the lease term when it is reasonably likely that we will exercise that option.

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These leases are not recorded in the Consolidated Balance Sheets.

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We determine if an arrangement is a lease or contains a lease at its inception, which normally does not require significant estimates or judgments.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants and we currently have no material sublease agreements.

In accordance with FASB Staff Q&A - Topic 842 and Topic 840:

Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic ("FASB Staff Q&A") issued in April 2020, we elected to account for any lease concessions resulting directly from the COVID-19 pandemic as if the enforceable rights and obligations for the concessions existed in the respective contracts at lease inception and as such we will not account for any concession as a lease modification.

Guidance from the FASB Staff Q&A provided methods to account for rent deferrals which include the option to treat the lease as if no changes to the lease contract were made or to treat deferred payments as variable lease payments.

The FASB Staff Q&A allows entities to select the most practical approach and does not require the same approach be applied consistently to all leases.

As a result, we have accounted for lease deferrals as if no changes to the lease contract were made and will continue to recognize lease expense, on a straight-line basis, during the deferral periods.

During the year ended December 31, 2020, these rent concessions related to the COVID-19 pandemic were not material.

Components of lease expense for the years ended December 31, 2023, 2022, and 2021 were as follows:

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Total lease cost

For the years ended December 2023, 2022 and 2021 the Company recorded sublease income of $ 532 , $ 562 and $ 589 , respectively.

Supplemental cash flow information related to leases was as follows:

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NOTE 13 —

NOTE 13 — Debt

Long-term debt was comprised of the following:

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Weighted-average interest rate

On December 15, 2021, we entered into a second amended and restated five-year credit agreement with a group of banks (the “Revolving Credit Facility”) to (i) increase the total credit facility to $ 400,000 which may be increased by $ 200,000 at the request of the Company, subject to the administrative agent's approval, (ii) extend the maturity of the Revolving Credit Facility from February 12, 2024 to December 15, 2026 , (iii) replace LIBOR with SOFR as the primary reference rate used to calculate interest on the loans under the Revolving Credit Facility, (iv) increase available sublimits for letters of credit, and swingline loans as well as providing for additional alternative currency borrowing capabilities, and (v) modify the financial and non-financial covenants to provide the Company additional flexibility.

This new unsecured credit facility replaced the prior $ 300,000 unsecured credit facility, which would have expired February 12, 2024.

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We use interest rate swaps to convert a portion of our revolving credit facility's outstanding balance from a variable rate of interest to a fixed rate.

The contractual rate of these arrangements ranges from 1.49 % to 2.49 %.

Refer to Note 14, "Derivatives," for further discussion on the impact of interest rate swaps.

The Revolving Credit Facility includes a swing line sublimit of $ 20,000 and a letter of credit sublimit of $ 20,000 .

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These costs are included in interest expense in our Consolidated Statements of Earnings (Loss).

NOTE 14 —

Derivative Financial Instruments

NOTE 14 — Derivative Financial Instruments

Our earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates and interest rates.

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We manage our credit risk by entering into derivative contracts with only highly rated financial institutions and by using netting agreements.

The effective portion of derivative gains and losses are recorded in accumulated other comprehensive (loss) income until the hedged transaction affects earnings upon settlement, at which time they are reclassified to costs of goods sold or net sales.

If it is probable that an anticipated hedged transaction will not occur by the end of the originally specified time period, we reclassify the gains or losses related to that hedge from accumulated other comprehensive (loss) income to other income (expense),net.

The effective portion of derivative gains and losses are recorded in accumulated other comprehensive income (loss) income until the hedged transaction affects earnings upon settlement, at which time they are reclassified to costs of goods sold or net sales.

If it is probable

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that an anticipated hedged transaction will not occur by the end of the originally specified time period, we reclassify the gains or losses related to that hedge from accumulated other comprehensive income (loss) to other income (expense), net.

We assess hedge effectiveness qualitatively by verifying that the critical terms of the hedging instrument and the forecasted transaction continue to match, and that there have been no adverse developments that have increased the risk that the counterparty will default.

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The currency forward contracts are designed as cash flow hedges and are recorded in the Consolidated Balance Sheets at fair value.

We continue to monitor the Company’s overall currency exposure and may elect to add cash flow hedges in the future.

At December 31, 2022 , we had a net unrealized gain of $ 915 in accumulated other comprehensive (loss) income, of which $ 849 in gains are expected to be reclassified to earnings within the next 12 months.

We continue to monitor the Company’s overall currency exposure and may elect to add cash flow hedges in the future.

At December 31, 2023 , we had a net unrealized gain of $ 1,426 in accumulated other comprehensive income (loss), of which $ 1,285 in gains are expected to be reclassified to earnings within the next 12 months.

The notional amount of foreign currency forward contracts outstanding was $ 45,335 at December 31, 2023.

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These swaps are treated as cash flow hedges and consequently, the changes in fair value are recorded in other comprehensive (loss) income.

The estimated net amount of the existing losses that are reported in accumulated other comprehensive (loss) income that are expected to be reclassified into earnings within the next twelve months is approximately $ 1,561 .

The estimated net amount of the existing losses that are reported in accumulated other comprehensive income (loss) that are expected to be reclassified into earnings within the next twelve months is approximately $ 1,121 .

The location and fair values of derivative instruments designated as hedging instruments in the Consolidated Balance Sheets as of December 31, 2023, are shown in the following table:

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Interest rate swaps reported in Other assets

Interest rate swaps reported in Accrued expenses and other liabilities

Interest rate swaps reported in Other long-term obligations

Cross-currency swap reported in Accrued expenses and other liabilities

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Gain recognized in other expense for hedge ineffectiveness

Total derivative gain (loss) on foreign exchange contracts

Total derivative gains on foreign exchange contracts

recognized in earnings

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Income recorded in interest expense

Total gains (losses) on derivatives

Total gains on derivatives

Cross-Currency Swap

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Accordingly, any gains or losses on this derivative instrument will be included in the foreign currency translation component of other comprehensive income until the net investment is sold, diluted or liquidated.

At December 31, 2023, the variable rate debt associated with the cross-currency swap was $ 17,500 due to ongoing principle payments.

Interest payments received for the cross-currency swap are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense in the Condensed Consolidated Statements of Earnings.

The assumptions used in measuring fair value of the cross currency-swap are considered Level 2 inputs, which are based upon the Krone to United States Dollar exchange rate market.

At December 31, 2022 we had a net unrealized loss of $ 557 in accumulated other comprehensive (loss) income.

At December 31, 2023 we had a net unrealized loss of $ 1,138 in accumulated other comprehensive income (loss).

Prior to designation as a net investment hedge, a gain of $ 111 was recorded in other expense within the Condensed Consolidated Statements of Earnings during the second quarter of 2022.

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As a result of these contracts, the Company recognized a $ 1,776 loss in other expense in the Consolidated Statements of Earnings (Loss) in 2022.

NOTE 15 —

Accumulated Other Comprehensive (Loss) Income

Shareholders’

equity includes certain items classified as accumulated other comprehensive (loss) income (“AOCI”) in the Consolidated Balance Sheets, including:

NOTE 15 — Accumulated Other Comprehensive Income (Loss)

Shareholders’ equity includes certain items classified as accumulated other comprehensive income (loss) (“AOCI”) in the Consolidated Balance Sheets, including:

• Unrealized gains (losses) on hedges relate to interest rate swaps to convert a portion of our revolving credit facility's outstanding balance from a variable rate of interest into a fixed rate and foreign currency forward contracts used to hedge our exposure to changes in exchange rates affecting certain revenues and costs denominated in foreign currencies.

These hedges are designated as cash flow hedges, and we have deferred income statement recognition of gains and losses until the hedged transactions occur, at which time amounts are reclassified into earnings.

Further information related to our derivative financial instruments is included in Note 14, “Derivative Financial Instruments”

and Note 18, “Fair Value Measurements”.

Further information related to our derivative financial instruments is included in Note 14, “Derivative Financial Instruments,” and Note 18, “Fair Value Measurements.”

• Unrealized gains (losses) on pension obligations are deferred from income statement recognition until the gains or losses are realized.

Amounts reclassified to earnings from AOCI are included in net periodic pension income (expense).

Further information related to our pension obligations is included in Note 7, “Retirement Plans”.

Further information related to our pension obligations is included in Note 7, “Retirement Plans.”

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• Cumulative translation adjustment relates to our non-U.S.

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We are required to translate the subsidiary functional currency financial statements to U.S.

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using a combination of historical, period-end, and average foreign exchange rates.

dollars using a combination of historical, period-end, and average foreign exchange rates.

This combination of rates creates the foreign currency translation adjustment component of other comprehensive income.

The components of accumulated other comprehensive (loss) income for the year ended December 31, 2022 are as follows:

The components of accumulated other comprehensive income (loss) for the year ended December 31, 2023 are as follows:

Changes in fair market value of derivatives:

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Income tax benefit (expense)

Total accumulated other comprehensive (loss) income

The components of accumulated other comprehensive (loss) income for the year ended December 31, 2021 are as follows:

Total accumulated other comprehensive income (loss)

The components of accumulated other comprehensive income (loss) for the year ended December 31, 2022 are as follows:

Changes in fair market value of derivatives:

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Income tax benefit (expense)

Total accumulated other comprehensive (loss)

Total accumulated other comprehensive income (loss)

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NOTE 16 —

Shareholders' Equity

NOTE 16 — Shareholders' Equity

Share count and par value data related to shareholders' equity are as follows:

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Treasury stock

On May 13, 2021, the Board of Directors approved a share repurchase program that authorizes the Company to repurchase up to $ 50,000 of the Company’s common stock.

The repurchase program has no set expiration date and replaced the repurchase program approved by the Board of Directors on February 7, 2019.

During the year ended December 31, 2022, 583,526 shares of common stock were repurchased for approximately $ 21,447 .

Approximately $ 19,767 is still available for future purchases under this program.

On February 9, 2023, the Board approved a new share repurchase program that authorizes the Company to repurchase up to $ 50 million of its common stock.

The repurchase program has no set expiration date and supersedes and replaces the repurchase program approved by the Board in May 2021.

On February 9, 2023, our Board of Directors approved a share repurchase program that authorized the Company to repurchase up to $ 50,000 of the Company’s common stock.

The repurchase program had no set expiration date and replaced the repurchase program approved by the Board of Directors on May 13, 2021.

The purchases under the program were made from time to time in the open market (including, without limitation, the use of Rule 10b5-1 plans), depending on a number of factors, including our evaluation of general market and economic conditions, our financial condition and the trading price of our common stock.

The repurchase program could have been extended, modified, suspended or discontinued at any time.

During the year ended December 31, 2023, 970,109 shares of common stock were repurchased for approximately $ 41,337 , including 96,401 shares that were repurchased for approximately $ 4,245 under the May 2021 program.

As of December 31, 2023 approximately $ 12,908 was still available for future purchases under the February 2023 program.

As of 2023, we are subject to a 1% excise tax on stock repurchases under the United States Inflation Reduction Act of 2022 which we include in the cost of stock repurchases as a reduction of shareholders’ equity.

As of December 31, 2023, we accrued $ 359 for 2023 repurchases within Accrued expenses and other liabilities in the Consolidated Balance Sheet.

On February 2, 2024, our Board of Directors approved a new share repurchase program that authorizes the Company to repurchase up to $ 100 million of its common stock.

The repurchase program has no set expiration date and supersedes and replaces the repurchase program approved by the Board of Directors in February 2023.

The purchases may be made from time to time in the open market (including, without limitation, the use of Rule 10b5-1 plans), depending on a number of factors, including our evaluation of general market and economic conditions, our financial condition and the trading price of our common stock.

The repurchase program may be extended, modified, suspended or discontinued at any time.

A roll forward of common shares outstanding is as follows:

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Balance at end of period

NOTE 17 —

Stock-Based Compensation

NOTE 17 — Stock-Based Compensation

At December 31, 2023 , we had five stock-based compensation plans:

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Future grants can only be made under the 2018 Plan.

The 2018 Plan allows for grants of stock options, stock appreciation rights, restricted stock, restricted stock units ("RSUs"), performance shares, performance units, and other stock awards subject to the terms of the 2018 Plan.

The 2018 Plan allows for grants of stock options, stock appreciation rights, restricted stock, RSUs, performance shares, performance units, and other stock awards subject to the terms of the 2018 Plan.

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The following table summarizes the compensation expense included in selling, general and administrative expenses in the Consolidated Statements of Earnings (Loss) related to stock-based compensation plans:

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Income tax benefit

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The fair value of all equity awards that vested during the periods ended December 31, 2023, 2022, and 2021 were $ 8,282 , $ 4,535 , and $ 7,063 , respectively.

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RSUs granted to non-employee directors generally vest one year after being granted.

Upon vesting, the non-employee directors elect to either receive the stock associated with the RSU immediately or defer receipt of the stock to a future date.

Upon vesting, the non-employee directors may elect to either receive the stock associated with the RSU immediately or defer receipt of the stock to a future date.

The fair value of the RSUs is equivalent to the trading value of our common stock on the grant date.

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A summary of RSU activity for the year ended December 31, 2023 is presented below:

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Years Ended December 31,

Weighted-average grant date fair value

Weighted-average fair value upon release

Intrinsic value of RSUs released

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A summary of non-vested RSU activity for the year ended December 31, 2023 is presented below:

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Performance-Based Restricted Stock Units

We grant performance-based restricted stock unit awards ("PSUs") to certain executives and key employees.

PSUs are usually awarded in the range from zero percent to 200 % of a targeted number of shares.

The award rate for the 2018-2020, 2019-2021, and 2020-2022 PSUs was dependent upon our achievement of sales growth targets, cash flow targets, and relative total shareholder return ("RTSR") using a matrix based on the percentile ranking of our stock price performance compared to a peer group over a three-year period.

Other PSUs are granted from time to time based on other performance criteria.

The initial fair value of the PSUs is equivalent to the trading value of our common stock on the grant date.

We grant PRSUs to certain executives and key employees.

PRSUs are usually awarded in the range from zero percent to 200 % of a targeted number of shares.

The award rate for the 2021-2023, 2022-2024, and 2023-2025 PSUs is dependent upon our achievement of targets for sales growth, cash flow, and relative total shareholder return ("RTSR").

We use a matrix based on the percentile ranking of our stock price performance compared to a peer group over a three-year period to calculate the achievement of the RTSR targets.

Other PRSUs are granted from time to time based on other performance criteria.

The initial fair value of the PRSUs is equivalent to the trading value of our common stock on the grant date.

The fair value is subsequently adjusted quarterly based on management's assessment of the Company's performance relative to the target number of shares performance criteria.

A summary of PSU activity for the year ended December 31, 2022 is presented below:

A summary of PRSU activity for the year ended December 31, 2023 is presented below:

Outstanding at January 1, 2022

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Releasable at December 31, 2022

The following table summarizes each grant of performance awards outstanding at December 31, 2022:

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The following table summarizes each grant of PRSUs outstanding at December 31, 2023:

Vesting Dependency

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of Units to be Granted

2020 - 2022 QTI Performance RSUs

September 24, 2019

50 % EBITDA growth, 50 % Sales growth

2021 - 2023 Performance RSUs

February 9, 2021

25 % RTSR, 40 % sales growth, 35 % operating cash flow

2021 - 2023 Performance RSUs

25 % RTSR, 40 % sales growth, 35 % operating cash flow

25 % RTSR, 40 % sales growth,

35 % operating cash flow

2022 - 2024 Performance RSUs

February 10, 2022

35 % RTSR, 35 % sales growth, 30 % operating cash flow

35 % RTSR, 35 % sales growth,

30 % operating cash flow

Focus 2025 Performance RSUs

Cumulative revenues of $ 750 million over a trailing four-quarter period

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2023-2025 Performance RSUs

February 9, 2023

60 % sales growth,

40 % operating cash flow, RTSR modifier

Cash-Settled Restricted Stock Units

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At December 31, 2023 and 2022 , liabilities of $ 676 and $ 566 , respectively were included in accrued expenses and other liabilities on our Consolidated Balance Sheets.

NOTE 18 —

Fair Value Measurements

NOTE 18 — Fair Value Measurements

The table below summarizes the financial assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2023 and the gain recorded during the year ended December 31, 2023:

1 unchanged sentence

Quoted Prices

Gain (Loss) for

Interest rate swap

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Qualified replacement plan assets

The table below summarizes the financial assets that were measured at fair value on a recurring basis as of December 31, 2021 and the (loss) recorded during the year ended December 31, 2021:

(Liability) Asset Carrying

Contingent consideration

The table below summarizes the financial assets that were measured at fair value on a recurring basis as of December 31, 2022 and the gain recorded during the year ended December 31, 2022:

Asset (Liability) Carrying

Quoted Prices

(Loss) Gain for

Interest rate swap

Foreign currency hedges

Contingent consideration

We use interest rate swaps to convert a portion of our Revolving Credit Facility’s outstanding balance from a variable rate of interest into a fixed rate and foreign currency forward contracts to hedge the effect of foreign currency changes on certain revenues and costs denominated in foreign currencies.

Cross-currency swap

Qualified replacement plan assets

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denominated in foreign currencies.

In addition, the Company entered into a cross currency swap agreement in order to manage its exposure to changes in interest rates related to foreign debt.

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There is a readily determinable market for these derivative instruments, but that market is not active and therefore they are classified within Level 2 of the fair value hierarchy.

The QRP assets consist of investment funds maintained for future contributions to the Company’s U.S.

401(k) program.

The investments are Level 1 marketable securities and are recorded in Other Assets on our Condensed Consolidated Balance Sheets.

The QRP assets consist of investment funds maintained for future contributions to the Company’s U.S.

The investments are Level 1 marketable securities and are recorded in Other Assets on our Consolidated Balance Sheets.

Gains and losses from these investments are recorded in other income and expense in the Consolidated Statements of Earnings.

Refer to Note 7, "Retirement Plans," for further information on the QRP.

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The Company's fair value estimates used in the contingent consideration valuation are considered Level 3 fair value measurements.

The fair value estimates were based on assumptions management believes to be reasonable, but that are inherently uncertain, including estimates of future revenues and timing of events and activities that are expected to take place.

The fair value estimates were based on assumptions management believes to be reasonable, but that are inherently uncertain, including estimates of future revenues and customer order targets.

These estimates are highly judgmental and changes to the estimate of expected future contingent consideration payments may occur, from time to time, due to various reasons, including actual results differing from estimates and/or from adjustments to the revenue or customer order target assumptions used as the basis for the liability.

A roll-forward of the contingent consideration is as follows:

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Consideration

Balance at December 31, 2021 in accrued expenses and other liabilities

Settled in cash

Balance at December 31, 2022

Acquisition date fair value of contingent consideration

Change in fair value

Balance at December 31, 2022 in accrued expenses and other liabilities

Balance at December 31, 2023

As of December 31, 2023, approximately $ 1,076 of contingent consideration was recorded in accrued expenses and other liabilities with the remainder in other long-term obligations in the Consolidated Balance Sheets.

Our long-term debt consists of debt outstanding under the Revolving Credit Facility, which is recorded at its carrying value.

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The fair value of long-term debt approximates carrying value and was determined by valuing a similar hypothetical coupon bond and attributing that value to our long-term debt under the Revolving Credit Facility.

NOTE 19 —

NOTE 19 — Income Taxes

Earnings (Loss) before income taxes consist of the following:

Years Ended December 31,

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Significant components of income tax provision/(benefit) are as follows:

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Total provision for income taxes

CTS CORPORATION 63

Significant components of our deferred tax assets and liabilities are as follows:

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Depreciation and amortization

Statutory inventory adjustments

Qualified replacement plan

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Total net deferred tax assets

The deferred tax assets and deferred tax liabilities, classified as non-current, are as follows below:

The deferred tax assets and deferred tax liabilities, classified as non-current, are as follows:

As of December 31,

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Total net deferred tax assets

At each reporting date, we weigh all available positive and negative evidence to assess whether it is more-likely-than-not that the Company's deferred tax assets, including deferred tax assets associated with accumulated loss carryforwards and tax credits in the various jurisdictions in which it operates, will be realized.

At each reporting date, we weigh all available positive and negative evidence to assess whether it is more-likely-than-not that the Company's deferred tax assets, including deferred tax assets associated with accumulated loss carry-forwards and tax credits in the various jurisdictions in which it operates, will be realized.

As of December 31, 2023, and 2022, we recorded deferred tax assets related to certain U.S.

state and non-U.S.

income tax loss carryforwards of $ 4,547 and $ 5,070 , respectively, and U.S.

income tax loss carry-forwards of $ 3,911 and $ 4,547 , respectively, and U.S.

tax credits of $ 13,415 and $ 10,467 , respectively.

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Generally, we assess if it is more-likely-than-not that our net deferred tax assets will be realized during the available carry-forward periods.

As a result, we have determined that valuation allowances of $ 8,386 and $ 9,489 should be provided for certain deferred tax assets at December 31, 2022, and 2021, respectively.

As a result, we have determined that valuation allowances of $ 8,370 and $ 8,386 should be provided for certain deferred tax

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assets at December 31, 2023 and 2022, respectively.

As of December 31, 2023, the valuation allowances relate to certain U.S.

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state tax credits that management does not anticipate will be utilized.

A valuation allowance of $ 172 was recorded in 2022 against the U.S.

federal foreign tax credit carryforwards of $ 362 .

A valuation allowance for 2023 and 2022 of $ 172 and $ 172 was recorded against the U.S.

federal foreign tax credit carry-forwards of $ 1,854 and $ 362 , respectively.

These credits begin to expire in varying amounts between 2028 and 2033 .

A valuation allowance of $ 449 was recorded in 2023 against the U.S.

federal research and development tax credits of $ 9,362 .

No valuation allowance was recorded in 2022 against the U.S.

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We assessed the anticipated realization of those tax credits utilizing future taxable income projections.

Based on those projections, management believes it is more-likely-than-not that we will realize the benefits of these credit carryforwards.

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Based on those projections, management believes it is more-likely-than-not that we will realize the benefits of these tax credit carry-forwards.

The following table reconciles taxes at the U.S.

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In 2020, the Company began the termination of the U.S.-based pension plan.

As a result of the final settlement of the pension liability in 2021, we reclassified the disproportionate tax effect related to the pension plan of $ 5,375 that was previously recorded in accumulated other comprehensive loss to income tax expense.

In 2022, the remaining assets of the pension plan were liquidated and reverted back to CTS.

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tax purposes.

Further information related to our pension terminations is included in Note 7 –

"Retirement Plans."

Following the enactment of the 2017 Tax Cut and Jobs Act ("Tax Act") and the associated one-time transition tax, in general, repatriation of foreign earnings to the U.S.

Further information related to our pension termination is included in Note 7, "Retirement Plans."

Under current U.S.

tax regulations, in general, repatriation of foreign earnings to the U.S.

can be completed with no incremental U.S.

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The Company records a deferred tax liability for the estimated foreign earnings and state tax cost associated with the undistributed foreign earnings that are not permanently reinvested.

In 2020 the Company made the decision to no longer permanently reinvest the earnings of its Taiwan subsidiary.

The Tax Act also includes provisions for Global Intangible Low-Taxed Income (“GILTI”) wherein taxes on foreign income are imposed in excess of a deemed return on tangible assets of foreign corporations.

We elected to recognize the tax on GILTI as an expense in the period the tax is incurred.

In accordance with guidance issued by the FASB staff, the Company has adopted an accounting policy to treat any Global Intangible Low-Taxed Income (“GILTI”) inclusions as an expense in the period the tax was incurred.

We recognize the financial statement benefit of a tax position when it is more-likely-than-not, based on its technical merits, that the position will be sustained upon examination.

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As of December 31, 2023, we have approximately $ 1,943 of unrecognized tax benefits, which if recognized, would impact the effective tax rate.

We anticipate reducing our unrecognized tax benefits by approximately $ 222 in the next 12 months.

We do not anticipate any significant changes in our unrecognized tax benefits within the next 12 months.

A reconciliation of the beginning and ending unrecognized tax benefits is provided below:

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Decrease related to lapse in statute of limitation

Decrease related to settlements with taxing authorities

Balance at December 31

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Our continuing practice is to recognize interest and/or penalties related to unrecognized tax benefits as income tax expense.

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however, U.S.

tax authorities also have the ability to review prior tax years to the extent loss carryforwards and tax credit carryforwards are utilized.

tax authorities also have the ability to review prior tax years to the extent loss carry-forwards and tax credit carry-forwards are utilized.

The open years for the non-U.S.

tax returns range from 2014 through 2022 based on local statutes.

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NOTE 20 —

Geographic Data

NOTE 20 — Geographic Data

Financial information relating to our operations by geographic area were as follows:

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CTS CORPORATION

SCHEDULE II —

VALUATION AND QUALIFYING ACCOUNTS

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

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(a) Evaluation of Disclosure and Controls

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Annual Report on Form 10-K.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K were effective in providing reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Annual Report on Form 10-K.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K were effective in providing reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud.

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Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within CTS Corporation have been detected.

(b) Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934 as amended (the "Exchange Act")).

(b) Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act).

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023.

In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013 framework).

We have excluded from the scope of our assessment of internal control over financial reporting the operations and related assets of TEWA Temperature Sensors SP.

and Ferroperm Piezoceramics A/S, which we acquired in 2022.

At December 31, 2022 and for the period from acquisitions through December 31, 2022, total assets and revenues subject to our internal control over financial reporting represented 15% of our consolidated total assets and 4% of our consolidated total net revenues.

Based on our assessment under the framework in Internal Control—Integrated Framework (2013 framework), our management concluded that our internal control over financial reporting was effective as of December 31, 2022.

The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in their report that is included herein.

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Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of CTS Corporation (an Indiana corporation) and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated February 24, 2023 expressed an unqualified opinion on those financial statements.

We have audited the internal control over financial reporting of CTS Corporation (an Indiana corporation) and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2023, and our report dated February 23, 2024 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting (“Management’s Report”).

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of TEWA Temperature Sensors SP.

and Ferroperm Piezoceramics A/S, both wholly-owned subsidiaries, whose combined financial statements reflect total assets and revenues constituting 15 and 4 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

As indicated in Management’s Report, TEWA Temperature Sensors SP.

and Ferroperm Piezoceramics A/S were both acquired during 2022.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of both TEWA Temperature Sensors SP.

and Ferroperm Piezoceramics A/S.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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Othe r Information

Not applicable.

During the quarter ended December 31, 2023, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted , modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408 of Regulation S-K).

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Please see Part I, Item 1 of this Annual Report on Form 10-K for information about our executive officers, which is incorporated by reference herein.

Information with respect to Directors and Corporate Governance may be found in our definitive proxy statement to be delivered to shareholders in connection with our 2023 Annual Meeting of Shareholders.

Information with respect to our directors and our corporate governance policies and practices may be found in our definitive proxy statement to be delivered to shareholders in connection with our 2024 Annual Meeting of Shareholders.

Such information is incorporated herein by reference.

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(a) (1) Financial Statements

The financial statements are filed as part of this Annual Report on Form 10-K under “Item 8.

Financial Statements and Supplementary Data.”

The financial statements are filed as part of this Annual Report on Form 10-K under “Item 8.

Financial Statements and Supplementary Data.”

(a) (2) Financial Statement Schedule:

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Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3 to the Current Report on Form 8-K, filed with the SEC on June 3, 2022).

Amended Bylaws (incorporated herein by reference to Exhibit 3 to the Current Report on Form 8-K, filed with the SEC on November 22, 2022).

Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934

Amended Bylaws (incorporated herein by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q, filed with the SEC on October 26, 2023).

Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023).

CTS Corporation Stock Retirement Plan for Non-Employee Directors, effective April 30, 1990, as amended (incorporated by reference to Exhibit (10)(a) to the Quarterly Report on Form 10-Q for the quarter ended March 30, 2003, filed with the SEC on April 23, 2003).*

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CTS Corporation 2014 Performance and Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K, filed with the SEC on May 22, 2014).*

Credit Agreement Between CTS Corporation and CTS International B.V.

and BMO Harris Bank N.A.

dated February 12, 2019 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on February 15, 2019).

Credit Agreement by and among CTS Corporation, the Lenders from time to time parties thereto, and BMO Harris Bank N.A, as L/C Issuer and Administrative Agent dated December 15, 2021 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on December 17, 2021).

CTS Corporation Pension Plan Exhibit (Amended and Restated Effective As of July 1, 2015) (incorporated by reference to Exhibit 10(s) to the Form 10-K filed with the SEC on February 23, 2018).

Amendment to the CTS Corporation Pension Plan (Amended and Restated Effective as of July 1, 2015) as of October 6, 2016, (incorporated by reference to Exhibit 10(t) to the Form 10-K filed with the SEC on February 23, 2018).

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Amendment to the CTS Corporation Pension Plan (Amended and Restated Effective as of July 1, 2015) as of June 26, 2017, (incorporated by reference to Exhibit 10(u) to the Form 10-K filed with the SEC on February 23, 2018).

Amendment to the CTS Corporation Pension Plan (Amended and Restated Effective as of July 1, 2015) as of September 22, 2017, (incorporated by reference to Exhibit 10(v) to the Form 10-K filed with the SEC on February 23, 2018).

Amendment to the CTS Corporation Pension Plan (Amended and Restated Effective as of July 1, 2015) as of June 28, 2018, (incorporated by reference to Exhibit 10.1 to Form 10-Q filed with the SEC on July 31, 2020).

Amendment to the CTS Corporation Pension Plan (Amended and Restated Effective as of July 1, 2015) as of June 1, 2020, (incorporated by reference to Exhibit 10.1 to Form 10-Q filed with the SEC on July 31, 2020).

CTS Corporation Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Form 8-K, filed with the SEC on February 18, 2015)

CTS Corporation 2018 Equity and Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K, filed with the SEC on May 22, 2018).

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Form Restricted Stock Unit Agreement (service-based) under the CTS Corporation 2018 Equity and Incentive Compensation Plan, covering grants made in 2021, 2022 and 2023, (incorporated by reference to Exhibit 10(a) to Form 10-Q filed with the SEC on April 27, 2023).

Form Restricted Stock Unit Agreement (performance-based) under the CTS Corporation 2018 Equity and Incentive Compensation Plan, covering certain grants made in 2020, (incorporated by reference to Exhibit 10(b) to Form 10-Q filed with the SEC on April 27, 2023).

Form Restricted Stock Unit Agreement (performance-based) under the CTS Corporation 2018 Equity and Incentive Compensation Plan, covering grants made in 2021, (incorporated by reference to Exhibit 10(c) to Form 10-Q filed with the SEC on April 27, 2023).

Form Restricted Stock Unit Agreement (performance-based) under the CTS Corporation 2018 Equity and Incentive Compensation Plan, covering grants made in 2022, (incorporated by reference to Exhibit 10(d) to Form 10-Q filed with the SEC on April 27, 2023).

Form Restricted Stock Unit Agreement (performance-based) under the CTS Corporation 2018 Equity and Incentive Compensation Plan, covering grants made in 2023, (incorporated by reference to Exhibit 10(e) to Form 10-Q filed with the SEC on April 27, 2023).

Subsidiaries.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Compensation Clawback Policy

The following financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2023, formatted in Inline XBRL:

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February 23, 2024

/s/ Ye Jane Li

February 23, 2024

February 24, 2023

/s/ Randy Stone

February 23, 2024

/s/ Amy Dodrill

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis